Patterns of Adjustment under the Age of Finance: The Case of Turkey as a Peripheral Agent of Neoliberal Globalization

Erinc Yeldan

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: Turkey experienced a severe economic and political crisis in November 2000 and again in February 2001. The IMF has been involved with the macro management of the Turkish economy prior to and after the crisis, and provided financial assistance of $20.4 billion between 1999 and 2003. Following the crisis, Turkey implemented an orthodox strategy of raising interest rates and maintaining an overvalued exchange rate. The government was forced to follow a contractionary fiscal policy to attain a primary surplus of 6.5% of the GNP, and promised to satisfy the customary IMF demands: reduce subsidies to agriculture, privatize, and reduce the role of the public sector in economic activity. Contrary to the traditional stabilization packages that aim to increase interest rates to constrain domestic demand, the new orthodoxy aimed at maintaining high interest rates to attract speculative foreign capital. The end result in Turkey was shrinkage of the public sector; deteriorating education and health infrastructure; and failure to provide basic social services to the middle class and the poor. Furthermore, as the domestic industry intensified its import dependence, it was forced to adopt increasingly capital-intensive, foreign technologies with adverse consequences on domestic employment. In the meantime the transnational companies and the international finance institutions have become the real governors of the country, with implicit veto power over any economic and or political decision that is likely to act against the interests of global capital.

Date: 2007
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