Rise of Entrepreneurship in Turkey and Middle East: Successes, Failures, and the Future
Berkeley, California – October 2013
With the introduction of multiparty politics in 1950, Turkey’s political trajectory began to diverge form the closed, authoritarian, and repressive political systems that were fast becoming entrenched in virtually every country in the Middle East. In spite of its relatively open, democratic, and pluralistic (though flawed and military-dominated) political system, however, for most of the postWWII period Turkey’s economic structure and patterns of development bore an uncanny resemblance to the regional norm of underperformance and unfulfilled potentials. Although largely bereft of abundant natural resources and export commodities, Turkey was nonetheless saddled with a state-dominated, inward looking, uncompetitive, corrupt, and inefficient economy that was beset with anemic growth and chronically high levels of inflation, unemployment, disparity, mismanagement, debt, and deficit. The primary foundations for economic takeoff, including the dismantling of import substituting industrialization, encouragement of private initiative, retreat from autarky, and embrace of export led growth, were laid during the premiership/presidency of Turgut Ozal in the 1980’s.
Nevertheless, the 1980’s were also a time of turmoil and disruptive transition during which inflation averaged 75 percent and the ratio of government debt to GDP was consistently and excessively high. The period also witnessed the emergence of cozy and unsustainable relations between the government, bureaucracy, banks, and corporations, which paved the way for subsequent financial scandals and crises. The Turks themselves refer to the 1990’s as the lost decade, characterized by fragile and unstable coalition governments, whose lifespan averaged around nine months. During these years, chronic political instability resulted in consistent overspending, and the combination of hyper-inflation (averaging some 50 percent throughout the decade), relatively low growth, and high interest rates proved inimical both to people’s standards of living and the ability/willingness of businesses to commit to long-term investments.