Introduction

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Notes

 1. However, within the context of the analytical framework utilized here for the 1980 reforms, I will occasionally point out significant points of divergence between the 1958 and 1970 cases of reform abandonment, and the 1980 case of reform endurance.

 2. See Anne Krueger, Foreign Trade Regimes and Economic Development: Turkey (New York: Columbia, 1974), especially Chapter 1. Anne Krueger's other works on Turkey also reflect the same type of periodization. See for example Anne Krueger and Vernon Ruttan, “Assistance to Turkey,” in Anne Krueger, Constantine Michalopoulos and Vernon Ruttan, Aid and Development (Baltimore: Johns Hopkins University Press, 1989).

 3. See Korkut Boratav, Türkiye İktisat Tarihi, 1908–1985, 4th ed. (İstanbul: Gerçek Yayınları, 1993).

 4. Other areas of contention in the Turkish political economy during the mid 1970s included interest rate and credit policies, direct foreign investment policies, agricultural support policies and regional inequalities in the distribution of resources. See Henri J. Barkey, The State and Industrialization Crisis in Turkey (Boulder: Westview Press, 1990), especially pp. 109–48.

 5. For a similar statement, see Henri J. Barkey, The State and Industrialization Crisis in Turkey (Boulder: Westview Press, 1990), especially, p. 99.

 6. Anne Krueger and Okan Aktan, Swimming against the Tide: Turkish Trade Reform in the 1980s (San Francisco: ICS Press, 1992), pp. 23–4.

 7. As Baysan and Blitzer state, “controls were intensified and additional measures were undertaken to restrict imports in response to sever balance-of-payments difficulties. Throughout this period, but especially in the second half, the extent of overvaluation was much greater than in the period 1963–1973. This created a even greater bias in favor of import-substituting industries by raising implicit nominal protection” (Tercan Baysan and Charles Blitzer, “Turkey,” in Demetris Papageorgiou, Michael Michaely, and Armeane M. Choksi, Liberalizing Foreign Trade Volume 6: The Experience of New Zealand, Spain, and Turkey (Cambridge: Basil Blackwell, 1991), p. 318).

 8. Krueger and Aktan, Swimming against the Tide, p. 25. The following information on the export policy draws heavily from the same source (pp. 72–83). The export rebates were intended to refund the taxes that exporters paid at earlier stages of production. Eligible products, mostly non-traditional export commodities, were divided into 11 lists in 1975, each list having a different rebate rate. The rebate rates were increased when the TL exchange rate became excessively overvalued and reduced following devaluations. Second, exporters received rebates on custom duties they paid earlier on inputs imported to be used in the production of export items.The foreign exchange retention rights allowed exporters to keep the amount of foreign exchange they spent for the exporting activities, including export credits and their interest payments. Further, exporters of industrial and mining products were permitted to retain a certain percentage of their export proceeds to be used in the financing of the imported inputs used in the production of the exported items. This percentage was 25 percent of net foreign exchange earnings before it was raised to 50 percent in 1979.Export credit facilities were designed to give exporters access to credit at lower than prevailing rates. This facility was important to exporters given that the Turkish interest rates were higher than international rates, and that credit was rationed. Among the special funds established for this purpose, the Special Export Fund (SEF) and the Interest Differential Rebate Fund (IDRF) were important. The SEF supplied credit for exporters of fresh fruit and vegetables, marine products, export trading companies and construction contractors working overseas. The IDRF, on the other hand, was designed to refund the portion of exporters' costs associated with paying higher interest rates in Turkey than exporters pay in foreign countries. The payment from the IDRF was made after exports had been shipped, and at rates differentiated by product category. Finally, during the 1970s export policy measures encouraged small exporters to utilize foreign trade companies by extending additional export rebates to those trade companies exporting in excess of a certain amount. While in 1975 the additional five percent rebate was given to the companies exporting more than $1.8 million per year, the minimum export requirement was raised to $3.5 million in 1979.

