Thursday, November 27, 2014

Why Turkey is Rebelling

ISTANBUL – Turkey’s economy has been booming for a decade, earning praise not only from financial markets, but also from development economists like Jeffrey Sachs. Why, then, have peaceful demonstrations that began in Istanbul’s landmark Taksim Square turned into a nationwide protest movement, with hundreds of thousands of people taking to the streets in opposition to Prime Minister Recep Tayyip Erdoğan’s government?

Sachs, and others, have rightly acknowledged and praised the Erdoğan government for its economic policies, which have led to a higher growth rate. But the question is whether a developing country like Turkey can sustain rapid economic growth if the same government is undermining basic liberties and impeding the advance of key institutions needed for long-term success.

The Erdoğan government’s brutal response to the protests highlights this dilemma. Initially, fewer than 200 peaceful demonstrators gathered in an effort to protect Taksim Square – the last green space left in central Istanbul – against the construction of yet another shopping mall. As the government cracked down, with Erdoğan adopting an uncompromising position in defiant speeches, the protests grew – and continue to grow, despite (or perhaps because of) the use of excessive police force. Unofficial figures indicate that more than 1,000 people have been injured so far, and more than 1,000 have been arrested.

True, Turkey’s annual GDP growth has averaged 5% over the last decade of rule by Erdoğan’s Justice and Development Party (AKP). But this should not lead anyone to conclude that Turkey is a development success story. If we have learned anything from the extensive research on growth and development that now exists, the key to sustainable progress lies in a country’s institutional design.

Institutions embody and reinforce a society’s rules. They consist of both informal constraints (traditions and cultural norms) and formal rules (constitutions, laws, and regulations). They shape the structure of an economy.

There is an important distinction between policies and institutions. Policies reflect choices that are made within a political and social structure – that is, within a set of institutions. It is the institutions within which policies are framed that ultimately affect economic performance. Property rights, for example, influence investment decisions by protecting entrepreneurs against the risk of expropriation, and an independent judiciary is necessary to ensure credible enforcement of such rights.

Turkey still lacks the institutions that are critical for long-term progress. Its International Country Risk Guide score (a commonly used index that measures the overall quality of a country’s institutions) is one of the lowest in the OECD. Turkey also ranks last in the OECD’s Better Life Index. Only 31% of adults aged 25-64 have completed secondary school; inequality is dangerously high; and, according to the Committee to Protect Journalists, more journalists are imprisoned in Turkey than in any other country, including China and Iran. The 2013 report by the democracy watchdog Freedom House indicates that civil liberties in Turkey are increasingly threatened.

In recent years, much research has investigated the complex relationship between culture and institutions, with the former creating a set of informal constraints on the latter. Can Turkey lead the way among Muslim-majority countries in showing that a rather conservative culture is not a constraint on the type of institutions that are needed for sustainable growth and development?

Turkey’s success, as measured in terms of economic growth, is impressive indeed. Prudent monetary and fiscal policies, a cleanup of the banking system after the 2000-2001 crisis, and investment in infrastructure surely played a part. These policies set in motion a process of transitional/catch-up growth, with Turkey steadily closing the income gap vis-à-vis rich countries.

But we should not mistake transitional growth with long-term success, which requires strong institutions, including protection of property rights and civil liberties. This, in turn, will help to realize investments in education (especially for women) and technology, together with structural reforms, all of which have been highlighted as areas of concern in several studies of Turkey in recent years. It is far too early to ask, “How did Turkey do it?” and declare an answer based on policies that will boost short-run growth but that will run out of steam if not properly augmented.

Whether or not Turkey is a long-run development success remains to be seen. The indicators so far are not very favorable. The recent events in Taksim Square and in other Turkish cities are a stark reminder of the country’s still-weak institutional infrastructure. People are still in the streets – and they seem in no hurry to go home. I hear them chanting as I write this: “Democracy without liberty is no democracy.”

Read more from our "Turkey's Reckoning" Focal Point.

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    1. Commentedjracforr jracforr

      This is not a Turkish problem as à previous writer said, rather it is a global problem in which progress is measured in the number of skyscrapers built and not in the quality of life created. While the Gulf States can deport their discontented guest workers most nations vant and will pay a terrible price for their vain glory.

