Economic Instability and Ethnic & Term Paper

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Shift from Central Planning to Market Economy

The Turkish economy is in what might be termed semi-precarious health. It could certainly be worse, but also certainly be better. Since its birth as a nation-state into its current shape in 1923 in the wake of World War I, Turkey has operated a mixed economy, in which both state and private enterprise have contributed to economic development. (Indeed, it is arguable that all country's in the world today have a mixed economy; the United States may be a bastion for private enterprise but many workers also benefit from government money, such as the money awarded by the federal government to private companies in the form of defense industry contracts.) Since the end of World War II, the economy has been transformed from a predominantly agricultural one to one in which industry and services are the most productive and rapidly expanding sectors even as agriculture and other rural economic activities continue to play an important role (Howe, 2000, p. 28).

Until the middle of this century, the federal government itself played by far the most important role in the industrialization process that was occurring in the nation. Federal monies provided most of the capital needed, for example, for structural upgrading of the nation's railroads and ports (thus improving its basic transportation infrastructure) as well as for the development of basic first-stage industrial sectors such as mining. This provision of assistance in building the physical infrastructure that businesses and industries would need to expand and compete in world markets was an essential part of the role that the Turkish government took over in the decades after nationhood.

But at least as important as the physical building of roads and railroads by the government was its protection of the nation's emerging industries by high and indeed almost impenetrable tariffs that effectively nearly closed its markets to foreign competitors. This - along with other government policies - had the effect of discouraging foreign investment. The result was, until about 1950, an economy that remained self-contained and but also essentially isolated, with foreign trade playing only a minor role (http://(www.imf.org).

It is of course impossible to know what would have happened to the nation had it continued along this highly centralized and isolationist economic policy; however, we may look to other similarly isolated economies and assume that the nation would have been ill-served indeed and would in fact be in an even worse economic position today than the one that it is in if it had not opened and decentralized its economy in substantive ways after World War II.

These economic reforms came about in large measure because of the political (more than purely economic) relationship that Turkey had with Western nations in the middle decades of the century. The government began to open Turkish markets to outside countries even as it also began to allow for more private sector power in the economy. In large measure as a direct result of the opening of the economy to the West, the country began to receive large amounts of foreign aid. This foreign aid was in turn used to finance improvements in the nation's agricultural sector, bringing Turkish farming methods more into line with those used in the First World.

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(it should perhaps be noted here that this is not entirely a good thing, for while modern farming methods are more efficient at extracting larger crops in the short run, they also tend to produce greater rates of erosion and soil degradation, tend to deplete the water level, tend to cause pollution through the greatly increased use of pesticides and fertilizers and tend to make crops more subject to attacks by parasites because of monocultural practices.) in both the agricultural as well as the industrial sectors, economic growth accelerated (as measured by such standard indicators as the per capita rate of the growth domestic product and available per capita calories), with the private sector playing an increasing role (viz. Landau, 1997, chapter three).

In the middle decades of the century, it looked as if the country were well on its way to becoming a First World nation through the application of classical economic strategies and theories. Among the most important of these classical economic theories, of course, was the shifting of economic importance away from intervention and central planning by the federal government and an ever-increasing reliance on the mechanisms of the free market. Thus, by the 1980s, the government was acting as if it were a true believer in the virtues of at least an almost unrestrained economy and actively encouraging foreign investment along with the establishment of joint enterprises with foreign companies and foreign government and praising the value of free trade even as at the same time it promoted a substantially reduced role for the state in the economic sector (www.nytimes.com).

However, as both developing and developed nations have all-too-often had occasion to learn, the free market is neither perfect nor merciful. Throughout the 1980s and 1990s inflation remained a serious problem, and Turkey's per capita gross domestic product remained well below those of most Middle Eastern and European countries (www.un.org).Thetransitionfrom Third World to First World country that had seemed to be almost assured began to seem a distant possibility.

Conclusion

Turkey remains far richer culturally than it is economically and there is no obvious solution to its problems on the horizon despite the fact that over the last half century it has in most ways acted in all the ways that a Third World country "should" act to modernize, improve and stabilize its economy.

The two most important reasons that the country remains on economically shaky ground is that the cost of Turkey's annual imports is usually much higher than earnings from exports and its continuing inability to bring inflationary forces into line. If Turkey is to have a bright economic future, it must find some way of reducing this trade imbalance, possibly by increasing its reliance on tourism (already an important source of revenue for the country). Any failure to meet the current challenge of inflation could prove disastrous to a country that has so much to offer the world, but finds itself repeatedly unable to overcome the significant challenges that it faces......

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