 9. See for example, Kemal Derviş and Sherman Robinson, Foreign Exchange Gap, Growth and Industrial Strategy in Turkey: 1973–1983 (Washington, DC: World Bank, 1978), p. 41; Merih Celasun and D. Rodrik, “Debt, Adjustment, and Growth: Turkey,” in Jeffrey D. Sachs and Susan M. Collins, Developing Country Debt and Economic Performance: Country Studies – Indonesia, Korea, Philippines, Turkey, Vol. 3 (Chicago: University of Chicago Press, 1989), p. 622; Bella A. Balassa, The Newly Industrializing Countries in the World Economy (New York: Pergamon Press, 1981), pp. 315–16; Boratav, Türkiye İktisat; and Asaf Savaş Akat, Alternatif Büyüme Stratejisi: İktisat Politikası Yazıları (İstanbul: İletişim, 1983).

10. TÜSİAD, The Turkish Economy, 1981 (İstanbul: TÜSİAD, 1981), p. 138; DPT, Dördüncü Beş Yıllık Kalkınma Planı, 1979–1983 (Ankara: DPT, 1978), p. 38.

11. See William Hale, The Political and Economic Development of Modern Turkey (New York: St Martin's Press, 1981), p. 230.

12. For an analysis of this type of borrowing and its effects on Turkey's economic crisis in the late 1970s, see Celasun and Rodrik, “Debt, Adjustment, and Growth: Turkey,” pp. 631–2.

13. World Bank, Turkey: Prospects and Problems of an Expanding Economy (Washington, DC: World Bank, 1975), p. 408.

14. Eskişehir Sanayi Odası, Eskişehir Sanayi Odası'nın 10. Yılı ve Mümtaz Zeytinoğlu (İstanbul: Eskişehir Sanayi Odası Yayınları, 1981), pp. 233–4.

15. Sanayi Odaları Birliği, IVüncü Beş Yıllık Plan'ın Sanayileşme Stratejisine İlişkin Görüş ve Öneriler (Ankara: Sanayi Odaları Birliği, 1976), p. 26.

16. Kutlay Ebiri, “Turkish Apertura, Part I,” METU Studies in Development 7 (314), 1980, p. 229.

17. DPT, Üçüncü Beş Yıl – Yeni Strateji ve Kalkınma Planı (Ankara: DPT, 1972).

18. Their mission included supplying cheap inputs to all sectors of the economy and employment to the masses of villagers pouring into the cities. The governments utilized state enterprises for two main purposes: to manipulate those who use state enterprises' products through the control of prices, and to provide employment opportunities to those who offer support at the polls.

19. See for example, Barkey, The State and Industrialization Crisis in Turkey.

20. Aydın Ulusan, “Public Policy Toward Agriculture and Its Redistributive Implications,” in Ergun Özbudun and Aydın Ulusan, The Political Economy of Income Distribution in Turkey (New York: Holmes & Meier Publishers, Inc., 1980), p. 125.

21. Zeyyat Hatiboğlu, An Unconventional Analysis of Turkish Economy – An Essay on Economic Development (İstanbul: Aktif Büro Basım Organizasyon, 1978), p. 299.

22. Ulusan, “Public Policy Toward Agriculture and Its Redistributive Implications,” in Özbudun and Ulusan, The Political Economy of Income Distribution in Turkey, p. 125.

23. The top 6.05 percent of households had 33.86 percent of total privately owned land. On the other hand, about 42 percent of all rural households own only less than 2.72 percent of total privately owned land. See DPT – Kırsal Kalkınma İhtisas Komitesi, Kırsal Refah Politikası (Ankara: DPT, 1975), p. 6, Table 1.

24. For a general statement on this point, see Keith Griffin, Political Economy and Agrarian Change (Cambridge, MA: Harvard University Press, 1974).

25. Another potential source of export interests, mining firms, were mostly state-owned and catered to the domestic industry. Overall, they did not count as an important sector in the Turkish economy. Private mining companies were a few, relatively small, and heavily regulated by the state.

26. Indeed, the average annual growth rate exceeded 7 percent between 1974 and 1977.

27. T. Baysan and C. Blitzer, “Turkey,” in Papageorgiou, Michaely and Choksi, Liberalizing Foreign Trade Volume 6: The Experience of New Zealand, Spain, and Turkey, p. 315.

