This paper provides a critical assessment of Turkey's economic performance under the neoliberal economic policies which have been instrumental in generating a profound transformation in its socioeconomic structure since 1980. The paper draws special attention to the government's loss of policy autonomy and the democratic deficit at the initial and implementation stages of this transformation. It then evaluates Turkey's economic performance on the basis of indicators with medium and long-term impacts, such as investment, saving, industrialization, unemployment, and income distribution. This assessment shows that the neoliberal model has failed to fulfill its promises, with the Turkish economy failing to achieve performance equal to that under the previous import-substitution strategy or in comparable countries. The paper then identifies the main problem areas confronting the economy: the current account deficit, the labor market, insufficient industrial progress and income distribution, and poverty. To solve these problems, it calls for both a radical rethinking of the neoliberal policy regime and for proactive state intervention to stimulate saving and investment as part of a new development strategy, giving primary importance to industrialization, employment creation, and more equitable income distribution.

In 1989, Turkey became one of the first—and few—emerging economies to fully liberalize its capital account. Given the adverse macro-economic conditions before the reforms, it is puzzling that Turkish policy-makers implemented policies amounting to a comprehensive and imprudent capital account liberalization. Using in-depth interviews with a significant number of key decision-makers behind capital account liberalization and employing archival material from news sources on the debates surrounding the reform process, this article examines the policy objectives and rationale behind the Turkish capital account liberalization. The main argument is that capital account liberalization represented a political rationality that put a premium on short-term expansion through funds from the rest of the world. This liberalization was a policy response to decreasing rates of economic growth and demands from organized labor and public employees for better working conditions and higher wages. Thus, this article shows that these distributional conflicts and the trajectory of economic growth were important determinants of the timing and scope of capital account liberalization in Turkey.

In the last three decades, the Turkish economy has become much more open and market-oriented. This paper provides an account of the changes in the underlying economic institutions that have accompanied this transformation. In particular, it assesses whether or not new economic institutions have emerged that constrain the discretionary powers of the executive in the area of economic policy and whether institutional change has resulted in a more rule-based and transparent policy framework. The story that broadly emerges is that the first two decades of the neoliberal era were predominantly a period of increased discretion at the expense of rules. By contrast, after the crisis of 2000-2001 one witnesses a substantial delegation of decision-making power to relatively independent agencies, and the establishment of rules that constrain the discretion of the executive. But this transformation is not uniform across sectors, and there are divergences between the de jure rules and their de facto implementation. Moreover, there are also examples that do not fit the general trend, especially in the case of the construction industry. Finally, recent signs suggest that the government may be having second thoughts about the “excessive” independence of regulatory and policy making bodies.

The paper discusses the main characteristics of Turkey's experience of neoliberal industrialization since 1980. We suggest that Turkey has been a “successful follower” in the sense that it has achieved structural transformation in manufacturing output and exports, while its mode of articulation with the global economy has remained intact. To follow our premise, we first provide a comparative overview of the dynamics of growth, productivity, employment and trade in the post-1980 period. We focus on the manufacturing industry because it has evolved as the leading sector in the restructuring of the economy away from domestic demand-oriented import substitution towards export orientation and integration with global production networks. To analyze the direction of structural change in a comparative perspective, we also offer a synopsis of divergent patterns of development in Turkey and Korea. Our brief comparison emphasizes that, while Korea has rapidly changed the structure of its industry and mode of articulation with the world economy with the sense of direction provided by a pro-active state and a far-reaching industrial policy, Turkey has remained a follower ever trying to reach its moving target.

This study applies the proactive/reactive state framework to the transformation of Spanish and Turkish finance capital in a comparative perspective. It concludes that the “proactive” policies pursued by the Spanish state and the strategic coalition established between political elites and the integrationist segments of finance capital resulted in the heterodox internationalization of Spanish firms, whereas the “reactive” state policies in Turkey, designed in line with orthodox neoliberal dictums, paved the way for an incomplete internationalization. The 2007/2008 crisis, however, demonstrates that the same state may be both proactive and reactive across various policy fields over time. The recent Spanish financial crisis and Turkey's regulatory success after 2001 illustrate this point.

In the process of neoliberal transformation in Turkey, what differentiated the 2000s from the previous two decades were the block sale privatizations of large-scale state enterprises such as PETKİM, Türk Telekom, TÜPRAŞ, and ERDEMİR. These block sales, the conditions of which were shaped by political struggles at different levels, were also constitutive political and ideological moments per se, helping to reproduce a particular perception of social reality at the expense of others. This paper will overview and critically problematize the privatization processes of these four enterprises, all completed under the successive AKP governments in power since 2002. By focusing on the apparently technical and economic aspects of the block-sale processes, such as valuation, efficiency enhancement and marketing, the paper calls into question the increased concerns over their transparency, and wonders whether such concerns can be understood as attempts to mask the substantially corrupt nature of capitalist relations of production, which inescapably makes itself felt during these processes.