12
The Challenge of Globalization and Turkey’s
Changing Political Economy
Mine Eder
The changing global economy and the increasing role of international economics in foreign relations has required a transformation of Turkey’s foreign policy priorities. The factors involved include the need to be competitive in world markets, adjust to new rules of the global economy, and
exploit Turkey’s assets to gain advantages.
At first glance, Turkey appears to be doing rather well in managing its
external economic ties. Tu r k e y ’s customs union agreement with the
European Union, acceptance as an EU member candidate in December
1999, and acceptance to the Group of Twenty (G-20), a collection of industrialized states and emerging new economic power centers, all signal
progress in trade and financial integration.1
Yet, does Turkey have a coherent foreign economic policy based on
managing integration into world markets? What kind of a role does Turkey
really play in the global economy? Is Turkey prepared to deal with the challenges of a globalized and regionalized world economy? How exactly do
changes in the global economy affect Tu r k e y ’s economic options and
strategies?
Turkey is still quite insulated from the effects of global capital flows
and foreign direct investment (FDI). Although Turkey’s economic liberalization since the 1980s went a long way in opening its economy, the
absence of public-sector reform meant that populist strategies could easily
be employed for electoral gains. In short, external pressures have not as yet
built up sufficiently to reverse patronage politics in Turkey.
The timing and nature of Turkey’s economic liberalization also created
fundamental problems. Premature liberalization without institutions able to
deal with the resulting distributional conflicts worsened populist pressures
on Turkey’s political economy. The result was that Turkey could not really
reap the benefits of its geography in the new international economic framework.
189
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Turkey in World Politics
What does globalization Mean?
Some scholars have defined globalization as intensified competition and
capital flows among advanced industrial countries and criticized it for
widening the North-South divide. 2 Others have seen it as expansion of the
international economy and a tool for increasing global prosperity and welfare in the long run. 3 This first group has equated globalization with the
inevitable advances in production technologies and the unprecedented,
unstoppable integration of worldwide product and capital markets. 4 The
intensity and speed of capital flows largely driven by technological
advances in telecommunications and transport mark a qualitative break
with earlier global capitalism.
The International Monetary Fund in 1997 described globalization as
“the growing economic interdependence of countries worldwide through
the increasing volume and variety of cross-border transactions in goods and
services and of international capital flows, and also through the more rapid
and widespread diffusion of technology.” This “market-centered explanation” of globalization also sees increasing international competition and
further integration of markets as likely to improve global welfare and prosperity in the long run despite adjustment costs in the short run.5
Another aspect of this market-centered argument has been the suggestion that globalization has made the state’s role in economic development
redundant if not irrelevant. Technological changes and global markets have
placed significant constraints on what the state can do by delinking money
from territory. The emergence of supraterritorial production and markets
have largely undermined the capacity of states to control the flows of persons, goods, weapons, technology information, and commodities. With
intense financial integration, traders operate twenty-four hours a day and
move billions around the globe.
In short, markets and the threat of outward capital flows, according to
this view, hold governments hostage. That is why increased global market
integration and competition coincide with the unprecedented and unquestioned adoption of neoliberal policies in the developing world, including
privatization, elimination or reduction of capital, and price controls.” 6
Policy choices of governments, particularly in developing countries,
increasingly converge around financial and capital deregulation along with
monetary and fiscal discipline.7
Whether globalization is caused by technology-driven market forces
that undermine the capacity of the states, or by the governments’ deliberate
decisions to open up their markets, there is a consensus that globalization is
associated with at least two main elements. One is the intensification and
deepening of international trade liberalization, which accelerated in the late
1980s, particularly with the Uruguay Round of the General Agreement on
Globalization and Turkey’s Changing Political Economy
191
Tariffs and Trade and the establishment of the World Trade Organization.
Second is the enhanced mobility of capital. Both of these are also associated with technological developments in transportation, communications, and
information processing.
International Trade
Foreign trade measured in terms of imports and exports of goods and services as percentage of gross domestic product (GDP) in the developing
world has systematically increased across all regions in the developing
world.8 Overall, trade in goods and services has grown twice as fast as
global GDP in the 1990s, and the share attributable to developing countries
has climbed from 23 to 29 percent. But, the biggest surge in trading activity
was intraregional trade centered around the European Union, Japan, and the
United States that had a significant impact on the developing world, particularly on countries in the immediate periphery of these regions. Increasing
regional agreements coupled with the concentration of trade activity in
these three economies suggest that globalization coexists and develops
along with regionalization. 9
Turkey, however, did not take its share either of the expansion of world
trade in the 1990s or of growing regionalist trends. In contrast to the sharp
increase in exports throughout the 1980s, Turkey failed to maintain its
export boom in the 1990s. While exports had averaged around 6.0 percent
of gross national product (GNP) in the 1970s, they jumped to 21.5 percent
by 1985. 10 In real terms, exports increased sharply during the 1980s but
then slowed, particularly when compared with other emerging markets.
When 1983 exports are compared to 1998 exports from Mexico, Brazil, and
South Korea, for instance, export volume quadrupled (at the least), whereas
Turkey’s exports, though still significant, merely doubled (see Table 12.1).
Although Turkey is not a significant player in world trade, the country
still fits into global trends in terms of trade liberalization and regional trade
agreements. The significant shift in Turkey’s economic policies in the early
1980s from import substitution, capital controls, and protectionism to
neoliberalism, brought a significant transformation of Turkey’s political
e c o n o m y. 11 Between 1977 and 1980, a deteriorating economy with an
annual inflation rate of 120 percent and extensive foreign exchange constraints, as well as increasing political violence and instability, had already
made this shift inevitable. 12
The iron fist of the military between 1980 and 1983 allowed Turgut
Özal, then head of the regime’s economic team, to apply his “January 24
package” designed prior to the intervention. This package, a typical IMF
stabilization program, included a large devaluation, export subsidies, price
increases in state economic enterprise products, a rise in interest rates, and
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Table 12.1 Turkey’s Global Trade in Comparative Perspective
Merchandise exports
Selected
Countries
US$ millions
1983
Turkey
Mexico
Brazil
Argentina
S. Korea
Taiwan
China
Hungary
Poland
Israel
USA
Japan
Germany
World Total
5,728
25,559
21,899
7,836
24,446
25,094
22,151
8,770
11,580
5,108
205,639
146,965
169,417
1,757,216
1998
26,140
117,505
50,992
25,227
133,223
109,890
183,757
22,940
26,300
23,282
682,977
387,965
539,689
5,414,844
Merchandise imports
Mfg. % total
1983 1998
46
37
39
16
91
89
55
61
64
80
65
96
84
66
75
80
53
33
87
96
85
46
72
92
80
95
86
78
US$ millions
1983
9,235
10,896
16,801
4,504
26,192
20,308
21,323
8,555
10,600
9,574
269,878
126,437
152,877
1,755,569
1998
46,400
128,940
60,890
31,402
93,345
104,240
140,165
25,820
48,020
29,130
944,586
280,531
466,619
5,358,567
Mfg. % total
1983 1998
43
96
34
75
51
51
70
59
52
59
60
21
—
57
72
83
74
88
61
73
77
66
77
76
78
54
68
73
Source: World Development Report 1999/2000.
