Turkey's Political Economy in the Age of Financial Globalization: The Significance of the EU Anchor

Abstract

The recent Turkish experience clearly illustrates how markets and politics can interact in producing significant economic transformation. Focusing on the new phase of neo-liberal restructuring in Turkey in the post-crisis era, we highlight the importance of the European Union (EU) and International Monetary Fund (IMF) anchors and the specific domestic and external linkages through which these double external anchors have operated. We argue that the anchors played significant and complementary roles in the recent transformation process in Turkey. We also underline some of the tensions that are likely to arise in the new era of accession negotiations with the EU given the incomplete transformation accomplished so far.

Keywords:

• Turkey; IMF
• European Union
• External Anchors
• Economic Reforms
• State Capacity

Acknowledgement

An earlier version of this paper was presented at the GLODEM (Center for Research on Globalization and Democratic Governance) conference entitled ‘Europeanization and Transformation: Turkey in the Post-Helsinki Era’ hosted by Koç University on 2–3 December 2005. We would like to thank Faruk Aysan, Başak Kuş and conference participants as well as Izzet Nas and Nihat Şengül for their able assistance. We would also like to thank the editor and the anonymous referees of the journal for their valuable comments and suggestions.

Notes

[1] On the nature and contents of the programme agreed with the IMF in December 1999, see the Turkish government's letter of intent, available at < www.imf.org/external/np/loi/1999/120999.htm>.

[2] The only exception to this was the minor member of the coalition government, the Motherland Party (ANAP), under the leadership of Mesut Yılmaz. This party, the main representative of the urban bourgeoisie, was more liberal in outlook and more receptive towards an IMF-style reform process. ANAP also differed from the two dominant coalition partners in being much more receptive to the kinds of political and economic conditions associated with EU membership.

[3] Reports published during the post-crisis era by financial actors such as Deutsche Bank, Morgan Stanley, J. P, Morgan, Goldman & Sachs and Merrill Lynch, among others, clearly highlight the importance of the EU for the long-term performance of the Turkish economy and underline the need to press ahead with both the economic and the political components of the Copenhagen criteria. An example of a typical comment is as follows: ‘The EU wants to see implementation and not just laws passed,’ says Peter Worthington, Director of Economic Research for Eastern Europe, the Middle East and Africa at Credit Suisse First Boston (CSFB) in London. ‘It's one thing to say that you'll ban torture under police custody, and another thing to actually do it, but there are now signs that implementation is improving as well.’ Quoted from Fittipaldi (2004).

[4] For example, FDI outflows from Turkey reached US$856.3 million in 2004 from US$410.6 million in 2003 (Treasury 2005).

[5] For evidence on changing legislation designed to create a better macro- as well as micro-institutional framework for reform, see the report prepared by Ibrahim Çanakçı, Undersecretary of the Treasury (2005).

[6] For evidence on recent privatizations, see the report of the Turkish Privatization Administration, available at < http://www.oib.gov.tr/program/uygulamalar/yillara_gore.htm>.