Global Crisis, National Responses: The Political Economy of Turkish Exceptionalism

With its dilatory and piecemeal fiscal activism and uncharacteristic reluctance toward IMF assistance, the Turkish government’s response to the global economic crisis of 2008-2009 sharply contrasted the bold approaches adopted by other major emerging market countries. Underlying this policy exceptionalism were the constraints posed by Turkey’s pre-existing policy and macroeconomic constraints, cognitive failures on the part of policymakers, and the conjunctural dynamics of domestic politics. The interplay of these factors progressively narrowed the policy space for vigorous action, leading instead to a motley combination of reactive initiatives that neither offered sufficient protection to the most vulnerable social groups during the crisis nor promised sustainable growth in the long run.global economic crisis, fiscal stimulus, IMF, emerging markets, Turkey

Political economy of policy reform in Turkey in the 1980s

Turkey's adjustment experience was a tremendous success in terms of structurally reorienting the economy. The share of output for export rose from 5 percent in 1979 to 23 percent in 1989, and real output roughly doubled. The financial markets opened and have developed depth and sophistication. The program failed to reduce fiscal deficits, inflation, income inequality, and the size of the inefficient public enterprise sector, but the transformation of trade and finance fundamentally altered the context of the problems, changing their effects on the private sector and changing the government's options for dealing with them. The first phase of economic adjustment was sustained, although not initiated, in an authoritarian context, but the Turks restored democracy when the agenda for reform was incomplete. The Motherland Party (ANAP) won office on the platform of economic success and eventally lost partly because of the failure of economic policy. ANAP's electoral defeat in 1991 did not mean, however, the demise of the pro-structural adjustment or the pro-liberalization coalitions. The long period of ANAP rule helped consolidate reforms to such a degree that all of the principal parties agreed on a broadly similar economic program. The ideological differences between the left and the right - a state-directed versus a marked-oriented economy - substantially diminished. The reforms of the early 1980s greatly reduced the importance of rent-seeking, particularly through foreign trade, but patronage politics became widespread again in the second half of the decade. The initial strength ANAP derived from privileged access to state resources progressively became a disadvantage, creating resentment and reaction among the populace. One source of discontent was the over-invoicing of exports (that is, fictitious exports), designed to take advantage of favorable export subsidies, and the government's failure to discipline or penalize the companies involved. This jeopardized attempts to build a pro-export coalition, and some key features of import substitution continued. The authors attribute the failure of Turkey's macroeconomic policies in the late 1980s to the government's failure tocultivate popular support for macroeconomic stability; to the top bureaucrats'lack of autonomy to counteract political pressures to expand the fiscal deficit; and to the continuation of top-down individualistic linkages between policymakers and key economic interests.National Governance,Parliamentary Government,Politics and Government,Environmental Economics&Policies,Economic Theory&Research

Entrepreneurs, Democracy and Citizenship in Turkey

Digitised version produced by the EUI Library and made available online in 2020.Product of workshop No. 1 at the 2nd MRM 200

Financial Globalization, the Democratic Deficit and Recurrent Crises in Emerging Markets: The Turkish Experience in the Aftermath of Capital Account Liberalization

Financial globalization offers both risks and benefits for countries of the semi-periphery or the so-called "emerging markets". Politics within the national space matters, yet acquires a new meaning, in the age of financial globalization. “Weak democracies " are characterized by limited accountability and transparency of the state and other key political institutions. Such democracies tend to suffer from populist cycles, which result in low capacity to carry out economic reform. Financial globalization, in turn, magnifies populist cycles and renders their consequences more severe. Hence "weak democracies " are confronted with the predominantly negative side of financial globalization which includes over-dependence on short-term capital flows, speculative attacks and recurrent financial crises leading to slow growth and a more regressive income distributional profile. The relevance of these set of propositions are illustrated with reference to the case of Turkey which, indeed, experienced recurrent financial crises in the post-capital account liberalization era with costly consequences for the real economy. Two general conclusions follow. Firstly, there is a need to strengthen democracy in the developing world. Secondly, since this is hard to accomplish over a short space of time serious question marks are raised concerning the desirability of early exposure to financial globalization given the current state of the world