Note: Mfg.=Manufacturing.
elimination of most government subsidies. Liberalization of the trade
regime included the elimination of quotas in 1980 and an average 20-percent reduction in tariffs. Ending import substitution along with export promotion launched an unprecedented period of export growth in the 1980s
that did not last in the 1990s.
Turkey’s record on regionalization is also mixed. Turkey has signed a
number of regional trade agreements, notably the Black Sea Economic
Cooperation project (BSEC) founded in 1990. BSEC aims to create a loose
trading area among Tu r k e y, Albania, Armenia, Azerbaijan, Bulgaria,
Georgia, Greece, Moldavia, Romania, Russia, and Ukraine. Having managed to achieve significant trade among its members, reaching a total
export volume of $89 billion by 1994, BSEC largely fell victim to the
regional, political, and geostrategic rivalries of its members.
Macroeconomic instability in some of these countries, such as Russia’s
1998 financial collapse, impeded the steady growth of trade in the region.
While trade between Turkey and Russia reached $4 billion in 1997, it
decreased by almost 13 percent to $3.5 billion in 1998.13
Meanwhile, the Cold War’s end opened markets in the former Soviet
republics. The cultural and linguistic ties Turkey shares with the Central
Asian republics—particularly the Turkic ones: Azerbaijan, Kyrgyzstan,
Turkmenistan, and Uzbekistan—initially gave Turkish exporters a signifi-
Globalization and Turkey’s Changing Political Economy
193
cant advantage. The dynamic growth in Central Asian markets throughout
the 1990s, coupled with Turkey’s increasing energy dependence on Russia
and the Commonwealth of Independent States (CIS) region, reveal the
potential for mutually beneficial trade partnerships between Turkey and
these countries. Turkey’s proven record in the construction industry in the
Middle East and North Africa and solid consumer goods industry also show
that there are complementary economies between Turkey and this region.
Informal “luggage trade” with Russia alone, for instance, was estimated at
$6 billion dollars a year in the first half of the 1990s. If this informal commerce was a temporary benefit—due to economic turmoil in Russia, tax
controls, and the gradual entry of competitors into the Russian market—
Russia continues to be Turkey’s third largest export market, after Germany
and the United States.
The customs union agreement with the European Union that went into
effect in 1996 marked a turning point in Turkey’s role in global trade. First,
the agreement reduced the 10.22 percent nominal rate of protection Turkey
had with EU countries to 1.40 percent and brought down the overall rate
against third parties to 6.92 percent. More than half of Turkey’s trade is
with the European Union and about half of this volume is with Germany
(see Appendixes 12.1 and 12.2). It is important to note, however, that
Turkey hardly accounts for 2.5 percent of EU exports. Turkey’s imports
from the European Union in 1998 reached $24 billion, accounting for 3
percent of total EU imports.14
Clearly, the increasing pace of integration within the European community in the aftermath of the Maastricht Treaty and the 1992 Single
European Act began to raise concerns that Turkey would be increasingly
isolated in the region. The restructuring that Europe underwent in the 1980s
indeed transformed the external environment of Turkey as well as that of
other countries on Europe’s periphery. Turkey’s membership application to
European community reflected its growing anxiety and threat of marginalization. The European Union’s acceptance of Turkey’s candidacy for membership in December 1999 renewed hopes for full membership, yet even by
the best estimates, Turkey’s full membership is not likely to be realized
before 2010. The fact that Turkey is not usually placed in the first batch of
prospective members, which includes such countries as Czech Republic,
Hungary, and Poland—and is usually listed as last in line—also suggest
that Turkey will be a latecomer in terms of reaping the benefits of the new
regionalism emerging in the global economy.
The customs union agreement also brought changes in Turkey’s trade
with other countries. As a part of the customs union and harmonization of
trade policy with the European Union, Turkey had to sign free trade agreements (FTAs) with countries that already had FTAs with the European
Union, including Israel, Hungary, Romania, Lithuania, Estonia, the Czech
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Turkey in World Politics
and Slovak republics, Slovenia, Latvia, and Bulgaria. The most prominent
of all these FTAs was the one with Israel, which had significant repercussions for the strategic balance in the Middle East. 15
The agreement with Israel used the global symmetry principle, which
meant that all concessions given the European Union by Israel would apply
to Turkey as well. The FTA aimed to liberalize trade on industrial products
and processed agriculture by the year 2000. It also let Turkey use Israel to
gain indirect access to the United States, because Israel had already a working FTA with the latter, ensuring a zero tariff on industrial products. The
immediate benefits of this agreement showed itself as Turkey’s exports to
Israel jumped from $178 million dollars in 1994 to $479 million in 1998
(appendix 2).
In sharp contrast, Turkey’s overall trade with the Middle East did not
do well. Turkey’s export boom in the 1980s was largely based on its successful export of construction services and consumer goods to the region.
This momentum was not sustained in the 1990s largely due to the end of
the Iran-Iraq War, international sanctions on Iraq in the aftermath of the
Gulf War, and overall instability in the region. Growing tensions with Syria
and Iran also made economic cooperation extremely difficult.16
The United States is Turkey’s second largest export partner after the
European Union and third largest source of imports after Germany and
Italy. Turkey has enjoyed a Generalized System of Preferences (GSP) status
with the United States, meaning it receives nondiscriminatory, nonreciprocal tariff reduction for certain goods. About 18 percent of Turkey’s exports
to the United States, which reached $2.2 billion in 1998, fall into that category. However, Turkey’s main exports to the United States are textiles and
clothing that are subject to quantitative restrictions under the Multi-Fiber
Agreement and WTO Agreement on Textiles and Clothing. About 85 percent of Turkey’s textile and clothing exports to the United States are subject
to quota limits. In short, despite significant trade liberalization on the part
of Turkey, the country faces significant protectionism in the United States.
In addition, Turkish-U.S. trade has lagged behind expectations in both
volume and growth. Nevertheless, the United States’ particular interest in
Tu r k e y ’s energy and telecommunication sectors, including petroleum
pipeline projects, are bound to boost bilateral trade in the coming years.