28. Outside the government, the Demokratik Parti, a splinter from JP, appeared to be more outward-oriented than the JP. This party resembled the Freedom Party of the 1950s in its positions. The Demokrats argued that “industrialization would not succeed without agricultural development and advocated support for that sector. Not surprisingly, this message was best received in regions marked by low urban but high levels of rural development, in other words, the relatively well-off agricultural areas of the Western Anatolia. Unlike the NSP, the Demokratik Parti turned out to be a one-election phenomenon. By the 1977 elections, the JP had successfully reabsorbed most of these defectors back into its fold.” Barkey, The State and Industrialization Crisis in Turkey, p. 158.

29. Erbakan had been elected to the presidency of the TOBB in 1969 in spite of the efforts of Prime Minister Demirel to the contrary. Demirel later ousted Erbakan from this position. Therefore, there was an animosity between the two party leaders.

30. The JP had 149 seats, the NSP had 48 seats, and the NAP had three seats in parliament.

31. Yalçın Doğan, IMF Kıskacında Türkiye: 1946–1980 (Ankara: Toplum Yayınları, 1980), p. 128.

32. Yalçın Doğan, IMF Kıskacında Türkiye: 1946–1980 (Ankara: Toplum Yayınları, 1980), p. 129.

33. Yalçın Doğan, IMF Kıskacında Türkiye: 1946–1980 (Ankara: Toplum Yayınları, 1980), p. 129.

34. Yalçın Doğan, IMF Kıskacında Türkiye: 1946–1980 (Ankara: Toplum Yayınları, 1980), pp. 128–9.

35. See Barkey, The State and Industrialization Crisis in Turkey, pp. 160–61.

36. Krueger and Aktan, Swimming against the Tide, p. 32.

37. Celasun and Rodrik,, “Debt, Adjustment, and Growth: Turkey,” in Sachs and Collins, Developing Country Debt and Economic, p. 639, Table 1.10, and p. 643, Table 1.12.

38. Doğan, IMF Kı skacında Türkiye: 1946–1980, p. 134; for the ownership of the banks, Barkey, The State and Industrialization Crisis in Turkey, p. 125, Table 5.1.

39. Doğan., IMF Kıskacında Türkiye: 1946–1980, pp. 138–40.

40. Barkey, The State and Industrialization Crisis in Turkey, p. 162.

41. Barkey, The State and Industrialization Crisis in Turkey, pp. 162–3.

42. Doğan, IMF Kıskacında Türkiye: 1946–1980, p. 144.

43. Doğan, IMF Kıskacında Türkiye: 1946–1980, pp. 144–5.

44. Barkey, The State and Industrialization Crisis in Turkey, p. 119.

45. For example, İbrahim Bodur, the president of the General Council of the İstanbul Chamber of Industry, complained that the government lacked credibility. See Cumhuriyet, October 20, 1977.

46. Yalçın Doğan writes that the convertible currency account debt together with interests reached $3 billion dollars by the time the system was abolished. The rescheduling of the short-term debt was described at the time as the largest rescheduling operation in the Turkish economic history. See Doğan, IMF Kıskacında Türkiye: 1946–1980, p. 135. The following account of RPP–IMF relations during the period draws from the same source.

47. Barkey, The State and Industrialization Crisis in Turkey, p. 167.

48. Most of Özal's ideas in this report were published earlier in January 1978. He wrote that article as a representative of a private company. See TÜSİAD, 1978 Yılına Girerken ve 1980'lere Doğru Türkiye'nin Temel Sorunları Üzerine Görüşler – Öneriler (İstanbul: TÜSİAD, 1978), pp. 107–108.

49. Emin Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası (İstanbul: Milliyet Yayınları, 1984), p. 45.

50. For an interesting history of Özal's rise, including his Washington, DC days at the IMF, see Emin Çölaşan, Turgut Nereden Koşuyor? (İstanbul: Tekin Yayınevi, 1992).

51. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, pp. 46–7.

52. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, p. 75.

53. Ekrem Ceyhun, the state minister in charge of economic policy coordination, İsmet Sezgin, the minister of finance, and Nuri Bayar, the minister of industry and technology, were all staunch Demirel supporters within the JP. However, these ministers were not involved in the design of the reform package. For example, Ekrem Ceyhun instead focused on coordinating the distribution of scarce commodities such as oil.

