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Turkey: Neither East Nor West

Turkey: Neither East Nor West. Presentation for the Association for Continuing Education, CWRU 27 October 2003 Dr. Ugur Aker. GNP Per Capita (2000). Average standard of living is about one fifth of the U.S. level, similar to Poland. U.S.: $34,260. Mexico: $8,810.

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Turkey: Neither East Nor West

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  1. Turkey: Neither East Nor West Presentation for the Association for Continuing Education, CWRU 27 October 2003 Dr. Ugur Aker

  2. GNP Per Capita (2000) • Average standard of living is about one fifth of the U.S. level, similar to Poland. • U.S.: $34,260. • Mexico: $8,810. • At current exchange rates: $5,080. • Turkey: $7,030. • At current exchange rates: $3,090.

  3. Population • 71 million • 1923: 12.5 million • 1950: 21 million • 1975: 41 million • Growth rate • 1950-1960: 3% • 1960-1970: 2.5% • 1970-1980: 2.3% • 1990-2000: 1.8%

  4. Young Population • Percent of population under 15: 30%. • Percent of population 65 and over: 5%.

  5. GDP • In 2002, Turkey's GDP was 200 billion dollars.  The same year, the largest two corporations in the world, Wal-Mart and General Motors had revenues of 250 billion and 185 billion dollars, respectively.

  6. Agriculture in GDP • The contribution of agriculture to the GDP declined significantly: 1950: 45% 1965: 34% 1980: 24% 1991: 18% 2000: 16%

  7. “Tradition” • Rural population • 1950: 81.3% • 1960: 73.7% • 1970: 63.9% • 2000: 27%

  8. Industry and Services • Industry comprised 12% of GDP in 1950, 25% in 2000. • Services comprised 43% of GDP in 1950, 59% in 2000.

  9. Effective Service • Translation: My wall is leaking. Please plumber Joseph, help. Phone: 588…

  10. Military • Founding institution of the Republic • Guarantor of national interest • Confronting reactionary Islam • Ethnic secessionism • Communist challenge • Officer corps 40,000 strong

  11. Military Colleges • 6 hr classes; 2 hr exercise. • Apart from breakfast, lunch and dinner, only ½ hr free time. • 45 days vacation. • 4 in 5 from military secondary schools.

  12. Military Secondary Schools • Established in 1845 • 1500 graduating seniors • Entrance at age 14-15 • Science classes in a foreign language • Student-teacher ratio of 10:1 • Latest technology

  13. Military Secondary Schools • Monthly family income • < $60 : 6% • $60-$120: 33% • $120-$180: 55% • > $200: 4% • Only 10% sons of officers or non-commissioned officers • Only 3% sons of professionals

  14. Expulsion From Military College • Flunking twice. • Criminal activity. • Getting married. • Coup attempt. • In 1963, 1400 were expelled. • Ideological expulsions. • Between 1977 and 1984, 1200 were expelled for leftist activities.

  15. Exchange with US • Many Turkish officers get training in US Military Academies. • American officers attend Turkish War Colleges. • Turkish military handbooks are translated American handbooks.

  16. Military Interventions • Coup in 1960. • Rise of reactionary politics, erosion of economic power of fixed incomes, political oppression of opposition. • New constitution. • Civilian rule in 1963.

  17. Islamists • The first political rise of “Islamic” concerns came with the establishment of Democratic Party in 1946. • Secularists, through the military and center-left parties, tried to suppress the rise of Islamists.

  18. Military Interventions • Ultimatum in 1971. • 1961 constitution provided more freedoms ever before. • Proliferation of left and right radical movements. • Government resigned, freedoms restricted.

  19. Islamist Fundamentalists • Islamists first organized under National Order Party. • Junior coalition partner (1974, 1975-78).

  20. Military Interventions • Coup in 1980. • Reason: terrorist activities of right and left. • All political parties suspended, left and labor suppressed. • New constitution. • Civilian rule in 1983.

  21. Center-right: Motherland and True Path Parties • Since 1983, both have been in and out of coalition governments. • Their ideology and supporting base are the same but leaders don’t cooperate. • TPP leader became the first female prime minister in middle 90s.

  22. PKK • Kurdish Marxist guerilla group PKK started terrorist activities. • During the next 15 years, 40 thousand lives were lost. • Military is charged with the solution.

  23. Labor • Labor lost political and economic power between 1980 and 1991 but regained it after 1991 elections. • Wages and salaries comprised 26% of total factor income in 1989 but 37% in 1992.

  24. 1991 Coalition • Center-left and center-right coalition. • Labor and bureaucracy supported social democrats. • Agriculture interests who lost subsidies and inward oriented businesses who lost to foreign competition supported True Path Party. • After the 1991 elections, agricultural supports increased, transfer payments increased from 2.9% of GNP in 1990 to 5.5% in 1993.

