Abstract
This chapter traces the rise, retreat, and return of industrial policy in Turkey, illustrating the highly context-specific nature of effective industrial policies. Turkish economy industrialized under state-led import substituting industrialization in the 1930s and national development plans from the 1960s. These were replaced by export-led growth and the liberalization of finance and trade since the 1980s. However, state intervention persisted, becoming more ad-hoc and increasing the scope for corruption. Following the 2001 crisis, institutional reforms implemented to reduce patronage and corruption strengthened the state’s regulatory capacity but its transformative capacity continued to weaken. Since the global financial crisis and despite some early achievements, the ‘new’ export-oriented industrial policies for a ‘tech’ and ‘environmental’ upgrade of Turkish industry have faltered. Since 2016, they have been undermined by increased authoritarianism, return of reactive ad-hoc policies, erosion of institutional autonomy, macro-economic instability, and the weakening developmental space in the global economy.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
These themes are further explored in the forthcoming book on Industrial Policy in Turkey by Mina Toksoz, Mustafa Kutlay, William Hale, to be published by Edinburgh University Press.
- 2.
Metin Heper (1991) argues that the ‘Ottoman-Turkish polity’ was ‘bureaucratic centralist in the sense that in contrast to the situation in feudal polities (in Western Europe) the centre in the Ottoman-Turkish polity did not face countervailing powers’.
- 3.
The Lausanne Treaty of 1923 (which replaced the Treaty of Sevres partitioning the Ottoman Empire at the end of WWI) recognising the new Turkish republic included a Commercial Convention which prevented Turkey from establishing its own foreign trade and customs regime until 1929.
- 4.
See also the joint International Economic Association and World Bank conference on ‘New thinking in Industrial Policy’ in Washington DC, May 22–23, 2012, co-chaired by Dani Rodrik, Joseph Stiglitz, and Justin Yifu Lin.
- 5.
For an analysis of ‘state as a minority share-holder’, see Musacchio & Lazzarini (2014).
- 6.
The current breakdown is 36% medium, 3% high-tech in Turkish exports.
- 7.
The EU and US argued Turkish measures to incentivise public procurement of domestically manufactured pharmaceuticals and for EU firms to produce domestically undermined competition. The WTO ruled against Turkey and the case was referred by Turkey to the Dispute Settlement process of the WTO in May 2022.
- 8.
This debate arose in the 1990s with a World Bank report, East Asian Miracle: Economic Growth and Public Policy (1993) arguing that sound economic policies were the main drivers of growth in East Asian economies, refuting the earlier work by Chalmers Johnson published in 1982 in MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975, that it was government support for specific industries that was responsible for Japan’s post-war economic growth. For a summary of the debate, see Hufbauer & Jung (2021).
- 9.
As a member of the OECD, Turkey is in the ‘developed world’ category in the Paris Accord (this differs to Turkey’s UN categorisation as a developing country), and hence does not qualify for financial assistance.
- 10.
Economic Policy Research Foundation of Turkey.
- 11.
‘Turkey’s installed wind capacity reaches over 10GW’, Istanbul International Centre for Energy and Climate (IICEC) Newsletter, November 2021. The feed in tariffs introduced in 2011 were recently changed from US$ based to TL based in June 2021.
- 12.
Here are the firms which have pressed the Green-button (İşte yeşil için düğmeye basan şirketler’), Dünya, 19 October, 2021. https://www.dunya.com/surdurulebilir-dunya/iste-yesil-icin-dugmeye-basan-sirketler-haberi-637011.
- 13.
Is Bank Weekly Bulletin, 30 December 2019. https://ekonomi.isbank.com.tr/contentmanagement/Documents/eng02_weekly/2019/wb_20191230_Turkish_lira_depreciated_while_BIST100_hit_an_over_one_and_a_half_year_high.pdf.
- 14.
Data from Automotive Manufacturers Association of Turkey. Access: https://www.osd.org.tr/homepage.
- 15.
Defence and related sector investments reach TL2bn in 11-months (‘Silah ve muhimmiyat yatırımları 11 ayda 2 milyar liraya ulaştı’), Dünya, 7 January, 2020. https://www.dunya.com/ekonomi/silah-ve-muhimmat-yatirimlari-11-ayda-2-milyar-liraya-yaklasti-haberi-460022.
- 16.
DARPA—the US Defense Advanced Research Projects Agency—that has been responsible for many pioneering R&D and innovations for defence technologies which have been further developed into commercial use by the private sector.
- 17.
For an extensive analysis of Turkish R&D policies, see Kutlay & Karaoğuz (2017).
- 18.
