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TURKEY AS A MODERN DEVELOPMENTAL STATE? COMPARISON WITH JAPAN TOMAS VACLAVICEK, SID: 40078080

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TURKEY AS A MODERN

DEVELOPMENTAL STATE?

COMPARISON WITH JAPAN

TOMAS VACLAVICEK, SID: 40078080

1

TURKEY AS A MODERN

DEVELOPMENTAL STATE?

COMPARISON WITH JAPAN

INTRODUCTION

In the 2015 Brookings report about the fastest growing metropolitan

areas of the world, China and one other country accounted for 8 out of

10 of these areas. (Brookings institute, 2015) This second country was

Turkey, a nation of 75 million people at the border between Asia and

Europe.

The growth of these four cities – Izmir, Bursa, Istanbul and Ankara

symbolizes the developmental drive of this country. The economy was

growing 5.8% in the first 5 years since AKP took power. (Onis, 2010)

Economy is predicted to expand at rates between 3 and 4% in the next

years according to OECD (2015). Even though more moderate than in

the past, such growth rates are still compatible with Turkey catching up

to the poorer members of the EU, such as Romania or Croatia, which is

underway.

However, Goldman (2012) claims that the expansion of Turkish economy

was driven mainly by strong credit expansion with as much as 40%

annual increase in credit provided in 2011. Therefore, he suggests that

Turkish economic success is not going to be long-lasting.

Turkey is currently ranked 70th in the world in terms of economic

freedom, slightly above the world average, but far behind economically

free countries. (Heritage Foundation, 2015). Therefore, present-day

Turkey is hardly a good example of free-market liberalism, despite

liberalization attempts from 1980s on. But can it be considered a modern

developmental state or does it more closely resemble another model?

The key question of this essay is whether Turkey in the period of AKP

(Justice and Development party) rule is comparable to the

developmental state of 1950s and 1960s Japan and it focuses

exclusively of similarities with the features of developmental states.

The following sections of this essay will aim to answer this question by

briefly reviewing the political economy of Turkey, key features of

developmental states with the example of Japan as a role model and

further by evaluating present-day Turkey based on these features.

ANOTATION

This essay compares

the economic and

political development

or Turkey under the

AKP rule to the model

of developmental state

practiced by Japan in

order to industrialize

the country.

The findings suggest

that while there are

some similar features,

significant differences

such as a lack of

bureaucratic insulation

are present as well.

Thus the evidence is

mixed. Also, important

risks might endanger

Turkey’s economic

development and

cause AKP to lose

power.

2

1. TURKISH POLITICAL ECONOMY IN 20TH

CENTURY

Since the breakup of the Ottoman Empire in 1923, the new Turkish state has evolved through several

quite distinct phases of development. In the early years after World War I, president Mustafa Kemal

Atatürk and Turkish governments were mandated by the international community to keep the role of the

state in the economy limited, refrain from interventions in the interest rates and exchange rates and from

conducting industrial policy which could transform Turkey from an agrarian economy. (Goksel, 2015)

While Turkey has inherited a poor state of development from the Ottoman empire, an educated class of

intellectuals, bureaucrats and military officers was beneficial for its future modernization efforts. The ruling

Republican party (CHP) further secured its power by cooperating with land owners. (Goksel, 2015)

The free market period was followed by a statist era, covering two decades of 1930s and 1940s and

brought about by the economic chaos of the Great Depression. In this period, the state focused on soviet-

style planning and autarky. (Goksel, 2015) Nationalization, state-led industrilization and control over

foreign exchange was the sign of the times. Development was complicated by the onset of 2nd World

War and the period of 1940’s is now remembered as a „lost decade“ for Turkey.

The prevailing policy was briefly reversed in 1950’s, as the CHP’s obsession with long term development

led to dissatisfaction and electoral defeat. Landlords and capitalists also felt endangered and ceased to

support CHP. (Goksel, 2015) Agriculture was favoured by the newly ruling Democratic party (DP) as it

represented the majority of its electorate. While the beginning of the decade was very hopeful, a balace

of payment s crisis of 1958 meant a defeat for DP, both politically and economically.