    2. CommentedTJ Leatherman

      What does people protesting Erdogan government because of their ideological preferences have anything to do with Turkey's economic growth and Sachs' praise?
      I think you need to be reminded of the fact that the real wealthy people in Turkey (who, in majority do not like Erdogan to put it mildly) has benefited the most from this economic growth and prosperity.
      So I never understand people like you bashing AKP religiously even when there is a need for praise.
      This just puts you in that small circle of "dinosaurs" that has no academic credibility because you are a prisoner of your ideology.
      Keep them separate, dear!

    3. CommentedAyse Tezcan

      to those who argue that economic development democratizes a country, here is a good read.

      and those who criticize turkish citizens for complaining about the mr erdogan's autocracy by comparing him as being better than syrian, egyptian etc rulers: just because he is better that those leaders, that doesn't give him immunity from public disapproval. even the most democratic countries' leaders are subject to public scrutiny. do you hear what you are saying?

    4. CommentedZain S.

      Most of institutions under assault in Turkey happen to be political in nature - which is an important distinction. The economic freedom in Turkey has continued to improve.

    5. CommentedAmmar Nouri

      I like the way you described Mr. Erdogan's response to the riots as "brutal". I guess I should state now that I am Syrian and it makes me laugh to know that Mr. Erdogan is "brutal", what is left for Assad? Can we be objective please, don't you owe it to your readers to have the decency of being at least honest and respect their intellect?

    6. CommentedPaul A. Myers

      My premise is that pluralism is key to the adaptability that future economic growth requires. My concern about Muslim countries is that they lack pluralism and in many places are driving away non-Muslim, non-fundamentalist thinking; they are becoming increasingly mono-religious.

      Kalemli-Ozcan should continue her research on culture and institutions and discuss widely the results. This has been an illuminating essay. Her association with the IMF is encouraging.

      Turkey's experience seems to strongly point out the dangers of reducing pluralism in a society. And the statistic on journalists jailed shows a profound intolerance for other voices, other views by the Turkish ruling elite.

    7. CommentedZsolt Hermann

      This is not a Turkish problem.
      Why did people riot in Stockholm when Sweden is envied by many for economic success and social support system?
      What is happening in Spain, Greece, Cyprus, why are people turning against their government and mainstream politicians with true hate in the UK, France or other countries for example?
      Because the stubborn insistence that the markets and the financial institutions decide and showcase the health and state of the country continues, completely ignoring the actual state and livelihood of the general public.
      The same pattern is developing everywhere, whether we talk about Europe, China, India or even the US.
      The present consumerism system with its constant quantitative growth has failed, it is broken, moreover it is now in self-destruct mode, every "solution", "adjustment", "bailout" is digging deeper and deeper hole underneath everybody.
      The signs are everywhere, youth unemployment, increasing social inequality, break down of social support, depression, emptiness and increasing hate.
      If we continue viewing the signs in isolation, and try to "explain" them with the usual stereotypes we will continue to "miss the boat", the boat we are all sitting on.
      In a global world, where everybody is integrated with everybody else we will see such terms as "domino effect", "contagion" more and more often.
      If we understand what principles we have to follow, how to plan and act in a mutually responsible and complementing fashion then those terms will be used describing how positive "waves" ripple through the system, but if we stubbornly ignore our present conditions then pain and suffering will spread.

    8. CommentedE. Batur

      Democratic institution are getting stronger in Turkey now. economic institutions are under stress test for many years and we can see their endurance. Generally foreigners are more objectif while evaluating the situation in turkey. But some people despite their academic titles can not spare themselves from their political and ideological afiliations. Consequently they give false pictures from turkey. Dani Rodrik, who is one of them, son in law of one of turkish generals, and the writer of this article. They dont have even the business ethics to tell the truth.

    9. CommentedKubilay M Öztürk

      Thanks Şebnem for this well-put piece. I guess it is now also time to point the finger at the Western community for giving Erdoğan and his government the benefit of the doubt too much. To the locals, Turkiye's journey over the last decade has always been too good to be true. Yet, outsiders with vested interests just turned a blind eye to the inorganic nature of economic growth, overly-politicized state institutions, circumcised freedom of speech and duplicity in democratization attempts.

    10. CommentedFrank O'Callaghan

      The inequality and the lack of democratic freedoms are the keys. Expectations and promises have not been met. All over the world there is discontent. Even where inequality has narrowed slightly it is too wide for the people to tolerate.