Asia's growth meets Turkey!

Published 16.06.2017 00:59

The details of Turkey's growth performance in the first quarter are important, as they reveal not only an economic orientation and its consequences, but also the clues to an important change based on this orientation.

First of all, Turkey's exports to Asian countries that are outside of the near and Middle Eastern countries have soared by nearly 30 percent and continue to increase. What's more, Turkey is catching up with Asia in its growth momentum. Turkey achieved the highest growth rate at 5 percent after China, 6.9 percent, and India, 6.1 percent, in the first quarter of 2017.

In fact, Asia's growth, which began accelerating in the mid-1990s, represented a fundamental break from the growth and development paradigm of the West. The successive crises of the 1990s brought up a new path in Asian countries, especially in South Korea, in which the states' contribution to market regulations and general growth was more intense. In fact, even if we exclude China, because it is a different story, the divergence of these countries came became apparent by the 1970s. South Korea's accelerating industrialization and the role of the state in this area also date back to these years.

As John Kenneth Galbraith wrote in 2004, "Both China and India steered free of Western banks in the 1970s and spared themselves the debt crisis and have continued to maintain capital controls to this day, so that hot money cannot flow freely in and out, and continued to have large state sectors in heavy industry. On the whole, China and India have indeed done well. But is this due to their reforms or the regulations they kept imposing? No doubt, the right answer is: Partly to both."

Ramgopal Agarwala, who served as the chief economist of the World Bank in China, confirmed Galbraith's statements, saying that what underlay China's economic success was that it did not blindly abide by Washington Consensus policies. (Agarwala, The Rise of China: Threat or Opportunity 2002)

This orientation of the Asia Pacific region did not initially reject the market economy. On the contrary, the state supported and directed the private sector in order to expand the market as in the West's Industrial Revolution process. It undertook technological development and opened it to direct use of the private sector. This model ignored the ultra-liberal policies of the West based on external debt. It established a multi-faceted relationship between industrialization and educational policy and made technology and human capital a fundamental dynamic of the new growth model. Resources in the financial area were directed by the state in the direction of this new industrialization.

Also, China, in particular, carried out intensive capital exports with long-term loans to regions that were poised to develop rapidly, especially Africa, in this process. The innovation-oriented rise of countries like South Korea and even Malaysia was supported by radical reforms in the banking system.

Turkey spent this whole period with crises and political fluctuations. Apart from the interventions of Recep Tayyip Erdoğan both during his term as prime minister and president, unfortunately, we have not been able to achieve a total way out. After finishing the 19th stand-by agreement with the International Monetary fund (IMF) in 2008, Turkey escaped the 20th stand-by agreement through Erdoğan's will. In this sense, 2008 was the year when the main historic break in the history of the Turkish economy and convergence with the new Asian development began.

Erdoğan's historical decision is behind the slight impact of the 2008 crisis on Turkey and behind Turkey's growth rates in 2010 and 2011. However, the Turkish economy broke its stride again in 2012 and after, as the policies of the Central Bank of the Republic of Turkey (CBRT) and many other steps could not bring a notion of new growth that Turkey deserved.

However, with the election of the president through popular vote and the political will coming to see all aspects of the economy, Turkey began stepping into the contemporary and independent economy approach that Asia had achieved at the beginning of the new century. The institutions, incentives and practices of the new era began coming into force one after the other in this period. In terms of both fiscal and monetary policies, Turkey came to escape the guidance of the outdated institutions of the post-World War II period.

As a result, as revealed by the latest growth data, Turkey is physically and intellectually meeting the new Asian development. This is undoubtedly an important development not only for Turkey, but also for the Eurasian region.

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