Between 1960 and 1980, new developmental efforts were focused on the Import substitution

industrialization (ISI) and a new engine of growth. The objective was creation of large state owned

enterprises mainly in the field of manufacturing which was entrusted to specialized institutions such as

the State Planning organization (DPT) rather than to politicians. (Onis, 2010) The end of this period was

once again marked by a crisis. In 1980, a military coup turned Turkey’s political system over and brought an economic liberalization as

well as a greater orientation on export. State-owned enterprises were privatized or pushed to become

more efficient, austerity policies were implemented and a new middle class began to emerge. Many of

the privatization attempts, however, were stopped by the deeply entrenched statist bureaucruts and thus

only 8.3% of SOEs were privatized between 1985 and 1998. (Goksel, 2015) Liberalization attempts also

cannot be considered conventional, as the political and economic influence of the state increased rather

then declined. (Goksel, 2015) In 1990’s, however, Turkey’s strong economic growth came to an end and

instability erupted. The ensuing severe economic crisis of 2001 staged a perfect moment for Erdogan’s

AKP (Justice and Development party) to take power. (Onis, 2010)

Throughout the 20th century, statism has played a central role in the Turkish economy. Despite partial

liberalization after the post 1980s period, this statist legacy remained an important heritage even in the

AKP era (Goksel, 2015) Another important fact to note is that unlike most countries in the region, Turkey

did not have a colonial experience and Turkey’s NATO membership since 1952 has provided a generally

safe environment for development that its neighbors can only dream of.

3

2. KEY FEATURES OF THE JAPANESE DEVELOPMENTAL STATE

The next part of this essay tries to capture the essence of developmental states on the example of after

war Japan. To break down the developmental state model into distinct features and list provide examples

from Japan, the list of developmental state features mentioned by Leftwich (1995, p. 405) is adopted.

a determined developmental elite;

relative autonomy;

a powerful, competent and insulated economic bureaucracy

(henceforth analyzed as pilot agencies)

the effective management of non-state economic interests

a weak and subordinated civil society;

repression, legitimacy and performance.

A brief description of each feature follows, drawing from Leftwich and other authors in the field.

2.1. Developmental elite led by strong national leader

Developmental states of the past were led by strong elites which were committed to leading their country

through a period of rapid industrialization and who often were willing to sacrifice the short-term welfare

of the people in order to build a modern economy. In some developmental states, the elites are recruited

largely from the military, as previous business class was often lacking.

Leftwich mentions that elites from the public and private sector are typically linked to a large degree and

that they often shift between civil service and positions in business or military. In Japan, the tendency of

high government officials, such as the vice-presidents of MITI, to retire from civil service early and move

to positions of top business executives, is well-reported. (Johnson, 1982)

Leftwich (1995) further mentions that we don’t necessarily find developmental elites as monolithical

structures, but rather as what he calls “shifting coalitions of diverse interests” (Leftwich, 1995, p. 406).

Therefore, identifying the developmental elite may be a difficult task.

Further, at the top of the hierarchy in the developmental states stands a strong national leader. In Japan,

we talk of leaders such as Shigeru Yoshida or Hayato Ikeda, both of whom launched bold economic

programs and who managed to retain legitimacy despite short periods of losing power and experiencing

political setbacks. (Johnson, 1982)

2.2. Relative autonomy

Relative autonomy, sometimes labeled as bureaucratic insulation, can be best understood as a certain

level of protection or independence in decision making of the bureaucratic elite from special interest

groups (Leftwich) If properly established, relative autonomy should prevent wide-spread corruption and

rent-seeking, as those seeking to use public resources for their own benefit should find no way of

changing policy choices. Throughout the first decades, Japanese bureaucracy was remarkably protected

from outside interests. Even though a certain degree of corruption was present, the distinguishing feature

is that it did not influence decisions about industrial policy (Stiglitz and Yusuf, 2001)

4

2.3. Economic bureaucracy and pilot agency

Developmental states had established agencies or state organizations which were responsible for

conducting industrial policy, economic planning and economic co-ordination beyond the scope of a typical

finance or economic ministry. (Leftwich, 1995)

The chief example of a pilot agency and first of its kind was the Ministry of International Trade and Industry

(MITI), established in 1949 and operating till today in a slightly different form under the name METI.

