The Turkish Kadro pioneers of a Balkan Dependencia in the interwar period: rethinking underemployment, monetary policy, and technology

Abstract

The Kadro movement-cum-journal (January 1932–January 1935) was formed by a few Turkish economists and intellectuals sensitive to Balkan affairs and with post-war revolutionary experiences in Moscow, Berlin, and Munich. The Kadro was first and foremost developmentalist, given the circumstances of an undeveloped country situated in an unstable region caught in the repercussions of the collapsing world market. It was an innovative cluster open to team work to put forward an international political economic perspective for advancing economic thought and policy during the Great Depression. It is thus among the precursors of Latin American dependency theory.

Keywords:

• Balkans
• dependency
• Kadro
• monetary policy
• technology

JEL CLASSIFICATION::

• B29
• N14
• N74

Acknowledgments

We would like to thank the two anonymous referees for their criticisms, comments, and suggestions that have been of great help for improving the paper. The usual caveat applies.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The law for compulsory use of surnames was enacted in 1934. Before then the first two names were used instead. We stick to this convention here.

2 A detailed analysis of the Kadro Movement and contributors to the journal can be consulted in Ertan (1994), Tekeli and İlkin (1984), and Tekeli and İlkin (2003).

3 The crosscutting of paths from Berlin, Munich and Moscow in Kadro suggests a certain convergence of Turkish experience with that of Bulgaria that received Russian emigrant economists who played a role similar to those of German speaking economists later in Turkey (Nenovsky and Penchev 2016, 211, 214).

4 Eclecticism was quite common in the Balkans, for Bulgaria, see Nenovsky and Penchev (2016, 212, 218).

5 This tripartite perspective makes it easier to assess continuities and discontinuities in the Turkish case. It has the disadvantage of making cross-country comparisons more difficult because existing case studies of other countries do not necessarily take into account the three filters through which the Turkish case is observed here.

6 For a discussion of the discursive invention of the Balkans as a highly loaded quasi-scientific category reflected in derivatives terms like “balkanism” and “balkanisation”, see Todorova (2009). For the historical making of the Balkans as a world in itself in the longue duréee, see Staioanovich (1994). For an overview of Balkan history, see Mazower (2002). For a classic detailed study of Balkans during the Ottoman period, see Todorov (1998). For a comprehensive economic history, see Lampe and Jackson (1982).

7 Excluding Turkey from the Balkans because of its greater territory in Asia overlooks the role of the Balkan factor in Turkey that survived at least until the 1950s. During the interwar period, Turkey was in the Balkan matrix.

8 For the historical record of war ridden Balkans since the nineteenth century, see Glenny (2012).

9 Trostsky spent some 4 years (1929–1933) in exile in İstanbul because of a deal Soviet Russia made with the Turkish government (Coşar 2015).

10 Georgi Danailov the Bulgarian economist proposed already in 1900 “the establihment of a customs union of the Balkan countries, a union where Bulgaria would occupy the central place because of “the privileged position of the country in its relations with Turkey” (Nenovsky and Penchev 2016, 211).

11 Bulgarian government, while sharing common sensitivities and taking part in complementary bilateral treaties, nevertheless did not join the Balkan Entente because a precondition was to accept the Treaties of Paris that defined postwar Balkan order for states other than Turkey. Bulgaria was a “free-rider” as far as the security enhancing advantages of the treaty were concerned as all its neighbors were parties to the treaty. Albania was left out because it was seen as a borderland difficult to protect in the face of rising Italian imperialism; a foresight proven correct.

12 It was the culmination of a series of Balkan conferences in 1930, 1931, 1932, and 1933, held in Athens, İstanbul, Bucharest, and Salonica, respectively.

13 One Macedonia-born writer advocated the immigration of 2 million “Turks” in 1936 to facilitate hardship and tensions in the Balkans as well as panacea to Turkey’s shortage of working age population (Nabi [1936] 1999).

14 For the discussion of Balkan economic transformation and its summary characterisation see Palairet (1998).

15 Compare with Bulgaria that first “became the country most dependent on trade with Germany and became part of the German Lebensraum” and “despite the desire for neutrality” was drawn into the war via the Tripartite Pact in 1941 (Nenovsky and Penchev 2016, 213–214). Serbian economist Branko Bujić, to his credit, recognized “that patterns of trade of the Balkan countries with Germany had the character of occupation without any warfare” (Josifidis and Lošonc 2012, 299).

16 The confused states of mind and overlappings between facism and communism in the Balkans should be interpreted with caution. Even in Italy, we have been forewarned: “Fanno was not an economist who was an organic part of of Fascism. On this point we must be very clear.” (Magliulo 2012, 167–168).

