Download Optimum rate of increase in price level

ECONOMIC PLANNING 1963-1980
AND
THE COMPLETE SHIFT AFTER 1980
PLANNED ECONOMIC GROWTH
1960 constitution
 Economic planning framework
 Started in 1960 and lasted in its proper sense
until 1980

 The
coverege of plans are specified
 All plans had a targeted growth rate of the economy
 The plans took the existing production structure as
shown
 Common aim was industrialization
THE PLANS DURING THE 1960S AND 1970S
1st five year plan: 1962-1967
 2nd five year plan: 1967-1972
 3rd five year plan: 1973-1977
 4th five year plan: 1979-1983
Tarihçe:
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http://www.dpt.gov.tr/PortalDesign/PortalControls
/WebIcerikGosterim.aspx?Enc=83D5A6FF03C7B4
FC25320C1CC3C485FB70C9008EBE56E898F05
146F027CA65EC
THE COMPLETE SHIFT AFTER 1980
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Depression in the mid-1970s.
To cope with the deepening depression, a new
economic policy was set in 24th of January, 1980.
 Structural transformation idea led by world bank
and IMF
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ECONOMIC DEPRESSION AND SEARCH FOR A NEW
POLICY
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Causes of economic depression;
 Structure of the production,
 Domestic and external developments and factors.
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Some of the external factors;
 Cyprus issue,
 Five-fold rise in crude oil prices by OPEC in 1974,
 Deep economic depression in the partner countries of
Turkey.
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Reasons for the failure of the “SAN enterprises”:

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They were established without enough research which would
enable the decision-makers to decide whether they were
economically feasible.
Domestic and external economic conditions were not mature
enough to allow them to complete their development:
 financing of the public sector,
 difficulties in refunding made it almost impossible to borrow
from foreign markets to make new industrial investments.
ECONOMIC POLICY OF THE 1980S
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A new economic policy was implemented in January 24,
1980.
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Prevailing prices were regarded as the sole factors to
direct the market economy. Deviations from the
equilibrium price level would be eliminated by the market
system.

Economy was left to supply and demand conditions.

Prevailing prices would predominate not only in a
national basis but also in an international level.

Government should adjust the expenditures to create a
balance between supply and demand.
The process of opening:

Exports was increased to diminish the trade deficits.

To increase exports;
 Devaluation
when necessary; devaluation makes the
domestically produced goods cheaper and increases
exports accordingly, however it increases the prices of
imported inputs and costs of production at the same
time.

To induce exports;
•Freedom to hold more foreign currency by the exporters,
•Imported inputs used in exported goods have exempted from
taxation,
•Exporters were subsidized,
•Free zones were established and the transactions were facilitated,
•Monetary support to exporters.
 The idea behind this policy was to increase the competitive power
of domestic industries against the foreign ones.

By other similar enactments to induce foreign private capital;
 Foreign investments were allowed to enter the banking
sector,
 The access of foreign investments to agriculture, tourism,
and other sectors was facilitated,
 Foreign investments to crude oil industry were facilitated
as well.
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In this program, foreign private capital has played a key role
to overcome the problems such as balance of payments
deficits, insufficient domestic savings, and the transfer of
technology.
Macroeconomic policies:
Constraints imposed on the public sector:

The main purpose of the policy implemented after the 24th of
January was to limit the public sector. By implementig such a
policy, a rapid development was aimed for the private sector.
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This new policy was the symbol of the predominance of the private
sector in the national economic climate.
Optimum rate of increase in price level:
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In that period, there was a slowdown in price level. Increase in
production level and profits were closely related with this
downward movement in prices.
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However, it was quite difficult for a developing country to maintain
such an optimal price level which would stimulate economic
growth.

The WB wanted the developing countries to produce in
accordance with the comparative advantages theory
thus, it strictly recommended Turkey not to deal with
heavy industries.

Similarly, the recommendations were that Turkey should
adapt labor intensive techniques.
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Consequences of the policies determined on the 24th of January
1980;
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Shrinking public sector,
Capital and labor markets were left to market forces,
Liberalization of domestic and foreign markets.
Social aspects of the issue may be summarized in two
dimentions;
 Distribution
of income: wage rates have fallen
substantially since the determination of price has
been left in the hands of the market economy.
 Opportunities
for development in the long run: exportled growth strategy relies mainly on the foreign capital.
However, that kind of policy cannot be sufficient to
maintain economic growth in the LR.
Main properties of the transformation:
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Financial liberalization was adopted after 1989.
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Financial liberalization enabled the capital to flow freely to Turkey.
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Due to a substantial fall in the interest rates in most of the
developed countries, developing countries had the opportunity to
attract the capital in 1989, because they offer higher interest rates
compared to the world level.
http://www.youtube.com/watch?v=BhWKUbnlL
eo
 http://www.youtube.com/watch?v=vIibveHmaZ
o
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CONCLUSION
The change in economic policies was significant
 Accompanied by a destructive military coup
 Caused lasting economic, social, political
consequences
 Economy was liberalized fast
 Export promotion was the main pillar
 Industrialization was left to market forces
 Reduction of the role of state
 Full scale privatization
 Economy until severe crisis until 2000s.
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http://www.youtube.com/watch?v=9qjvwQrZm
pk&feature=relmfu
 http://www.youtube.com/watch?v=x_2Tv2GPs0&feature=relmfu
 http://www.youtube.com/watch?v=XIUWZnnHz
2g
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