Examples from other countries include the EPB in Korea or Council for Economic Planning and

Development in Taiwan. Often, these technocratic organizations could act on their own, without oversight

from the elected parliament, enabling them to be very powerful in formulating structural policies.

2.4. Effective management of non-state economic interests

This feature of developmental state is mostly focused on large economic power of the state and the

pursuit of policies which are sometimes called “economic nationalism”. Developmental states typically

actively influence their trade balance, with measures including even a ban on imports of certain goods or

foreign travel. Further, they control foreign investment, at least in their first years. Private economic

interests are subordinated to the developmental strategy (Leftwich, 1995) Japan saw a large number of

these policies and was also notable for a special company structure, Kereitsu.

2.5. Weak and subordinated civil society

Developmental states typically leave little space for activities of organizations like labor unions,

independent media, non-profit organizations and other civil society features. Concerning labor protection,

they might force workers into a state-controlled labor union as in Singapore or suppress the activity or

such organizations. In the case of Japan, this feature might be less obvious. Some authors actually argue

that civil society in Japan was active and became an important part of Japanese economic miracle,

contributing to the creation of social capital and more beneficial processes. (Jones, 2001)

2.6. Repression, legitimacy and performance

Developmental states tend to suppress civil liberties and protect their own political power. In non-

democratic countries, this might be done through outright repression. In formally democratic countries, it

takes a more subtle approach. Still, as Leftwich (1995) argues, they usually retain their legitimacy or even

popularity through their economic success and impact on many members of the society. They either

make the impression or take a genuine effort to “invest into human capital” in various forms – supporting

public investment in healthcare, education and in some cases housing.

In Japan, a representative of formally democratic country in the first after-war decades, the ruling Liberal

Democratic party managed to retain a remarkable level of legitimacy by relying on its economic success

as well as on an entrenched partnership between the party, bureaucracy and corporations, known as

Iron Triangle.

5

3. TURKEY VS. DEVELOPMENTAL STATE MODEL

In this chapter, present-day Turkey is analyzed using the framework of the Japanese developmental

state in order to bring insights about the key similarities and differences compared to this model.

3.1. Strong national leader

Recep Tayyip Erdoğan, the current president of Turkey, has been a dominant figure of the Turkish politics

since the 2002 elections. He has held the office of prime minister between March 2003 and August 2014.

He left the seat only to become president of Turkey following a victory in Turkey’s first direct presidential

elections and securing the presidency for 5 more years under the latest amendment of Turkey’s

constitution. (NSP, 2014) The length of term was reduced from 7 years, but greater powers were vested

in the presidency at the same time.

Erdogan promotes a strong long-term vision of Turkey, such as an ambitions 2011 election promise to

join the ranks of 10 largest economies by 2023. (Faidi, 2013) This vision is supported by an alliance of

bureaucrats, representatives of Islamic civil society and Islamic interests and close ties with select

business associations such as MÜSİAD, which represents primarily Anatolia-based SMEs. (Goksel,

2015)

3.2. Developmental elites

Turkey has distinct business elites which are nowhere to be seen in the western world. They combine

socially conservative attitudes, Muslim piety and entrepreneurial spirit. (Faidi, 2013) With these

characteristics, they might remind us of the “protestant work ethics” embraced by 19th century sociologist

Max Weber. Indeed, the Anatolian Tigers, as they are frequently called, attract interest of researchers for

this unique combination of attitudes.

The business structure evolving under AKP rule is quite different from that which we could find in after

war Japan or Korea. Instead of large corporations and conglomerates, the Anatolian Tigers are typically

operating export-oriented, family-owned SMEs. Some companies, such as Boydak Holding, however

evolved to a complex structure including a bank, reminiscent of Japanese kereitsu. (Faidi, 2013, p. 3)

Unlike Japan, where the elites mostly built ties in top-notch universities (Johnson, 1982), the Anatolian

Tigers began networking in mosques and Islamic social networks (Faidi, 2013) Apart from this new class

of entrepreneurs, state-owned enterprises (SOE) are still important in Turkey.

