When I say economic model, I am not talking about establishing a model to be published in an academic journal. Such models, if poetic and measurable, can be used to chart a 5-10 year roadmap to a real economy. What I call here an economic model or program is a “real world” event that economic actors can demand and carry, which can shift the economy from one equilibrium to another. For example, the model of the 1960s – which it was hoped would become permanent and comprehensive enough to constitute a development strategy – was planning. The 1980s are different and can be divided into two periods: Resolution 32, i.e. before 1989 and the second period until the crisis of 2001; 1989-2001. The sequel is a separate model and the Derviş-IMF program continued until 2008, although it started to lose momentum from 2006.
There are three major economic programs after 1960. The first is the planning/import substitution model. At that time, the type called indicative plan/development planning was common. Turkey is quite ahead in terms of the schedule. Important advisers such as Kaldor and Tinbergen came. Are they rested? That’s different. The influence of planning seems to have peaked around the 1965 elections; Revenues increased, but that was short-lived. Afterwards, right-wing politics, who didn’t even like the p’s in the plan, called it “the rice, not the plan”, and the matter got diluted. In fact, this period could have ended earlier. Import substitution continued in the 1970s – it lasted until 1977, after which the inclined plane – was mainly due to remittances. Unaccounted remittances peaked in 1973-74, and the inflationary effect of the first oil shock of 1973 was not reflected in subsidies until 1977.
There are reasons why the decisions of January 24, 1980 were not brought forward on March 12, 1971 – the issue was lightly discussed at that time: (a) Financialization had not yet begun in the world, the spectrum of mentality/fiction/programs called neoliberalism had not been clarified (b) The capital class in Turkey was not yet clear (c) The political alliances in the world were different; the wind was different. Even so, he might not have been expected until 1980, but remittances extended the waiting period. To sum up, the real/first/visible result and effect of import substitution is around 1965. It’s out of stock in ten years. For another ten years – in fact 7 years – the reason the work continues is unaccounted remittances. This created an effect as if we were exporting. However, this abundance of foreign currency did not last.
The second program is that of January 24, 1980. It is one of the pioneers of the neoliberal wave which became visible in 1979. The program was conceived in 1978 and published the same year as the Derviş-Robinson report. However, its implementation was delayed for two years due to the inability to make timely domestic political adjustments. When it became “70 cents short” with the second oil shock in 1979, it was finally announced, but its actual implementation was postponed until September 12. At that time, it was repeatedly written that such a program could not be implemented by any political party other than the military regime. This program had a more lasting impact and created its own wealth. However, in 1988 it showed clear signs of stagnation and when the collapse in real wages became unsustainable, the first phase was completed by granting high raises to workers in 1989. For this reason – and while competition politics resumed after the 1987 referendum, when it became necessary to give public finances a deficit and distribute it among the electorate – Decision No. 32 was born in 1989. Decision No. 32 is an early decision since there are no locals to receive the DIBS issuance increase. I believe that if the 1987 referendum had been negative, decision 32 would have been taken a few years later.
The 1990s is the period when this program – January 24 – was stalled or even terminated, but since rent distribution is still continuing, temporary emergency measures (beware, not program or model) – such as April 5 1994 – were administered. Public debt is high but the current account deficit is low. The exchange rate/inflation rose almost in tandem and terrible real interest rates were paid between 1994 and 2000. It can also be considered transfer income in terms of political economy. Since inflation accounting is not applied, company balance sheets for the period are not considered material.
The third program is the 2001 Derviş-IMF program. This program, which succeeded in its own logic, was gradually stopped since 2007, or even mid-2006. This program reduced public debt, but after 2004 private sector debt began to replace it. Similarly, the budget deficit was reduced, but the current account deficit replaced it. The luck of the program is that it coincides with the time of abundance of money in the world. The “prosperity effect” occurred due to the unprecedented levels of credit expansion and appreciation of the TL in the early years, and this effect turned into an “illusion of wealth”. It was then loaded onto construction/real estate to maintain the ‘welfare effect’ and fell into the trap of diminishing returns to scale, as with all single factor/sector based models.
There is technical support, human resources, an understanding and social acceptance of the political economy behind them, the state of the global financial architecture and timing that affect all of these “real world” models or economic programs fully fledged. Without its economic and sociological carriers, a model of the “real world” cannot be created, an economic program that will determine the direction for years to come cannot be proposed. These are the three models of the last 60 years.