Posted to pen-l by Ahmet Tonak

Louis Proyect lnp3 at
Thu Jan 9 16:53:58 MST 2003

Louis Proyect wrote: "Although the economic situation in Turkey has
probably improved since the stock market collapse of 2001, it is still very

Ahmet Tonak:
Generally, I do not think that it is a good idea to judge an economy's
well-being (?) through stock market indices. Specifically, tough Louis
--who is now every Turk's Eniste!!-- is not saying so, but his statement
above implies that the stock market is now a better shape than 2001. That
is not the case:

Here are the annual market indices, the first column is in Turkish liras,
and the second one is in US $.

2000    8884    769
2001    13055   528
2002    10086   358
2003    10528   372

Moreover, the economy, both in terms of profitability and that of standard
of living, so far shows no sign of improvement relative to the 2000 or 2001

For those who might be interested in Turkish economy, I am attaching below
the description of a workshop on the state of Turkish economy organized by
a group of economists and trade unionists from Turkey for the 3rd Social
Forum, Porto Alegre.

Here is the group's web site for additional info and downloadable papers, etc.:


At the turn of the millennium, the neo-liberal orthodoxy juxtaposed a new
set of conditionalities as part of its hegemonic agenda on the developing
world: privatization, flexible labor markets, financial de-regulation,
central bank independence, flexible exchange rate regimes, and fiscal
austerity. To this end, integration of the developing nation-economies into
the evolving world financial system has already been achieved through a
series of policies aimed at liberalizing their financial sectors and
privatizing major industries. The motive behind financial liberalization
was to restore growth and stability by raising savings and improving
economic efficiency. A major consequence, however, has been the exposure of
these economies to speculative short term capital (hot money) attacks which
increased instability and resulted in a series of financial crises in the
developing countries. Furthermore, contrary to expectations, the
post-liberalization episodes were inflicted with the divergence of domestic
savings away from fixed capital investments towards speculative financial
instruments with often erratic and volatile yields. As a result, developing
economies with weak financial structures and shallow markets suffered from
increased volatility of output growth, shortsightedness of investment
decisions, and financial crises with severe economic and social
consequences. Often the economic crises were realized hand in hand with the
ensuing political crises.

One recent example of such economic cum political crisis episode had been
the Turkish debacle of 2001/2002. With a sudden capital flight of 25
billions in the course of a few months, the contraction of the Turkish real
gross domestic product reached to 9.8 percent and was accompanied with a
deep political chaos and social conflict. Yet the historical importance of
the Turkish crisis lies more in its significance as a serious blunder to
the neo-liberal orthodoxy, rather than just the pure economic/political
mishaps. The Turkish crisis, which outbreak in the midst of an IMF-directed
adjustment programme, became one of the clearest examples of how in an
indigenous economy, the unfettered workings of the myopic markets can serve
as the main source of disequilibrium and chaos thorough the speculative
attacks of the international financial capital flows.

 From a historical perspective Turkey's post-1990 history of macroeconomic
and political developments under the neo-liberal model is observed to
suffer from persistent difficulties and wide fluctuations in national
income, with conflicting policy adjustments. At the turn of the 3rd
millennium, the most striking aspects of the current Turkish political
economy context are the persistence of price inflation under conditions of
a crisis-prone economic structure; persistent and rapidly expanding fiscal
deficits; marginalization of the labor force along with the dramatic
deterioration of the economic conditions of the poor; and the severe
erosion of moral values with increased public corruption.

Thus, the Turkish adjustment experience throughout the post-1980 period
reveals a process in which a developing market economy trapped within the
needs of integration with the world markets and the distributional
requirements warranted by such re-orientation, the state apparatus became
the bastion of privilege, regulating the mode of income re-distribution
within the society. Muddled with short sighted myopia and speculative herd
behavior of the domestic and foreign financial arbiters, the IMF-directed
Turkish adjustment episode all too clearly spells the dangers of
restricting the development policy of an economy to speculative
in-and-out-flows of short term foreign capital, which by itself, is
excessively liquid, excessively volatile, and is subject to herd psychology.

In this workshop we seek to discuss lessons from the Turkish
economic-political crisis with colleagues from the other crisis-inflicted
Latin American countries. We hold the hypothesis that the recent wave of
financial/economic/political crises in the Third World are not the end
result of a series of mishaps and governance errors unique to each
particular country, but they should rather be seen as an integral part of
the new wave of corporate and financial globalization along with its
hegemonic orthodox dogmas -the neoliberal ideology.

Frequently the only possible answer is a critique of the
question and the only solution is to negate the question.
Karl Marx, 1857, Grundrisse, "The Chapter on Money," p.127.

E. Ahmet Tonak
Professor of Economics
Simon's Rock College of Bard
84 Alford Road
Great Barrington, MA 01230
Tel: 413 528 7488
Fax: 413 528 7365

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