Turkey’s Economic Policy Shifts and Failures


Turkey has experienced a series of shifts in policy since the 1920s. However, almost all these changes have been a result of crises, both financial and political. This brings into perspective the debate of which type of economic system is better and the role of the government in the economy. On the other hand, no government would be willing to see itself collapse, and the authorities will do anything that is within their control to rescue the situation. Just like crises in other countries, there are many reasons why policy changes were delayed until the system collapsed.

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Causes of the delay in a policy shift

First, Turkey was a reactive state, which means it did not take the initiative to develop the economy through policies. However, it only responded to the crisis. Reactive states are characterized by a lack of state capacity, especially transformative and developmental capacity. This refers to a situation whereby policy-making organs cannot pursue adjustment strategies domestically, working together with economic entities organized to uplift and change the industrial economy (Weiss, p. 5). As a result, such states highly dependent on external factors and actors to provide an impetus for the transformation of existing policy. A macroeconomic crisis will eventually take place and render the existing system useless. Hence external actors are empowered to effect change.

Secondly, support by external actors of the 1960s and early 70s regime, which recognized the state as a key driving force in economic and social transformation, also caused a delay in policy shift. For instance, the World Bank was increasingly supportive towards the protection of infant industries as a temporary measure, in which it believed that it was away of promoting rapid industrialization and development. The US was also receptive to Turkey’s adoption of capitalism instead of communism in the light of the Cold War era. As a result, these external actors who would have piled pressure for regime change were reluctant and, on the contrary, provided support that prevented the necessary changes from being instituted (Kasaba, p. 282).

One other reason why the shift in policy never happened early was that policies had culminated relatively in many successes in terms of economic growth and structural changes between the years 1933 to 1977. This period was characterized by industrial entrepreneurship, which resulted in national development, made possible by the significant and complementary role played by both the state economic and private enterprises (Kasaba, p. 286).

There existed a coalition bloc of ISI and developmentalists that favored the policy regime that existed before the crisis. This coalition was composed of rising industrialists who had changed from commercial land ownership to industrial entrepreneurship during the late 1950s when protectionism was slowly creeping in. They also included some bureaucratic elite who had been marginalized during the previous regime of Menderes, and hence they had regained their ground as a result of the military intervention. The constitutional change of 1961 was another key reason as organized labor benefited greatly through the expansion of social rights. As a result, the thirst for change, if any by workers, was quenched (Öniş & Şenses, p.7)

Lessons to be learned on economic policy-making based on this delay

There are numerous lessons that can be drawn from Turkish economic policy-making in the post World War 2 based on this delay and the resulting problems: First, Nations need to adopt pro-active state policies which refer to nations that have transformative and developmental ability, regulatory ability, and redistributive ability that is being capable of building social cohesion. Success in the economy is limited when a state adopts the strategy of self-enclosure and inward-orientation.

However, economies that are generally open have adopted an outward-orientation process and have focused on capitalizing on export openings in the world market and set up strategies for long term foreign investment have, to a great extent, been able to generate high economic growth. Such economies include South Korea, Taiwan among others. Although reactive states do experience periods of economic boom, such periods are short-lived because they end with a crisis when the system can no longer hold the external pressures. Hence this lowers the overall economic growth that had been made during the period before the crisis (Öniş & Şenses, p. 26-29)

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There cannot be any single agent responsible for economic growth or policy change in any economy, such as Turkey. Therefore, for any significant shift in policy, there must have been a composition of different factors. These include external actors such as key international organizations, for example, the World Bank, and powerful countries such as the United States. Particularly the US influences development in other developing countries through their material incentives, which are offered in the condition that the recipient will make certain adjustments. Also, as relations between the two countries continue, the developing country ends up adopting ideas of development from the powerful country.

On the other hand, international organizations such as the World Bank always offer financial support to countries but with conditions that the country makes certain structural adjustments. In light of these facts, developing countries are restricted to acceptable norms of these external actors, and hence they cannot chart the economic path that will enable them to mature industrially (Yeldan, P. 19-20)

A crisis in an economy always indicates that there was a delay in implementing necessary policy changes. As a result, the existing system is rendered unsustainable. Hence it collapses. As Turkey was reluctant to institute policy changes, whereby it opted for a prolonged import-substituting policy, other countries such as South Korea voluntarily transited to an export-oriented policy. This change helped South Korea to realize great export performance, which served as a basis for its hyper-growth experience enabling it to prosper rapidly compared to most other developing economies. Therefore if Turkey had implemented export growth strategy voluntarily in the 1970s instead of a forced transition as a response to the crisis, its development performance would have relatively reached greater heights (Öniş & Şenses, p.11).

