Old ideological fallacies and new economic facts

Published 14.03.2018 02:02

All the periods of economic crises are at the same time periods in which the crises of ideologies deepen. At such times, the ideologies that keep the old paradigm alive turn into a pile of superstitions and fallacies, pouring out their old gilded paint.

Some advocate anything and even present it like science in universities, media empires, state bureaucracy and in the institutions that keep the system alive, for the sake of career, money and position. When the gilded paint fades away, the hypocrisy of these advocates comes to light and they all disappear.

Now, I see that any development in the economy, any data disclosed and any struggle to overcome the crisis these days turns into enormous garbage, leaving behind a human wreck along with old ideological fallacies.

With the fall of the Berlin Wall and the dissolution of the Soviet Union in the late 1980s, some have argued that global white revolution and pure liberalism would be the only absolute economic and political fact as the end of history and humanity. Now, however, they are quite surprised that the U.S., which is the empire of these ideals, says it will not be able to overcome the crisis through global liberalism. Even International Monetary Fund (IMF) Managing Director Christine Lagarde, who has been selling liberalism to underdeveloped countries for years, reacted to U.S. President Donald Trump's decisions on protectionism, saying: "No one emerges victorious from a trade war." However, she could not convince the U.S., unlike Chile, Argentina and Turkey in the past. Trump thinks he will win. However, declaring Trump, who is striving to kill liberalism, a scapegoat will be to desperately take the easy way out.

This crisis has revealed that the ideology that the West has been selling as liberalism is actually a monopolistic system in which the state is at the center and which has nothing to do with a free market.

Friedrich Hayek, a famous economist and philosopher who is one of the founding fathers of liberal ideology, gave a lecture at the London Economy Club in November 1936. During the lecture, which was later published as an article, Hayek suggested that economists have conceived of the importance of the division of labor since Adam Smith, but that they have not comprehended the importance of spreading information everywhere and achieving it on equal terms by all of humanity. This is what an ideology is - one side of the humankind is those who are persecuted and who are deprived of possibilities. They have always known the importance of the equality of conditions. However, whenever they have stood for it and voiced something other than the dominant ideology, they have been accused of and condemned for spoiling the function of the liberal world.

Those who have advocated fake liberalism on international platforms for years and those who say that protectionism is the greatest enemy of the global system want liberalism only for themselves.

Today, developing countries, including Turkey, should put a stop to this historic fraud. For instance, in the face of such a delusion a protectionism, Turkey will not act on World Trade Organization (WTO) and EU regulations alone. This is because today, the WTO and EU do not have the dynamics and power to build a new global trade system. However, if organizations such as the WTO and EU institutions support regulations that emphasize the interests of not only developed countries, but also the economic and commercial interests of developing countries, it would be possible to achieve reconciliation on a global level again. In a sense, this achievement means a new global trade regime, namely a new WTO and new EU.

If memory does not fail me, the WTO's round of trade talks last collapsed in Doha in 2006. Back then, WTO Director-General Pascal Lamy had said the Doha round was an initiative that was compatible with the U.N.'s millennium goals and that could support the efforts by developing countries, adding that the failure of the Doha round would lead to the spread of protectionism and rise of uneasiness, which we can interpret as wars. "Everyone will lose," he had said. Even this statement reveals a historic hypocrisy.

Lamy and his advocates had ignored the demands of developing countries in Doha. When developing countries brought up their interests at the WTO, it was developed countries that rendered the WTO inoperative.

Meanwhile, what about Turkey's customs union issue with the EU? While the EU is procrastinating on the issue with historical hypocrisy, as it does in all issues, Turkey will not restrain itself by looking to the EU alone in the face of ever growing protectionism. For sure, Ankara will take its own measures against both the customs union with the EU and other U.S.-based protectionism.

We are, however, gingerly listening to debates on interest rates, external deficit and inflation in Turkey.

Some circles tell the old story when current account deficit data is announced in Turkey: Brake the growth, hike interest rates and tighten your belt. The current account deficit is rising. If there is such a problem, it is because until recently, we have been trying to repeat the outmoded clichés that have become fallacies now.

Whenever Turkey starts to grow above the global average, some immediately wait for current account deficit data, address the current account deficit problem and combine it with the inflation problem. They all suggest hiking interest rates further and tightening belts. We now know that all these problems are the result of the implementation of a failed, bad ideology. This is certainly not liberalism and the free market, but a fallacy.

For instance, Paul Krugman is an economist who eventually reacted against these fallacies. He argues that if the state fails to set an industrial policy in developing countries and develop policies that boost and protect high-tech areas, it will forever have external deficits and will not be able to climb to the upper league.

The traditional approach - or rather fraud - suggests that each country is advantageous in terms of goods that are subject to foreign trade in line with its technological level of data. That is, now that Turkey is advantageous in medium-technology goods today, it should produce them beyond its needs and be a net exporter of them. This approach fixes the technology league. In this case, as Krugman puts it, "the ladder of countries" never changes, and those that are late in technology can close current account deficit or run short-term trade surpluses only at the expense of impoverishment - only through intensive labor productivity and funds transfer from agriculture.

This being the case, the state must be a regulatory player in the market. Developing countries, starting from the Asia-Pacific, are doing so now. China has shifted to a policy of surplus depending on the export of high-tech goods from a policy of growth and trade surplus depending on labor productivity and funds transfer from agriculture alone. South Korea has done that, too. In this sense, it is time for Turkey to have a new growth and development story.

Share on Facebook Share on Twitter
Disclaimer: All rights of the published column/article are reserved by Turkuvaz Media Group. The entire column/article cannot be used without special permission even if the source is shown.
However, quoted column/article can be partly used by providing an active link to the quoted news. Please click for details..