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Economic Growth and Structural Change in Turkey 1960–88

Published online by Cambridge University Press:  23 April 2009

A. Aydin Çeçen
Affiliation:
Department of Economics, Central Michigan University, Mt. Pleasant, Mich. 48859, U.S.A.
A. Suut Doğruel
Affiliation:
Department of Economics, Marmara University, Kuyubaşi, Istanbul, Turkey 81040.
Fatma Doğruel
Affiliation:
Department of Economics, Marmara University, Kuyubaşi, Istanbul, Turkey 81040.

Extract

After almost five decades of industrialization—characterized, on the one hand, by considerable state intervention and, on the other, by protectionist import-substituting policies in domestic capital formation—in the early 1980s Turkey ostensibly entered a new era of export-led economic growth. Since 1960, the Turkish democracy has experienced a series of crises with astonishingly regular ten-year cycles of recurrence. The 1980 military intervention, however, brought about a radical attempt to restructure the economy, hardly comparable with the rather gradual changes in its recent economic history. Its ten years of experimentation with economic liberalization and structural adjustment provide us today with an adequate record to identify and discuss at least the salient features of this period by comparing the performance of the economy in different years.

Type
Articles
Copyright
Copyright © Cambridge University Press 1994

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References

NOTES

1 World Bank, Turkey: Policies and Prospects for Growth (Washington, D.C.: World Bank Publication, 1980), 1.Google Scholar

2 Ibid., 2.

3 Chenery, H. D. and Syrquin, M., Patterns of Development: 1950–1970 (Oxford: Oxford University Press, 1975).Google Scholar

4 These five-year development plans, their various shortcomings not with standing, should be contrasted with the previous planning programs that were, for the most part, motivated by short-term policy responses to existing internal and external economic conditions, devoid of any long-term view of industrialization. For an in-depth analysis of these five-year plans, see Durdağ, M.;, Some Problems of Development Financing (Dordrecht: D. Reidel Publishing Co., 1973);Google ScholarGünce, E., “Türkiye'de Planlamanin Dünü, Bugünü, Yanni,” ODTü Gelişme Dergisi, özel sayi (1981): 117–32.Google Scholar

5 For a discussion of the political factors behind the introduction and evolution of central planning during 1960–71, see Ahmad, F., The Turkish Experiment in Democracy: 1950–1975 (London: Hurst and Company, 1977),Google Scholar chap. 10. On the other hand, Boratav and Keyder define the five-year plan periods as “populist” economic policies, based on a fragile compromise between capital owners, workers, and peasants; Boratav, K., Türkiye Iktisat Tarihi 1908–1985 (Istanbul: GerÇek Y., 1988);Google ScholarKeyder, Ç., “Ithal Ikameci Sanayileşme ve Çelişkileri,” in Krizin Gelişimi ve Turkiye'nin Alternatif Sorunu, ed. Boratav, K., Keyder, Ç., and Pamuk, S. (Istanbul: Kaynak Y., 1984), 1332.Google Scholar

6 Pamuk, ş., “Ithal Ikamesi, Döviz Darboğazlari ve Türkiye: 1947–1979,” in Krizin Gelişimi ve Türkiye'nin Alternatif Sorunu, 3668.Google Scholar

7 The growth rate of total output (value added) /Q can be written as

where denotes the rate of technological change, and are the rates of increase in capital and labor inputs, respectively; eK and eL are the share of capital and labor in total output. Using the aggregate data for the 1963–75 period, the following results (%) are obtained: = 6.4, = 6.82, = 1.02, eK = 55, eL = 45, = 2.23. See Chenery, H. D., Robinson, S., and Syrquin, M., Industrialization and Growth (London: Oxford University Press, 1986), 22.Google Scholar

8 World Bank, Turkey: Prospects and Problems of an Expanding Economy (Washington, D.C.: World Bank Publication, 1975).Google Scholar

9 These percentages do not add up to 100.0 because the mining and energy sectors are left out; see various publications of the State Institute of Statistics and the State Planning Organization.

