Macro Economic Constraints in Developing Nations T

he case of Turkey Türkel Minibaş, Prof.Dr.

Istanbul University Faculy of Economics

every crisis period became a restoration period for capitalism, in that when economic, social and political balances are upset new balances were created.

• the crisis usually spreads to developing countries through import channels and foreign debts by the countries at the heart of capitalism. • This is the reason why capitalism is trying to solve the last crisis by globalizing capital. • Public utilities like water and energy, public provisioning of social services such as education, health and social security become domains of private sector.

to solve the crisis of the capitalist system

• is

not to solve

macro economic defects in developing nations, but to solve the crisis of the capitalist system by integrating less developed ones to the system, irrespective of whether they are called stability or structural adjustment programs. • They are the dependency programs that are established by neo-liberal policies.

• The main task of these policies is to the design of a new world order.

neo-liberal thinker

“the liberalization of trade and investment laws around the world has contributed to an enormous increase in the volume of world trade and foreign direct and portfolio investment, whose impact on the welfare of participants has been considerable and for the better.”

If we consider Turkey as an example .

• GNP is now 5 %, but was - 8 in 2001. • the growth in the manufacturing sector was 12 % in 2004 compared to 4 % in 2005. • Consumption price index was 69 % in 2001, now it is around 7.6 %.

An increase in growth rates and foreign money reserves depends on continuing short term funds. 21.5 billion dollar external funds entered 50 % of which was government debt instruments and stock market shares. .

can the house of card break down?

as far as the decrease of real interest rates less than the degree of nominal rate decreases, we have time!!!

Three years ago, the nominal interest rate of Treasure stocks were 63.9 %, and they decrease to 17.4 %. This was the reason why real interest rates decreased from 30.8 % to 8 % at the same time.

DOMESTIC DEBT AND OUTSTANDING EXTERNAL DEBT AS A PERCENTAGE OF GNP IN TURKEY (1993-2004, %)

200 150 100 50 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Outstanding External Debt/GNP 49,59 43,09 43,33 43,77 46,67 55,58 58,92 76,79 72,38 61,56 Domestic Debt/GNP 17,33 21,02 21,38 21,70 29,28 29,00 69,22 54,49 54,50 52,34

Years

Outstanding External Debt/GNP Domestic Debt/GNP

GROWTH RATE OF GNP AND GNP BY MAIN KIND OF ECONOMIC ACTIVITY (AT 1987 PRICES) Annual Percentage Change

40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 Services Construction Industry Agriculture Growth Rate of GNP Services Construction Industry Agriculture Grow th Rate of GNP Services Construction Industry Agriculture Grow th Rate of GNP 1998 7,86 0,33 1,81 9,64 3,86 1999 -3,23 -12,52 -5,09 -5,57 -6,08 2000 7,33 4,88 6,15 3,83 6,30 2001 -6,15 -5,79 -7,38 -5,95 -9,50 2002 7,39 -6,31 9,05 7,46 7,94 2003 6,49 -9,27 7,76 -2,44 5,90 2004 7,00 4,65 9,35 2,02 9,90

Can the happiness chain break?

i f

the increase in foreign money stocks

will continue

and how long an over valued Turkish lira

will continue

by over valued Turkish lira :

• Import costs become lower in intermediate goods and raw materials. - import of intermediate goods increased to 22 %, - import of raw materials increased 24 %. • domesticly produced final goods such as otomotive sector and consumer durables will begin to be imported.

• ımport of oil and related goods increased to 14.4 billion to 17 billion dollars.

IMPORTS AND EXPORTS AS A PERCENTAGE OF GNP IN TURKEY (1995-2004, %)

40,00 30,00 20,00 10,00 0,00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Imports/GNP 21,00 23,86 25,23 22,23 21,95 27,06 27,93 28,50 28,98 32,50 Exports/GNP 12,72 12,70 13,65 13,06 14,35 13,79 21,14 19,93 19,75 21,04

YEARS

Imports/GNP Exports/GNP

the growth of inequality

the poorest 20 % in the world population with the richest population of 20 %. 1960 1980 1989 1997 30 times 45 59 70

The main indicator of growth is the wage level both in public and private sectors.

Structural adjustment programs

• Their share of the pie will not grow • Smaller portion will be divided even less equally among individuals • The share of trade among the poorest countries will not increase • Transnational companies will maintain their dominante status in the world market. And, continue transfer resources to the developed world.

• İncome inequality will continue to increase

1- Free market model increases the GNP as far as state has no restrictions and control over the market.

How will she success this ?

2- State control is regarded as one of the causes of an economic crises and interruption of social reforms.

1993 1994 1995 1996 1997 1998 1999 2000

public workers wage

average wage Reel wage ındeks of a year before % Percentage of dissolution

4.072.052

6.556.503

78,05 21,95 12.091.709

23.463.672

74,35 79,97 25,65 20,03 50.759.457

92.481.635

159.429.000

218.520.153

93,16 91,95 96,13 85,06 6,84 8,05 3,87 14,94

public workers wage

average wage

2001 324.738.063

2002 497.849.499

2003 619.873.260

2004 702.778.601

2005 773.877.650

Reel wage ındeks of a year before

81,87 86,56 85,79 88,0 90,48

percentage of dissolution

18,13 13,44 14,21 11,99 9,52

Personel Expenditures in Total (%) Personel Harcamalarının Toplam İçindeki Payı (%)

45,00 40,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 1989 41,74 38,72 37,23 34,56 1991 30,26 1993 1995 28,70 25,20 24,40 24,20 24,80 24,20 20,80 18,20 19,40 21,30 23,40 24,30 1997 1999 2001 2003 2005 2007

Personel Expenditures to GNP (%) Personel Harcamalarının GSYİH Oranı (%)

4 3 2 1 0 9 8 7 6 5 2000 8 2001 7,7 7,8 7,7 2002 2003 2004 7,3 6,56 6,37 6,04 2005 2006 2007 2008 2009

The percentage of public workers in employment and population in selected countries Seçilmiş Ülkelerde Kamu Emekçisi Sayılarının İstihdama ve Nüfusa Oranı

30 25 20 15 10 5 0 Ka na da 17,5 8,1 12,3 5,3 15,2 3,9 Al m an ya İs pa ny a Fi nl an di ya 24,3 21,3 10,4 8,2 Fr an sa İrl an da 14,6 6,2 Tü rk iye 14,6 15,4 9,1 3,2 7,5 6,9 AB D Çe k Cu m hu riy et i M ac ar ist an 21,4 15,2 7,8 3,9 İta lya

Ülkeler

İstihdama Oranı(%) Nüfusa Oranı(%)