In summary, clearly, Turkey is not a global player in international
trade. Although the rate of growth in exports is quite significant and parallels export jumps in countries such as Hungary, Israel, A rgentina, and
Poland, the volume of trade falls well below trade volumes in other emerging markets such as Brazil, Mexico, South Korea, and Taiwan (see Table
12.1 for comparative figures). What is more problematic is that Turkey’s
apparently declining trade competitiveness comes in the midst of globalization. While Turkey was the first developing country to enter into the
Globalization and Turkey’s Changing Political Economy
195
world’s most competitive top-twenty list in 1986, Turkey’s ranking had
dropped to fortieth in 1998.17 The export-import coverage ratio never really
went beyond 60 percent, and Turkey’s trade deficit doubled from $9.3 billion in 1990 to $18.9 billion in 1998. The initial surge in trade deficits
immediately after the start of the customs union, however, appears to have
at least been stabilized in 1998.
Even though there has been a significant increase of industrial products
in Tu r k e y ’s export composition, Turkey did not have much success in
diversifying its exports, Textiles, for instance, accounted for more than 38
percent of total exports. Agriculture accounted for 11 percent, iron and steel
products 10 percent, and food industry 9 percent.18 Overall raw materials
constitute more than 25.0 percent of Turkey’s exports, consumer goods
constitute 58.0 percent and investment goods only 16.3 percent. Of this last
16.3 percent, 8.9 percent is in construction goods, which is the other competitive sector in Turkey. Such excessive reliance on textiles makes Turkey
vulnerable. Geographic dispersion in Turkey’s exports has been rather limited as well. The disproportionate reliance on Europe has left Turkey vulnerable to demand fluctuations there: slow demand in Europe, for instance,
was responsible for declining exports in 1998.
Furthermore, until the 1990s Turkey had traditionally relied on cheap
labor in its exports. Real wages, however, have steadily, albeit very slowly,
increased in Turkey since 1991. The hourly wage in 1995, for instance, was
approximately 35 cents in the private sector and 52 cents in the public sector. Although these wages may appear very low by world standards, Turkey
faces tough competition, especially from Southeast Asia and China, where
wages are even lower. The fact that the main export item of these countries
is also textiles creates significant problems for the future export growth of
Turkey’s textile industry. Meanwhile, Eastern European economies also
began to compete with Turkey in the textile and manufacturing industry
exports to the EU market. As the importance of cheap labor for world competitiveness declined and was increasingly replaced by quality of products,
marketing, brand recognition, information on customer taste, and local
assets, Turkey began to face the urgent need of restructuring its industries.
As for agriculture, Turkey has considerable comparative advantage in
dried fruits, tobacco, figs, apricots, and hazelnuts—but attempts to liberalize trade in this sector have not been successful (agriculture remains one of
the most protected sectors in global trade). Furthermore, the customs union
agreement completely excluded the agricultural sector: the common agricultural policy in Europe is based on substantial national subsidies due
largely to powerful lobbies, and the fact that Turkey’s agricultural exports
directly compete with those of Greece, Spain, and Portugal make it highly
unlikely that any trade liberalization will occur between Turkey and the
European Union.
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Turkey in World Politics
Finally, another reason behind Turkey’s unsustained export performance is that developing countries have begun to liberalize their trade at the
same time. Today about seventy developing countries and some European
states have economies in which exports account for one-third of their GDP.
This wholesale shift toward an export orientation in the early 1980s (largely due to the debt crisis and its aftermath) has increased global competitive
pressures in export markets.
Globalization of Foreign Direct Investment
For the world as a whole, the ratio of FDI stock to GDP has increased
steadily since 1980. In fact during the past decade and a half, global integration seems to have proceeded faster through FDI than through trade. 19
About one-third of trade has occurred within global production networks:
transnational corporations (TNCs) comprise over 500,000 foreign affiliates
established by 60,000 parent companies.
But once again, just as with the case of global trade, most FDI inflows
and outflows actually occurred among the most advanced economies. Out
of the total $2.4 billion outward FDI stock of the United States, Europe,
and Japan, $1.5 billion was invested in each other’s economies in 1997.
Ninety percent of the top 100 TNCs in 1998 have their headquarters in
these same countries. 20 Most important, the FDI that went to the developing world also originated in a handful of countries. “The five largest host
countries over the past decade or so (China, Brazil, Mexico, Singapore and
Indonesia in that order on the basis of inward FDI stock) accounted for 55
percent of the FDI inflows to the developing countries in 1998 ($166 billion) compared to 41 percent in 1990.”21
Just as was the case in global trade, Turkey is not an important actor in
terms of FDI flows (see Table 12.2). Of the $166 billion worth of inward
FDI to the developing world in 1998, Turkey received approximately $1
billion. The contrast is most evident in the case of China and Brazil, which
received approximately $40 billion and $20 billion in annual FDI inflows,
respectively, in the past several years (see Table 12.3 for comparative figures).
Even though there was a considerable jump in inward FDI in the latter
half of the 1980s, this flow was not sustained in the 1990s. Actual FDI
inflows increased from an annual average of $128 million during the 1980–
1987 period to $488 million in 1988, $855 million in 1989, and $1.05 billion in 1990. But since 1990, the annual FDI flow has stagnated, hovering
around $1 billion. The cumulative FDI inflow into Turkey has barely
reached $11 billion since the early 1980s. While inward FDI stock accounted for an average 16.0 percent of GDP for the developing countries in
1997, this percentage was 3.5 for Turkey.22
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Globalization and Turkey’s Changing Political Economy
Table 12.2 Growth of FDI in Turkey by Years
Years
1954–1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Total
Foreign capital ventures in Operation
(number of firms, cumulative totals)
N/A
78
109
147
166
235
408
619
836
1,172
1,525
1,856
2,123
2,330
2,554
2,830
3,161
3,582
4,068
4,053
4,817
4,533a
Actual annual inflow,
US$ millions
228
35
141
103
87
162
158
170
239
488
855
1,055
1,041
1,242
1,016
830
1,127
964
1,032
976
4 1 4b
12,085
Source: Foreign Investors Association of Turkey (YASED) Fact Sheet of Turkey.
Notes: a. As of August 1999.
b. As of May 1999. These numbers are approximations: records are kept in Turkish liras.
What is more surprising is that this stagnant FDI performance has
occurred in the midst of significant liberalization of the FDI regime in
Turkey. The creation of the Foreign Investment Department within the state
planning organization to streamline FDI applications in 1984, for instance,
l a rgely eliminated bureaucratic delays and uncertainties for foreign
investors. The establishment of free-trade zones where Turkish labor laws
would not apply for ten years and foreign investors would be tax exempt,
was another strategy to lure FDI started in the mid-1980s. Furthermore,
establishing build, operate, and transfer models to attract FDI was an institutional innovation particularly in the transportation and telecommunication sectors, where there had been insufficient and often mismanaged public investments. Effecting legislative changes to allow for 100-percent
ownership in 1986 and eliminating export requirements and fiscal discrimination were all parts of the FDI liberalization regime.23
In 1987, Turkey also signed and ratified the Convention on the
International Center for Settlement of Investment Disputes and the
Multinational Investment Guarantee A g e n c y. The Foreign Capital
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Turkey in World Politics
Table 12.3 Turkey’s Global Finance in Comparative Perspective
Millions of dollars
Net private flows
External debt
FDI
Total
millions US$
Selected
Countries
1990
1997
1987–1992
annual avg.
