The market economy and the rise of the middle class

Published 01.09.2017 00:43
Updated 01.09.2017 01:28

The economy and economic policies in Turkey will be spoken of from a more political point of view until the 2019 elections. In fact, it should be like this. This is because even the simplest form of the economy is political and the "thing" we refer to as the economy is actually the economic policy. If you ask me what is the most political concept in life, I would say "government budget" without hesitation. Yes, there is nothing more political than a government budget, considering that the budget tells us how and where the resources that the state raises will be used, how they will be portioned among the segments, how much and from which segments taxes will be raised, and how and where they will be transferred later. In this sense, it is the most political economic institution ever.

Today, government budgets are one of the main means of "contemporary" fiscal policy. The resources of the budget and the means by which the budget will be linked after the creation and redistribution of these resources, namely the budgetary equilibrium, is directly related to the political stance of politics in power.

Today, the most important expense of the budget is interest. In this sense, the primary surplus of the budget is considered a success today. However, I think that this "success" criterion alone should be left behind now.

A country like Turkey, which has quite a dynamic economy, has the ability to minimize the interest burden and to remove it from being the basic burden of the budget. It can also provide more efficient and quantitatively greater supply of budget sources and budget revenues.

To start with, it should allocate budgetary resources to the areas that will contribute more to the budget and the overall economy in the medium and long term. The Justice and Development Party (AK Party) governments partly achieved this after President Recep Tayyip Erdoğan severed Turkey's ties with the International Monetary Fund (IMF) in 2008. In line with the Southeastern Anatolia Project (GAP) Action Plan, a significant portion of budget resources was transferred to infrastructure investments in 2008. And after this, unprecedented amounts of resources in the history of the Republic was allocated to education and health, and infrastructure investments, which would create externalities in the economy and boost the welfare of future generations. This budget policy neither created a current account deficit, nor made the inflation chronic. On the contrary, the investments made reduced operating costs thanks to the economic externalities created, and prevented inflation and the waste of resources.

As such, the formation of the government budget in the Erdoğan era was based on a political preference. This political preference had two important pillars: The first was not to compromise the discipline of public finance, not to waste budget resources and to direct the resources to areas that would create economic externalities. The second is to raise general public welfare in an inclusive way and to achieve inclusive growth. In this sense, Erdoğan differed from the traditional neoliberal approach, but never allowed the waste of public resources. For example, he did not practice an election economy.On the other hand, apart from the fiscal policy, we must discuss the monetary policy in this framework. Erdoğan argued for the Central Bank of the Republic of Turkey's (CRBT) instrument independency in monetary policy, but suggested that the central bank should be in harmony with the government in the objectives of economic policy. In this context, the CBRT should be considered one of the most advanced banks in the world in terms of instrument independence.

In this regard, the AK Party and Erdoğan in particular have differed from their contemporaries with non-populist, realistic and inclusive and fair economic policy as far as possible. This applies to both Turkey and the world, especially to developing countries. Again, in this context, as Turkey followed a new kind of politics by enriching the middle class with this economic perspective, it differed from traditional right and left political movements in Eastern Europe and Asia Minor and preferred to follow its own unique path.When I watch from both the outside and work with President Erdoğan, I see that he views the economy as an uncompromising advocate of the market economy. He does not view this market as a place where the powerful are led to oppress the weak and where Turkey goes down on its knees in the face of global capital powers in the name of market.

A fair economic system is not the result of the market; on the contrary, the inevitable result of a fair economic system is a market that runs without interruptions and crises. However, the actualization of this formula depends on the politics. Well, what kind of political stance does implement and advocate this type of market today? The answer to this question goes beyond the right and left politics of the 19th and 20th centuries, which can be considered outdated now.

The politicians and leaders who go beyond the outdated concepts like traditional right-left, center left and center right will survive in this century... I see that new parties are being established in Turkey now, thinking that they will come to power with definitions like "center right" in a country like Turkey. Social democrat leader Bülent Ecevit introduced the concept of the "left of the center" in the previous century. He thought it was original, but it was not. It was a conjuncture-based and pragmatist idea that lacked identity and that obscured class interests. Of course, it is gone.

All the parties which say that they are approaching the "center" in Turkey advocate an economic approach that has failed recently. However, as I said above, Erdoğan's success depends on his ability to surpass this conception and form a strong middle class. I will continue with this topic in the coming columns.

Eid Mubarak!

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