Is Turkey Rich? A Look at the Country’s Growing Wealth and Economy

Economic Differences, Political Divisions

In the late 1960s, increasingly powerful interests of the urban-based industrial sector clashed again with commercial and agricultural interests, as well as with owners of small businesses whose economic survival was threatened by the power of the corporate giants. Rifts also appeared between those manufacturers dependent on a high-wage internal market for their durable goods and those in textiles and food processing who favored lower wages to spur exports. The main bone of contention was the distribution of foreign credits and import quotas. A foreign exchange crisis made matters worse and exposed the problems of the import-substitution economy. The military again briefly intervened in 1971 to repress a growing labor movement and to consolidate the industrial bourgeoisie’s position.

A number of new political parties emerged in the 1970s, a period of sharp polarization. The Democratic Party, with strong support from landowners, broke away from the Justice Party. The National Salvation Party, an Islamist group, gathered support from smaller business interests in the country’s hinterland. The Nationalist Movement Party, post-war Europe’s largest fascist movement, capitalized on the discontent of the smallest businesses and socially and economically frustrated small-town youths. Political instability was fueled by the most serious economic crisis since the founding of the Republic. As international pressures mounted, civilian governments were unable to implement the harsh measures necessary to “stabilize” the situation. In September 1980, the military intervened for the third time.

The 1980 military takeover was an important milestone in the development of the Turkish economy, opening up a new era of export promotion. Like earlier military interventions, this coup had been preceded by a “stabilization” program drawn up by the International Monetary Fund (IMF) and other international financial institutions. The basic goal was to tear down protectionist barriers which had allowed Turkey to industrialize through import substitution.

The military, by now an integral part of Turkey’s economic structure through their financial and industrial institutions, chose Turgut Özal, a former World Bank official and executive for several large Turkish corporations, to guide the new economic policies. Holding the finance portfolio in the military government, Özal worked to deflate the internal market and to spur exports while the military imposed its harsh rule. [4]

Helped by major aid infusions, Özal has achieved some success in realigning the Turkish economy. Exports have shot up from $2.9 billion in 1980 to nearly $8 billion in 1985. Inflation has dropped from triple-digit figures in 1980 to approximately 40 percent in 1985. Those involved in export markets have been prospering, but those most closely tied to the depressed internal economy have suffered. Real wages have fallen to less than half of their 1977 level. [5] While most corporate giants have been able to weather the transition, smaller companies have not fared so well. In the early 1980s, hundreds went bankrupt.

The economy has been sharply redirected to the Middle East, where Turkish contractors and industrialists found major markets for their skills and products. Aided by market opportunities created by the Iran-Iraq war, Turkish entrepreneurs have made both countries Turkey’s major trading partners. In 1985, Turkish contractors gathered orders worth $736 million, of which $387 million was in Saudi Arabia. Turkish firms have accumulated contracts worth $17 billion throughout the Middle East, up from less than $2 billion in 1980. [6]

The Growth of Industry

During the 1950s, industry grew rapidly as the country moved to an import-substitution economy. This change set off a conflict between urban industrial interests on the one hand and commercial interests with strong links to the country’s agricultural sector on the other. The ruling Democrat Party supported the agricultural sector, where the majority of voters were concentrated, so the new industrialists increasingly defected to support the RPP. The armed forces eventually intervened as arbiters of the country’s political future in the coup of May 27, 1960.

The military turned the government over to a civilian regime a short while later, but the coup cemented relations between the military and the industrialists. The Turkish military itself made a number of direct investments in industry, using the assets of its pension and social security funds. Through such ventures as OYAK, a holding company which manufactures Renault cars and other products, the military became one of the most important economic forces in the country.

Throughout the 1960s, and until the 1977 crisis, the country’s industrial sector grew at an average yearly rate of 9 to 11 percent while the economy as a whole registered growth rates of 6 to 7 percent. By 1985, despite years of stagnation following the 1977 crisis, the industrial sector accounted for 33 percent of the GNP, while the agricultural sector, which had accounted for a 45 percent share in 1959, had dipped to 19 percent. [2] This change also reflected the growth of tourism and construction.

The state generally confined its investments to basic industries such as steel and energy, leaving consumer durables and light industries to private capital. During this period, corporations such as Fiat, Chrysler, Ford, Renault, Phillips, AEG and numerous others extended licenses to Turkish companies for assembly and manufacture of new consumer products. By the 1970s, the consumer market in Turkey had equaled Holland’s in terms of purchasing power. [3]

Throughout the 1960s, smaller companies merged into large corporations such as Koç, Sabancı and Çukurova. Groups such as the Turkish Association of Industrialists and Businessmen (TUSIAD), the Turkish Union of Chambers (TOB), the Turkish Confederation of Employers’ Unions (TISK), and local chapters of Chambers of Industry and Commerce gained political sophistication and clout.

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