Transcript Etatism in the Turkish Economy

Etatism in the Turkish Economy
1933
1938
Etatism Period
1945
War Economy
Reasons of the Etatism Policy
• External Factors:
▫ Great Depression
▫ There was rapid industrialization in the USSR.
▫ Low export and import prices after the Great
Depression
Reasons of the Etatism Policy
• Domestic Factors:
▫ Falls in production and national income
▫ Serious falls in exports
 Foreign exchange bottlenecks
 Troubles in imports of raw materials
 Falls in employment
Reasons of the Etatism Policy
• Domestic Factors:
▫ The need for domestic production of previously
imported goods
▫ Private manufacturers were not successful
▫ The reaction to the CHF government in Anatolia
Boratav, K. Türkiye’de Devletçilik
s.143
• “... Yeni gümrük tarifesinin arkasına sığınarak dünya
fiyatından birkaç misli yükseğe satan basit ve şımarık bir
sanayi türemeye başlamıştı....İşte demir telleri keserek
çivi yapan, çiviyi dış piyasa fiyatının on misline satan,
milli sanayi olduğu için demir telleri de hammadde diye
gümrüksüz sokan şu çivi fabrikası...”
Boratav, K. Türkiye’de Devletçilik
s.145
• “ .... Samsun’a geldiğimiz zaman başka yerde
görmediğimiz bir manzara karşısında kaldık: Gece her
tarafta fevkalade inzibati tedbirler alınmıştı. İstasyondan
itibaren bütün yollar sürgülü askerler tarafından
tutulmuştu. Bu suretle askerden ve polisten mada
kimseyi görmeden, adeta bir düşman şehrine henüz
giren bir kumandan gibi Gazi ve bizler otomobillerle
Gazi’nin misafir edileceği konağa geldik.....” (1930)
Definition of Etatism
• Moderates:
▫ Government should take action if private
entrepreneurs fail to do something
• Radicals:
▫ Government must do everthing that ensures
public interest
Etatism in Turkey
• State-owned business enterprises
• The establishment and control of the economic
life
Etatism in Turkey
• 1932: The Soviet Committee headed by Prof.
Orlof prepared the first report
• 1934: This report was accepted as the “First Five
Year Industrialisation Plan”
Etatism in Turkey
• First Five Year Industrialisation Plan:
▫ Covers the 1934-1938 period
▫ Industrial production must be based on agricultural products and
natural resources
▫ Only exception: Industries that will provide high benefit to the
society
▫ To substitute imports of consumption goods by domestic
production
▫ The location of industry: Must be near to the natural and labor
resources
▫ Priority given to: Textile, mining, paper, chemistry, glass and
glassware, cement.
Etatism in Turkey
• Second Five Year Industrial Plan:
▫ 1939- period
▫ Aim was to produce intermediate and investment goods
▫ Could not be put into practice because of the WWII
Etatism in Turkey
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It was financed by domestic resources (taxes)
High-technology
Production costs were low (limited worker rights)
Complements and encourages private sector
Import substitution (consumption goods)
Etatism in Turkey: Results
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Industrialisation started
Balanced budget
Trade surplus except 1938
Foreign firms that have privileges were liquidated
Railways were nationalized
State Economic Enterprises:
▫ Sümerbank, Etibank, Denizcilik Bankası etc.
Agriculture
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Distribution of state land
Area planted increased
1932/1938: Turkish Grain Board
Prices were volatile (domestic terms of trade)
Tax burden on agriculture
Mining and Energy
• Importance given
• 1935: General Directorate of Mineral Research and Exploration
(MTA)
▫ The institute was made responsible of carrying out the necesarry studies, chemical
and technological analysis, in order to search and to find mining and stone beds,
and then to determine whether they are appropriate for operation or not, and also
to educate engineers, assisting personnel and qualified employers for the sector.
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1935: Etibank
Mines were nationalized
1940: First oil well in Raman
Not efficient
Electricity production was deficient and costs were high.
Industry
• Domestic demand was satisfied by domestic production
• Most successful industries:
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Textile (80% of domestic demand)
Sugar (No need for imports)
Cement (exported)
Iron-steel
• Average number of workers:
▫ 1933: 47; 1939:84
• Problems:
▫ Increased import demand
▫ Agriculture-industry competition
International Trade
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Infant-industry argument
Clearing agreements
Trade surpluses except 1938
1934: Foreign Trade Office
Terms of Trade were against Turkey
International Trade (million TL)
Year
Exports
Imports
Balance
1933
96,2
74,7
21,5
1938
144,9
149,8
-4,9
1939
127,4
118,2
9,2
1945
218,9
126,2
92,8
National Income
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National income increased by 9% on average
Pre-war period: Agriculture, Industry
Post-war period: Services
Income distribution problems
1940-1945 Period
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War economy
State of war: Loss of labor force
Reduced agricultural production
Reduction in tax revenues
Reduced imports
Increased military expences
Capital Resources
• Money supply:
▫ Pre-war period:
 Rate of increase ≈0,5 % annual
 GDP Growth >5-6 % annual
 No inflation
▫ Post-war period:
 483,3 % increase
 Inflation
Capital Resources
• Budget:
▫ Pre-war period:
 Budget surpluses
 70% indirect taxes
▫ Post-war period:
 Increase in direct taxes
 New taxes: Varlık Vergisi, Toprak Mahsulleri Vergisi
 Rise in government expenditures
Measures
• 1940: National Protection Law
• 1940: Trade Office
• 1942: Wealth tax (Varlık Vergisi)
▫ Law No: 4305 “İktisadi şartların darlığından doğan güçlükleri
istismar ederek yüksek kazançlar elde ettikleri halde kazançları
ile mütenasip vergi vermeyenleri istihdaf etmekte ve içinde
bulunduğumuz fevkalade vaziyetin icap ettirdiği fedakarlığa
bunları da … iştirak ettirmek maksadını gütmektedir.
Mükelleflerin mali (güçlerini) …halk mümessillerinden terekküp
eden komisyonlar tayin edecektir.” (K. Boratav s.343)
• 1944: Soil Products Tax (Toprak Mahsulleri Vergisi)
Inflation
Money supply increased
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Production decreased
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Inflation
Inflation
• To cope with inflation:
▫ Price controls
▫ Government purchased agricultural products at
low prices
▫ Distribution of basic intermediate goods was done
by government