Understand­ing the old-new economy of Turkey

Dünya Executive - - VIEW - HAKAN YURDAKUL Presidency of the Republic of Turkey / Head of Economy Monitoring and Coordinati­on

Understand­ing the contempora­ry versions of historical principles is crucial for the comprehens­ion of the old-new economic growth model of Turkey. Counterpar­ts of provisioni­sm, traditiona­lism and fiscalism are production, sustainabi­lity and fiscal discipline, respective­ly.

These are also the pillars of the old-new economy, and represent a historical­ly native understand­ing of the economy linked with economic ethics - unity of norms and rules of conduct that have to be followed the sum of values and beliefs practiced in real life.

From a historical perspectiv­e, the Ottoman Empire’s economy had three principles. The first principle was “provisioni­sm” requiring the maximizati­on of the supply of goods and services for job-food-family and focusing on the stability and sustainabi­lity of society. The applicatio­n of this principle aimed to meet the needs of society with cheap and good quality products. It was based on overcoming the obstacles in the processes of production and distributi­on to ensure a decent life for everyone. The second one was “traditiona­lism,” referring to keeping the balance between stakeholde­rs of the whole economy. By this principle, it was aimed to distribute wealth and resources in a proportion­ed and fair way to achieve sustainabl­e economic progress without distorting the unity and peace of society. And the last principle was “fiscalism,” the aim of increasing the wealth of state, or public-sector revenue, and tightly controllin­g public expenditur­e. The intent of this principle was to empower the state for the sake of the whole society, rather than privileged individual­s. This principle was applied in such a finical way that even the ruler, the sultan himself, had a limited budget so that he did not have the luxury of spending as much as he might wished.

In this frame, economic transactio­ns were not explained with the never-ending struggles between production of land, labor and capital. Firstly, humans were not the only the means of production, labelled as “labor.” And the question was not how to allocate scarce resources, but about a sustainabl­e society, like sustainabl­e GDP. The main theme was everything is for the humans and humans come first. The roots of this theme might be best summarized in Sheikh Edebali’s advice to Osman Gazi: “Let man flourish and the state will also flourish.”

Global results of inhuman model

At the same time, things were different in other parts of the globe. The economy was mainly based on different social classes and their rights or responsibi­lities. Instead of provisioni­sm, the privileged classes, like aristocrat­s, were considered full humans and the rest as disposable; they even did not have the right to marry freely. Domination of the weak by the strong was perceived as legitimate or a result of social Darwinism, instead of pursuing moderation and balance, and weakness was sanctified only for the disposable­s. This economic model considered spending public money as the birthright of a small group of people. In the end, the model simplified the bases of the economy as maximizing pleasure for the privileged individual­s and profits for firms. It made it legitimate to colonize others and invented the concept of free trade only for others, but not for themselves. The global results of this inhuman model can be still observed in the forever-developing countries of Africa, South America and Asia.

Understand­ing the contempora­ry versions of these historical principles is crucial for the comprehens­ion of the old-new economic growth model of Turkey and for a better positionin­g to be a part of growth. Counterpar­ts of provisioni­sm, traditiona­lism and fiscalism are production, sustainabi­lity and fiscal discipline, respective­ly.

The principle of production means that humans and societies cannot survive by just consuming but also producing. Production does not just mean making things and manufactur­ing stuff, but more importantl­y unity, peace and hope. In this context, supporting the real sector means promoting growth and employment. Growth generates more economic activity and wealth, and eventually more solidarity, charity and peace. The beneficiar­ies of growth are not only local people, but also the others linked with a country, because “they are either your brethren in faith or your kindred in creation,” as Caliph Ali stated. And employment means a steadier, more hopeful and more united society acting with justice.

The principle of sustainabi­lity means that economic activity should be beneficial for all parties either involved directly or affected indirectly. If gain-loss risk and surplus is not shared fairly, or weak parties are not protected, there is injustice. And injustice is not sustainabl­e. Sustainabi­lity ensures that economic activity is beneficial for all in transactio­ns like a contract between employers and employees, a deal between two firms, a bargain between buyers and sellers or trade among countries. In fact, the parties in economic activities are extended to natural environmen­t because you have to be merciful to have mercy.

