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10/8/1949 - Introduction to Turkish Economy-I by Richard D. Robinson

RDR Introduction Turkish Economy INSTITUTE OF CURRENT WORLD AFFAIRS zveren Sokak No Maltepe Ankara Turkey 0ctober Mr Walter S Roers Institute Current Affairs Fifth Avenue New York New York Dear Mr Rogers Of sixteen member nations Organization European Economic Cooperation I suffered great physical destruction during War One Turkey All included within European Recevery Program simple reason economy Europe could parcelled arbitrarily overall recovery program succeed By reason normal trade channels severed during War economie European countries suffered severe damage Turkey among What I write introduction recent Turkish economic events The downs story largely terms effort three variables Jibe harmoniously commerce reign exchange living Refer Figures I I War Economy Tra B Just prior Hitler lEions began march across Europe Germany accounted Turkey exports V imports It Turkeyts inability compete world market because production costs which allowed Germans stranglehold Turkish foreign conerce hence economic being Because German State organized along totalitarisn lines could prlced Turkish produce recover uppln German goods Turkish trade This manipulation difficult private merchants totalitarian ststes The virtual elimination German business years literally ripped innards Turkey foreign trade particularly import picture From I8 total value Turkish exports dropped imports During ensuin8 years exports improved rather rapidly imports lagged It government RDR Page policy invest trade balances Thus hoard piled favorabl balanc malntaind Turkey through Favorabl econonic mualnd balance effect creating shortage imported consumer goods thereby providing strong infltionm Impetus Pre emot_ive Buyin exports statistics however leave rather false first impression It exports increased considerably value respect volume Over period September value exports increased about During tonnae The answer uneconomic compeition between Allied Powers Axla Turkish products particularly those emptive value chrome foods tuffs vegetable Prices consequently This unnatural competition effect adding further inflationary fires feedi Turkish eoonomye G_overent Expenditure expenses levels Turkish governing hierarchy increased When measured terms purchasing power other found vernment expenditumes constant See Figure Likewise governmental expense calculated percentage annual national income evidence upward swing In according available estimates trend least wa__s tkrough beyond which impossible estimate basis existing See Figure Although national government consistently operated deficit deficit registered heavy inflationary impact For instance May IV through Januaryi total incurred national government million million But during interim value slipped prices risen total terms IV something VO million I January IV In other words value reassured constant units purchasing power actually fallen In event large enouh V estimated annual natlonallincome B acted considerable inflationary lever R For these reasons probably government expenditure important inflationary force The gr0SS nati0nal United States million capita estimated annual national income Figures baaed Bureau Census S _tatiatica Abstract United States Washington D C page276 National years unproductive national security loomed larger successive Turkish budget rising million V R million million million V Percentag meant Jump G total national budget And include myriad supplementary military expenditures other departments government listed specifically military Thls expanding military expense often cited important factor leading Tumkiah inflation For reasons discussed preceedin section logic position would easily assailable However there another aspect matter namely lmportant Turkey recruited maintaining close million under still This drain power severe shook labor force production total population roughly milllon thereby giving powerful inflationary pressure economy Government controlled industry tradln organizations unscrupglous advantage price structure So State owned Smer Bank showed profit This administrative level which directly controls finances fifty major industrial installations including steel works country cellulose paper fctories large segment textile cement leather industries This profit aroused considerable criticism external expenditure social services reduced It thing drain excess purchasing power through prices quite another prices abnormally artificial level through overnment moopo practices The latter activity inflationary lever other prlce force which introduced picture Inflation All these factors inevitably brought about As goods reverberations everyday people became scarce prices climbed unnatural heights living something times possibly The largest Jump occured period which living reported trebled See Figure Devaluation It quite immediately following War along Turkey apparently doing badly herself foreign trade In realized million million trade balance RDR Pae But dropped minus Se million million first unfavorable baanof trade since largest since During bkmmer Turkish Government become worried about accumulation