The Political Economy of Regulation in Turkey

The impact of the economic progress of different social classes or groups is never the same, but progress might also put social cohesion at risk in a way which might be unbearable for society at large. The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society.

Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence of all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses, his real conditions of life, and his relations with his kind.

Marx and Engels, [] , In his treatise on nineteenth century capitalism, Karl Polanyi discusses how the unleashed forces of economic progress would be inimical to the survival of society and argues that not only the form but also the pace of progress should be politically determined according to the goals of non-economic character. However, the extent to which the forces of creative destruction are checked by political action or left to function unhampered differ in different historical periods and societal contexts.

The empirical case of Turkey also shows that the state remains an important actor in both historical contexts where development strategies are shaped within different frames of economic regulation and in both contexts state action is guided by political motives as well as economic growth related objectives. The analytical frame of the discussion is built with reference to the work of Karl Polanyi and the historical trends in development economics that closely follow the transformation of capitalism and change in nature in conformity with the characteristics of the historically different varieties of capitalism.

Like capitalism itself, the existence of markets, found in all kinds of societies in all historical periods, is not the problem that is explored in this book. It is only in the market society—where the totality of economic activity is guided by market exchange—that the economy constitutes an autonomous domain disembedded from society. Fired by an emotional faith in spontaneity, the common-sense attitude toward change was discarded in favor of a mystical readiness to accept the social consequences of economic improvement, whatever they might be.

The elementary truths of political science and statecraft were first discredited, then forgotten. It should need no elaboration that a process of undirected change, the pace of which is deemed too fast, should be slowed down, if possible, so as to safeguard the welfare of the community. Such household truths of traditional statesmanship [ … ] were in the nineteenth century erased from the thoughts of the educated by the corrosive of a crude utilitarianism combined with an uncritical reliance on the alleged self-healing virtues of unconscious growth.

Why should the ultimate victory of a trend be taken as a proof of the ineffectiveness of the efforts to slow down its progress? And why should the purpose of these measures not be seen precisely in that which they achieved, i. What is problematic, according to him, is the principle of non-interventionism informed by a blind faith in progress led by the self-regulating market which comprises all elements of industry including land, labour and money.

As Polanyi puts it , None of them is produced for sale. The commodity description of labor, land and money is entirely fictitious.

Turkey's new political economy

Commodification of land, labour and money was realised by a series of deliberate interventionist measures and further intervention was required to make such a strange economic organisation compatible with human society. However, this diversity of choices was going to have one outcome common to all societies: Labour, land and money were indeed not commodities.

As some of the pioneers of the field later observed, the global victory of Keynesian ideas over economic liberalism constituted an important source of inspiration to the daunting task they have undertaken with the optimism characteristic of the period. One of these pioneers, A. Hirschman , later commented on this unrealistic optimism, adding that without this they would never have attempted even to understand the problems at hand. But they did attempt to understand these problems and they also understood the limitations of development economics even before the discipline had come under attack from pro-market liberals.

Such objectives often dominated the strictly economic growth oriented alternatives and seriously limited the successful application of development models. This, as we know, has not been possible in the context of the market-oriented development strategies that accompanied late twentieth century globalisation. The demise of development economics was celebrated with the confident affirmation of the superiority of neo-classical economics and market-oriented policies.

The second age of global market society had begun and unbridled progress of the kind Hayek , associated with civilisation was the order of the day: The preservation of the kind of civilisation that we know depends on the operation of forces which, under favourable conditions, produce progress. The second life of developmentalism began in the setting of this new capitalism. In this process, international organisations such as the International Monetary Fund IMF and the World Bank, as well as the more recently formed World Trade Organization, have played an important role by presenting the blueprints for institution building, which have become the centrepiece of the international development policy environment.

Economic stabilisation and structural adjustment were the key words and, apart from fiscal austerity, what they meant was privatisation, the liberalisation of trade and financial liberalisation, labour market de-regulation, and the elimination of agricultural subsidies. At the same time, the voluntary sector is increasingly called upon to assume what were once the responsibilities of the state, and here—too—partnerships between the state and non-governmental organisations NGOs have become an important aspect of the models of good governance.

While the nation state is limited in its capacity to interfere with the commodification of land, labour and money, intervention can still be motivated by political factors, which vary in their compatibility with the requirements of economic progress. As mainstream development theories and policies undergo an important change, they continue to be marked by the tendency to overlook the significance of those objectives of a political nature pursued by nation states.

The case of Turkey shows how these deviations appear in society in specific ways that nevertheless reflect the nature of the historically prevailing variety of capitalism.