54. Interview with Hüsnü Doğan, Ankara, January 1994. Doğan was one of the members of the Özal team and is also Özal's cousin.

55. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, pp. 75–76. Erdem was the chief negotiator of the new government in the first several months. He had good working relations with the IMF's Turkish Desk official, Charles Woodward, and knew the expectations of the IMF from the new government very well. During the previous Ecevit government, Woodward complained about having to talk to many officials and ministers who expressed different opinions on the same issue. See Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, p. 76.

56. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, pp. 75–76. Erdem was the chief negotiator of the new government in the first several months. He had good working relations with the IMF's Turkish Desk official, Charles Woodward, and knew the expectations of the IMF from the new government very well. During the previous Ecevit government, Woodward complained about having to talk to many officials and ministers who expressed different opinions on the same issue. See Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, p. 76.

57. Krueger and Aktan, Swimming against the Tide, pp. 46, 60–61.

58. Okan H. Aktan, “Liberalization, Export Incentives and Exchange Rate Policy: Turkey's Experience in the 1980s,” in Sübidey Togan and V.N. Balasubramanyam, The Economy of Turkey Since Liberalization (New York: St Martin's Press, 1996), p. 183.

59. Celasun and Rodrik, “Debt, Adjustment, and Growth: Turkey,” in Sachs and Collins, Developing Country Debt and Economic, p. 719

60. Celasun and Rodrik, “Debt, Adjustment, and Growth: Turkey,” in Sachs and Collins, Developing Country Debt and Economic, pp. 719–20.

61. The 1980 reform virtually eliminated scarcity rents, especially after 1983, by removing import quotas. Therefore, the premium-exclusive EERs can be treated as a highly reliable measure in calculating the trade regime's bias. To the extent that there were premiums during the early 1980s, will lead to an underestimation of the inward bias for that period.

62. Krueger and Aktan, Swimming against the Tide, p. 91.

63. SIS, Statistical Yearbook of Turkey, various issues, and SPO, Main Economic Indicators, various issues.

64. See Henri J. Barkey, “The Silent Victor: Turkey's Role in the Gulf War,” in Efraim Karsh, The Iran–Iraq War: Impact and Implications (London: Macmillan, 1989), pp. 133–54.

65. SIS, Statistical Yearbook of Turkey, various issues, and SPO, Main Economic Indicators, various issues.

66. Krueger and Aktan, Swimming against the Tide.

67. Barkey, The State and Industrialization Crisis in Turkey, pp. 174–5.

68. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, p. 250.

69. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, pp. 250–51.

70. Çölaşan, 24 Ocak – Bir Dönemin Perde Arkası, pp. 250–51.

71. Barkey, The State and Industrialization Crisis in Turkey, p. 178

72. Milliyet, January 30, 1980.

73. Sabri Sayari, “Politics and Economic Policy-Making in Turkey, 1980–1988,” in Nas and Odekon, Economics and Politics of Turkish Liberalization, pp. 33. He also mentions that companies and individuals linked to multinational enterprises were also supporters of the reforms. However, his proposition is questionable since, as Mehmet Odekon puts it, “the multinationals have generally been import-substituting industries” (Mehmet Odekon, “Perspectives of Manufacturing Sector,” in Nas and Odekon, The Economics and Politics of Turkish Liberalization, p. 162).

74. See Ziya Öniş, “Organization of Export-Oriented Industrialization: The Turkish Foreign Trade Companies in Comparative Perspective,” in Nas and Odekon, The Economics and Politics of Turkish Liberalization, p. 77; Sübidey Togan, 1980'li Yıllarda Türk Dış Ticaret Rejimi ve Dış Ticaretin Liberizasyonu; and Krueger and Aktan, Swimming against the Tide.

75. For more detailed information, see Togan, 1980'li Yıllarda Türk Dış Ticaret Rejimi ve Dış Ticaretin Liberizasyonu, pp. 76–105, 131–48; and, Öniş, “Organization of Export-Oriented Industrialization,” pp. 76–80, 90.