10 For detailed discussion of factor-price distortions and capital intensity in the Turkish economy, see Krueger, A., Foreign Trade Regimes and Economic Development: Turkey (New York: National Bureau of Economic Research, 1974);Google Scholar and Balassa, B., The Newly Industrialized Countries in the World Economy (New York: Pergamon Press, 1981), essay 13.Google Scholar

11 World Bank, Turkey: Policies and Prospects, 129.Google Scholar

12 Given the nature of our discussion, we cannot go into a detailed analysis of these intricate issues here. For a more in-depth discussion, see ÇeÇen, A. A., Doğruel, A. A., and Doğruel, F., Türkiye'de Ekonomik Bü'yüme, Yapisal Degisim ve Kriz (Istanbul: Egemen Y., 1990);Google ScholarRittenberg, L., “Financial Liberalization and Savings in Turkey,” in Liberalization in the Turkish Economy, ed. Nas, T. and Odekon, M. (New York: Greenwood Press, 1988), 115–27.Google Scholar

13 Krueger, A. and Tuncer, B., Estimating Total Productivity Growth in a Developing Country (Washington, D.C.: World Bank Staff Working Paper, 1980).Google Scholar

14 World Bank, Turkey: Policies and Prospects.

15 For a detailed discussion of the incentive structure and protectionist measures in Turkish manufacturing, see Yağci, F., Protection and Incentives in Turkish Manufacturing (Washington, D.C.: World Bank Staff Working Paper, 1984).Google Scholar Krueger, on the other hand, argues that excess capacity in manufacturing could be the result of firms' deliberate overexpansion; Foreign Trade Regimes, 230.

16 For a discussion on the previous stabilization programs in Turkey, see Ekzen, N., “1980 Stabilizasyon Paketinin 1958, 1970 ve 1978–79 Paketleriyle Krşilaştirmah Analizi,” in I. Tekeli et al., Turkiye'de ve Dünyada Yaşanan Ekonomik Bunalim (Ankara: Yurt Y., 1984), 168–88.Google Scholar

17 See, among others, Durdağ, M., “1980 Yih Uygulamasinin Işiğinda istikrar Programimn Genel bir Değerlendirmesi,” Toplum ve Bilim 14 (1981): 98124;Google Scholar Nas and Odekon, Liberalization in the Turkish Economy; şenses, F., “An Assessment of Turkey's Liberalization Attempts since 1980 against the Background of Her Stabilization Program,” MEW Studies in Development 10 (1983): 271322;Google ScholarWolff, P., Stabilization Policy and Structural Adjustment in Turkey, 1980–85: The Role of the IMF and World Bank in an Externally Supported Adjustment Process (Berlin: German Development Institute, 1987).Google Scholar

18 For a more detailed discussion of these financial reforms, see Kopits, G., Structural Reform, Stabilization and Growth in Turkey (Washington, D.C.: IMF, 1987).CrossRefGoogle Scholar

19 Wage determinations by the council were mandatory for the public sector and were used as guidelines in the private sector. However, in the face of growing labor unrest, the role of the council declined and collective bargaining was liberalized somewhat after 1987.

20 For a detailed discussion of the determinants of exports during this period, see Rodrik, D., “External Debt and Economic Performance in Turkey,” in Liberalization in the Turkish Economy, 161–85, esp. 175–80.Google Scholar For an analysis and description of export-incentive programs, see Milanovic, B., Export Incentives and Turkish Manufactured Exports, 1980–84 (Washington, D.C.: World Bank Staff Working Paper, 1986);Google Scholar according to Milanovic, the efficiency of the export-incentive policy, measured by its deviation from the optimal structure, did not show any significant improvement in the period 1980–84, but exchange-rate adjustment was correct.

21 Rodrik, , “External Debt,” 161.Google Scholar

22 Anand, R., Chhibber, S., and Wijnbergen, S. van, “External Balance and Growth in Turkey: Can They Be Reconciled?” (Washington, D.C.: World Bank, 1988, Mimeographed), 21.Google Scholar

23 Ibid.; Anand et al. go on to suggest that “[these results] show that stabilization programs relying on reductions of public sector investment will have high and permanent negative output effects.” They also emphasize the fact that the key factor in this growth performance was the substantial excess capacity inherited from heavy investments made in the 1970s, which is very much in line with our discussion of the historic nature of excess capacity.

24 For a discussion and analysis of the contractionary effects of these stabilization and liberalization policies, see, for instance, Taylor, L., Structuralist Macroeconomics: Applicable Models for the Third World (New York: Basic Books, 1981);Google ScholarPorter, R. C. and Ranney, S. I., “An Eclectic Model of Recent LDC Macroeconomic Policy Analysis,” World Development 10 (1982): 761–65;CrossRefGoogle ScholarWijnbergen, S. van, “Stagflationary Effects of Monetary Stabilization Policies: A Quantitative Analysis of South Korea,” Journal of Development Economics 10 (1982): 133–69;CrossRefGoogle Scholaridem, Exchange Rate Management and Stabilization Policies in Developing Countries,” Journal of Development Economics 23 (1986): 227–47;CrossRefGoogle ScholarBuffie, E., “Financial Repression, the New Structuralists and Stabilization Policy in Semi-Industrialized Economics,” Journal of Development Economics 14 (1984): 305–27;CrossRefGoogle Scholaridem, The Macroeconomics of Trade Liberalization,” Journal of International Economics 17 (1984): 121–37;CrossRefGoogle ScholarKrugman, P. and Taylor, L., “Contractionary Effects of Devaluation,” Journal of De velopment Economics 8 (1978): 445–56.Google Scholar