A transfer of capital to these business people from non-Muslim minorities, who had a centrally important presence in the nineteenth century Ottoman economy, was an integral component of the new nation building project. Two historical developments have significantly contributed to an accumulation of capital in the hands of a Muslim bourgeoisie that has emerged with considerable state support: Politically supported mechanisms of capital accumulation continued to benefit Muslim entrepreneurs, at times at the expense of their remaining non-Muslim peers, as in the case of the notorious Wealth Levy of They were obviously not in conformity with a rational economic strategy given the fact that entrepreneurship is a scarce resource and national development would necessarily be affected negatively by the elimination of the holders of that resource.

Yet, even beyond the extraordinary circumstances of the war years, optimum use of entrepreneurial resources has not been the most important motive determining the state support provided to entrepreneurs. To maintain social stability and, after the transition to multi-party rule in the post-Second World War period, to gain electoral support, Turkish governments followed a policy orientation that slowed down economic progress and prevented the commodification of land, labour and money.

In fact, one of the first economic policy decisions taken by the founders of the Republic was the abolition of the agricultural tithe—a major source of public revenue—in Agriculture was thus left out of the tax system and subsequent governments, even in the planned economy period between and , have never followed a strategy of using the surplus extracted from agriculture to support industrial development. According to these anecdotes, Kaldor, who could not appreciate the political significance of leaving the peasant population undisturbed, actually thought that the statistics had to be inaccurate.

The urban population was about 25 per cent of the total population in and had only reached 44 per cent in After several decades of a first unplanned and then systematically planned policy of industrialisation, 45 per cent of total employment was still in agriculture. The survival of family farms has defined a situation where immigration to the city has not led to a total rupture with the countryside.

The remittances that immigrants sent to family members who remained in the village contributed to the survival of family farms, and these remittances—which were reciprocated by in-kind or in-cash support from the peasant economy—would constitute a mechanism of social protection for workers in urban industry or services.

However, the integration in the urban economy did not only depend on the prevailing employment opportunities. There was another society-specific mechanism of integration, which owed its existence to the character of state—society relations. Gecekondu , the Turkish form of irregular housing settlements, in fact appears as a key to any analysis of the nature of the interaction between politics and the economy during the first phase of developmentalism in Turkey. The unique economic and social significance of irregular settlements in Turkey can be explained with reference to two factors.

First, illegal appropriations of public land and housing developments without construction permits, which built on what were previously agricultural plots in the urban periphery, were enabled by the characteristics of urban real estate property.

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Hence, irregular settlements, which in another context of property relations would have met with strong opposition from the owners of private land with proper construction permits, could easily mushroom. Also significant in this development was a second factor, which was political. This pattern of irregular access to urban land was situated in a context where a proper public housing policy was absent, but electoral competition prevented political actors from being indifferent to popular demands.

In this context, the habitants of gecekondu acquired title deeds through periodically enacted amnesty laws and the irregular settlements were regularised through the provision of municipal services, usually around election time as favours granted in exchange for votes. Hence, the gecekondu appeared as a society specific form of popular housing and the irregular settlements have developed to also include middle-class residences. However, it would be a mistake to regard irregular settlements solely as a response to the need for shelter. These settlements were also spaces of livelihood with a variety of both formal and informal economic activities gravitating around them.

The inhabitants engaged in these activities could remain together with their family members in space and often in economic interest.

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Kinship ties could thus remain strong in their ability to provide support to individuals in social risk situations. Policies that were implemented checked the forces of creative destruction and slowed down the pace of economic development. State-owned enterprises and the modern firms in the private sector could contribute to a process of industrialisation that constituted the basis for the expansion of Turkish manufactured exports after the insertion of the country into the global market.

These enterprises could also provide decent jobs—today conspicuous by their absence in Turkey, as in most other countries—at least to a limited segment of the workforce. Inflationary pressures and the growing deficit of balance of payments led the government to adopt an economic stability package imposed by the IMF in January ; but the package could be implemented only after the military intervention of , by far the most ruthless and the most enduring of such interventions in terms of its impact on political and social relations.

Turkey has thus entered the age of globalisation with a military intervention and, for those of us who were around at the time, it was quite surprising to hear the leader of the junta state, in his first public address broadcast on television, that the implementation of a market-oriented, outward-looking development strategy was among the objectives of that intervention. Most tariff and non-tariff barriers to trade were eliminated, and the foreign direct investment regime was liberalised. Towards the end of the s, capital controls, too, were eliminated with full financial liberalisation.

While the barriers to agricultural imports were eliminated, agricultural subsidies, too, began to be discontinued without being fully eliminated. In the meantime, the most fertile plots of land in the western and southern regions of the country were sacrificed to tourism and real estate development, which had become the leading sectors for economic expansion in the s. Thus, de-ruralisation has gained impetus; in the mids rural and urban populations reached parity and urbanisation has proceeded at an increasing rate since.