17 With the Depression, Madgearu modified his position and approached towards his rival’s by shifting from his original “peasantism” to “dirijism” (Bobulescu 2012, 316–322).

18 Although studies of the Great Depression are numerous, there exists no consensus on its causes and mechanisms. See Keynes (1936), Eichengreen (1996), Friedman and Schwartz (1993), Bernanke (1983), Hobsbawm (1996), Galbraith (1961), and Kindleberger (1986).

19 They were aware that it overlapped with an agrarian crisis. In the Balkans where rural population far outweighed the urban one and agricultural exports constituted the source of foreign earnings, this would have been unforgivable. In Serbia, Velimir Bajkić, made this point a cornerstone of his analysis (Josifidis and Lošonc 2012, 287–289). For the cyclıcal vs. structural interpretations of the crisis in Bulgaria, see Nenovsky (2012b, 252–271).

20 Similarly in Greece, Demetrios Kalitsounakis “was deeply convinced that the economic turbulence of the 1920s bore the seeds of the overthrow of modern capitalism” (Psalidopoulos and Stassinopoulos 2016, 140). Tsankov expressed his similar conviction in the advance towards a third way and Kinkel to the “state-planned” economy as a further stage in Bulgaria (Nenovsky and Penchev 2016, 217–219). On the other side, in Serbia Bajkić who advocated a “dictated economy” that combined planned and liberal economy believed that capitalism was already out of the crisis by 1937 whereas Bujić, who attended Schumpeter’s lectures in Vienna as well as being well-versed in Marx and adopted a deductive approach from the whole to the part pace the Kadro economists but declined from endorsing “the breakdown theory” because he sensed a more dynamic characterisation of capitalism that emphasized its versatility (Josifidis and Lošonc 2012, 293–300). Last but not least, Manoilescu, who opted for a third way with his corporatism, “pessimistic about the future of capitalism” because of his disappointment with the disengagement of financial capital from productive investment, was to claim “Capitalism is not dying. Capitalism is committing suicide.” (Bobulescu 2012, 324–326).

21 The similarity between Kadro’s three tenets and Polanyi’s four main institutions (the balance of power system, gold standard, self-regulating market and liberal state) or “three tenets” (“a labor market, the gold standard and free trade”) on which the nineteenth-century civilisation of economic liberalism rested is noteworthy (Polanyi [1944] 1957, 3, 135).

22 Contrast with Papanastasiaou’s parallel advocation in Greece of “the national character economic policy” with the difference being the increased “role of the state, especially on social issues, such as the regulation of wages and of working hours”, hence a convergence with Demosthenes Stefanidis whose “emphasis was not on the strengthening of social bonds and the protection of the lower social strata but on the reinforcement of the Greek economy (Psalidopoulos and Stassinopoulos 2016, 139, 143).

23 Garvy (1975) argues that there was already a Keynesian economics before The General Theory appeared. There was also the Stockholm School and Michal Kalecki advancing independently along similar lines of reasoning. Landreth and Colander (2002, 422) and Blaug (1990, 672) call attention to the fact that even mainstream economists advocated public programs.

24 Given that maintaining a balanced budget was the established practice of countries, including Turkey, in the early 1930s this suggestion was contrary to the commonly held understanding of the market mechanism.

25 Vedat Nedim Tör, who did his Ph.D. with Sombart, and Burhan Asaf Belge both studied in Germany, economics and civil engineering, respectively.

26 The Ukranian Mikhail Tugan-Baranovsky is one of the economists highly respected by Kadro authors and Barnett (2001) informs us that he also influenced Keynes.

27 Compare with Kyriakos Varvaressos in Greece insisting “that the economic system he favoured went beyond capitalism and socialism; it was a command economy along the lines of étatisme, an authoritarian state analogous to that envisioned by Sombart” (Psalidopoulos and Stassinopoulos 2016, 142).

28 Spann and Sombart were associated with Nazi ideology and retrospectively criticized by both Marxist and liberal economists. Sweezy (1938, 268), states that Spann’s attitute toward collectivism was directly related to fascism. The committed liberal Röpke (1935, 92, 94), on the other hand, blamed Sombart for demanding the militarisation of whole society more than a military planner. He adds: “In his latest book, Deutscher Sozialismus, he uses his unwearying and versatile pen to give voice to Bellicism [a spirit placing preparedness for war and military considerations above everything] of the wildest kind, cheerfully adopting a ‘war for the sake of war’ attitude and demanding the valuation of everything on earth according to its military usefulness”. Yet Kadro economists used their works selectively and kept a safe distance from nonsense.

29 Turkey avoided anything comparable to the Greek default after the great crash of 1929 and the European banking crisis of 1931 that paved the shortcut to “protectionism and a higly regulated economic system” (Psalidopoulos and Stassinopoulos 2016, 137) or the credit crunch that served as the first transmission channel in Romania that forced the country to severe its French finacial connection and turn to a “German solution” prefiguring the WW2 German alliance (Bobulescu 2012, 307–309).