As Japanese entrepreneurs were copying some inventions made in the USA and Koreans were learning

from Japanese business practice, Turkish entrepreneurs are reported to replicate German business ideas

(Faidi, 2013)

3.3. Relative autonomy

This feature represents probably the biggest departure of Turkey from the Developmental state model,

as the ruling party of Turkey is often accused of building ties with ideologically close businesses and

being an active player in clientelism. (Goksel, 2015) As Heritage Foundation (2015) puts it, “Corruption,

cronyism, and nepotism persist in government and daily life.”

According to Leftwich (1995, p. 410), formally democratic developmental states maintained bureaucratic

insulation partly by one-party dominance. The dominance of AKP in Turkish politics since 2001 thus

prepared good ground for achieving relative autonomy, but the chance remained largely unused.

6

However, other developmental states were also not corruption-free and as Leftwich mentions, in some

developmental states we can observe a mixture of partimonialist tendencies, corruption and autocratic

government alongside the rational, technocratic economic policies typically associated with

developmental states (Leftwich, 1995).

3.4. Pilot agency

While AKP rose to power promoting what some would call “Neoliberal” agenda combined with socially

conservative values of Islam, the actual policy conducted by the AKP government can be considered a

distinctly Turkish “third way” between statism and market economy. It is clearly influenced by past

development of Turkey and much more statist in comparison to Western political economy (Goksel, 2015)

Apart from the Ministry of Economy, Turkey also has a specialized Ministry of Development, which was

established in 2011 as a successor to the State Planning Organization, which has been around for a

large part of modern Turkish history – since the 1960 military coup. Ministry of development creates four

year development plan. Currently, Turkey is about halfway through its Tenth development plan focused

on years 2014 – 2018. The plan includes various components, ranging from economic issues to regional

cooperation and even human rights and issues of social protection. A report from Faidi mentions a great

expansion of investment in manufacturing (from around 25% of all investments in 2000 to 50% in 2008),

leading to a large shift of labor towards modernized sectors with higher productivity (Faidi, 2013).

However, R&D is significantly underfinanced compared to emerging economies and the EU (0.86% of

GDP in 2012 compared to 1.8% and 1.9%, respectively). (TEPAV, 2013) But overall, it is hard to find

such a powerful and independent institituon such as Japan’s MITI.

3.5. Effective management of non-state economic interests

Chalmers Johnson said: “Collaboration between the state and big business has long been acknowledged

as the defining characteristic of the Japanese economic system.” (Johnson, 1992, p.1) Let’s now take a

look whether we can find such a strategic ruling alliance in today’s Turkey.

Besides the growth of the SMEs described above, large Turkish companies became Europe-wide market

leaders in consumer durables. As an example, Goksel (2015) mentions that Beko became the top

company in the UK market and Vestel established itself as the 2nd largest TV producer in the continent,

just after Samsung. (Goksel, 2015) Large industrial conglomerates such as Koc or Sabanci therefore

play an important role in the Turkish economy. As Onis (2010) notes, many of the export companies have

been supported through protectionist measures, even during the “neo-liberal” period of Turkish

development. Select national champions, such as Turkish Airlines with 49% state ownership, also play

an important role both domestically and internationally, hand-in-hand with the foreign policy of the Turkish

government. (Intellinews, 2015) Many companies are also tied to the government through like-minded

business associations which AKP is nurturing, suggesting that Chalmers’s point is fulfilled in Turkey.

Goksel (2015) also mentions that unlike previous export-oriented industrialization (EOI) attempts 1980s,

new policies implemented in the AKP era paid more attention to the role of institutions and led to

enhanced growth based on Japanese and Korean example.

The role of foreign investments is different from the government-controlled model of after war Japan or

Korea. Due to lack of domestic savings, Turkey focuses on attracting foreign investment. A side effect of

this effort is the rise of ”hot money”, which exposes Turkey to the risk of sudden stops when hot money

retreats in pursuit of more promising returns. (Faidi, 2013, p. 7)

7

3.6. Political authoritarianism and weak civil society

Formally, Turkey is still a multi-party democracy with the rule vested in the hands of elected parliament.