1997
1990
1997
Turkey
Mexico
Brazil
Argentina
S. Korea
Malaysia
China
Hungary
Poland
Israel
1,782
8,253
562
-203
1,056
769
8,107
-308
11,580
—
12,221
20,533
43,377
19,834
13,069
9,312
60,828
2,605
26,300
—
578
4,310
1,513
1,803
907
2,387
4,658
675
183
187
805
12,831
18,875
8,094
2,844
5,106
44,236
2,085
4,908
1,455
49,424
104,431
119,877
63,233
46,976
15,328
55,301
21,276
72
—
91,205
149,690
193,663
123,221
143,373
47,228
146,697
24,373
10,600
—
Present
value
% GNP
1997
43
37
23
38
33
48
15
52
—
Source: World Development Report 1999/2000. The data for foreign direct investment are
from the World Investment Report 1998 because these data is more comparable. The discrepancy in the Turkish data between Table 12.2 and Table 12.3 stems from difficulties in measuring realized, versus authorized, FDI, as well as the record-keeping techniques in the State
Planning Organization and the Treasury. Since the FDI numbers are calculated in Turkish liras,
conversion to the dollar is very difficult.
Framework Decree of 1995 also aimed to confirm the equal treatment of
domestic and foreign firms; foreign firms could also make use of the existing incentive mechanisms for investments available to domestic companies.
By the end of 1998, Turkey had signed an agreement to avoid double taxation with thirty-nine countries and completed investment protection and
promotion agreements with sixty-four countries. In 1999, the government
also passed legislation to accept international arbitration rules in FDIs in
the public sector.
Why has there been limited FDI inflow in the midst of liberalization?
Reasons include macroeconomic instability, political uncertainties, lingering implementation problems in FDI regulatory frameworks, and changing
FDI patterns in the global economy. Liberalization of regulatory regimes
for FDI was a global trend. In 1998, out of 145 regulatory changes in sixty
countries 94 percent was in the direction of creating a more favorable environment for FDI. The number of bilateral investment agreements also
increased considerably, reaching 1,726 by the end of 1998. By the end of
1998, the number of treaties for the avoidance of double taxation had
reached a total of 1,871. 24 In short, as with the trade regime, Turkey’s liberalization coincided with the liberalization of the policy framework for FDI
Globalization and Turkey’s Changing Political Economy
199
around the world, creating immense competition among developing countries in particular to lure FDI.
In addition, the increasing location options for TNCs have been coupled with the changing logic of transnationalization. The traditional determinants of FDI used to be natural resources, market size, or cheap labor,
but efficiency-seeking FDI has become increasingly salient. In other words,
as internationally integrated production and marketing systems become
ever more important for TNCs, the firms begin to seek such additional
location advantages as reliable labor supply, physical infrastructure, or easy
access to international markets.25 This also explains why most FDI is concentrated in the most advanced economies. 26 This new environment of
investment required countries interested in attracting FDI to offer more
than a liberal policy framework, a situation partly explaining the low levels
of FDI in Turkey.
Turkey has attracted most of its FDI from the European-U.S.-Japanese
triad economies. When FDI stock in Turkey is broken down according to
the home country origins of TNCs, France emerges as the biggest investor
in Turkey, followed by the United States. The Netherlands and Germany
are third and fourth respectively. Italian, Swiss, and British firms are big
investors as well. Finally, Japan became an important investor in the 1990s.
These eight countries account for 80 to 85 percent of total FDI in the country.
The sectoral breakdown of the FDI in Turkey also fits global trends. In
manufacturing, the top FDI receiving sectors are automotive, food industries, chemicals, and electronics. But as is the case in the overall FDI flows
into the developing countries, the most significant increase in FDI inflows
into Turkey is in services. Banking, trading and tourism are the top three
industries in service sector in terms of foreign investment.(27) Even though
the foreign direct investment in manufacturing still exceeds that of services
in Turkey, the banking industry has received the most FDI in recent years.
This is not surprising as the largest share of inward FDI stock in the world
is in financial services.
Global Financial Integration
Turkey could have compensated for the low level of FDI if non-FDI private
capital flows into the country, which became the largest source of capital
for most emerging markets in the 1990s, had also increased during this
period. But once again, Turkey lagged behind global trends. By the 1990s,
rapid improvements in technology for collecting and disseminating information—coupled with financial liberalization of capital account transactions, opening of domestic financial markets, and creation of many new
financial instruments—have created a multitrillion dollar pool of globally
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Turkey in World Politics
mobile capital. International portfolio flows—bonds and equities—have
risen sharply in the 1990s, constituting more than one-third of total private
capital flows.
Firms all around the world have begun to raise more funds from international securities markets. Since 1993, the amount of outstanding international debt issued by all firms has risen by 75 percent, reaching $3.5 trillion
in early 1998. Meanwhile, the increasing number of international transactions has also led to an eightfold increase in foreign exchange turnover,
reaching a daily amount of $1.5 trillion. 28 Mutual funds, pension funds,
insurance companies, hedge funds, and other asset managers compete with
banks for national savings. Most important, institutional investors have
become more willing and able to invest abroad. It is estimated that these
investors had invested $5 trillion of the total $20 trillion dollars that they
controlled in international markets by 1995. 29
In the midst of rapidly integrating global markets, two major factors
have driven investors’ growing interest in developing countries: one is the
search for higher returns, and the second is opportunities for risk diversification.30 Increased market accessibility in the emerging markets, thanks to
capital market deregulation and financial liberalization, was an important
factor in investors’ decisions. Still, most analysts agree that international
factors, such as the cyclical downturn of global interest rates and the business cycle in industrial countries, are what accounted for the resumption of
private capital flows to developing countries in the 1990s. “Capital flows to
developing countries respond less to the specific policies and circumstances of host countries than to conditions in international markets. It is
not that governments cannot tax capital, it is that local real interest rates
must be high and exchange rate expectations must be stable if global liquidity is tight. Domestic policy is then constrained by the requirement of
high interest rates and stable exchange rate expectations.” 31 Meanwhile,
incomplete information on emerging markets, irrationality, and the potential for herd behavior among investors can also increase capital flow
volatility.
Indeed, as the Mexican peso crisis (1994), the Turkish financial crisis
(1994), and the Asian financial crisis (1997), followed by the Russian and
Brazilian crises, have all shown, increased financial integration can be a
mixed blessing. Global integration can boost growth by raising investments
and improving returns on investments; countries can override constraints
imposed by a lack of sufficient domestic savings; and such financial integration can shield individuals from adverse economic developments in their
home markets through diversifying assets and allowing for a smooth transition in sudden declines of income. But financial integration also means
surges, capital reversals, and increased volatility for developing countries.
