Transcript 27 October 2003

Turkey: Neither East Nor West
Presentation for the Association for
Continuing Education, CWRU
27 October 2003
Dr. Ugur Aker
1
GNP Per Capita (2000)

Average standard of living is about one fifth of the
U.S. level, similar to Poland.
–U.S.: $34,260.
–Mexico: $8,810.
•At current exchange
rates: $5,080.
–Turkey: $7,030.
•At current exchange
rates: $3,090.
2
Population

71 million
– 1923: 12.5 million
– 1950: 21 million
– 1975: 41 million

Growth rate
– 1950-1960: 3%
– 1960-1970: 2.5%
– 1970-1980: 2.3%
– 1990-2000: 1.8%
3
Young Population

Percent of
population
under 15: 30%.
 Percent of
population 65
and over: 5%.
4
GDP

In 2002, Turkey's GDP
was 200 billion
dollars. The same
year, the largest two
corporations in the
world, Wal-Mart and
General Motors had
revenues of 250
billion and 185 billion
dollars, respectively.
5
Agriculture in GDP

The contribution of
agriculture to the
GDP declined
significantly:
1950: 45%
1965: 34%
1980: 24%
1991: 18%
2000: 16%
6
“Tradition”

Rural
population
– 1950: 81.3%
– 1960: 73.7%
– 1970: 63.9%
– 2000: 27%
7
Industry and Services

Industry comprised
12% of GDP in 1950,
25% in 2000.
 Services comprised
43% of GDP in 1950,
59% in 2000.
8
Effective Service

Translation: My
wall is leaking.
Please plumber
Joseph, help.
Phone: 588…
9
Military

Founding institution of
the Republic
 Guarantor of national
interest
– Confronting
reactionary Islam
– Ethnic secessionism
– Communist challenge

Officer corps 40,000
strong
10
Military Colleges

6 hr classes; 2 hr
exercise.
 Apart from
breakfast, lunch
and dinner, only ½
hr free time.
 45 days vacation.
 4 in 5 from
military secondary
schools.
11
Military Secondary Schools






Established in 1845
1500 graduating
seniors
Entrance at age 14-15
Science classes in a
foreign language
Student-teacher ratio
of 10:1
Latest technology
12
Military Secondary Schools

Monthly family
income
–
–
–
–
< $60 :
$60-$120:
$120-$180:
> $200:
6%
33%
55%
4%

Only 10% sons of
officers or noncommissioned officers
 Only 3% sons of
professionals
13
Expulsion From Military College




Flunking twice.
Criminal activity.
Getting married.
Coup attempt.
– In 1963, 1400 were
expelled.

Ideological expulsions.
– Between 1977 and 1984,
1200 were expelled for
leftist activities.
14
Exchange with US

Many Turkish officers
get training in US
Military Academies.
 American officers
attend Turkish War
Colleges.
 Turkish military
handbooks are
translated American
handbooks.
15
Military Interventions

Coup in 1960.
– Rise of reactionary
politics, erosion of
economic power of
fixed incomes,
political oppression
of opposition.
– New constitution.
– Civilian rule in 1963.
16
Islamists


The first political rise of
“Islamic” concerns came
with the establishment of
Democratic Party in 1946.
Secularists, through the
military and center-left
parties, tried to suppress
the rise of Islamists.
17
Military Interventions

Ultimatum in 1971.
– 1961 constitution provided
more freedoms ever before.
– Proliferation of left and right
radical movements.
– Government resigned,
freedoms restricted.
18
Islamist Fundamentalists

Islamists first
organized under
National Order
Party.
– Junior coalition
partner (1974,
1975-78).
19
Military Interventions

Coup in 1980.
– Reason: terrorist
activities of right and
left.
– All political parties
suspended, left and
labor suppressed.
– New constitution.
– Civilian rule in 1983.
20
Center-right: Motherland and
True Path Parties



Since 1983, both have
been in and out of
coalition
governments.
Their ideology and
supporting base are
the same but leaders
don’t cooperate.
TPP leader became
the first female prime
minister in middle
90s.
21
PKK

Kurdish Marxist
guerilla group PKK
started terrorist
activities.
 During the next 15
years, 40 thousand
lives were lost.
 Military is charged
with the solution.
22
Labor

Labor lost political
and economic
power between
1980 and 1991 but
regained it after
1991 elections.
– Wages and
salaries comprised
26% of total factor
income in 1989 but
37% in 1992.
23
1991 Coalition

Center-left and center-right coalition.
– Labor and bureaucracy supported social
democrats.
– Agriculture interests who lost subsidies and
inward oriented businesses who lost to foreign
competition supported True Path Party.
– After the 1991 elections, agricultural supports
increased, transfer payments increased from
2.9% of GNP in 1990 to 5.5% in 1993.
24
State Largesse

High agricultural
support prices.
 Employment
opportunities in statecontrolled sectors.
 Generous salary
adjustments to public
sector employees
before elections.
25
Gulf War

Loss of trade,
tourism, pipeline
revenues and
refugee crisis are
estimated to have
cost Turkey about
15-20% of her
GDP.
26
1994 Crisis

Liberalization of
capital markets
allowed the
government to raise
more funds,
leading to high
interest rates.
– International asset
holders more
influential in policy
choices.
27
High Interest Rates

High interest rates kept
currency overvalued,
– Real exchange rate
appreciated 20% from 1988
to 1993.

Large manufacturing
companies engaged in
lending.
– 1988: 25% of operating
profits from nonmanufacturing.
– 1994: 55%.
28
1994 Crisis
The exchange rate in June ’93 was
TL10,000 to the USD.
 The exchange rate in May ’94 was
TL35,000 to the USD.
 Inflation in November ’93 was 65%.
 Inflation in May ’94 was 118%.