30 This “fiscalism” nevertheless did not necessarily mean austerity; quite the contrary, Ottoman rulers were big spenders all along. It meant prioritizing security and ostentatious consumption at the expense of public and private saving, as well as preferring immediate taxation over either future taxation or the expansion of the tax base.

31 The Central Bank of Turkey was formed in 1931 when the Kadro economists proposed a credit volume increase in a planned context under its supervision. Compare with Greece where the Bank of Greece founded in 1927 was nevertheless paradigmatically not much different from its predecessor the National Bank of Greece that continued to survive just as its counterpart in Turkey inherited from the Ottoman Empire, the Ottoman Bank. Yet the new Bank of Greece was gradually transformed into a truly central bank starting with 1931 but decisively after the Greek banruptcy of 1932 whereas in Turkey no such sequence of events occurred and at about the same time the Central Bank was introduced with a new paradigmatic conception of its function. Even so, after 1936, Greek government was inclined to override its independence and deploy it as a tool to serve its aims. In both cases we observe a responsible fulfilment of newly defined functions as subservient to the transaction needs of the real economy, thereby transgressing the straightjacket of quantity theory (Loizos 2012). Hence we are faced with two paths of arriving at the same endpoint. In any case, this was a movement in the direction proposed by Kadro economists albeit not at the same speed and scale.

32 One referee kindly brought to our attention to the similarities between Kadro’s fiscal and monetary approaches to Abba Lerner’s functional finance and modern monetary theory, built on views of prominent economists, such as Keynes, Knapp, Lerner, and Minsky. Both Kadro authors and modern monetary theory supporters challenge the conventional view of government finance and especially the dangers of budget deficit. Similar to Kadro’s approach, in modern monetary theory coordination of central bank and treasury’s operations are important and “government spending for the public purpose is beneficial, at least up to the point of full employment of the nation’s resources.” For Kadro economists, in line with one of the principles of Abba Lerner’s functional finance approach, the government needs to spend more if domestic income is too low and if there is unemployment (Wray 2015, 6, 199).

33 Labor theory of value.

34 By referring to French economist Albert Aftalion, İsmail Hüsrev also made the same point (Tökin 1933b, 24).

35 On different occasions, the Kadro economists argued that Turkey did not have the option of accumulating national capital in the short term. Exploiting the laboring classes, and accumulating capital through class conflicts or the exploitation of colonies, an important source of raw materials, markets and thus capital accumulation for the European countries, were not viable options for Turkey. Capital accumulation through the trade of agricultural goods was not an option either, because the quality and marketing techniques of Turkish agricultural products were inferior. The accelerated development of an internal market could speed up the accumulation of capital, but Turkey could not afford to wait for it (Aydemir [1932] 1990, 187–190, 1932b, 5; Tökin 1934c, 17).

36 Unlike the orthodox approach which operates under full-employment assumption, the Kadro authors emphasized the existence of high unemployment in all factor markets (except that of capital) in Turkey. Not only people but also the natural resources of the country were underemployed. Aydemir (1932d, 11) states that forests were abandoned, soil lay idle, husbandry was primitive, and industry was built up on old and inefficient techniques.

37 The Bulgarian economist Tsankov used Tugan Baranovsky in 1919 (Nenovsky and Penchev 2016, 217).

38 The term hydraulic Keynesianism was coined by Alan Coddington and it represents the mainstream interpretation of Keynes. It is described by Samuelson’s “Keynesian cross” (45°) diagram or at a more advanced level Hicks-Hansen IS-LM model (Snowdon and Vane 2006, 327–328).

39 They were nevertheless aware that small and medium size enterprises could be as rationally organized as big enterprises.

40 We are grateful to Soner Aytek Alpan for supplying us with the details of the Greek case and the source in Greek, by Chatziiosif (1993, 165–174).

41 The Kadro economists were aware of the need for human capital in putting technology to use. Trained workers, masters and engineers were required to build, organize and operate high tech industries. To this purpose, new arts and crafts schools and science-based schools, as well as new departments in existing schools, were necessary. While employing foreign white-collar workers could be an immediate solution, the ultimate goal had to be educating the national labor force (Yazman 1934, 31–34).

42 In the post WW2 era, each one went his own way, but they usually worked with liberal or centre-left political parties until the 1970s.

43 Theses losses he identified as either dark periods, such as the “Great Gap” associated with possible contributions during the Eastern Roman Empire and the then little known medieval Islamic economic thought as a link in the chain between the antiquity and European scholasticism (Schumpeter [1954] 1994, 73).