Macro Economic Constraints in Developing Nations

The 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, %)

0

50

100

150

200

Years

Per

cent

age

%

Outstanding ExternalDebt/GNPDomestic Debt/GNP

Outstanding ExternalDebt/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

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Growth Rate of GNP

Agriculture

Industry

ConstructionServices

0,005,00

10,0015,0020,0025,0030,0035,0040,00

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

Services

Construction

Industry

Agriculture

Grow th Rate of GNP

Services 7,86 -3,23 7,33 -6,15 7,39 6,49 7,00

Construction 0,33 -12,52 4,88 -5,79 -6,31 -9,27 4,65

Industry 1,81 -5,09 6,15 -7,38 9,05 7,76 9,35

Agriculture 9,64 -5,57 3,83 -5,95 7,46 -2,44 2,02

Grow th Rate of GNP 3,86 -6,08 6,30 -9,50 7,94 5,90 9,90

1998 1999 2000 2001 2002 2003 2004

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, %)

0,00

10,00

20,00

30,00

40,00

YEARS

PERC

ENTA

GE %

Imports/GNP

Exports/GNP

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

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

the growth of inequality

the poorest 20 % in the world population with the richest population of 20 %.

1960 30 times

1980 45

1989 59

1997 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.

public workers wageaverage wage

Reel wage

ındeks of a

year before

%

Percentage of dissolution

1993 4.072.052

1994 6.556.503 78,05 21,95

1995 12.091.709 74,35 25,65

1996 23.463.672 79,97 20,03

1997 50.759.457 93,16 6,84

1998 92.481.635 91,95 8,05

1999 159.429.000 96,13 3,87

2000 218.520.153 85,06 14,94

public workers wage

Reel wage percentage

of ındeks of a dissolution

average wage year before

2001 324.738.063 81,87 18,13

2002 497.849.499 86,56 13,44

2003 619.873.260 85,79 14,21

2004 702.778.601 88,0 11,99

2005 773.877.650 90,48 9,52

Personel Expenditures in Total (%)

Personel Harcamalarının Toplam İçindeki Payı (%)

37,23

41,74

34,56

28,70

24,3024,80

23,40

21,30

19,4018,20

20,80

24,20

24,20

25,20

24,40

30,26

38,72

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

40,00

45,00

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Personel Expenditures to GNP (%)

Personel Harcamalarının GSYİH Oranı (%)

8 7,7

7,8

7,7

7,36,56

6,37

6,04

0123456789

2000 2001 2002 2003 2004 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

12,315,2

24,321,3

14,6

9,1

14,6 15,4

21,4

15,2

8,15,3 3,9

10,48,2

6,23,2

7,5 6,9 7,83,9

17,5

05

1015202530

Ülkeler

Ora

n

İstihdama Oranı(%) Nüfusa Oranı(%)