1

Turkey: Neither East Nor WestTurkey: Neither East Nor West

Presentation for the Association for Continuing Education, CWRU

27 October 2003Dr. Ugur Aker

2

GNP Per Capita (2000)GNP Per Capita (2000) Average standard of living is about one fifth of the U.S.

level, similar to Poland.

–U.S.: $34,260.

–Mexico: $8,810.•At current exchange rates: $5,080.

–Turkey: $7,030.•At current exchange rates: $3,090.

3

PopulationPopulation 71 million

– 1923: 12.5 million– 1950: 21 million– 1975: 41 million

Growth rate– 1950-1960: 3%– 1960-1970: 2.5%– 1970-1980: 2.3%– 1990-2000: 1.8%

4

Young PopulationYoung Population

Percent of population under 15: 30%.

Percent of population 65 and over: 5%.

5

GDPGDP In 2002, Turkey's

GDP was 200 billion dollars.  The same year, the largest two corporations in the world, Wal-Mart and General Motors had revenues of 250 billion and 185 billion dollars, respectively.

6

Agriculture in GDPAgriculture in GDP

The contribution of agriculture to the GDP declined significantly:1950: 45%1965: 34%1980: 24%1991: 18%2000: 16%

7

““Tradition”Tradition”

Rural population– 1950: 81.3%– 1960: 73.7%– 1970: 63.9%– 2000: 27%

8

Industry and ServicesIndustry and Services

Industry comprised 12% of GDP in 1950, 25% in 2000.

Services comprised 43% of GDP in 1950, 59% in 2000.

9

Effective ServiceEffective Service

Translation: My wall is leaking. Please plumber Joseph, help. Phone: 588…

10

MilitaryMilitary Founding institution

of the Republic Guarantor of national

interest– Confronting

reactionary Islam– Ethnic secessionism– Communist challenge

Officer corps 40,000 strong

11

Military CollegesMilitary Colleges 6 hr classes; 2 hr

exercise. Apart from

breakfast, lunch and dinner, only ½ hr free time.

45 days vacation. 4 in 5 from

military secondary schools.

12

Military Secondary SchoolsMilitary Secondary Schools Established in 1845 1500 graduating

seniors Entrance at age 14-15 Science classes in a

foreign language Student-teacher ratio

of 10:1 Latest technology

13

Military Secondary SchoolsMilitary Secondary Schools Monthly family

income– < $60 : 6%– $60-$120: 33%– $120-$180: 55%– > $200: 4%

Only 10% sons of officers or non-commissioned officers

Only 3% sons of professionals

14

Expulsion From Military CollegeExpulsion From Military College

Flunking twice. Criminal activity. Getting married. Coup attempt.

– In 1963, 1400 were expelled.

Ideological expulsions.– Between 1977 and 1984,

1200 were expelled for leftist activities.

15

Exchange with USExchange with US Many Turkish officers

get training in US Military Academies.

American officers attend Turkish War Colleges.

Turkish military handbooks are translated American handbooks.

16

Military InterventionsMilitary Interventions Coup in 1960.

– Rise of reactionary politics, erosion of economic power of fixed incomes, political oppression of opposition.

– New constitution.– Civilian rule in 1963.

17

IslamistsIslamists

The first political rise of “Islamic” concerns came with the establishment of Democratic Party in 1946.

Secularists, through the military and center-left parties, tried to suppress the rise of Islamists.

18

Military InterventionsMilitary Interventions Ultimatum in 1971.

– 1961 constitution provided more freedoms ever before.

– Proliferation of left and right radical movements.

– Government resigned, freedoms restricted.

19

Islamist FundamentalistsIslamist Fundamentalists

Islamists first organized under National Order Party. – Junior coalition

partner (1974, 1975-78).

20

Military InterventionsMilitary Interventions

Coup in 1980.– Reason: terrorist

activities of right and left.

– All political parties suspended, left and labor suppressed.

– New constitution.– Civilian rule in 1983.

