No need for raising the stakes
Ican’t understand some of the economic policy decisions made recently. They sound like decisions from another world. All have one thing in common: They are based on incentives (disbursing money) across different areas to revive the economy. If you mention these decisions to an economist who has no idea about the current situation in Turkey, if he or she is a shark economist, he or she would probably say: “As far as I understand, your economy is either growing very below its potential or it’s contracting. And the reason behind this is not the high risk perception regarding your country. You don’t have a problem finding resources for borrowing. Most probably your currency is not depreciating against other currencies and market interest rates show a steady trend. I’m not a foreign policy expert but your country should have very good relations with neighboring countries and have no issues with superpowers. Therefore, you assume that the economy can converge its potential growth rate smoothly, with no fear of backlash to your decisions.”
What a wrong assumption! First of all, the Turkish economy is growing already much above its potential. Secondly, let’s say that we have left above potential growth behind (there is the possibility of the growth rate to fall, and it will fall most probably). But all these measures aiming to revive the economy, can they also solve the problem of finding resources? In other words, can banks easily (without an interest rate race) collect deposits and borrow cheaply from abroad? Let’s put banks aside. Can our companies borrow cheaply from abroad? Thirdly, do we have favorable foreign financial conditions to borrow (i.e. to find resources)? Are major central banks entering a financial easing period? Four, is the risk perception of Turkey normal? Five, what leads the foreign exchange and interest rate increases if not increased risk perception? Six, is it possible to boost investment just by handing out incentives? Seven, do you say that you all know about this but assume that all these decisions will elim- inate all these risks and reverse the increase in foreign exchange and interest rates and increase the growth rate?
It is time to identify our risks and try to eliminate the reasons behind them. But the decisions being taken and to be taken may increase the risks by many folds, let alone eliminate them.
Here is a question that has stuck in my mind for a long time: I want to revive the economy (we should not do it now, but let’s say the conditions were favorable). Are policies supporting companies the only way to revive the economy for God’s sake?
What about the employers of these companies and their workers, don’t they contribute to success? Isn’t it possible to take measures that would favor them? Are those policies useless to companies? Isn’t there a concept called demand increasing measures?