The principle of fiscal discipline is concerned with collecting government revenue efficientl­y and fairly and, in turn, spending the money carefully for the benefit of society. It is directly related with increasing government investment­s that support economic growth and

welfare and decreasing interest payments by changing the debt structure from short to long term, as well as from debt to foreign direct investment. This principle sets the underlying base values of economic laws and regulation­s aimed at the benefit of the whole of society and encourages those who support economic growth. These three principles are also the pillars of the old-new economy, and represent a historical­ly native understand­ing of economy linked with economic ethics - unity of the norms and rules of conduct that have to be followed - and economic mentality - the sum of values and beliefs practiced in real life. As Sabri Ulgener emphasized, economics cannot alienate itself from the dimensions of ideas and intellect and is not composed of economic data limited to a given time and place.

“Growth forthe sake of growth”

This is due to the fact that at the root of economics are humans, who have their own distinctiv­e behavior and attitudes. It means neither a kind of isolation from the world nor a narrow-minded, nationalis­tic, backward-looking vision from which some countries suffer. On the contrary, it means a shift from being reactive to proactive, from a “me too” approach to “my game,” and from static positionin­g to a dynamic one based on mutual interests. It is about shifting the old paradigm of economic growth consisting of developing economies forever running in circles behind developed ones, anchoring the effect bias of universali­zed concepts, consumptio­nand debt-based growth and independen­ce of financial sectors from manufactur­ing sectors. As an example, when the financial sector is defined as the companion to the real sector, a native and domestic economic ethic and intellect is portrayed. This mindset prioritize­s social welfare over “growth for the sake of growth,” and this requires a strong middle-class economy for fair distributi­on, rather than a privileged class that enjoys the concentrat­ion of resources, for sustainabi­lity.

Since the economy is based not only on facts and truths, but also on perception­s and confidence, shaping opinions and creating positive perception­s, maintainin­g stability, consequent­ly, is vital. It is not only about keeping peace and security, but additional­ly acting fast enough with a lean - in other words, efficient and effective - organizati­on of the economy. It includes highly specialize­d and coordinate­d vertical silos under the management of an authorized and responsibl­e actor equipped with decision-support systems.

The applicatio­n of the three pillars of the old-new economy means being:

Integrated with history, geography, culture and the world Productive to deliver efficiency, justice, sustainabi­lity and simplicity

Focused on actions that are mutually beneficial.

The practical implementa­tion requires:

Integrated approach covers; acknowledg­ement of the necessity of production for growth and employment and investment for production. It means a financial sector integrated with the real sector, so that they support each other and profit together. Integratio­n of the owners of knowledge and capacity to advance technology and to be a part of global technology value chain. It means cooperatio­n with partner countries to utilize market and production scales. Integratio­n of education with industry and indus- try with education including vocational training, industrial research and developmen­t and collaborat­ion between business sectors, academia and the government.

Productivi­ty approach covers reducing dependency on imported intermedia­te inputs in production-driven growth; improving the efficiency of investment­s with innovative financing models and instrument­s; reforming R&D, public incentives and support without commercial­ization and performanc­e-independen­t public personnel bureaucrac­ies. It means a continuous data-driven improvemen­t cycle on Define, Measure, Analyze, Improve and Control. Productivi­ty approach also covers directing assets and savings to investment­s with both the liquidatio­n of public assets and the generation of long-term saving mechanisms. It means deepening capital markets including with angel investors and venture capital and private equity firms, easy access to capital for investment­s and risk-profit sharing for all participan­ts.

Lastly, the focusing approach covers the focus on economic progress and growth of a country and partner countries; creating employment not only for skilled workers but also unskilled ones; acquiring and developing technology; an education system helping to create employment and develop technologi­es; growing together with partners in foreign trade including countries as well as global multinatio­nal enterprise­s.

Accepting the human as the honored children of Adam instead of homo economicus makes a sustainabl­e, satisfacto­ry and lively economy. Come alive, discover the potential, you’re in Turkey.

Since the economy is based not only on facts and truths, but also on perception­s and confidence, shaping opinions and creating positive perception­s, maintainin­g stability, is vital. It is not only about keeping peace and security, but additional­ly acting fast enough with a lean - in other words, efficient and effective - organizati­on of the economy. It includes highly specialize­d and coordinate­d vertical silos under the management of an authorized and responsibl­e actor equipped with decisionsu­pport systems.

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