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The Changing Landscape and Dynamics of Turkey’s Political Economy in the Twenty-First Century: An Introduction Read chapter Read first chapter

2020 | OriginalPaper | Chapter

2. The Political Economy of Turkey’s Economic Miracles and Crisis

Author : Turan Subasat

Published in: Turkey’s Political Economy in the 21st Century

Publisher: Springer International Publishing

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Abstract

This paper argues that Turkey experienced two manufactured economic miracles since 2002 which required a corrective crisis. The first miracle occurred between 2002 and 2008 when Turkey’s GDP tripled. This miracle was fictional since the increase in GDP was largely due to the appreciation of the exchange rate. During this period, Turkey experienced large current account deficits and accumulated large external debt, which are at the heart of the current crisis. Turkey experienced the second miracle between 2009 and 2013 when the economy grew faster than most countries in the world. This miracle was even more peculiar since it was associated with the deterioration of many economic and political indicators. This miracle was fostered by the 2016 revision of the Turkish Statistical Institute and therefore was also fictional. In this period, Turkey continued to experience large current account deficits and the external debt has become large enough to threaten the economy. The deterioration of the global environment marked the end of the second miracle and created the conditions for a painful adjustment. This paper argues that Turkey’s two economic miracles and the current crisis are dialectically linked and the crisis cannot be comprehended without a proper grasp of how the miracles were manufactured.

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previous chapter The Changing Landscape and Dynamics of Turkey’s Political Economy in the Twenty-First Century: An Introduction
next chapter Income Inequality in Turkey: 2003–2015
Footnotes
1
These are the current account balance, inflation rate, investment rate, government debt, unemployment rate, labor force participation rate, domestic credit to the private sector, age-dependency ratio, urbanization rate and the net international investment position.
 
2
Mayersson excluded the poorest, smallest (in terms of both population and land areas) and the main oil and gas exporter countries.
 
3
The focus on the middle-income countries is justified because the middle-income countries are structurally different from the low- and high-income countries and the high-income countries have experienced the worst economic crisis in their history since 2008. The middle-income countries are the most crowded group, which include 110 countries out of 218 countries in the world.
 
4
In other words, if there was no inflation in the USA, the NGDP (PPP) and RGDP (PPP) would give the same results for all countries.
 
5
While the original data is indexed to 2011 (i.e., takes the value of one in 2011), here it is indexed to the beginning year 1990 for better visibility.
 
6
Imagine two countries with the identical RGDP (PPP) figures. If one country’s NGDP (PPP) is calculated by using the USA’s PP but the other country’s NGDP (PPP) is calculated by using a different PP, the second country will have higher or lower NGDP (PPP), which will not be comparable with the first country.
 
7
In fact, countries that with a separate PP experienced faster increases than the USA’s PP, which implies that they have systematically higher NGDP (PPP) than the others.
 
8
Although the new and old series move close to each other, it is interesting that the revision influenced this measure.
 
9
The cumulative unaccounted net capital inflows into Turkey since 2002 add up to 48 billion dollars. In the first half of 2018 alone, Turkey received 8.3 billion dollars of unidentified capital, which is likely to hit a record by the end of the year. Subasat (2017) argued that the net error and omission figures significantly underestimate the real unaccounted capital inflows.
 
10
This figure also stands in contrast to Fig. 2.9A which shows a rapid increase in gross capital formation with the new series. If the new figures were correct, one would face a dilemma in explaining it in the face of high real interest rates.
 
Literature
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Subasat, T. (2004). Bretton Woods Kurumları Bağlamında Doğu Asya Mucizesi ve Kriz. In T. Subasat & S. Dedeoğlu (Eds.), Kalkınma ve Küreselleşme. İstanbul: Bağlam Yayıncılık.
Subasat, T. (2014). The Political Economy of Turkey’s Economic Miracle. Journal of Balkan and Near Eastern Studies, 16(2), 137–160.CrossRef
Subasat, T. (2016). Conjunctural and Policy Based Causes of the 2008 Crisis. In T. Subasat, The Great Meltdown of 2008: Systemic, Conjunctural or Policy-Created? London: Edward Elgar.
Subasat, T. (2017). Turkey at a Crossroads: The Political Economy of Turkey’s Transformation. Markets, Globalization Development Review, 2(2), 1–32.
Subasat, T., & Uysal, S. (2018). Ülkelerin Ekonomik Gelişmişlik Düzeyi Karşılaştırmalarında Yeni Bir Ölçüt: Düzeltilmiş Gayri Safi Milli Hasıla. Efil Ekonomi Araştırmaları Dergisi, 1(2), 74–89.
Terzioglu, N., & Subasat, T. (2018). Import Dependency of Exports as a Cause of Current Account Deficit. Central European Review of Economics & Finance, 25(3), 37–49.CrossRef
Yasar, S. (2013, October 15). Madem riskli o halde kim kullanıyor sıcak parayı? Sabah Newspaper.
Yildirim, A. (2013, April 2). Yüksek Büyümenin Bedelini Ödedik. Haber Turk Newspaper.
Metadata
Title
The Political Economy of Turkey’s Economic Miracles and Crisis
Author
Turan Subasat
Copyright Year
2020
Book
Turkey’s Political Economy in the 21st Century

Print ISBN: 978-3-030-27631-7

Electronic ISBN: 978-3-030-27632-4

Copyright Year: 2020

DOI
https://doi.org/10.1007/978-3-030-27632-4_2