Notes on change at the central bank

Published 13.04.2016 00:12

The Central Bank of the Republic of Turkey (CRBT) has determined its new governor. The change in the CRBT, one of the most deep-rooted institutions in Turkey, is occurring in a way worthy of such an institution. Unlike what certain circles expected, discussions about who would be the next CRBT governor were not done in a chaotic atmosphere that would pose uncertainties in the Turkish economy as the bank found a solution in its own right. This unsurprising outcome can be attributed to the fact that Turkey's deep-rooted institutions are ready for a change. However, what is even more important is that Turkey, unlike before, can improve its ability to find solutions about its welfare and future away from what is imposed on it and can discuss these solutions in front of the public. Indeed, this is a discussion about an economic policy for Turkey, as all constituents of the Turkish economy, including employees, the media, trade unions, occupational organizations and economic non-governmental organizations, have been engaged in it.

President Recep Tayyip Erdoğan has played a very significant part to get back to where we stand now. Since the very beginning, Erdoğan has argued that the Turkish economy must be built on solid ground, suggesting that it must be fair and it must match all national interests. Erdoğan has always upheld a completely outward-oriented, liberal, competitive and anti-monopolistic economy, which also means the democratization of administrations in Turkey's strategic institutions. In Turkey's recent history, the bureaucracy was structured as the tutelage of certain interest lobbies, firstly in politics and Parliament and then in strategic state institutions. Now, the elected authorities of this country are publicly discussing the managers of strategic state institutions and change administrations in accordance with national interests and allow the public to discuss them freely. This is a silent revolution for Turkey.

In this process of change in the central bank, we did not discuss who would take up this major position. Rather, we have discussed and will discuss monetary policy, one of the two major parts of Turkey's economic policy, national welfare and how income can be shared in a fair way. In this process, some praised the CRBT's current monetary policy and others vilified it. Also, the president criticized the CRBT's existing monetary policy - which shows that the bank is not politically suppressed contrary to assertions. Moreover, the fact that the new governor was a former deputy CRBT governor indicates that the change in the bank's administration occurred in line with the CRBT's own internal dynamics. Let us note that the CRBT is one of the most independent central banks in the world in terms of its instruments.

How, and as a result of what dynamics were central bank governors determined in Turkey in previous years? What were the roles of central bank governors and policies in national development and the fair distribution of income? Anyone in Turkey gives negative answers to these questions and says that the administration and policies of the CRBT were determined in accordance with the interests of an oligarchic minority. Now, let alone central bank governors, we can freely discuss what monetary policies the bank will implement and what instruments it will use. I think this is true democracy and Turkey is one of the few countries that have such privileges.

Monetary policies and market mechanism instruments that are implemented by central banks are not complicated issues that are understood merely by related specialists and cannot be discussed or rejected by others. On the contrary, they are hypotheses that are even simpler than a mathematical problem to be understood by all literate people. These hypotheses are tested by the efforts and professional knowledge of all of us. So, they are either falsified and remain as hypotheses or fixed as a political path that serves for the good of the majority.

I think the monetary policy that the Turkish central bank implemented for a while and many instruments that this policy produced did not go beyond written hypotheses. Today, not only Turkey, but also all developing countries, must question their inflation-targeting regime to its core. It is a requirement of the day that central banks must not only focus on financial stability, but also have new monetary policies and instruments that focus on employment as well as inclusive and fair growth. We cannot deny that the CRBT took successful steps when it switched to a new floating exchange rate regime after the 2001 crisis.

Certainly, all of us, and the new CRBT administration, need to embrace what we gained and achieved in this whole process. But, we should not insist on the previous century's clichés, which do not match the requirements of the day and Turkey's new path. Hypotheses regarding social sciences, and the economics as one of the most important branch of social sciences, are proved not in laboratories but in a society that is the subject of all these hypotheses. Although the economics need to exist for the welfare of the entirety of society, regarding and defining it as a technical area that is dominated and exploited by a small number means the betrayal of the society we live in. Based on this basic principle, we must question the positions and practices of central banks particularly in developing countries and freely discuss them both in the academy and public.

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