Globalization and Turkey’s Changing Political Economy
201
Countries affected by the latter currents become extremely exposed to sudden changes and shocks in the international economy, and the effects of
domestic shocks tend to become magnified.32 Such shocks in turn tend to
have immense developmental consequences, with related banking and currency crises possibly delaying economic development for years.33
Despite the risks of financial integration, however, developing countries have engaged in a race to capital account liberalization, currency convertibility, and financial deregulation. Turkey was no exception. First came
the liberalization of its foreign exchange regime that included a devaluation
and commitment to adopt realistic flexible exchange rates in the 1980s.
(Real exchange rates were indeed instrumental in the country’s phenomenal
export growth, particularly in the post-1980 period.) Lowering legal
reserve requirements and liquidity ratios, creating interbank money markets, reopening the Istanbul stock market, liberalizing interest rates, and
accepting a fully convertible currency in 1989 were steps toward significant financial deregulation. Decree 32 (1989) also removed all restrictions
on overseas institutional and individual investment in securities listed on
the Istanbul stock exchange. Hence, the Turkish stock and bond markets
became open to foreign investors without any restrictions on the repatriation of capital and profits. Decree 32 also allowed Turkish citizens to buy
foreign securities.
That is why Turkey’s status has shifted from that of a country with
“medium” financial integration in the 1985–1987 period to a “relatively
high financial integration” in the 1992–1994 period.34 Indeed, there was a
significant surge in private capital flows into Turkey in the 1992-1993 period, largely based on extremely high interest rates in Turkey at the time. Yet
the volume of capital inflows remained small, particularly when compared
to those of other countries such as Mexico or Chile at the time. 35 T h e
cumulative inflow, which accounted for 5.7 percent of Turkey’s GDP at the
end of 1993, was low in comparison to that of Malaysia, for instance,
where annual capital flows accounted for 23.2 percent during 1989–1995
period. Open capital accounts might not in themselves be problematic, but
most of the capital flows into Turkey in the 1992–1994 period were portfolio investments and short-term loans, which are easily reversible. 36 When
the reversal of capital flows started in 1994 following a loss of confidence
in government policies, the outcome was a significant external shock for
Turkey. The magnitude of capital reversal as a percentage of GDP reached
10 percent during the 1993–1994 period, causing a contraction of the GDP
growth rate by 9 percent. 37 Considering that the capital reversal-GDP ratio
in Mexico in the aftermath of its debt crisis was 12 percent, the serious
impact on the sudden withdrawal of capital in Turkey becomes clear.
Turkey’s economy has also been negatively affected by the Asian and
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Russian financial crises that brought in 1997 and 1998 negative portfolio
investment outflows. As a Turkish State Planning Organization report on
1998 developments explains:
The contagion effect of the Russian crisis was immediate because Turkey
and Russia have been attracting similar investor groups. Moreover, since
Turkey has a very liquid bonds market, foreign investors liquidated their
Turkish T-bill position in order to cover their losses in other markets.
Hence, as foreign investors pulled out, yields on Treasury bills jumped
from 77 percent on average in July 1998 to 136 percent in September and
145 percent in the last quarter. External debt spreads also increased
sharply during the August-September period. The equity market was
affected significantly and the Istanbul Stock Exchange Index fell by 47.5
percent during the peak of Russian crisis. The Central Bank intervened
heavily in the foreign exchange market in order to provide stability of currency depreciation. Hence official reserves declined from $26 billion in
June to around $21.5 billion in September and $19.7 billion at the end of
1998.38
In short, despite its relatively lower levels of financial integration, the
Asian and Russian crises have indicated that Turkey’s economy is also
quite vulnerable to changes in global capital flows. As is the case in all
developing countries, financial liberalization has brought its own risks and
volatility.
What then has gone wrong in Turkey’s overall integration into global
markets in terms of international trade, production, and finance? As suggested above, part of the answer lies in the dynamics of globalization itself.
Turkey still faces closed markets in agriculture and textiles. The main logic
of global FDI has shifted from pure market and natural resource concerns
to efficiency and productivity considerations, altering conditions for
attracting FDI to Tu r k e y. Global financial markets have also become
extremely volatile, and all the trends have placed significant constraints on
Tu r k e y ’s policy options. The growing regionalism in global trade, for
instance, has increased Turkey’s desire to formalize its trade ties with the
European Union.
Most important, international constraints were also crucial in Turkey’s
adoption of neoliberal policies starting in the 1980s. Turkey was among the
first in the developing world to liberalize its trade and FDI regimes and to
eliminate capital controls. Yet this shift occurred at a time when developing
countries had started to race in the same direction. Hence, a liberal policy
framework became a necessary but insufficient condition for successful
integration into global markets.
Turkey’s “lost decade” of the 1990s, however, cannot be attributed
solely to globalization dynamics and liberalization pressures. All emerging
markets faced similar challenges and engaged in liberalization policies.
Globalization and Turkey’s Changing Political Economy
203
How countries liberalized, the timing and sequence of their liberalization
policies, and most important, the domestic institutional framework in
which deregulation and liberalization took place all played a crucial role in
a country’s successful adjustment to globalization. Consider a brief review
of the fundamental problems embedded in Tu r k e y ’s domestic political
economy and how they relate to Turkey’s ability to respond to the globalization challenge.
Liberalization: What Went Wrong?
At first glance, Turkey is among the first developing countries to liberalize
their economies and further integrate into world markets. However, Turkish
economic liberalization during the 1980s was unorthodox in many ways. 39
Although there was considerable liberalization in foreign economic policy,
as described above, it proved more difficult to undertake long-term structural reforms such as privatization and achieving the so-called retreat of the
state on the domestic front. As John Waterbury, Ay≈se Buπra, Ziya Öni≈s, and
David Waldner have all argued, Turgut Özal’s liberalization agenda was
also accompanied by the expansion and concentration of the state’s economic power.40 The public sector still dominated in the economy, and the
problem of endemic fiscal deficits with inadequate tax revenues and rising
external/internal debt remained unresolved.
In describing the 1980s, for instance, Waterbury argued that the “Özal
government favors turning the economy over to the private sector and reinforcing the state. It has promoted deregulation and liberalization in the
name of efficiency and increased the scope of discretionary allocations in
the economy. It has promoted the survival of the fittest in the export sector
and entitlements elsewhere” (author’s emphasis).41 The creation of the outof-budget funds, such as those for public housing and public transportation,
were under the direct control of the prime minister. The total number of
such funds ranged from 96 to 134, and total assets in the 1987–1988 period
were at $3.5 billion to $5.7 billion. In 1988, the estimated public housing
and public transportation funds had reached a value of $2.2 billion.42
In essence, Turkey’s liberalization did not transform the behavior of
economic groups that have long relied on import substitution policies.