large exportable surpluses certain commodities Partly situation Turkish devalued September from7to current price Devaluation possibly permitted Trkey maintain trade balance where might otherwise negative exportin importing value months after devaluation Ii reaction Unilateral devaluation currency obviously makes price imported goods higher And December three months after devaluation Government foolishly imposed impossible customs tariff which upped imports IS0 The Government unable domestic price Export prices reacted risin rapidly eompensatin8 devaluation The result another spiral inflation trade deficit Devaluation boomeransed trend events shoul foreseen Domestic prices Turkey peculiarly sensitive import prices This probably countr4 which specialize either producing materials manufactured goods which necessarily therefore mport their supplies other High import prices permit domestic sources expand brinsinginto production mersin marsinsl producers reason additional productive capacity exist economic For countries unilateral devaluation currency accompanied effective price controls inflationary avoided Turkey possess administrative machinery wisdom controls effective In certain Governmant aeneies themselves aided abetted inflationary after devaluation InitiatinK domestic price increases Notable agenciesWstoil Poducta Office effect establishes minimum maximum price important crops holds monopoly export cereals De spite S devaluation currency office continued maintain export prices cereals devaluetion levelae Because unusual world demand particulr moment Soil Products Office realize enormous profits Meanwhile continued paying domestic producer devaluation prices Granted price policy doubt improved certain peasant classes expense economic country Last Soil Products 0ffiee established price Just about double going world price Refer Letter point Briefly Turkish economy deteriorated durln years these reasons A steady falling imports consumer 8coda maerlals onwaA A slmalaneous impressive increase internal parohasin power Pre emptive buyng ttrkish goods Axis Allie Powers abnormally prlees labor force hence produetlon caused maintenance milllon Ill advised prein polieles oontrolle industry trading organizations LaeM effeetlve prlee controls Drastic increase import duties followln devaluation hzrkish Page Figure holesale Price IndicesforTurkey andtheUnitedstates Souroe Refer Ide Figure Holdings Foreln Exchange Balanoe 10otober Refer SO0 RDR Page Figure LiPs Value Turkish Annual Impos Expos ouroe Refer Figure Turkey Cumulativ Commodit Tpade Balanoe Souoe Refer Lir I00 RDR Page Figure Pe apita Government Expenditures inukand United Source Refer IV Note All levels Government included T JR M E Y UNITED Figure Relation Between National Income Oovernment Expenditure Turke United States Note All levels government included SoLCe Reger RDR Page II Pest Economy Deflation The unfavorable trade balance which appeared continued through aminus million V8 millioa reason which world markets opening business after wartime shutdown As supplies agaim became available Turkish importer demand could satisfied imports skyrocketed The period B increaae import value O An important second reason negative trade balance books found active government dlscouraement exports sterling In August convertibility sterling announced Turkey found herself record accumulation sterling ereit of16millloa liras worth This trend events itself deflat ionary More services flowing country Note circulation wholesale prices living began level slightly Fortunately crops exceptionally All these factors deflation But movemeat taking place partly making seemingly clamorous inroads foreign credit position country Trae Ba C Conbinuing begun Turkey mgative trade balance maintained least through July Later figures available there reason believe rreat reversed As July Oth deficit million million shownfthe first seven mcths This somewhat miaus million reported period The reason improvement threefold Turkish German trade agreement signed I December again opened Up important Ge market Turkish experters Overtheinitialfive monthperiodofInolesstha million liras worth milllon Trkish goods Trienia times value shipments during corres pondingperiodiaIB PartofthistradewasfinancedbyGermany ERP drawing rights against Turkey Secondly Turkish experts United Kingdom doubled likewise partly financed drawing rights Thlrdlx Government Megan approve barter transactions country certain surplus cemmeditles notably tobaccos Interestingly enough during first months England nosed United Turkey number cstomer Trizonia ceming clese third Pre patterns beginning reappear RDR Page What means Turkey apparent slowing inflationary trends expense dwindling foreign exchange Increased production Current Situation As June Turkey forei e_xehaBg_e balance preceding month period stood minus million million This figure includes movements invisible items included pttrely commodity trade balances which calculated customs clearances The deficit figure largelyreflects foreign exchange inpaent large import surplus Unless trend halted seems unlikely general failure Turkey foreign credit position dangerously virtu depletion currency accounts There cushion