76. Öniş, “Organization of Export-Oriented,” p. 75. This section draws heavily from this source.

77. Öniş, “Organization of Export-Oriented,” , pp. 76–80.

78. Sayari, “Politics and Economic Policy-Making in Turkey, 1980–1988,” p. 32.

79. Öniş, “Organization of Export-Oriented,” p. 89.

80. Robert Kaufman, “Industrial Change and Authoritarian Rule in Latin America: A Concrete Review of the Bureaucratic Authoritarian Model,” in David Collier, The New Authoritarianism in Latin America (Princeton: Princeton University Press, 1979), p. 189, as quoted in Sayari, “Politics and Economic Policy-Making in Turkey, 1980–1988,” pp. 32–3.

81. Erkut Onursal, “İhracat Formalitelerinin Basitleştirilmesi,” in İktisadi Kalkınma Vakfı, Türkiye'nin Sanayi Mamulleri İhracatı (İstanbul: İktisadi Kalkınma Vakfı, 1983), p. 30.

82. Osman Ulagay, 24 Ocak Deneyimi Üzerine (İstanbul: Hil, 1983), p. 29.

83. See Yakup Kepenek, “Ekonomi Politikasında Belirsizlik,” Cumhuriyet, December 9, 1982.

84. Ulagay, 24 Ocak Deneyimi Üzerine, pp. 22–9.

85. Ulagay, 24 Ocak Deneyimi Üzerine, pp. 24–5.

86. The membership of TÜSİAD grew from the twelve founding members in 1971 to 243 members by 1987.

87. Yeşim Arat, “Politics and Big Business: Janus-Faced Link to the State,” in Metin Heper, Strong State and Economic Interest Groups – the Post-1980 Turkish Experience (Berlin and New York: Walter de Gruyter, 1991), p. 136. See also pp. 141–7.

88. Osman Ulagay, “Özal Programına Muhalefet Potansiyeli,” Cumhuriyet, April 19, 1982.

89. See Arat, “Politics and Big Business,” pp. 146–7.

90. A minority of the TÜSİAD members was, however, able to benefit from new trade policies very quickly, and defended export promotions. Atilla Yurtçu and şarık Tara, two TÜSİAD members heavily involved in export activities, opposed Halit Narin in support of export promotions. However, these internal cleavages among the members never reached significant proportions to undermine the basic homogeneity of the association.

91. Arat, “Politics and Big Business,” p. 138.

92. Odekon, “Perspectives of Manufacturing Sector,” p. 164.

93. Sayari, “Politics and Economic Policy-Making in Turkey, 1980–1988, p. 37.

94. Ulagay, “Özal Programına Muhalefet Potansiyeli.”

95. Ulagay, 24 Ocak Deneyimi Üzerine, p. 49.

96. Arat, “Politics and Big Business,” p. 144.

97. Ayşe Öncü ve Deniz Gökçe, “Macro-Politics of De-regulation and Micro-Politics of Banks,” in Heper, Strong State and Economic Interest Groups – the Post-1980 Turkish Experience, pp. 103–4.

98. Ayşe Öncü ve Deniz Gökçe, “Macro-Politics of De-regulation and Micro-Politics of Banks,” in Heper, Strong State and Economic Interest Groups – the Post-1980 Turkish Experience, pp. 104–5. See also Sayari, “Politics and Economic Policy-Making in Turkey, 1980–1988,” pp. 32–3.

99. Journalist Bilal Çetin wrote about how several hazelnut exporters attempted, through illegal means, to get around having to pay the export tax during the early 1980s. See Bilal Çetin, Soygun (İstanbul: Sosyal Yayınlar), pp. 35–8.

100. Üstün Ergüder, “Agriculture: The Forgotten Sector,” in Heper, Strong State and Economic Interest Groups – the Post-1980 Turkish Experience, p. 76. For the interest group activities of the Turkish Union of Chambers of Agriculture, the peak association, see the same source.

101. See for example, Akat, Alternatif Büyüme Stratejisi: İktisat Politikası Yazıları; and Zeyyat Hatiboğlu, Bilinmeyen Türkiye Ekonomisi (İstanbul: Sedok Yayınları, 1995).