21

Center-right: Motherland and Center-right: Motherland and True Path PartiesTrue Path Parties

Since 1983, both have been in and out of coalition governments.

Their ideology and supporting base are the same but leaders don’t cooperate.

TPP leader became the first female prime minister in middle 90s.

22

PKKPKK

Kurdish Marxist guerilla group PKK started terrorist activities.

During the next 15 years, 40 thousand lives were lost.

Military is charged with the solution.

23

LaborLaborLabor lost political

and economic power between 1980 and 1991 but regained it after 1991 elections.– Wages and salaries

comprised 26% of total factor income in 1989 but 37% in 1992.

24

1991 Coalition1991 Coalition

Center-left and center-right coalition.– Labor and bureaucracy supported social

democrats.– Agriculture interests who lost subsidies and

inward oriented businesses who lost to foreign competition supported True Path Party.

– After the 1991 elections, agricultural supports increased, transfer payments increased from 2.9% of GNP in 1990 to 5.5% in 1993.

25

State LargesseState Largesse High agricultural

support prices. Employment

opportunities in state-controlled sectors.

Generous salary adjustments to public sector employees before elections.

26

Gulf WarGulf War

Loss of trade, tourism, pipeline revenues and refugee crisis are estimated to have cost Turkey about 15-20% of her GDP.

27

1994 Crisis1994 Crisis

Liberalization of capital markets allowed the government to raise more funds, leading to high interest rates.– International asset

holders more influential in policy choices.

28

High Interest RatesHigh Interest Rates

High interest rates kept currency overvalued,– Real exchange rate

appreciated 20% from 1988 to 1993.

Large manufacturing companies engaged in lending.– 1988: 25% of operating

profits from non-manufacturing.

– 1994: 55%.

29

1994 Crisis1994 CrisisThe exchange rate in June ’93 was

TL10,000 to the USD.The exchange rate in May ’94 was

TL35,000 to the USD.Inflation in November ’93 was 65%.Inflation in May ’94 was 118%.

30

1994 Crisis1994 Crisis

Between 1993 and 1998 real wage rate in private manufacturing fell by 25%.

31

Reformist FundamentalistsReformist Fundamentalists

Welfare Party was established after 1980 coup.

Highest percentage in 1995 elections.

Senior partner of coalition for a year: 1996-1997.

32

Kurdish RepresentationKurdish Representation Kurdish parties failed to

achieve the 10% threshold in 1995, 1999 and 2002.

Successive Kurdish parties were closed by the courts on charges of separatism and terrorism.

33

Kurdish RepresentationKurdish Representation Many cities and towns

in the Southeast have elected Kurdish local officials for decades.

Some 30% of the population of the region migrated to the western and southern urban centers.

34

Military InterventionsMilitary Interventions

Ultimatum in 1997. Radical Islamist prime minister resigns.

35

Reformist FundamentalistsReformist Fundamentalists

After the closing of the Welfare Party, the Virtue Party was established (15.4% in 1999).

36

Ultra-NationalistsUltra-Nationalists

Traditionally rabidly anti-leftist and suspected of terrorist activities, 2nd largest party in 1999 elections with 18% of the vote.– Formed a coalition with center-right Motherland Party

and center-left Democratic Left Party.

– In power, they opposed human rights for Kurds and privatization efforts supported by IMF.

37

Average Annual InflationAverage Annual Inflation

20% in the 1970s.35-40% in the early 1980s.60-65% in the late 1980s and early 1990s.90% before the disinflation program in late

1990s.

38

Center-leftCenter-leftCarrying the ideology of Kemalism.

– Secularism.– State dirigism; mistrust of markets and business.

Democratic Left Party gave up its opposition to free-market reforms in 1997. – In 1999, received 22% and became the senior

partner in the coalition.

Republican People’s Party was not represented in the Parliament in 1999 (8.7% vote).

39

InstabilityInstability

Central Government Expenditure(Percent of GNP)

1989: 17%1993: 25%1997: 30%2000: 34%

State support for political loyalty undermining the market discipline.