25 These equations are part of the 45-equation macroeconometric model estimated for the Turkish economy for the 1963–85 period, using three-stage least-square estimation techniques. For a more complete discussion of the determinants of inflation and the underlying structural rigidities, see ÇeÇen et al., Turkiye'de Ekonomik Bu'yume, section 5.

26 Conway, P. J., Economic Shocks and Structural Adjustment: Turkey after 1973 (Amsterdam: North Holland, 1987), 199, Table 7.8.Google Scholar

27 Celasun, M. and Rodrik, D., “Debt, Adjustment and Growth: Turkey,” in Developing Country Debt and Economic Performance: Country Studies-Indonesia, Korea, Philippines, Turkey, ed. Sachs, J. D. and Collins, S. M. (Chicago: University of Chicago Press, 1989), 3:615808.Google Scholar

28 Arslan, I. and Wijnbergen, S. van, Export Incentives, Exchange Rate Policy and Export Growth in Turkey (Washington, D.C.: World Bank Working Paper, 1989).Google Scholar

29 Kopits, Structural Reform, Table 2.

30 See, for instance, Balassa, B., “Exports and Economic Growth: Further Evidence,” Journal of Development Economics 5 (1978): 181–89;CrossRefGoogle ScholarFeder, G., “On Exports and Economic Growth,” Journal of Development Economics 12 (1982): 5373;Google ScholarRam, R., “Exports and Economic Growth: Some Additional Evidence,” Economic Development and Cultural Change 33 (1985): 415–25.CrossRefGoogle Scholar Cline, Adelman, and Streeten, however, offer critical evaluations of these export-led growth strategies; Cline, W., “Can the East Asian Model of Development Be Generalized?World Development 10 (1982): 8190;CrossRefGoogle ScholarAdelman, I., “Beyond Export-led Growth,” World Development 12 (1984): 934–49;CrossRefGoogle ScholarStreeten, P., “A Cool Look at ‘Outward Looking’ Strategies for Development,” The World Economy 5 (1982): 159–69.CrossRefGoogle Scholar

31 Yeldan, A. E., “Turkish Economy in Transition: A General Equilibrium Analysis of Export-led versus Domestic Demand-led Strategies of Development” (Ph.D. diss., University of Minnesota, Minneapolis, 1988).Google Scholar

32 Celasun, M., “Income Distribution and Domestic Terms of Trade in Turkey 1973–1983,” ODTU Gelisme Dergisi 13 (1986): 193216.Google Scholar

33 önal, H., “Effect of Income Distribution in Non-Agriculture on Agricultural Prices and Income: The Turkish Case,” European Review of Agricultural Economics 14 (1987): 413–25;CrossRefGoogle Scholar Onal analyzes the effects of the distribution of income in non agriculture sectors on agricultural prices and income distribution.

34 The relationship between income distribution, growth, and savings is debated in light of the findings of the new literature on endogenous growth. Contrary to the classical view, endogenous-growth theory maintains that more equal income distribution fosters economic growth; see Lindert, P. H. and Williamson, J. G., “Growth, Equality and History,” Explorations in Economic History 22 (1985): 341–77;CrossRefGoogle ScholarPersson, T. and Tabellini, G., Growth, Distribution and Politics (Washington, D.C.: IMF Working Paper, 1991)Google Scholar

35 Dornbusch, R., “Dealing with Debt in the 1980s,” Third World Quarterly 7 (1985): 532–51;CrossRefGoogle Scholar Dornbusch argues that “Today, real wage cuts in debtor countries assure the trade surpluses and dollar earn ing that keep bank stockholders in the black. One might argue (or even believe) that this is essential to maintain order in the international financial system, but that raises the question of in whose interest the system works. For many who are paying the bill now, there have been few benefits before and there are no obvious ones down the road” (533).

36 We are not claiming here that this is indeed the actual state of affairs in Turkey. This question should be empirically analyzed beyond theoretical possibility and anecdotal evidence.