There are exceptional ones that do not have this problem such as the ODTU-Teknokent at the Middle East Technical University in Ankara. Set up in the late 1980s, it now houses 470 firms including R&D arms of Aselsan, Havelsan, Tusaş, and Siemens in defence, electronics, and aerospace; Türk Telekom, Netaş, in telecoms; Arçelik, Vestel, and Samsung in consumer goods (see also Gökçe, 2021).
- 19.
In 2018, the government hastily issued new instructions to try to correct this and ensure KGF credits were directed into capital investment and exporters.
- 20.
It is notable that in France, the revival of the Commissariat General du Plan was announced in September 2020.
- 21.
Estrin and Bruno put Turkey in the “hierarchically coordinated market economy” category that suggests it could be suited for industrial policies if government effectiveness is there.
- 22.
References
Atiyas, I., & Bakış, O. (2015). Structural change and Industrial Policy in Turkey. Emerging Markets Finance and Trade, 51(6), 1209–1229.
Bahçeli, D. (2001). Kicking and screaming all the way, briefing, No 1342. EBA Agency Press.
Block, F., & Evans, P. B. (2005). The state and the economy. In N. Smelser & R. Swedberg (Eds.), The handbook of economic sociology. Princeton University Press.
Bruszt, L. (2015). Regional normalisation and national deviations: EU integration and transformations in Europe’s Eastern Periphery. Global Policy, 6(1), 38–45. https://doi.org/10.1111/1758-5899.12226
Bugra, A. (1991). Political sources of uncertainty in business life. In M. Heper (Ed.), Strong state and economic interest groups: The post-1980 Turkish experience. de Gruyter.
Bugra, A. (1994). State and business in modern Turkey, a comparative study. SUNY Press.
Chakravorti, B., & Chaturvedi, R. S. (2017). Digital planet 2017: How competitiveness and trust in digital economies vary across the world. The Fletcher School, Tufts University. https://sites.tufts.edu/digitalplanet/files/2020/03/Digital_Planet_2017_FINAL.pdf
Chang, H. -J. (2010, January). Industrial Policy: Can we go beyond an unproductive confrontation. Turkish Economic Association Discussion Paper.
Chang, H. -J., & Andreoni, A. (2016, July 13). Industrial policy in a changing world: Basic principles, neglected issues and new challenges. 40 Years of the Cambridge Journal of Economics Conference.
Chang, H. -J. (2005). Kicking away the ladder, development strategy in historical perspective. Anthem Press.
Charif, R., & Hasanov, F. (2019). The return of the policy that shall not be named: Principles of industrial policy. IMF Working Paper, WP/19/74.
Commack, P. (2012). The G20, the crisis, and the rise of global developmental liberalism. Third World Quarterly, 33(1), 1–16.
Dalacoura, K. (2021). Turkish foreign policy in the Middle East. International Affairs, 97(4), 1125–1142. https://doi.org/10.1093/ia/iiab082
Derviş, K., Gros, D., Emerson, M., & Ülgen, S. (2004). The European Transformation of Modern Turkey, Centre for European Policy Studies (Brussels) and Economic and Foreign Policy Forum (Istanbul).
Estrin, S., & Bruno, R. (2020). Taxonomies and typologies: Starting to reframe economic systems. In E. Douarin & O. Havrylyhyn (Eds.), Handbook of comparative economics. Palgrave Macmillan.
G7. (2021). Global economic resilience: Building forward better. Final Report of G7 Panel on Economic Resilience. https://www.g7uk.org/wp-content/uploads/2021/10/G7-Economic-Resilience-Panel-Report.pdf
Gökay, B. (2021). Turkey in the global economy: Neoliberalism, global shift and the making of a rising power. Agenda Publishing.
Gökçe, H. (2021, November 23). Devlerin adresi: ODTU Teknokent (The adress of the giants: ODTU Teknokent). https://www.dunya.com/sektorler/devlerin-adresi-odtu-teknokent-haberi-640581
Haggard, S. (2018). Developmental states. Cambridge University Press.
Hausman, R., & Rodrik, D. (2003). Economic development as self-discovery. Journal of Development Economics, 72(2), 603–633. https://doi.org/10.1016/S0304-3878(03)00124-X
Heper, M. (1991). The state and interest groups with special reference to Turkey. In M. Heper (Ed.), Strong state and economic interest groups: The post-1980 Turkish experience. de Gruyter.
Hufbauer, G., & Jung, E. (2021, November 21–25). Scoring 50 years of US industrial policy. PIIE Briefing.
