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Part of the book series: International Political Economy Series ((IPES))

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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.

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Notes

  1. 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. 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. 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. 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. 5.

    For an analysis of ‘state as a minority share-holder’, see Musacchio & Lazzarini (2014).

  6. 6.

    The current breakdown is 36% medium, 3% high-tech in Turkish exports.

  7. 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. 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. 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. 10.

    Economic Policy Research Foundation of Turkey.

  11. 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. 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. 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. 14.

    Data from Automotive Manufacturers Association of Turkey. Access: https://www.osd.org.tr/homepage.

  15. 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. 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. 17.

    For an extensive analysis of Turkish R&D policies, see Kutlay & Karaoğuz (2017).

  18. 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. 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. 20.

    It is notable that in France, the revival of the Commissariat General du Plan was announced in September 2020.

  21. 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. 22.

    This difficult balancing act is also taking place in international relations. See Kutlay & Onis (2021), Levaggi & Donelli (2021), Dalacoura (2021).

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Correspondence to Mina Toksoz .

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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

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