The U.S., following its takeover of the capitalist system from the U.K. in 1941, came up with the Marshall Aid Plan to reinforce its dominance in the global economy that it reshaped step by step starting in 1944 with the World Bank, the International Monetary Fund (IMF), the United Nations and NATO. The Marshall Aid Plan, carried out from 1948 to 1960, was one of the most successful marketing strategies in history in terms of goods produced by the U.S. The support the U.S. provided with the Marshall Aid Plan for the entire world economy as a hegemon power was $410 billion in 2018 alone. For the 25 years from 1948 to 1973, until the Bretton Woods money system collapsed, the U.S. was the indisputable king of the world economy with its industrial goods, music and film industry.
This strategy made the dollar the indispensable international currency of the world economy. Today, almost 60 percent of the world's central banks' reserves are still held in dollars. For the U.S., making its currency the international go-to and dominating the world economy required it to not only be an innovative economy but also to have a foreign trade deficit in favor of the world economy and distributing dollars as a benevolent hegemon. However, today, even though it has sustained its innovation, the U.S. economy cannot manage a very high federal budget deficit with its hefty federal debt burden and a substantially high foreign trade deficit at the same time. Therefore, Washington is wary of China, which has an international reserve of $3.1 trillion and is patiently carrying out its Belt and Road Initiative (BRI) as the new power center.
Thanks to the BRI, China's investments span an impressive stretch of the world, from Asia to Africa, and have reached $890 billion – a figure expected to reach $1.3 trillion by 2027. So, is China ready to take the U.S.' place? The answer is no because it has a foreign trade surplus, it does not allow the yuan to gain value, and it does not work with local entrepreneurs and the local workforce in any country for BRI-based projects. Likewise, it doesn't have a music or cinema industry to embrace the world. For these reasons, we are coming up on a five-year stretch during which both the U.S. and China will think hard about what their future strategies are going to be.
$2 per kilogram target
Although global trade sees significant competition in terms of volume, the real ingenuity is not in selling large quantities of goods but rather making the added value per kilogram high. Japan has seen success in the world economy with close to $4 per kilogram of exports. Germany follows the Japanese with $3.70 per kilogram. South Korea is a bit above the U.S., producing $2.53 of added value per kilogram, compared to the U.S.' added value of $2.54. Poland produces $1.85 of added value, while China produces $1.59. Turkey has been able to increase the added value of exports per kilogram, up to $1.54 until a few years back. Today, however, it is exporting at a rate between $1.37 and $1.32. For the sake of Turkey's 2023 and 2030 goals, it is necessary to attain a $2 per kilogram performance in exports.
Of the sectors that can attain this level, no doubt our national defense industry is making us proud, and it would be very effective for it to sustain its latest projects and export its success with the same performance. However, increasing added value is not necessarily based on exporting technologically advanced products. While you achieve an added value of $0.20 per kilogram when you export fresh apples, for example, if you dry and cut them, and export them as dried, chopped apples in stylish, effective packaging in healthy product sizes, the added value instantly goes up to $4 per kilogram. Therefore, innovative processing and packaging can increase the added value of each product, offering a window of opportunity to boost the value to $2 per kilogram.
Let's not forget the value added per kilogram of Turkey's exports was only $0.69 in 2001. At the same time, Malaysia's exports produced $0.88 per kilogram. While we increased the added value per kilogram by almost 100 percent to $1.40 per kilogram, Malaysia's added value per kilogram stayed at $1, a 13.6 percent increase. Turkey didn't spend the last 18 years on innovation and value-added goods production for nothing. Therefore, during this period that saw the 11th Development Plan efforts accelerated, the focus point for the Turkish economy should be the manufacturing industry as the driving force and that an export perspective is brought to the agriculture, manufacturing and service sectors. This, in turn, will mean that we will reach a $2 added value by 2023, $3 by 2030 and reach the target of creating a trade surplus for Turkey.