IEA. (2021). Turkey: Energy policy review, international energy agency. https://iea.blob.core.windows.net/assets/cc499a7b-b72a-466c-88de-d792a9daff44/Turkey_2021_Energy_Policy_Review.pdf
IMF. (2017). Fiscal transparency evaluation report: Turkey, International Monetary Fund. Country Report No. 2017/208. https://www.imf.org/-/media/Files/Publications/CR/2017/cr17208.ashx
IMF. (2018). Turkey: 2018 Article IV consultation-press release; Staff report; and Statement by the Executive Director for Turkey. International Monetary Fund, April 2018. https://www.imf.org/en/Publications/CR/Issues/2018/04/30/Turkey-2018-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-45822
Kavcioglu, S. (2021, October 28). Current account surplus would mean price stability. Bloomberg.
Köksal, C., & Cetin, G. (2021). The international trade analysis of Turkey’s polluting industries. Journal of Economic Policy Research, 8(2), 257–275. https://doi.org/10.26650/JEPR.930212
Kutlay, M., & Karaoğuz, H. E. (2017). Neo-developmentalist turn in the global political economy? The Turkish case. Turkish Studies, 19(2): 289–316.
Kutlay, M., & Onis, Z. (2021). Turkey’s foreign Policy in a post-Western order. International Affairs, 97(4), 1085–1104. https://doi.org/10.1093/ia/iiab094
Levaggi, A. G., & Donelli, F. (2021). Turkey’s changing engagement with the global South. International Affairs, 97(4), 1105–1124. https://doi.org/10.1093/ia/iiab093
Mazzucato, M. (2021, October 13). A new global economic consensus, project syndicate. https://www.project-syndicate.org/commentary/cornwall-consensus-rebuilding-global-governance-by-mariana-mazzucato-2021-10
Musacchio, A., & Lazzarini, S. (2014). Reinventing state capitalism, Leviathan in business, Brazil and beyond. Harvard University Press.
OECD. (2018, July). OECD economic surveys: Turkey. www.oecd.org/eco/surveys/economic-survey-turkey.htm
Onis, Z. (2019). Turkey under the challenge of state capitalism: The political economy of the late AKP era. Southeast European and Black Sea Studies, 19(2), 201–225. https://doi.org/10.1080/14683857.2019.1594856
Pamuk, S. (2021). Economic policies, institutional change, and economic growth since 1980. In A. S. Akat & S. Seyfettin Gürsel (Eds.), Turkish economy at the crossroads: Facing the challenges ahead (pp. 1–36). World Scientific Publishing.
Ricz, J. (2018). New developmentalism in the 21st century: Towards a new research agenda, Working Paper 245. Institute of World Economics, Centre for Economic and Regional Studies, Budapest.
Rodrik, D, (2008). Normalising Industrial Policy, Commission on Growth and Development, Working Paper, No 3. World Bank.
Sak, G. (2021, September 1). Sanayi Politikası yoksa Yeşil mutabakat şoku şiddetli olur’ (Without an industrial policy, there will be a big shock from the Green Agenda). TEPAV.
The Economist. (2022, January 15). Special report, Business and the state: The new interventionism.
Tüsiad. (2021). Yeni bir anlayışla geleceği inşa: İnsan, Bilim, Kurumlar (A new approach to constructing the future: People, science, institutions). https://tusiad.org/tr/yayinlar/raporlar/item/10855-yeni-bir-anlayisla-gelecegi-i-nsa-i-nsan-bilim-kurumlar
UNCTAD. (2018). World Investment Report, 2018: Investment and new industrial policies. United Nations Conference on Trade and Development. United Nations.
UNESCO. (2021). Science report: The race against time for smarter development.
Weiss, J. (2021). Neoclassical economic perspectives on industrial policy. In A. Oqubay, C. Cramer, H. -J. Chang & R. Kosul-Wright (Eds.), The Oxford handbook of industrial policy. Oxford University Press.
World Bank. (2019). Country economic memorandum: Firm productivity and economic growth in Turkey. Turkey Productivity Report. The World Bank.
Yağcı, S. (2021, July 26). Turkiye’de 10 unicorn yola çıkmaya hazırlanıyor (10 Turkish Unicorns on the way). Dünya. https://www.dunya.com/girisimcilik/turkiyede-10-unicorn-yola-cikmaya-hazirlaniyor-haberi-628689
Yülek, M. (2018). Thinking about a new industrial policy framework for Turkey. In A.F. Aysan, M. Babacan, N. Gür & H. Karahan (Eds.), Turkish economy: Between middle-income trap and high-income status. Palgrave Macmillan.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2023 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Toksoz, M. (2023). The Return of Industrial Policy in Turkey. In: Ricz, J., Gerőcs, T. (eds) The Political Economy of Emerging Markets and Alternative Development Paths. International Political Economy Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-20702-0_9
Download citation
DOI: https://doi.org/10.1007/978-3-031-20702-0_9
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-031-20701-3
Online ISBN: 978-3-031-20702-0
eBook Packages: Political Science and International StudiesPolitical Science and International Studies (R0)