Central government budget deficits rose from 3.0% of GNP in 1988 to 8.5% in 1998.

40

1999-2001 Crisis1999-2001 Crisis Contagion of Russian crisis of 1998. Devastating earthquakes of 1999. Capital flight took place after a political spat in

Feb. 2001.– Crawling peg policy led to real exchange rate

appreciation.– Capital inflows lowering interest rates.– Current account deficit rose to unprecedented 5%.– Banks’ open positions proved too vulnerable.

41

RecessionsRecessions

1978-1980: -1.5% 1994: -6.1% 1999: -4.7% 2001: -7.4%

42

Loans Upon LoansLoans Upon Loans As of 2002, Turkey owed

31 billion SDR to IMF, 28 billion of it acquired in 1999 and 2002, the latter engineered by Kemal Dervish, former vice president of the World Bank, appointed as the Economy Minister.

43

InflationInflation

IMF has announced that Turkey had the sixth best inflation improvement between 2000 and 2002.

44

Losers of 2002 ElectionsLosers of 2002 Elections

Ultra-nationalists: 8.3%.Reformist Fundamentalist: 2.5%.Motherland: 5.1%.True Path: 9.5%.Democratic Left: 1.1%.Kurdish: 6.2%.

45

Winners of 2002 ElectionsWinners of 2002 Elections

Justice and Development Party (Liberal Islam: 34.1% with 363 deputies).

Republican People’s Party (Center Left: 19.3% with 178 deputies).

46

Justice and Development PartyJustice and Development Party First party in 15 years

to hold a majority in the Parliament.

Supports EU membership, IMF reforms.

Some leftists support them because they undermine the power of the military.

47

Democracy of DisappointmentDemocracy of Disappointment

In 2002 elections, 9 out of 10 incumbents were not reelected to the legislative.

The pattern of previous elections was also one of churning, replacing the favored party.

48

Rays of HopeRays of Hope

IMF program – Budget surplus– Banking reform– Privatization

7th round of legal reforms

Centers of power– NGOs– Anatolian Tigers

49

Anatolian TigersAnatolian Tigers

In the 90s, small-scale, manufacturing family enterprises flourished in the heartland by serving the export market, without any subsidy from the government.

50

Anatolian TigersAnatolian Tigers

46% of employers and 94% of employees had only primary schooling.

65% of the workers were unskilled; only 1% received union wages.

Only 14% of managers were salaried, the rest were owners.

51

Iraq WarIraq War The generals wanted

to be part of the coalition.

The government wanted to support ($24 billion promise).

The newly elected Parliament followed popular sentiment.

The resolution to send 10,000 troops passed after $8.5 billion loan.

52

Is It EU or Something Else?Is It EU or Something Else?

These four countries were similar in their standard of living in the fifties.

53

Valerie Giscard D’EstaingValerie Giscard D’Estaing

”It would be “the end” of the EU if Turkey were ever actually to get in. Turkey is by definition unacceptable as an EU member.”

54

Swimmers in Eastern TurkeySwimmers in Eastern Turkey

55

““Please Please Use the Use the

Pedestrian Pedestrian Tunnel”Tunnel”

15% of the population is illiterate.

56

UniversitiesUniversities

Every June, 1.5 million high school seniors take university entrance exams. About a fourth receive scores to qualify for acceptance, but only 3 in 5 (15% of the total) get placed.

57

Swimmer in Western TurkeySwimmer in Western Turkey

58

University StudentsUniversity Students

59

Kultur Forum Europa awarded 2003 Europe Culture Award to Istanbul Culture and Art Foundation, the organizer of Istanbul Festival since 1973.

60

Sertab Erener’s special duets with Jose Carreras and Ricky Martin demonstrated her versatility as a singer of different kinds of music.

61

Miss World 2002 - Azra AkinMiss World 2002 took place at Alexandra Palace in London, December 7, 2002.

62

Cover of The EconomistTurkey belongs in Europe

Dec 5th 2002