Crises always hurt the social and political environments of any state. Although crises can bring transformation in an economy that otherwise seem impossible, it is important to note that such crises come with costly consequences in human and social-political lives. When there is a crisis, the existing democratic regimes are overthrown, and repressive military rule takes over. This means that all the economic and political gains that had been achieved mostly go down the drain.

Also, the weaker segments of the society tend to bear a larger burden of the transition, particularly because other segments have amassed wealth that cushions them from the shocks associated with such drastic changes. It is also evident that measures instituted as a response to such a crisis tend to lead to another collapse, in the long run, hence resulting in a cycle of crises. The regime that takes power tends to do away with anything that is associated with the preceding regime. As a result, all the gains that had been made are stopped or destroyed, and also, such uncontrolled shifts result in the exposure of vulnerability of the system (Yeldan, p. 13).

Policy shifts need to be a step-by-step process that entails implementing strategies and acting on the resultant developments. Late industrialized countries that have high economic performance did not start their adjustments under free-market conditions. The state was actively involved in industrialization as well as nurturing the private entrepreneurial class through industrial protection, as they were in the process of catching up with the developed economies.

Therefore the state played a key role as the countries had weaknesses in their technological, educational and entrepreneurial abilities. As opposed to countries like Turkey that exercised extreme situations as far as government is concerned, the late industrialized countries ensured there was a balance between state organs and private business shifts over time. As a result, private players were empowered, and hence the economy climbed to maturity levels of industrialization (Eligur, p. 137-141).

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This shows that the difference between the late industrialized countries and countries such as Turkey is in nature as well as the quality of state intervention, which results in major differences in economic performance and level of development over some time. Reactive states such as Turkey tend to intervene by correcting market failures indirectly, whereby they use market instruments to control market operation mechanism or directly by an extensive public enterprise. Therefore, this limits their goals, whereby they cannot strategize on long-term policies that will see them have an export industry that is equally capable of competing internationally. These states also tend to go along acceptable norms of operation as demanded by external actors, particularly because in times of crisis, they depend on these actors to bail them out (Öniş & Şenses, p. 4)


It is evident that the major obstacle to Turkey’s economic development is the reactive perspective to the events that happen in the world economy. However, it is also clear that such an economy can also experience significant development performance if it can improve its state capacity, brought about by influences from external actors. This includes improving all the arms of the state that is the developmental and transformative, the regulatory and the distributive arms.

A change in policy is a gradual process that needs a state-backed plan. Therefore, rather than the state taking a back seat in the economic development process, it should be actively involved by monitoring the situation. However, the nature and level of involvement should be to empower the private actors, who in turn will drive the economy towards the maturity of the industry.

It is also evident that external actors can be so instrumental in instituting policy shifts in reactive states because such states mostly lack the institutional capacity to initiate that change. However, it also comes out that such external actors are often driven by their interests. As a result, they always offer pre-conditional support, mostly financial. Therefore, this calls for the state to be ready to go against the accepted norms and voluntarily make policy shifts in time instead of waiting to be forced to change policies as a response to the crisis.


Eligur, Banu. The Mobilization of Political Islam in Turkey. New York, NY: Cambridge University Press, 2010.

Kasaba Reşat. The Cambridge history of Turkey: Turkey in the modern world. New York, NY: Cambridge University Press, 2008.

Öniş, Ziya and Şenses, Fikret. Global Dynamics, Domestic Coalitions and a Reactive State: Major Policy Shifts in Post-War Turkish Economic. 2007. Web.

Weiss, Linda. The myth of the powerless state. Ithaca, NY: Cornell University Press, 1998.

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Yeldan, Erinc. Turkey 2001-2006 Macroeconomics of Post-Crisis Adjustments. 2006. Web.

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StudyCorgi. (2021, April 18). Turkey's Economic Policy Shifts and Failures. Retrieved from https://studycorgi.com/turkeys-economic-policy-shifts-and-failures/

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"Turkey's Economic Policy Shifts and Failures." StudyCorgi, 18 Apr. 2021, studycorgi.com/turkeys-economic-policy-shifts-and-failures/.

1. StudyCorgi. "Turkey's Economic Policy Shifts and Failures." April 18, 2021. https://studycorgi.com/turkeys-economic-policy-shifts-and-failures/.


StudyCorgi. "Turkey's Economic Policy Shifts and Failures." April 18, 2021. https://studycorgi.com/turkeys-economic-policy-shifts-and-failures/.


StudyCorgi. 2021. "Turkey's Economic Policy Shifts and Failures." April 18, 2021. https://studycorgi.com/turkeys-economic-policy-shifts-and-failures/.


StudyCorgi. (2021) 'Turkey's Economic Policy Shifts and Failures'. 18 April.

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