102. Ergüder, “Agriculture: The Forgotten Sector,” p. 74; see also p. 76.

103. See Turk-Trade, Ana Tüzük (İstanbul: Turk-Trade, 1985); and Turk-Trade, Türkiye'de Dış Ticaret Derneği Nedir? (İstanbul: Turk-Trade, 1986).

104. See Hürriyet, November 18, 1987, as quoted in Selim İlkin, “Exporters: Favored Dependency,” in Heper, Strong State and Economic Interest Groups– the Post-1980 Turkish Experience, p. 93.

105. İlkin gives the examples of 1983–1984 Board of Directors' Decisions, and lists of Turk-Trade's formal demands from the Undersecretariat of Foreign Trade and Treasury regarding the foreign trade regime. See İlkin, “Exporters: Favored Dependency,” p. 93.

106. There are two different interpretations of the significance of the foreign credits Turkey received during the period. On the one hand, Colin Kirkpatrick and Ziya Öniş argue that the creditors were more generous for Turkey than they were for other countries in need of credits. See Colin Kirkpatrick and Ziya Öniş, “Turkey,” in Paul Mosley, Jane Harrigan, and John Toye, Aid and Power – The World Bank and Policy-based Lending, Case Studies, Vol. 2 (New York: Routledge, 1991), pp. 9–38. Krueger and Aktan, on the contrary, suggest that Turkish receipts of new money were quantitatively not more important than those received by Mexico, Chile and a number of other heavily indebted countries. See Krueger and Aktan, Swimming against the Tide, p. 172.

107. For two examples, see Krueger and Aktan, Swimming against the Tide, and Kirkpatrick and Öniş, “Turkey.”

108. See SIS, İstatistik Göstergeler 1923–1990, as quoted in Togan, 1980'li Yıllarda Türk Dış Ticaret Rejimi ve Dış Ticaretin Liberizasyonu, pp. 178, 217.

109. On Turkey's evolving relations with the EU, see for example, Ali Çarkoğlu and Barry Rubin (eds), “Special Issue: Turkey and the European Union,” Turkish Studies, Vol. 4, No. 1 (Spring 2003).

110. See, for example, Dani Rodrik, “Premature Liberalization, Incomplete Stabilization: The Özal Decade in Turkey,” National Bureau of Economic Research Working Paper No. 3300, March 1990; John Waterbury, “The Political Economy of Public Sector Reform and Privatization in Egypt, India, Mexico, and Turkey,” in Ezra Suleiman and John Waterbury, The Political Economy of Public Sector Reform and Privatization (Boulder: Westview Press, 1990), pp. 293–318; and Ziya Öniş and Barry Rubin (eds), The Turkish Economy in Crisis (London: Frank Cass, 2003).

111. See, for example, Asaf Savaş Akat, “The Political Economy of Turkish Inflation,” Journal of International Affairs, Vol. 54, No. 1 (Fall 2000), pp. 265–82.

112. See, for example, Metin R. Ercan and Ziya Öni, “Turkish Privatization: Institutions and Dilemmas,” Turkish Studies, Vol. 2, No. 1 (Spring 2001), p. 109–34.

113. See for example, Merih Celasun, “2001 Krizi, Öncesi ve Sonrası: Makroekonomik ve Mali Bir Değerlendirme,” in Ahmet Alpay Dikmen, Küreselleşme Emek Süreçleri ve Yapısal Uyum (Ankara: İmaj Yayıncılık, 2002), pp. 27–103; Ziya Öniş, “Domestic versus Global Dynamics: Towards a Political Economy of the 2000 and 2001 Financial Crises in Turkey,” in Öniş and Rubin, eds., The Turkish Economy in Crisis, pp. 1–30; and Soli Özel, “After the Tsunami,” Journal of Democracy, Vol. 14, No. 2 (April 2003), pp. 80–94.

114. John Waterbury, “The Political Management of Economic Adjustment,” in Joan M. Nelson, Fragile Coalitions: The Politics of Economic Adjustment (New Brunswick: Transactions Books, 1989), p. 41. For Waterbury's formulation of coalitional politics of economic reforms, which focuses only on the reward system, see the source.