Instead, a new export elite began to prosper largely because of export subsidies and export promotion schemes. Side payments to various interest
groups, such as subsidies for the agricultural elite and industrial incentives
for various industrial groups, as well as the lowering of import tariffs on
certain goods, were all crucial for building various large electoral coalitions
for successive governments in the 1980s and 1990s.
Ironically, democratic pressures and electoral concerns increased the
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need for more side payments and extention of state patronage. Thus, even
though economic policies changed, the institutional setting, the nature of
bureaucracy, and the personalized, highly politicized distribution of state
patronage remained intact. It was therefore not surprising that the fate of
economic reforms was very much linked to who was in power and what
kind of side payments was made.43
The center-right coalitions of the Özal governments since 1987, as well
as the governments led by Süleyman Demirel and Tansu Çiller, distributed
such payments to their constituencies, which included farmers in the case
of Çiller’s True Path Party (explaining above-the-world-market base prices
for farmers) and the urban workers in the case of the Republican People’s
Party (wage increases in the 1990s). Growing support for the new
Anatolian business community and small-to-medium-sized enterprises during the True Path and Welfare Party coalition (July 1996–June 1997) and
rising base prices for tea during the Motherland Party coalition government
(1997–1999) constitute examples of side payments by existing governments.44 Increasing political fragmentation in the parliament and the need
for coalition governments and frequent elections throughout the 1990s also
induced populist policies as each party tried to use state resources for its
own constituency.
The problems with privatization, for instance, also reflected the paradox of a liberal agenda coexisting with a state based on patronage. Despite
some success with privatization in the 1980s, less than 10 percent of the
privatization program’s goals were achieved in the 1990s. In a 1996 World
Bank report on privatization, Turkey ranked among the worst three privatizing countries. Between 1987 and 1997 total revenue from privatization
did not exceed $3 billion. 45 How privatization was essentially linked to
state patronage also became clear in the privatization attempt of a major
state bank, Türkbank, at the end of 1998. The open attempt of the Yılmaz
government to intervene in the auctioning procedures revealed the ties
between the government and “favored” business community, eventually
bringing about the collapse of the minority government.
The failure of public-sector reform, the persistent problem of rent distribution, and the reasons behind the populist strategies of successive governments have been discussed extensively. 46 Here, two major points need to
be underlined. One is that these problems are clearly associated with the
nature of state-society relations in Turkey and the absence of what Peter
Evans has called the “embedded autonomy of the state.”47 The absence of
institutionalized channels of information and negotiation between state and
society, along with a certain degree of insulation of state bureaucracy to
provide for policy coherence, led to continual policy oscillations and inconsistencies throughout the 1990s. 48
Second, and perhaps more important, populist pressures do arise from
the nature of distributional conflicts. Liberalization, for instance, has meant
Globalization and Turkey’s Changing Political Economy
205
losses for some: the agricultural sector, urban workers, and industrialists
used to Turkish import substitution policies were, of course, among the
opponents of liberalization. As described above, various governments since
the late 1980s have tried to mediate these conflicts by distributing state
rents to their respective constituencies. The more inequality in income distribution increases, and the more there is a regional discrepancy, the more
the tendency for rent distribution, which typifies Turkey’s experience in the
1990s.
Regardless of what may have caused these populist strategies and the
distribution of funding by the political elite, increased state spending and
growing public deficits had fully returned in the second half of the 1980s.
Payoffs to constituents, especially to the rural sector, resulted in relaxed
austerity measures and spiraling inflation. Even though the commitment to
liberal reforms did not change with successive governments in the 1990s,
the return of macroeconomic instability coupled with increasing political
fragmentation made Turkey less attractive for potential foreign investors.
All the expected benefits of liberalization (i.e., increased capital flows, foreign direct investment, and greater exports) failed to materialize. Declining
investor confidence launched a well-known vicious cycle of rising interest
rates, soaring public debt leading to a further loss of confidence, yet higher
deficits, and higher interest rates. 49
Meanwhile, the sudden capital outflow during the 1994 financial crisis
was followed by a renewed surge in portfolio investments and short-term
loans until 1997, and then by the Asian and Russian crises that generated
yet another capital reversal in 1998, which also undermined macroeconomic stability. The essential problem, however, was how capital flows were
used within Turkey: because the capital did not produce significant growth
generation, it did not solve the problems caused by transient high currentaccount deficits and indebtedness. 50
There were factors that created fundamental problems for Turkey’s
political economy in dealing with capital flows. One was the debt burden
associated with capital inflows, bringing growing reliance on domestic borrowing and higher interest rates: extremely high interest rates had a negative effect on productive investment. Rent-seeking activity, coupled with
i n e fficient state economic enterprises that led to high deficit spending
meant serious misuse of public funds. Finally, shallow financial markets
made the creation of speculative rent extremely easy, particularly for foreign investors. In short, large public deficits and an inefficient public sector
largely undermined Turkey’s ability to take advantage of international capital flows.
A similar picture can be drawn of Turkey’s ability to deal with FDI and
international trade. Turkey’s export performance in the 1980s was not complemented by increased industrial investment and augmented productivity.51 The increase in manufactured goods’ share in exports had relied large-
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Turkey in World Politics
ly on increasing existing capacity utilization ratios rather than new investments. Furthermore, export performance has largely been a function of
export promotion schemes and exchange rate devaluations. Low private
investment in manufacturing largely due to high interest rates and the elimination of export promotion schemes, particularly after Turkey’s entry to
the EU customs union, explain why Turkey could not sustain its export performance.
Turkey’s inability to attract FDI can largely be attributed to domestic
macroeconomic and political uncertainty. The kind of foreign firms that
invest in a given economy and the factors that motivate FDI can shape patterns of industrialization and technology development. Given the reluctance of foreign investors to come to Turkey, it governments have found it
extremely difficult to drive an effective bargain with incoming T N C s .
Technology transfer has been limited, and FDI in such sectors as the chemical, pharmaceutical, and cement industries has largely been motivated by a
desire to circumvent strict environmental regulations in home countries. In
short, not only has Turkey been unable to attract significant FDI but it has
also been unable to shape the existing FDI inflow for its development and
industrialization purposes.
In summary, one of the striking aspects of Turkey’s political economy
since the 1980s has been the state’s inability to couple its liberalization
strategies with investment and productivity growth. Yet as Dani Rodrik has
aptly put it:
What drives economic growth in practice is a process whereby capacity
expansion and profitability of private investment feed on each other. . . .
