Download Etatism in the Turkish Economy

Etatism in the Turkish Economy
1933
1938
Etatism Period
1945
War Economy
Reasons of the Etatism Policy
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External Factors:
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Great Depression
Law export and import prices after the Great
Depression
There was rapid industrialization in the USSR.
Reasons of the Etatism Policy
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Domestic Factors:
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Falls in production and national income
Heavy tax burden especially on farmers
Serious falls in exports
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Foreign exchange bottlenecks
Troubles in imports of raw materials
Falls in employment
Reasons of the Etatism Policy
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Domestic Factors:
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The need for domestic production of previously
imported goods
Private manufacturers were not successful
The reaction to the CHF government in
Anatolia
Boratav, K. Türkiye’de Devletçilik s.143

“... Yeni gümrük tarifesinin arkasına sığınarak
dünya fiyatından birkaç misli yükseğe satan basit
ve şımarık bir sanayi türemeye başlamıştı....İşte
demir telleri keserek çivi yapan, çiviyi dış piyasa
fiyatının on misline satan, milli sanayi olduğu için
demir telleri de hammadde diye gümrüksüz
sokan şu çivi fabrikası...”
Boratav, K. Türkiye’de Devletçilik s.145

“ .... Samsun’a geldiğimiz zaman başka yerde
görmediğimiz bir manzara karşısında kaldık: Gece
her tarafta fevkalade inzibati tedbirler alınmıştı.
İstasyondan itibaren bütün yollar sürgülü askerler
tarafından tutulmuştu. Bu suretle askerden ve
polisten mada kimseyi görmeden, adeta bir
düşman şehrine henüz giren bir kumandan gibi
Gazi ve bizler otomobillerle Gazi’nin misafir
edileceği konağa geldik.....”
Definition of Etatism
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Moderates:
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Government should take action if private
entrepreneurs fails to do something
Radicals:
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Government must do everthing that ensures
public interest
Etatism in Turkey
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State-owned business enterprises
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The establishment and control of the
economic life
Etatism in Turkey
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1932: The Soviet Committee headed by
Prof. Orlof prepared the first report
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1934: This report was accepted as the
“First Five Year Industrial Plan”
Etatism in Turkey
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First Five Year Industrial Plan:
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Covers the 1933-1938 period
Industrial production must be based on agricultural
products and natural resources
Only exception: Industries that will provide high benefit
to the society
To substitute imports of consumption goods by domestic
production
The location of industry: Must be close to the natural
and labor resources
Priority given to: Textile, mining, paper, chemistry, glass
and glassware, cement.
Etatism in Turkey
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Second Five Year Industrial Plan:
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1939- period
Aim was to produce intermediate and investment goods
Could not be put into practice because of the WWII
Etatism in Turkey
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It was financed by domestic resources (taxes)
High-technology
Production costs were low (limited worker rights)
Complements and encourages private sector
Import substitution (consumption goods)
Question: Why consumption goods but not capital
goods are produced?
Etatism in Turkey: Results
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Industrialization started
Trade surplus except 1938
Foreign firms that have privileges are liquidated
Railways are nationalized
State Economic Enterprises:
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Sümerbank, Etibank, Denizcilik Bankası etc.
Agriculture
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Distribution of state land
Area planted increased
1932/1938: Turkish Grain Board
Prices are volatile
Tax burden on agriculture
Mining and Energy
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Importance given
1935: General Directorate of Mineral Research and
Exploration
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The institute was made responsible of carrying out the necesarry
studies, chemical and technological analysis, in order to search and to
find mining and stone beds, and then to determine whether they are
appropriate for operation or not, and also to educate engineers,
assisting personnel and qualified employers for the sector.
1935: Etibank
Mines are nationalized
1940: First oil well in Raman
Not efficient
Electricity production is deficient and costs are high.
Industry
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Domestic demand was satisfied by domestic
production
Most successful industry:
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Average number of workers:
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Textile (80% of domestic demand)
Sugar (No need for imports)
Cement (exported)
Iron-steel
1933: 47; 1939:84
Problems:
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Increased import demand
Agriculture-industry competition
International Trade
Infant-industry argument
 Clearing agreements
 Trade surpluses except 1938
 1934: Foreign Trade Office
 Terms of Trade are against Turkey
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International Trade (million TL)
Year
Exports
Imports
Balance
1933
96,2
74,7
21,5
1938
144,9
149,8
-4,9
1939
127,4
118,2
9,2
1945
218,9
126,2
92,8
National Income
National income increased by 9% on
average
 Pre-war period: Agriculture, Industry
 Post-war period: Services
 Income distribution problems
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1940-1945 Period
War economy
 State of war: Loss of labor force
 Reduced agricultural production
 Reduction in tax revenues
 Reduced imports
 Increased military expences
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Capital Resources
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Money supply:
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Pre-war period:
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Rate of increase ≈0,5 % annual
GDP Growth ≈5-6 % annual
No inflation
Post-war period:
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483,3 % increase
Inflation
Capital Resources
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Budget:
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Pre-war period:
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Budget surpluses
70% indirect taxes
Post-war period:
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Increase in direct taxes
New taxes: Varlık Vergisi, Toprak Mahsulleri Vergisi
Rise in government expenditures
Measures
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1940: National Protection Law
1940: Trade Office
1942: Varlık Vergisi
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Law No: 4305 “İktisadi şartların darlığından doğan
güçlükleri istismar ederek yüksek kazançlar elde ettikleri
halde kazançları ile mütenasip vergi vermeyenleri
istihdaf etmekte ve içinde bulunduğumuz fevkalade
vaziyetin icap ettirdiği fedakarlığa bunları da … iştirak
ettirmek maksadını gütmektedir. Mükelleflerin mali
(güçlerini) …halk mümessillerinden terekküp eden
komisyonlar tayin edecektir.” (K. Boratav s.343)
1944: Agricultural Product Tax
Inflation
Money supply increased
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Production decreased
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Inflation
Inflation
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To cope with inflation:
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Price controls
Government purchased agricultural products at
low prices
Distribution of basic intermediate goods was
done by government