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Structure of Turkish Economy Lecture Notes 2

Alper Duman

October 2011

Fiscal revenues of the state were as follows in 1910 and 1909: Real Estate Taxes Income Taxes AAR Livestock Taxes Military Avodiance Taxes Other Sources Total Revenues 1909 15,780,892 1,717,755 76,568,397 525,435 7,190,565 18,484,901 148,314,619 1910 26,625,980 2,052,256 85,718,059 1,093,004 837,726 33,050,110 184,944,903

Table: State Revenues in 1909 and 1910

Railways Electricity, subway Ports Industry Trade Metalurgy Banking Insurance Total Public Debt General Total

Amount 53,310 5,700 4,710 6,500 2,660 3,580 8,200 84,660 149,480 234,140

Annual Return 1,040 170 160 560 230 890 3,370 13,000 16,370

Rate of Return 1.95 2.98 3.4 8.61 6.42 10.85 3.98 8.70 6,99

Table: FDI in Ottoman Empire, 1000 liras

An economy which could be considered as almost self-sucient in textiles at the beginning of 19th century ended up importing 80-90 % at the beginning of 20th century (Boratav, 2009: 21).
Textiles Leather Metal products Food processing Wood products Chemicals Total Establishment 20,057 5,347 5,273 1,273 704 337 33,058 Workers 33,316 17,964 8,021 4,493 3,612 802 76,058 Average Size 1.76 3.36 1.52 3.52 5,13 2.38 2.30

Table: Anatolian Industry, 1921

1908-1922, Constructing a Nation and a National Economy!

ttihad ve Terakki (T) were an amalgam of ocers, intellectuals and petty bourgeoise, who were aware that the 1908 movement would not have been successful if the project of nation-state building failed. The members, or at least, the leading cadres of IT understood that a national economy is a sin qua non of a nation state.

In this respect one of the major achievement was to abolish the millet system in jurisdiction. The minorities, members of various ethnic and religous communities, were subject to their own laws and regulations. Furthermore, the foreigners were altogether beyond the scope of the Ottoman jurisdiction. CUP, following the essential requirements of a centralized modern state, abolished such pecularities and made every citizen to be subjected to the same law and regulations. (Ahmad, 1995: 41) [?] Remember that construcing a modern state in a multi-ethnic and a multi-cultural empire was a very dicult project. The conicts among the ruling elite could be insurmountable. The strcuture of the rst parliament demonstrates the extent of such a conictual political scene. Out of 288 members of the parliament 147 were Turkish, 60 were Arabic, 27 were Albanian, 26 were Greek, 14 were Armenians, 10 were Slavic and 4 were Jews. (Ahmad, 1995: 47)

The Ottoman economy was semi-colonized in two senses 1. First, the international specialization had forced the Ottoman economy dependent on imports of industrial goods and export of agricultural primary goods. This dependency had been deliberately constructed during the long 19th century. An economy which could be considered as almost self-sucient in textiles at the beginning of 19th century ended up importing 80-90 % at the beginning of 20th century (Boratav, 2009: 21) 2. More importantly nancial indebtness exerted the main constraint on any economy policy. The nancing of the wars before 1908 and thereafter required heavy conditionals (such as Dyun-i Umumiye) 1 that kept the hands of the bureaucracy tied up.

The detailed conditionals enforced by IMF after 1980s very much resembles this era.

More importantly nancial indebtness exerted the main constraint on any economy policy. The nancing of the wars before 1908 and thereafter required heavy conditionals (such as Dyun-i Umumiye) 2 that kept the hands of the bureaucracy tied up. This institution became so powerful that in 1911 the personnel amounted to 9,931 persons. The nance ministry at that time did not employ as many people. (Ahmad, 1995: 101) Furthermore, the state could not get any international loans without the guarantee of the Dyun-u Umumiye (just like IMF). The nance minister, Cavit Bey, had to visit France and England and came back empty handed before making an agreement with German banks. The loan of 11 million gold liras had a annual interest cost of 4 percent.

The detailed conditionals enforced by IMF after 1980s very much resembles this era.

IT was divided in terms of the long-term vision of a national economy. The liberals (Prens Sabahaddin, Cavit Bey, etc.) argued that international integration and liberal state would be best. Pragmatists like Celal Bayar won.

The identity of the bourgeoise to be ourished did not matter for the liberals. However, the nationalists (Ziya Gkalp, Ahmet Mithat, etc.) adamantly opposed such a policy. Their target was a national model of industrialization led by a native Turkish bourgeoise coordinated and helped by an active state agency. The score is mixed; though the institutional setting was tilted towards the nationalists. First, the wars and political initiatives such as population exchange and Armenian Massacre moreorless expelled all but a very small minority of non-muslim population. Their assets were seized up by the to be native national bourgeoise. Secondly during the war years, especially the WWI and the Independence War, the provision of metropolitan cities such as Istanbul and Izmir created huge protable opportunities for middle or large merchants and graft for the IT bureacrats. Due to the war the international trade routes that sustained the provision of these cities were blocked.

The only way was channeling the agricultural products of Anatolia, hence domestic trade. 3 These two aspects might have caused a mutation on the DNAs of the native bourgeoise. Instead of capitalist dynamic accumulation, the emerging class had found accumulation by dispossession and simple rent-capturing as the most common way of wealth accumulation. Thirdly, Sanayi Tevik Kanunu partially had been successful in terms of decreasing dependency on imported industrial goods. About 30 percent of the enterprises covered in 1915 Industry survey had been established after 1908 (Boratav 2009). The industrial and service oriented enterprises faced a capital friendly labor relations thanks to the Law of Tatil-i Egal.

The transaction cost of using Anatolian grains was 75 percent higher than of importing from US or Europe. Those merchants who were suciently connected could reserve monopoly positions to transport the Anatolian grain could charge monopoly prices and capture enormous rents

Nevertheless, the economy suered enormously from the destruction of the capital stock as well as the labor power. Within the years from 1912 to 1922, 2 million person, civilian or military, died . The total population declined from 17 million in 1914 to 14 million in 1924. Agriculture, industry and mining were all aected adversely by the loss of human lives and by the deterioration and destruction of equipment, draft animals and plants during the war years. GDP per capita in 1923 was approximately 40 percent below its 1914 levels. (Pamuk, 2007)

The classes who gained mostly are the merchants. Then came the upper echelons of the landowners who could produce a surplus for the provision of the metropolitan cities. Some of the IT bureaucrats collobrating with the aforementioned merchants also could accumulate substantial wealth. The workers lost. Their number was not much. Mostly they were employed in the construction, municipalities and basic industrial activities. Within this period, the ocers were the major losers. Their real purchasing power had declined by almost 80%. With the beginning of the WWI, all of the salaries were cut by 50% and did not get a remarkable raise while the general price level has been increasing real fast.

The national economy required a unied market with citizens sharing a common language and a common base for conventions and norms that would make exchange transactions enforcable. The decline in non-muslim population might be an important step towards the unied market framework, however neither the norms nor the perception of citizenship could not rmly estabished among the common people.

Questions

1. To what extent the wars in 18th and 19th century, hence their nance were the causes of nancial indebtedness that the T and Republic of Turkey inherited? 2. Why could not domestic textile producers compete with the imported goods during the 19th century? What would be the eect of small-scale and egalitarian landownersip structure? 3. Who were Cavit Bey and Kara Kemal Bey? What does Kemal Tahir think and write about them? 4. What were the real connections (persons, companies, organizations) between the merchants exploiting the blockage of trade routes during the war years and the IT bureaucracy?