Governments have to be imaginative in devising investment strategies that
exploit their country’s resources and capabilities, while respecting administrative and budgetary constraints. A useful starting point is to acknowledge that openness is a part of a development strategy, it is not substitute
for one. 52
The fundamental question that needs to be asked in facing the challenge of globalization is not simply how much to liberalize, but how to
increase private investment and economic growth. Clearly, as is the case in
most developing countries, liberalization by itself is not a panacea for solving developmental problems in Turkey.
Toward a New Political Economy
and New Economic Diplomacy
There is no doubt that globalization has introduced significant policy constraints on Turkey’s transforming its political economy from a protected and
Globalization and Turkey’s Changing Political Economy
207
closed regime to an export-oriented liberal one. Yet Turkey’s economic performance in the 1990s, when compared to that of the previous decade or to
changes in other emerging markets, has been quite disappointing. While
other national economies have been able to attract a significant amount of
FDI and portfolio investments, and become significant players in regional
and global trade, Turkey has lagged. Rapid technological changes and the
pace of financial integration simply caught Turkey off guard. The liberalization strategies adopted earlier as a response to globalization pressures were
not sufficient to reap the benefits of a highly interdependent global economy.
Openness was not enough to sustain Turkey’s economic performance.
Creating an environment conducive to private investment and undertaking
necessary reforms to reduce the damaging effects of patronage was necessary. Ironically, Turkey’s open financial system actually fueled successive
governments’ increasing use of deficit spending for their own political
ends. In short, Turkey got the worst of both worlds: it became a liberal
economy but not sufficiently enough to push for public-sector reform and
end patronage-based politics. Furthermore, it liberalized its economy without complementary investment strategies and without setting up the necessary institutional framework to resolve the distributional conflicts that will
naturally result from openness and liberalization. Instead, extreme forms of
popular spending and spiraling public deficits accounted largely for
Turkey’s stagnant economic performance.
This is why improving Turkey’s economic standing in the global economy will increasingly rely on the country’s ability to implement institutional and public-sector reforms. These reforms need not follow the neoliberal
recipes often associated with IMF and World Bank programs: in fact, an
unquestioned acceptance of these neoliberal policies might be the source of
certain economic problems. Each country has to come up with its own
institutional solutions and development strategies.
Thais is also why it is time to reconsider Turkey’s foreign economic
policy. So far, Turkey has simply applied a liberalization strategy in its
external ties, but experience has made clear that this is not enough or is
even at times counterproductive. What is needed instead is to answer Dani
Rodrik’s question: How can we make openness work for Turkey’s economic growth and development purposes? 53 The solution requires ongoing
coordination of domestic industrial strategies, technology policies, and
incentive mechanisms with those of foreign economic venues. It has
become increasingly clear, however, that countries that effectively combine
proactive foreign economic strategies with domestic institutional reforms
and development goals will become significant actors in the global economy. After all, even though globalization places significant constraints on
national actors, it is still the national policy framework that can and will
shape the prospects of a state’s development.
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Turkey in World Politics
Notes
1. In its first meeting in Berlin on December 16–17, 1999, the G-20 discussed issues of tackling extreme indebtedness, coordinating currency values, and
transparency in economic institutions. See Financial F orum, December 17, 1999.
2. For recent globalization debates, see Paul Hirst and Graham Thompson,
Globalization in Question (London: Polity Press, 1996).
3. For the first view, see Barbara Stallings, Global Change and Re gional
Response: the New International Context of Development (Cambridge: Cambridge
University Press, 1995) and Anne Hoogvelt, Globalization and the P ostcolonial
World, (Baltimore: John Hopkins University Press, 1997). The latter is particularly
prevalent among analysts of financial integration where financial liberalization and
deregulation are correlated with economic growth. See, for instance, Dennis Quinn
“The Correlates of Change in International Financial Regulation” A m e r i c a n
Political Science Review 91 (1997): 531–551. For a good review, see Marco Pagano,
“Financial Markets and Growth” European Economic Review 3 (1993): 613–622.
4. For this group see, John H. Dunning, Governments, Globalization, and
International Business (Oxford: Oxford University Press, 1997); John H. Dunning,
Alliance Capitalism and Global Business (London: Routledge, 1997); K. Ohmae
The End of the Nation State (New York: Free Press, 1995).
5 . N gaire Woods “ Editorial Introduction: Globalization: Defi n i t i o n s ,
Debates and Implications,” Oxford Development Studies 26, 1 (February 1998):
5–15.
6. For an excellent review of these issues, see Geoffrey Garrett, “Global
Markets and National Politics: Collision Course or Virtuous Circle?” International
O rg a n i z a t i o n 52, 4 (1998): 787–824; Gµnther G. Schulze and H. Ursprung,
“Globalisation of the Economy and the Nation State,” World Economy 22, 3 (1999):
295–352; Benjamin Cohen. “Phoenix Risen: The Resurrection of Global Finance,”
World Politics 48 (1996): 268–296.
7. P. Hirst, and G. Thompson. Globalization in Question.
8. World Bank, World Development Report 1999/2000 (Washington, D.C.:
World Bank, 1999), p. 33.
9 . Charles Oman. Globalization and Regionalisation: the Challenge for
Developing Countries (Paris: OECD Publications, 1994).
10. Dani Rodrik “External Debt and Economic Performance in Turkey,” in T.
F. Nas and M. Odekon, eds., Liberalization and the Turkish Economy (Westport,
Conn.: Greenwood Press, 1988), pp. 168.
11. These reforms and their impact have been thoroughly discussed among
economists and political scientists. For a review see Tevfik F. Nas and Mehmet
Odekon, eds., The Economics and Politics of Turkish Liberalization (Lehigh, Pa.:
Lehigh University Press, 1991).
12. For a good review of the reasons for adjustment and its aftermath, see
Merih Celasun and Dani Rodrik, “Turkish Experience with Debt: Macroeconomic
Policy and Performance,” in Jeffrey Sachs, ed., Developing Country Debt and the
World Economy (Chicago: University of Chicago Press, 1989), pp.193–212; Ali
Tosun Arªcanlª and Dani Rodrik, eds., The Political Economy of Turkey: Debt,
Adjustment and Sustainability (London: Mcmillan, 1990).
1 3 . Turkish Undersecretariat of Foreign Trade, 1999 trade figures, w w w.
foreigntrade.go v.tr
14. See Appendixwa 12.1 and 12.2
15. For further elaboration of this point, see Ali Çarkoπlu, Mine Eder and
Globalization and Turkey’s Changing Political Economy
213
Kemal Kiri≈sci, Political Economy of Regional Cooperation, (London: Routledge
Press, 1998).
16. Ibid. for details.
1 7 . UN Conference on Trade and Development (UNCTAD), Wo r l d
Development Report 1999 (New York: UNCTAD, 1999), p. 23; World Economic
Forum, World Competitiveness Report: Executive Summary(Geneva: WEF, 1998),
p. 23.