Authoritarian tendencies of the AKP, however, are not hard to find. In the period starting in 1980, the

country had faced two decades of increased political turbulence. In contrast, the political environment

was stabilized after the electoral victory of AKP in 2002. The party’s promise of liberalization was soon

forgotten. Instead, during his rule, Erdogan has been blamed of leading the country in a more

authoritarian way, creating what some perceive as “neo-ottomanism” – an attempt to amass the power

once held by the nation’s all-powerful sultans.

The government has demonstrated its power by implementing unpopular reductions to social security in

selected provinces in order to increase competitiveness. This and other steps of AKP might raise

inequality concerns. But, as observed in the data and contrary to most developmental states, Turkey has

retained a stable, albeit quite high, level of inequality during the AKP rule. (OECD Database, 2015)

However, at least one part of the civil society thrives. That is the part tied to Islamic values which are in

line with the official policy of AKP, such as Islamic charities. These charities, as described by Goksel

(2015), play an important role in Erdogan’s hybrid social policy.

3.7. Repression, legitimacy and performance

Through which mechanism does the leading party retain its legitimacy? Similarly to Japan, the ruling

party has not seized power by force, but rather gained it through elections. Fairness of the elections has,

however, been disputed and opposition is frequently labeled as “enemies of the nation”. (Kocamaner,

2015, p.5) Voting rules in Turkey also deserve attention, as they strongly favor the winning party. In 2002,

AKP managed to control 66% of seats in the parliament as a result of only 34.28% popular support. A

political party must achieve at least 10% of the vote to be awarded seats in the parliament. Therefore,

we can observe some growing degree of authoritarianism, which is appearing in the previously

democratic system.

AKP has also been able to secure legitimacy so far largely due to improved economic situation and

stability, through so-called performance legitimacy, which is at odds with the situation before AKP took

power, which became known as the “lost decades of Turkish development” (Goksel, 2015). For example,

poverty was greatly reduced since AKP took power, with the poverty headcount ratio decreasing from

30.3% of the total population in 2002 to only 2.3% in 2012. (Goksel, 2015) This happened despite a

reduction of relevant expenses in the government budget. The masses lifted from poverty by the

cooperation of AKP and its business allies then provide political support and legitimacy for the party.

A large percentage of Turkish population is reported as not covered by social security of healthcare.

(Goksel, 2015) This resembles the practice of developmental states, which were often accused of

exploiting workers and providing only minimal social protection necessary to make the workforce

productive. Evidence of investing into the worker’s productivity, which at the same time was typical for

developmental states, is however harder to find in case of Turkey.

8

4. COMPARISON: TURKEY VS. JAPAN

Overall, there seems to be a number similarity between present-day Turkey and developmental state in

Japan. But some notable differences do not allow us to conclude that Turkey is a full blown developmental

state.

We can certainly find a strong national leader and close cooperation between the state bureaucracy,

ruling party and select business elites (such as the Anatolian tigers), similarly to Japan and other

developmental states. A unique mix of limited social protection and heightened state power in economic

activities (Goksel, 2015) also strongly resembles developmental states and leads to successful

achievement of at least some of Turkey’s developmental goals, namely poverty alleviation.

As developmental states were distinguished as “plan rational” rather than “plan ideological” political

environments (Leftwich, 1995, p. 403), it seems clear that both Japan after the 2nd World War and Turkey

under AKP are much closer to the “plan rational” model, even though Turkey seems to be focused more

on SMEs as part of its strategy. Ideologically speaking, the ruling elite in Turkey considers itself more

economically liberal and socially conservative, but with alleged cronyism and with a large number of

policies, the Turkish system seems rather pragmatic and rational.

