Transcript Turkish Economy in 1946

Turkish Economy in the 1946-1962
Period
• External Factors:
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The end of World War II
New political order in the world economy
The deterioration of relations with USSR
Marshall Plan (a set of recommendations)
IMF & IBRD
Marshall Plan
• On June 5, 1947, speaking to the
graduating class at Harvard
University, Secretary of State
George C. Marshall laid the
foundation, in the aftermath of
World War II, for a U.S. program
of assistance to the countries of
Europe. At a time when great
cities lay in ruins and national
economies were devastated,
Marshall called on America to "do
whatever it is able to do to assist
in the return of normal economic
health in the world, without which
there can be no political stability
and no assured peace."
Marshall Plan
The official mission statement: To
give a boost to the Europe
economy, to promote European
production, to bolster European
currency, and to facilitate
international trade, especially
with the United States, whose
economic interest required
Europe to become wealthy
enough to import U.S. goods.
Unofficial goal: The containment
of growing Soviet influence in
Europe, evident especially in the
growing strength of communist
parties in Czechoslovakia, France,
and Italy.
Marshall Plan
• The first substantial aid went to Greece and
Turkey in January 1947, which were seen as
being on the front lines of the battle against
communist expansion and were already being
aided under the Truman Doctrine.
Marshall Plan
• In 1949, in response to a
request from Turkish officials
for American technical
assistance and training, an
American expert discusses
newly donated agricultural
equipment with Turkish
farmers at the Ankara
Agricultural School. (Courtesy of
the George C. Marshall Research
Library, Lexington, Virginia)
Marshall Plan
• Conditions laid down to make use of the plan:
▫ Public entrepreneurship should be constricted
▫ Private entrepreneurship should be encouraged
▫ Heavy industry (iron-steel, heavy chemical etc.)
should not be established in Turkey.
▫ Industrialization must be based on processed
agricultural products, construction materials,
leather, forest products etc.
▫ Increased tractor usage and highway construction.
Turkish Economy in 1946-1962 Period
• External Factors:
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The end of World War II
New political order in the world economy
The deterioration of relations with USSR
Marshall Plan
IMF & IBRD
International Bank for Reconstruction
and Development (IBRD)(World Bank)
• Conceived during World War
II at Bretton Woods, New
Hampshire, the World Bank
initially helped rebuild Europe
after the war. Reconstruction
has remained an important
focus of the Bank's work, given
the natural disasters,
humanitarian emergencies,
and postconflict rehabilitation
needs that affect developing
and transition economies.
International Bank for Reconstruction
and Development (IBRD)(World Bank)
• During the 1980s, the Bank was pushed in many
directions: early in the decade, the Bank was
brought face to face with macroeconomic and
debt rescheduling issues; later in the decade,
social and environmental issues assumed center
stage.
International Monetary Fund
• The International Monetary Fund was conceived at a United
Nations conference convened in Bretton Woods, New Hampshire,
U.S. in July 1944. The 45 governments represented at that
conference sought to build a framework for economic cooperation
that would avoid a repetition of the disastrous economic policies
that had contributed to the Great Depression of the 1930s.
• It was established to promote international monetary cooperation,
exchange stability, and orderly exchange arrangements; to foster
economic growth and high levels of employment; and to provide
temporary financial assistance to countries to help ease balance of
payments adjustment.
International Monetary Fund
• The IMF's resources are
provided by its member
countries, primarily
through payment of
quotas, which broadly
reflect each country's
economic size. The total
amount of quotas is the
most important factor
determining the IMF's
lending capacity.
• Current membership: 185
countries
• Staff: approximately
2,716 from 165 countries
• Total Quotas: $317
billion)
Turkish Economy in 1946-1962 Period
• Internal Factors:
▫ 1944: İvedili Plan
▫ 1947: Türkiye İktisadi Kalkınma Planı
Prepared under the control of foreigners
Transportation (highway), agriculture, energy
Private sector based industrialization
Privatization (except mining, iron-steel and railroad
construction)
 49% of expenditures will be financed by external
resources (foreign aid or credits)
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Turkish Economy in 1946-1962 Period
• Internal Factors:
▫ 1950: Multi party system
▫ 1950: Elections (Democrat Party)
Turkish Economy in 1946-1962 Period:
General Principles
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Liberal trade
Private entrepreneurship
End of etatism
Mechanization in agriculture
Highway construction
Encouragement of foreign capital
Capital Resources
• Internal resources:
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Increase in money supply
Increased credit volume
Budget deficits (Duty losses)
Resource transfer from public sector to private
sector
Increase in
money
supply (%)
Bank credits
Budget balance
TEF Annual
change
(%)
1945
-7.6
619
+58.1
1946
6.1
785
+22.6
-3
1947
-9.2
