Champions of protectionism and nonmarket intervention Articles
- COLUMNS The story of a step-by-step, inconclusive economy operation
- COLUMNS Rules of game are changing in politics, economy
- COLUMNS The end of a paradigm
If you ask me what has been the most distinctive feature of the economy since Recep Tayyip Erdoğan came to power in 2002, I would say it's Turkey's direct investments in foreign countries in terms of stock difference, which amounted to $35.5 billion from 2002 to the third quarter of 2017, while foreign direct investments in Turkey reached $158.6 billion in the same period.
Such a high capital movement (in the form of foreign direct investments) was not possible before the Erdoğan era.
On the other hand, a total of $3.15 billion in direct investments flowed from Turkey to other countries in terms of current payment balances in 2016, while this figure stood at $1.83 billion in the first nine months of 2017. Also, Turkey attracted $12.77 billion in foreign direct investments in 2016.
These figures were achieved in a conjuncture in which the world witnessed one of the biggest crises in the history of capitalism and Turkey experienced a coup attempt. But, of course, these numbers are not enough. Turkey will boost its international investment position volume, along with economic and political stability, in the coming years.
Despite all these figures, somebody has been lying from the very beginning that Turkey would have difficulty paying its debts or it would restrict capital flows. Why would someone invent such a lie? In fact, this question has quite a historical and comprehensive answer: For a while, there has been an attempt to create a dirty market based on speculative and fabricated news regarding emerging economies, instead of trend models consisting of current and potential data sets and expectation analyses. There are also some concepts that have been created regarding this dirty market. For instance, concepts such as "fragile countries" and "fragile five" have been imprinted in the rhetoric of this market as the most operational categorical narrative in the recent period.
Previously, there was a category of countries which were directed by the International Monetary Fund (IMF) or which were not yet intervened by the IMF. This is defined as an IMF anchor and, this anchor guaranteed that countries, which were in the grip of IMF prescriptions, would pay their debts.
Countries that did not use IMF anchors were treated as countries which were doomed to go bankrupt in an undulant ocean. The chain of financial crises in the 1990s and Latin America's experiences told the whole world that the IMF anchor itself was the cause of the crisis. The IMF was fired from many countries, including Turkey, losing credibility. In fact, what was driven out from these countries was an approach and theory of an economic policy. Then, global capital institutions and their analysts and ideologists who accepted this economy understanding as a tenet, assumed the role of IMF anchor.
Rating agencies came to the forefront as the primary elements of this understanding and assumed the role of inflicting ideological pressure on all emerging economies, from Argentina to Turkey, in other words, they came to function as "anchors."
Their main argument was based on the speculation that these countries would control capital inflows and outflows, and would not be able to pay their debts. On the contrary, no countries, especially Turkey, which have been referred to as the "fragile five," attempted to avoid paying their debts and to restrict capital inflows and outflows. It was the arrogant EU countries that failed to pay their debts and no "fragile five" countries failed to pay their debts in the recent period.
As of the mid 1980s, Turkey has made a rapid liberalization process a supra-party economic policy. Of course, this policy is quite controversial and has some aspects that need to be corrected. What is interesting, however, is that all the fundamental mistakes of this policy have resulted from the insistent practice of the IMF's monetary and fiscal policies. For instance, the "austerity" policies based on exchange rate regime and debt rollover alone, which led Turkey to the 2001 crisis, were an understanding of deindustrialization based on imports and debts.
The Erdoğan era has striven to eliminate these policies that were the fundamental faults of the past. The same picture was true for Argentina as well.
These economy policies, that were based on a fixed exchange rate regime and that created excessive debts as a result of transferring funds abroad, controlled capital inflows and outflows. Both Latin America and Turkey were made to buy into these so-called "liberal" economy policies for years.
For instance, among the main causes of all the crises in Argentina in the 1980s and 1990s and of the 2001 crisis in Turkey were fixed or a semi-floating exchange rate regime pursued by the central banks, and the monopolist and nonmarket understanding that limited money supply to dollar reserves, established the budget on debt payment, suspended all the investments and intervened the economy from above and outside. Long-term investment capital inflows into these economies and their capital investments abroad were also hampered by bad economic policies. However, we know very well that a country that cannot export capital can never be economically strong, becomes politically weak after a while and is driven into corner by big countries. Turkey has acted with this fact in mind in recent years.
Depending on all this, let us now acknowledge the fact that Turkey is one of the few countries which has a floating exchange rate regime, a transparent budgetary practice and public finance and where capital inflows and outflows are the freest. So, it is theoretically not possible for a country that applies a floating exchange rate regime to control capital by using even a tax tool (such as Tobin). Countries such as Brazil have to control capital with practices such as the Tobin tax as they want to protect themselves against hot money inflows accompanying the cheap borrowing wave, and to prevent the switch to a closed economy. Such a practice has never been brought up in Turkey, and it has not even been discussed by the government especially during Erdoğan's era in which populist end Peronist approaches have been completely excluded. However, developed countries, especially the U.S., utilized protectionism both implicitly and explicitly in this whole period. And Turkey warned developed countries against excessive protectionism and preventing technology and capital transfer on all G20 platforms.
Let us note that all people and institutions that are doomed to old statist and protectionist economy policies, which have been put forward as market-friendly suggestions, are the enemies of the market and the last instances of a monopolistic mentality. Turkey will continue its path with strong market-friendly reforms.
Source: Daily Sabah