Yet, the final hour of the peasant economy came only in the first decade of the new millennium, when a series of policies directed at the full commercialisation of agriculture were systematically implemented. Until then, agricultural productivity continued to decline in such a way that Turkey appeared to be one of the few countries in the world where there were no productivity improvements in agriculture between the early s and the late s World Bank, , With the geographic expansion of the cities and the new popularity of suburban, middle-class residences, the inhabitants of irregular settlements and new immigrants hoping to find shelter in these areas found themselves in intense competition with real estate developers.

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However, the outcome of this newly competitive environment also only became clear in the first decade of the new millennium, when the urban property regime was finally established as part of a systematic strategy of urban transformation. Neither could the separation of the economy from politics be achieved since the political concerns of the governments in power prevented them from implementing drastic measures to eliminate all agricultural subsidies, organising the urban land market in conformity with the norms of private property relations or even refraining from attempts to control interest rates to prevent the ruin of many small and medium-sized enterprises.

Ongoing state intervention in an unregulated market economy, which was nevertheless set out to function by treating labour, land and money as commodities, led to a series of crises, in , and the worst in When the decision to eliminate capital controls was being debated at the end of the s, Keynesian economists warned the policy makers that financial liberalisation in the absence of mechanisms to assure fiscal discipline was a recipe for disaster Akyuz, These economists were proven right by the developments that followed.

The main purpose of these reforms was to prevent discretionary political involvement in the economy. Hence, a series of independent regulatory agencies were put in place and existing agencies were further strengthened. Turkish companies are often interested in partnerships and knowledge transfer, rather than a purely transactional commercial relationship.

Turkey stands at 78 among economies on the ease of starting a business. Turkey ranks 61st out of in the Global Competitiveness index compiled by the World Economic Forum. In Turkey was ranked in the Transparency International corruption indicators as 81 out of countries. Turkey placed higher than Brazil, and at the same level as India.

The New Turkish Commercial Code which came into force on 1 July goes some way to addressing the need for greater transparency and reduced bureaucracy in Turkish business as well as flexibility in directorship. Turkish companies increasingly have strong corporate governance and social responsibility structures in place. Turkish companies are now subject to Corporate Governance Compliance legislation and in due course conformity to international financial reporting standards IFRS , which should ensure increased international confidence in the market. The UK continues to encourage human rights reforms in Turkey to ensure that democratic and justice standards as set out in international law are met.

The UK supports bilateral projects in partnership with Turkish government institutions and civil society that aim to strengthen rule of law and rights protections. But it described backsliding in some areas of fundamental freedoms. Under the UK Bribery Act, bribery is illegal and it is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK.

In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere. In recent years, the reform process on anti-corruption has declined, as amendments to the legal system framework have weakened rather than strengthened the NIS. Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in Turkey and some basic effective procedures you can establish to protect your company.

Read the information provided on our Bribery and corruption page. Please read the information provided in the Terrorism section of the Foreign Office travel advice for Turkey. The Centre for the Protection of National Infrastructure also provides protective security advice to businesses. IP rights are territorial, that is they only give protection in the countries where they are granted or registered.

If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets. IP rights have been protected under the general rules of Turkish law since the beginning of the Turkish Republic. Turkey is a party to a number of international agreements, conventions and treaties related to intellectual property rights. Under Turkish law, the main intellectual property rights that are capable of protection are patents, trademarks, registered and unregistered designs, copyrights and confidential information.

The Turkish Patent Institute registers trademarks, patents, license agreements and such rights upon application. The protection starts when the application is lodged with the Turkish Patent Institute. Read the information provided on our [Intellectual Property https: Turkey is now viewed as a source, transit and destination country for Organised Immigration Crime.

The majority of irregular migrants that are attempting to reach the EU are non-Turkish nationals transiting Turkey.

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Turkey works hard to house and supply approximately 4 million refugees 3. Although the Turkish Coast Guard is predominantly focused on search and rescue operations in the Aegean, an increased capacity is now allocated to tackling illegal migration. This flow is now starting to have a direct impact on the UK. The high number of people crossing borders illegally increases the vulnerability of the countries through which they pass.

This effects serious and organised crime, including drugs and people trafficking. Turkey continues to be a prominent transit country for heroin trafficking from source country Afghanistan to end use European countries and more recently notable in the movement of cocaine from South America. Turkish law enforcement continue to make significant seizures and investigate international drug trafficking, evidenced by the seizure last year of 17 tons of heroin, more than the rest of Europe put together.

Read the information provided on our Organised crime page. To help us improve GOV. It will take only 2 minutes to fill in. Skip to main content. Home Overseas Business Risk - Turkey. Political and Economic 2. Bribery and Corruption 6. Protective Security Advice 8. Political and Economic Political overview Turkey is a secular democracy with a majority Muslim population. New Turkish Commercial Code The New Turkish Commercial Code which came into force on 1 July goes some way to addressing the need for greater transparency and reduced bureaucracy in Turkish business as well as flexibility in directorship.

Human Rights The UK continues to encourage human rights reforms in Turkey to ensure that democratic and justice standards as set out in international law are met.