a narrow winning electoral coalition. The latter can be seen as part of the mechanism through which gains from trade are partially redistributed to those owners of factors who are most hurt by trade expansion.' There are a number of assumptions associated with these variables. With respect to public expenditures, they can be seen as of two kinds, those that enhance productivity and exports in a straightforward way and those that maintain the coalition and compensate losers in the new strategy through discretionary funds. These two kinds of public expenditure yield two kinds of discourse, one in which the efficiency of the market is lauded and one in which traditional patronage politics, centered in the government and the governing party, predominates. International creditors and business elites are attuned to the first discourse, while potential and actual voters listen to the second. A second assumption is that Turkey has established an electoral system in which the center-right predominates. Among the heterogeneous elements that make up the center-right, a party or parties can fashion a fairly narrow winning coalition under current electoral law. One segment of this coalition is the large business sector that is undertaking the export drive and making heavy claims on the public budget. But this sector can neither openly align itself with a specific party nor deliver votes commensurate with its financial claims. Therefore, the governing coalition must use large amounts of discretionary funding to keep other allies, richer in votes, in the coalition, as well as to neutralize broad segments of the population that experience a relative loss of income as the new strategy unfolds. Third, the large business sector will tolerate the use of these discretionary funds, which do not have a direct payoff in increased production or efficiency, because they provide the level of political stability necessary to sustain their activities.2 This point needs some elaboration. All of Turkish enterprise is highly leveraged and must walk a tight rope of working at near full capacity and meeting payments on increasingly costly debt. No matter how dynamic the economy, it has the appearance of a house of cards. Widespread default on debt held by the banking system could end the miracle. The loss of a few foreign markets could lead to such a default. If external creditors find their confidence in the export drive flagging, the flow of external credits that have sustained Turkey's high rate of imports, themselves
Read full abstract