Comparative Political Economy of Turkey and Germany in the Aspect of Historical Context

Turkey has been struggled with severe economic crisis during the liberalization years. Many solutions and policies have been made in order to solve struggles but Turkey’s short-term based economy and lack of check and balances did not let these solutions be effective. Even today, Turkey cannot show regularized, stable economic growth with ups and downs.

The 1980’s was the milestone not only for the Turkey but also for the whole world. The 1970 Economic Crisis forced countries to make open economic policies and letting the globalization do the work. Turkey was one of the countries who follow these globalization process. 24 January Stability Program played a significant role in the Özal’s era. If we take a look at 80’s economy in Turkey generally, providing open-market economy, increasing exports, decreasing inflation were the major cases. These short-term goals could not be as effective as it should be in the long-term because Turkey was lack of infrastructure and institutions to make sure the economy is functioning well. Özal was against government intervention over economy but not the regulation. Özal believed that government should not be the competitor as individual, instead it should remove the barriers of individuals. By the way, after the 80’s, GDP and economic growth was still unstable. The effect of the coalition government and miscalculated policies caused severe crisis in the era. The devaluations helped to increase foreign trade and maybe it was the only field which was generally (still had some ups and downs but not that critically) rising. On the other hand, the policies for increasing foreign trade caused deficit. The government tried to solve this deficit problem with domestic borrowing. But still, current account deficit was so high so banks increased interests. Trying to increase foreign capital and its low taxes caused huge space in the economy in the 90’s. On the other hand, Turkish Liras gained value because of the increased foreign currency and decreased exchange rate. That is why severe crisis occurred. And after increasing of the inflation rate, 5 April Decrees published but it could not help to overcome the crisis. The effort of decreasing interest rates without stabilization caused higher interest rates. In the late 90’s tax reform has been made as a solution but even today people seem to understand this solution as a “deform” not reform. The main idea of the reform was increasing tax revenues without imposing a new tax burden to the individual. It could not work effectively as well. Turkey was lack of political integration to work with market-led economy. After the crisis in 2000 and 2001, Turkey has made some decisions to restructure neo-liberal economy. The support of IMF and World Bank was there but still, there were no checks and balances and foreign currency reserves was not enough. After the AKP has won the elections, regulatory state was still playing its role, but reforms have been made. Private Banks have been opened for providing competition. Working with IMF and EU membership goals strengthened the connections of Turkey with outer world. These improvements has shaken by 2008 World Crisis. Neo-liberal policies started questioning. After 2010, developmentalist policies adopted and Turkey started to become regional power. If we take a look at German economy, we see social welfare state and market which we do not see in Turkey that much. Even though, Germany lets its social market to function freely. It is kind of similar with Turkey before 2010. On the other hand, government’s role is not just regulating the economy but also being a part of coordination system for welfare. This system balances market and social concerns which we cannot achieve in Turkey. The neo-liberal policies differ from Germany’s welfare state capitalism. Capital, labor, banks and government work with cooperation. As mentioned before, Turkey was in a post-coup era when they started to adopt neo-liberal policies, so people consumed more than they produced. Labor is also another key for functioning German economy well. European countries like Germany pay more attention to labor because of their elderly population rate. So the worker benefits are much higher than we see in Turkey. German economy intend on high saving rate, capital accumulation and economic growth to sustain stability while the Turkey’s goals are decreasing inflation and increasing export. The quality of the Germany’s law system also another opportunity for foreign investments. Turkey’s weak infrastructure did not let the goals to be achieved but in Germany, universal banks are essential for the system to function. The links between industry, government and the banks are really strong, so they can achieve economic growth and stability. On the other hand, exports are also quite different. Turkey could not export heavy industry as much as Germany. The institutions and industrialization level is still different.

As a result, Turkey was struggling with high inflation rates (still does) and after military coup, in Özal era, was a beginning of neo-liberal policies that tried to be achieved. Turkey’s institutions and cooperation was not enough to be the policies successful as planned so severe crisis occurred and economy could not be stabilized. On the other hand, Turkey has some similarities with Germany in the liberal understanding but still their goals and links between sectors are quite different. Germany’s unemployment and Turkey’s unemployment also similar but for different reasons. Germany has a high elderly population rate, Turkey does not. So the economic growth today, is also different.

CEREN AKTAŞ