29
1994 Crisis

Between 1993
and 1998 real
wage rate in
private
manufacturing
fell by 25%.
30
Reformist Fundamentalists

Welfare Party was
established after 1980
coup.
 Highest percentage in 1995
elections.
 Senior partner of coalition
for a year: 1996-1997.
31
Kurdish Representation


Kurdish parties failed to
achieve the 10%
threshold in 1995, 1999
and 2002.
Successive Kurdish
parties were closed by
the courts on charges of
separatism and
terrorism.
32
Kurdish Representation

Many cities and towns
in the Southeast have
elected Kurdish local
officials for decades.
 Some 30% of the
population of the region
migrated to the western
and southern urban
centers.
33
Military Interventions
Ultimatum in 1997. Radical Islamist prime minister
resigns.
34
Reformist Fundamentalists

After the closing of
the Welfare Party,
the Virtue Party
was established
(15.4% in 1999).
35
Ultra-Nationalists

Traditionally rabidly anti-leftist and suspected
of terrorist activities, 2nd largest party in 1999
elections with 18% of the vote.
– Formed a coalition with center-right Motherland Party
and center-left Democratic Left Party.
– In power, they opposed human rights for Kurds and
privatization efforts supported by IMF.
36
Average Annual Inflation

20% in the 1970s.
 35-40% in the early 1980s.
 60-65% in the late 1980s and early 1990s.
 90% before the disinflation program in late
1990s.
37
Center-left

Carrying the ideology of Kemalism.
– Secularism.
– State dirigism; mistrust of markets and business.

Democratic Left Party gave up its opposition to
free-market reforms in 1997.
– In 1999, received 22% and became the senior
partner in the coalition.

Republican People’s Party was not represented
in the Parliament in 1999 (8.7% vote).
38
Instability

State support for
Central Government Expenditure
political loyalty
(Percent of GNP)
undermining the
market discipline.
1989: 17%
Central government
1993: 25%
budget deficits
1997: 30%
rose from 3.0% of
2000: 34%
GNP in 1988 to
8.5% in 1998.
39
1999-2001 Crisis

Contagion of Russian crisis of 1998.
 Devastating earthquakes of 1999.
 Capital flight took place after a political spat in
Feb. 2001.
– Crawling peg policy led to real exchange rate
appreciation.
– Capital inflows lowering interest rates.
– Current account deficit rose to unprecedented 5%.
– Banks’ open positions proved too vulnerable.
40
Recessions

1978-1980: -1.5%
 1994: -6.1%
 1999: -4.7%
 2001: -7.4%
41
Loans Upon Loans

As of 2002, Turkey owed
31 billion SDR to IMF, 28
billion of it acquired in
1999 and 2002, the latter
engineered by Kemal
Dervish, former vice
president of the World
Bank, appointed as the
Economy Minister.
42
Inflation

IMF has announced
that Turkey had the
sixth best inflation
improvement between
2000 and 2002.
43
Losers of 2002 Elections

Ultra-nationalists: 8.3%.
 Reformist Fundamentalist: 2.5%.
 Motherland: 5.1%.
 True Path: 9.5%.
 Democratic Left: 1.1%.
 Kurdish: 6.2%.
44
Winners of 2002 Elections

Justice and Development
Party (Liberal Islam:
34.1% with 363
deputies).
 Republican People’s
Party (Center Left:
19.3% with 178
deputies).
45
Justice and Development Party

First party in 15 years
to hold a majority in
the Parliament.
 Supports EU
membership, IMF
reforms.
 Some leftists support
them because they
undermine the power
of the military.
46
Democracy of Disappointment

In 2002 elections, 9
out of 10 incumbents
were not reelected to
the legislative.
 The pattern of
previous elections was
also one of churning,
replacing the favored
party.
47
Rays of Hope

IMF program
– Budget surplus
– Banking reform
– Privatization
7th round of legal
reforms
 Centers of power

– NGOs
– Anatolian Tigers
48
Anatolian Tigers

In the 90s, small-scale, manufacturing family enterprises
flourished in the heartland by serving the export market,
without any subsidy from the government.
49
Anatolian Tigers

46% of employers and
94% of employees had
only primary schooling.
 65% of the workers were
unskilled; only 1%
received union wages.
 Only 14% of managers
were salaried, the rest
were owners.
50
Iraq War

The generals wanted
to be part of the
coalition.
 The government
wanted to support
($24 billion promise).
 The newly elected
Parliament followed
popular sentiment.
The
resolution to send
10,000 troops passed after
$8.5 billion loan.
51
Is It EU or Something Else?

These four
countries were
similar in their
standard of living
in the fifties.
52
Valerie Giscard D’Estaing
”It would be “the end” of the EU if Turkey
were ever actually to get in. Turkey is by
definition unacceptable as an EU member.”
53
Swimmers in Eastern Turkey
54
“Please
Use the
Pedestrian
Tunnel”

15% of the
population
is illiterate.
55
Universities
Every June, 1.5 million high school seniors take
university entrance exams. About a fourth receive
scores to qualify for acceptance, but only 3 in 5 (15% of
the total) get placed.
56
Swimmer in Western Turkey
57
University Students
58
Kultur Forum Europa
awarded 2003 Europe
Culture Award to Istanbul
Culture and Art Foundation,
the organizer of Istanbul
Festival since 1973.
59
Sertab Erener’s
special duets with
Jose Carreras and
Ricky Martin
demonstrated her
versatility as a singer
of different kinds of
music.
60
Miss World 2002 - Azra Akin
Miss World 2002 took place
at Alexandra Palace in
London, December 7, 2002.
61
Cover of The Economist
Turkey belongs
in Europe
Dec 5th 2002
62