The fragile growth regime of Turkey in the post-2001 period

Abstract

AbstractAfter the 2001 crisis, Turkey continued to pursue the radical market-oriented reform strategy that had started in the early 1980s and followed the philosophy of the Washington Consensus. Gross domestic product (GDP) growth in the post-2001 period was relatively high, but it was a “jobless” growth caused by substantial productivity increases generated largely by intensifying the work process rather than by technological advancements. Economic growth in the post-2001 period benefited society very unequally. The growth regime of Turkey is vulnerable owing to high current account deficit; high currency mismatch, particularly in the corporate sector; high income inequality; high unemployment; and an unsatisfactory development of the industrial sector, despite some successes. We recommend a new development regime with selective capital controls, a balanced current account, an active industrial policy by the government, stronger trade unions and employers’ associations engaged in social dialogue combined with coordinated wage bargaining on the sectoral level, and last but not least, redistributive policies aiming to achieve a more equal income distribution.