1087
+50.8
+1
1948
5.0
1188
+65.5
+3
1949
-13.8
1069
+56.8
+11
1950
7.3
1301
-48.0
+10
1951
16.8
1779
+65.5
+6
1952
9.6
2620
-13.2
+1
1953
16.5
3429
-22.0
-
1954
3.1
4311
-173.9
+11
1955
31.5
5062
-160.5
+8
1956
29.2
5885
-182.6
+20
1957
26.6
7849
-196.2
+26
1958
3.6
8737
-155.0
+25
1959
11.5
9511
-342.2
+37
1960
12.3
9640
-387.0
+12
1961
7.7
8366
-448.7
+7
1962
9.6
10399
-100.3
+14
Capital Resources
• External resources:
▫ Borrowing from USA (1945-1949)
▫ Aids from USA (1950-1960)
▫ Foreign investments
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95 % in industry (high profits)
Partnership with domestic capital
Small scale production (not efficient)
Usage of imported inputs
▫ Petroleum Law (1954)
Agriculture
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1945: Çiftçiyi Topraklandırma Yasası
Increase in tractor usage
Tractor production
Expansion in agricultural credits
Price supports for agriculture
Agricultural output increased
1952: Et ve Balık Kurumu
Increase in fertilizer usage
Agricultural input increase rate (%)
Area cultivated
Number of tractors
Agricultural credits
1946
3.4
17.3
55.8
1947
3.7
14.7
38.1
1948
2.4
12.9
-2.9
1949
4.6
422.2
42.8
1950
9.6
80.9
22.3
1951
5.0
44.7
56.8
1952
13.7
30.9
65.2
1953
8.4
13.3
13.7
1954
4.3
6.0
14.0
1955
7.0
6.7
4.1
1956
6.9
8.6
21.2
1957
1.3
1.0
11.7
1958
2.7
-3.7
2.5
1959
1.0
-1.5
7.0
1960
1.4
0.6
3.4
1961
-1.0
0.9
29.7
Industry
• Domestic market expanded
• Import substitution policies were completed
(consumption goods)
• Private industrialization
• No new legal arrangements to support industry
• 1950: Türkiye Sinai Kalkınma Bankası (IBRD)
• Intermediate and investment good production
started
Mining and Energy
• 1954: Petroleum Law
• 1954: Mining Law
• Turkish Petroleum Corporation
(Türkiye Petrolleri Anonim Ortaklığı)
• Energy:
▫ Hydraulic Energy
▫ 350% increase from 1950 to 1960
Services
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Rapid expansion
Migration from rural areas to urban areas
Highest share in national income: 46%
Trade, transportation, construction
50
45
40
35
30
Agriculture
25
Industry
20
Services
15
10
5
0
1946
1950
1955
1960
Labor Force
• Number of workers increased
• Population increase (from 19 million to 27,5 million)
• Urbanization
▫ Increased tractor usage
▫ Housing (squatter’s house;shanty)
▫ Transportation (dolmuş)
• Ministry of Labour
• İş ve İşçi Bulma Kurumu
Labor Force
• Sectoral composition of
employment (%)
1955
1960
80,8
77,7
Mining
0,5
0,6
Industry
6,2
7,1
Energy
0,1
0,1
Services
12,3
14,5
Total
100
100
Agriculture
National Income
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1950-55: Annual growth rate 5-6%
Share of agriculture decreased
Shares of services and industry increased
Income per capita increased
Income distribution deteriorated
▫ (%)
Employment
Agriculture
75
Industry
10
Services
15
Production
35
17
48
National Income
• Consumption increased and consumption
patterns changed
▫ Demand shifted from non-durable consumption
goods to durable consumption goods
▫ Conspicuous consumption
• Black-markets
Thorstein Veblen (1857-1929)
(Ekelund, R. And R. Hebert, A History of Economic Theory and Method,
McGraw-Hill International Editions, 1990.)
▫ Theory of the Leisure Class (1899)
▫ American Institutional Economics
▫ Conspicuous Consumption:
 A person’s status is determined by how well his or
her holdings square with those of an immediate peer
group and with the group immediately above the
person
 PRODUCTIVE WORK becomes a mark of infirmity
and LEISURE becomes evidence of pecuniary
strenght. Thus a leisure class emerges in all stages of
culture, but its ultimate expression takes place in a
quasi-peaceable stage of society.
Conspicuous Consumption
(Ekelund, R. And R. Hebert, A History of Economic Theory and Method,
McGraw-Hill International Editions, 1990.)
 Conspicuous consumption: waste of goods
 Conspicuous leisure: waste of time
 Leibenstein (1950): Veblen good is the one whose
utility derived not only from the direct use of the
good but also from the price paid for it. Thus a
conspicious price is the price that a consumer thinks
the other people think he or she paid for a
commodity.
 Qd= f(P, P’)
where P is the price and P’ is the expected
conspicous price.
1st Devaluation: September 7, 1946
• TL/$=1,30  2,80
• Aim:
▫ Inflation
▫ To decrease imports and to increase exports
▫ IMF membership
International Trade
Year
Imports
Exports
Balance
1946
223,9
432,1
208,2
1950
799,9
737,6
-62,3
1952
1556,6
1016,2
-540,4
1955
1393,4
877,4
-516,0
1961
4585,1
3120,7
-1464,4
2nd Devaluation: August 4, 1958
• Exchange rate differentiation
• Stability Measures:
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Devaluation of TL
Import liberalization
To tighten money supply and expenditures
To raise the prices of SEE’s prices
Developments in the period
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1947: IMF and IBRD membership
1947: Vaner Plan
1947: Truman Doctrine
1948: Marshall Plan
1949: Tractor imports and highway construction
increased
• 1950: Democratic Party government (Adnan Menderes)
• 1950: Liberalization of imports
• 1950: SEEs were put up for sale
Developments in the period
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1952: NATO membership (Korean War)
1953: The law for free trade areas
1954: The law for encouragement of foreign capital
1958: First attempt to join European Economic
Community
• 1958: Stabilization Program (IMF)
• 1960: Military coup (May 27)