  25. State Largesse • High agricultural support prices. • Employment opportunities in state-controlled sectors. • Generous salary adjustments to public sector employees before elections.

  26. Gulf War • Loss of trade, tourism, pipeline revenues and refugee crisis are estimated to have cost Turkey about 15-20% of her GDP.

  27. 1994 Crisis • Liberalization of capital markets allowed the government to raise more funds, leading to high interest rates. • International asset holders more influential in policy choices.

  28. High Interest Rates • High interest rates kept currency overvalued, • Real exchange rate appreciated 20% from 1988 to 1993. • Large manufacturing companies engaged in lending. • 1988: 25% of operating profits from non-manufacturing. • 1994: 55%.

  29. 1994 Crisis • The exchange rate in June ’93 was TL10,000 to the USD. • The exchange rate in May ’94 was TL35,000 to the USD. • Inflation in November ’93 was 65%. • Inflation in May ’94 was 118%.

  30. 1994 Crisis • Between 1993 and 1998 real wage rate in private manufacturing fell by 25%.

  31. Reformist Fundamentalists • Welfare Party was established after 1980 coup. • Highest percentage in 1995 elections. • Senior partner of coalition for a year: 1996-1997.

  32. Kurdish Representation • Kurdish parties failed to achieve the 10% threshold in 1995, 1999 and 2002. • Successive Kurdish parties were closed by the courts on charges of separatism and terrorism.

  33. Kurdish Representation • Many cities and towns in the Southeast have elected Kurdish local officials for decades. • Some 30% of the population of the region migrated to the western and southern urban centers.

  34. Military Interventions Ultimatum in 1997. Radical Islamist prime minister resigns.

  35. Reformist Fundamentalists • After the closing of the Welfare Party, the Virtue Party was established (15.4% in 1999).

  36. Ultra-Nationalists • Traditionally rabidly anti-leftist and suspected of terrorist activities, 2nd largest party in 1999 elections with 18% of the vote. • Formed a coalition with center-right Motherland Party and center-left Democratic Left Party. • In power, they opposed human rights for Kurds and privatization efforts supported by IMF.

  37. Average Annual Inflation • 20% in the 1970s. • 35-40% in the early 1980s. • 60-65% in the late 1980s and early 1990s. • 90% before the disinflation program in late 1990s.

  38. Center-left • Carrying the ideology of Kemalism. • Secularism. • State dirigism; mistrust of markets and business. • Democratic Left Party gave up its opposition to free-market reforms in 1997. • In 1999, received 22% and became the senior partner in the coalition. • Republican People’s Party was not represented in the Parliament in 1999 (8.7% vote).

  39. Instability • State support for political loyalty undermining the market discipline. Central government budget deficits rose from 3.0% of GNP in 1988 to 8.5% in 1998.

  40. 1999-2001 Crisis • Contagion of Russian crisis of 1998. • Devastating earthquakes of 1999. • Capital flight took place after a political spat in Feb. 2001. • Crawling peg policy led to real exchange rate appreciation. • Capital inflows lowering interest rates. • Current account deficit rose to unprecedented 5%. • Banks’ open positions proved too vulnerable.

  41. Recessions • 1978-1980: -1.5% • 1994: -6.1% • 1999: -4.7% • 2001: -7.4%

  42. Loans Upon Loans • As of 2002, Turkey owed 31 billion SDR to IMF, 28 billion of it acquired in 1999 and 2002, the latter engineered by Kemal Dervish, former vice president of the World Bank, appointed as the Economy Minister.

  43. Inflation • IMF has announced that Turkey had the sixth best inflation improvement between 2000 and 2002.

  44. Losers of 2002 Elections • Ultra-nationalists: 8.3%. • Reformist Fundamentalist: 2.5%. • Motherland: 5.1%. • True Path: 9.5%. • Democratic Left: 1.1%. • Kurdish: 6.2%.

  45. Winners of 2002 Elections • Justice and Development Party (Liberal Islam: 34.1% with 363 deputies). • Republican People’s Party (Center Left: 19.3% with 178 deputies).

  46. Justice and Development Party • First party in 15 years to hold a majority in the Parliament. • Supports EU membership, IMF reforms. • Some leftists support them because they undermine the power of the military.

  47. Democracy of Disappointment • In 2002 elections, 9 out of 10 incumbents were not reelected to the legislative. • The pattern of previous elections was also one of churning, replacing the favored party.

  48. Rays of Hope • IMF program • Budget surplus • Banking reform • Privatization • 7th round of legal reforms • Centers of power • NGOs • Anatolian Tigers

  49. Anatolian Tigers • In the 90s, small-scale, manufacturing family enterprises flourished in the heartland by serving the export market, without any subsidy from the government.

  50. Anatolian Tigers • 46% of employers and 94% of employees had only primary schooling. • 65% of the workers were unskilled; only 1% received union wages. • Only 14% of managers were salaried, the rest were owners.

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