1 8 . Turkish Industrialists’ and Bussinessmen’s Association (TUSºAD),
Turkish Economy 1998(Istanbul: TUSºAD, 1998), p.79.
1 9 . U N C TAD, World Development Report 1998. ( N ew York: UNCTA D ,
1998), p. 7
2 0 . U N C TAD, World Development Report 1999. ( N ew York: UNCTA D ,
1999), p. 22.
21. Ibid., p. 19.
2 2 . Turkish Foreign Investors Association YASED Fact Sheet (Istanbu l :
YASED Publications, 1999).
23. For an excellent review of the FDI regime in the post–1980 period, see
Ziya Öni≈ s . “Liberalization, Transnational Corporations and Foreign Direct
I nvestment: The Experience of the 1980s,” in Fikret ≈ Senses, ed., The Recent
Industrialization Experience of Tu r key in Global Contex t ( Westport, Conn.:
Greenwood Press, 1994), pp. 91–109.
24. UNCTAD World Development Report 1999 (New York: UNCTAD, 1999),
p. xviii.
25. Ibid., p. xxv.
26. For an analysis of the changing geography of FDI, see John Dunning.
“Globalization and the New Geography of Foreign Direct Investment,” Oxford
Development Studies 26, 1 (February 1998): 47–71.
27. Those figures and the lineup of the countries change quite often because
the State Planning Organization and the Treasury keep different records. The numbers for FDI inflows in Turkey are also different in State Planning Organization and
Treasury largely because the investment numbers are recorded in Turkish liras,
which makes it very difficult to come up with reliable dollar figures.
28. World Bank, World Development Report 1999/2000: Entering the 21st
Century (Washington, D.C.: World Bank, 1999), pp. 70–71.
29. Ibid., p. 71.
30. World Bank. Private Capital Flows to Developing Countries: The Road to
Financial Inte gration (Oxford: Oxford University Press, 1997).
3 1 . For excellent elaboration of this argument, see Sylvia Maxfi e l d ,
“Understanding the Political Implications of Financial Internationalization in
Emerging Market Countries,” World Development 26, 7 (1998): 1204.
32. World Bank, Private Capital Flows to Developing Countries: The Road to
Financial Inte gration (Oxford: Oxford University Press, 1997), pp.27-28.
33. As World Development Report 1999/2000 reports, “Between 1977 and
1995, 69 countries faced banking crises so severe that most of their bank capital was
exhausted. Recapitalizing these banks was extremely expensive with budgetary
costs reaching 10 percent of GDP in Malaysia 1985–1988 and 20 percent of GDP in
Venezuela 1994–1999.”
34. Ibid., p. 18.
35. IMF Financial Statistics (1994) indicate that while total capital inflow to
Mexico for instance reached approximately $100 billion during 1990–1993, Turkey
received about $16 billion in the same period.
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Turkey in World Politics
36. For an overview of this issue see Cevdet Akçay and ≈Sule Özer, “Current
Account Position of the Turkish Economy: Is There A ny Cause for Concern?”
Boπaziçi Journal: Re view of Social, Economic and Administrative Sciences 12, 1
(1998): 39–53.
37. World Bank, Private Capital Flows to Developing Countries, p. 28.
3 8 . O fficial site of the State Planning Organization: h t t p : / / w w w. d p t . g ov.
tr/dptweb/ekogel/edp.html
39. The term is borrowed from Ziya Öni≈s. “Political Economy of Turkey in the
1980s: Anatomy of Unorthodox Liberalism,” in Metin Heper, ed., The State and
Economic Interest Groups, pp. 27–40.
40. See John Waterbury, “Export-Led Growth and Center-Right coalition in
Turkey,” Comparative Politics 24 (1992): 127–145; Ay≈se Buπra, State and Business
in Modern Turkey: A Comparative Study (New York: State University of New York
Press, 1994); Ziya Öni≈s “Unorthodox Liberalism”; David Waldner, State Building
and Late Development (Ithaca, N.Y.: Cornell University Press, 1999).
4 1 . J. Wa t e r bu r y, “Export-led Growth and the Center-Right Coalition in
Tu r key,” in Nas and Odekon, eds., Economics and Politics of Tu r k i s h
Liberalization, pp. 46.
42. Ibid. pp.52.
43. Metin Heper, ed., The State and Economic Interest Groups.
44. There is an extensive literature on the basis of patronage politics in Turkey.
For a good example see Ali Çarkoπlu, “The Interdependence of Politics and
Economics in Turkey: Some Findings at the Aggregate Level of Analysis,” Boπaziçi
Journal: Re v i ew of Social, Economic and A d m i n i s t rative Studies 9, 2 (1995):
85–108.
45. World Bank, Global Economic Prospects and the Developing Countries
(Washington, D.C.: World Bank, 1996).
46. Populism has always been endemic to Turkey’s political economy. For an
excellent analysis of the origins and development of populism, see ºlkay Sunar,
“Populism and patronage: The Demokrat party and its legacy in Turkey” Il Politico
(anno V): 745–757; and “The Politics of state interventionism in populist Egypt and
Tu r key,” in D evelopmentalism and Beyond: Society and Politics in Egypt and
Turkey (Cairo: American University in Cairo Press, 1994).
47. Peter Evans. Embedded Autonomy: States and Industrial Transformation.
(Princeton, N.J.: Princeton University Press, 1995).
4 8 . For the problem of too much autonomy of the state, see Mine Eder,
“Becoming Western: Turkey and the European Union,” in Jean Grugel and Will
Hout, eds., R egionalism A c ross the North-South Divide: State Stra t egies and
Globalization (London: Routledge Press, 1999), pp. 79–95.
4 9 . For an analysis of Tu r key’s public deficits, see ºzak Atªyas and ≈S erif
Sayªn, “A Political Economy Perspective on Turkish Budget Deficits,” Boπazici
Journal: Re view of Social, Economic and Administrative Sciences 12, 1 (1998):
55–79.
50. A. Fishlow has aptly called this the difference between revenue borrowing
and developmental borrowing. See Albert Fishlow, “Lessons from the past: Capital
m a r kets during the 19th century and the interwar period,” I n t e r n a t i o n a l
Organization 16 (1985): 83–104.
5 1 . See Ziya Öni≈ s , “The Political Economy of Export-Oriented
Industrialization in Turkey,” in Çiπdem Balªm et al., Turkey: Political, Social, and
Economic Challenge s , pp. 107–129; David Wa l d n e r, State Building and Late
Development.
Globalization and Turkey’s Changing Political Economy
215
5 2 . Dani Rodrik. The New Global Economy and Developing Countries:
Making Openness Work, policy essay 24 (Washington D.C.: Overseas Development
Council, 1999), p.16.
53. Ibid., p. 1.