Overall, the biggest difference between Japanese developmental state and present-day Turkey is the

lack of bureaucratic insulation in Turkey which encourages corruption and nepotism. If Turkey is

interested in imitating the developmental state of after war Japan and Republic of Korea as it claims

(Goksel, 2015), it should focus on dealing with this issue. A related issue is greater discontent with the

AKP led government, which is appearing since 2013, when corruption scandals brought about protests

largely followed by the media from all over the world. As a result of these protests, selected social media

sites were temporarily blocked, which can be considered a clearly authoritarian way of protecting the

power of the ruling party. (Kocamaner, 2015)

In developmental states, we typically observe a rapid change of industrial structure in a short period of

time. In Turkey, we cannot observe such a rapid change today. The importance of industry rather declined

moderately between 2003 and 2013. However, this is not necessarily a contradiction of a modern

developmental state in Turkey, as industrial share of gross total value stood at 23.4% at the beginning of

the period, which is more than the EU average of 20.3% (Eurostat Database, 2015) Rather, we can

observe an expansion in a broad range of services sectors. Also, the context of today’s global economy

might not favor such a change as much as the period of industrialization after the Second World War

which was the stage of Japanese economic miracle. For more detailed analysis of this issue, one can

refer to the debate about the 21st century developmental state, which is beyond the scope of this essay.

Also, it has to be noted that this essay focused exclusively on the comparison of Turkey and

developmental state model represented by after-war Japan, not a full description of political economy of

Turkey per se. There are some indications that Turkey could be viewed through the lens of a

partimonialist state as well, such as the cronyism and corruption scandals appearing in recent years, but

this would require a more detailed analysis of ideologies prevailing between the ruling elite (or lack of)

and a large additional research which would also go beyond the question this essay was aiming to

respond. The conclusions of this essay, however, are in line with Onis (2010), who claims that Turkey

has both characteristics of an economic tiger and a “temporary star” whose growth is endangered by

instability and hard to sustain.

9

The election in June 2015 brought a large setback for the ruling Justice and Development Party, as it

gained 40.87% of the popular vote and 258 seats in the parliament of 550 and came short of the 276

seat majority. A period of political vacuum and uncertainty resulted amids slowing economic growth,

mounting private debt and corruption scandals. The following elections in November were won by AKP

on the promise of bringing stability. However, with new conflicts and tensions arising in the region, this

promise might prove impossible to attain. Some scholars say that developmental states typically only last

for approximately two decades. Only the next months will tell if the AKP rule will end in the years

immediately following 2015 or if it will retain power similarly to Japan’s LDP.

CONCLUSIONS: RISING TIGER OR “TEMPORARY STAR”?

In closing, it seems that Turkey is close to the developmental state which we could observe in Japan

during the 1950s and 1960s in a number of ways. Some features such as bureaucratic autonomy,

however, are much weaker or missing. For example, the link between the ruling party, AKP, and such a

political establishment is harder to find. AKP seems as a supporter of developmental state policies only

in the last years, when it is becoming increasingly authoritarian. At the beginning, it ran in the elections

with a neoliberal agenda and aim to dismantle the entrenched Kemalist bureaucracy of the past. (Goksel,

2015) The ties of the government with Islamic businessmen, however, seem to have fueled economic

growth and helped AKP to retain its power and legitimacy.

Faidi now predicts looming problems for the Turkish economy, stemming from low savings, not yet fully

developed sophistication of exports and other issues. (Faidi, 2013) 2015 marked a slowdown in the

economy, investment outflow and a resulting weakening of the Turkish currency. Another factor, which

is worrisome, is the rapid debt expansion in the Turkish economy. While government debt is not high,

keeping around 46% of GDP (OECD Database, 2015), there has been a credit boom in the private sector

and the net external debt reached 51%, an unusually high level among emerging economies (Faidi, 2013)

This further fuels concerns about the sustainability of the Turkish development model.

Meanwhile, the notable political stability of the 2000s deteriorates. Resembling the way how the fast

growth of metropolitan areas symbolizes Turkey’s success, another shock might mark its upcoming

decline. On 10th October 2015, bombs exploded in Ankara, the nation’s capital, killing 102 people. In late

November 2015, a foreign policy tensions with Russia greatly escalated, as Turkey shot down a Russian

plane which allegedly crossed its border. Turkey’s NATO colleagues such as the USA stand by their ally

despite Russian claims that Turkey has been trading with ISIS. (CNN, 2015) This also highlights that

NATO membership and the role of Turkey in the region could have created favorable conditions for the

existence of developmental state at the crossing of Europe and Asia in the past. But amidst the worsening

security environment, the future of Turkey remains wide open.

10

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