foreign credit reserves In other words Turkey future import potential based current export possibilities international leans grants Foremost among these latter categories American Military Aid Program ECA grants loans possible World Bank But programs mortg heavily Turkey future This foreboding reasoni devaluation British pound probably I4 rather country economically And general election scheduled summer maEes these predictions signal importance poitieally Adverse weather conditions advised farming methods wheat estimated Press announcements Turkey nally surplus cereal producing country Will forced import 11tOnons American This heavy drain foreign credit reserves indication luther infltionary pressure Devaluation Pound The Oe value pound sterling annotuaeed September makes virtually impossible Turkey produce sterling without coter devaluation Turkish prices This latte alternative seems impreable Tkey The Oe 6berlst entral Ba indicates total foreign exchange defleit million Sof cnvertible currency million convertible crency I cleari account 805lli The stere dropped million liras since July The press currently reports within entral Bank liras worth which Taken Vatan Istanbul October rchase foreign exchee RDR light Turkey production costs And former politically repulsive Turkish Government Rightly wrongly devaluation would interpreted political opposition further indication mlsmanaement country economic affairs party eneral election Turkey But important Britain plays leading importer Turkey produce difficult TurkiSh Government going avoid devaluation regardless politiclly offensive might Government spokesmen stated oateorieelly TuPkish devalued Their answer problem increase exports dolla necessary those sterlln Overlooked British Turkish economies amazlnly complmentay Britain needs TurEey lacks manufactured American Turkish economies definitely except certaln limited items American marEets difficult indeed absorb other foodstuffs ormerly taken Bitaln The other apparent possibillty other direct devaluation mlght institution barter transactions sterlin countries which about importation short supply Turkey That return exports sterlln Turkey receive exchange those abnormally price could obtained Turkey This erely another devaluating ithout actually saying Such scheme theortal advantage permittin Turkey malnain value dollr though effect devalued serlin countries This devlee operate Turkish Government prevent transshipment areas exports sterlin8 If practice cannot efectlvely prevented appear dlfficult devalued quickly areas thereby eliminatin hoped advantage barter arrangement It seems likely there renewed drive increase exports Imports ourtaile Failing because complimentary nature Turki American economies difficulty competing sterling arket Turkish devalued something like2 present value hether devaluation value hidden behind facade barter transactions probably little difference reason inability control ultimate desnatlon exports Thus either prices imported consumer goods dollar automatically eoome valuable terms devalued Prices imports sterlin The results fewer goods imported devsluation levels exported It follows biddin limited supply RDR certain critica services available ithin country become intense durin effort ecoup foreign resources another inflationary surge recorded All through discussion which follo orthodox lines uneasy eelin basic troubles maladjustments besettln Turkish economy carefully behind curtain ourselves elter symptoms ithout pausing diagnose nature disease itself That quite Barring unforeseen misadventure story ontlnued communlque Sincerely yours Riehard D Robinson RDR Page NOTES I The OEEC European counterpar Economic Cooperation Admnlstratlo ECA Washington Both participating administatlon European Recovery Program ERP initially known arshall Plan Eurooean Reco Turkey ountr Economic Cooperation Administration Washington Februaryl E R Lingeman miedCommercial Conditions Trkey His aJesty statiary office Loo Ibd pages The wholesale price indices adapted those shown Figure reduce figure liras In calculating percentage national income estimates Bilke National Income Turkey DirectorateGeneal Statis statistikYII Hsntabiat Ba smevi stanbul ublCai0 No Directorate General Statistics Ankara pages Supra Bk intnote Lingeman Supra P_rnc Economic_ _Trends U S Embassy Report Ankara Ii No Supra Turkish indices taken Bilker U S figures adapted U S Bureau Gensus tatistical Abstract United States U S Government Pri ngOffi D Figures compiled followig source Principa Economic Trends in1947 Turkey InnotelO Ecoom Turk Embassy Report No Ankara February pages Va I Economic Deyelo pments Tqrke anuar Ju I Embe S Rport ugust pages Merkez Basr Aylk flten Quarterly Bulletin Th entral No Je pages Bankas Bflten No October cember teent Turkish Centr Ba October Reprinted Vat October portdexport fgues taken Economic Apraisal Twentieth Centy New Yok V keyCory Tkiy MerkeBankas eclisl Raoru ReportofhExeu kiShce ntriBk Import export values converted using wholesale price indices shown Figure This rough measure value Turkish trade fibres terms Sources those listed above RDR Page Turkish figur estimated basis presented tat_isik pages statstikler Pulhan atbaas Istanbul Publication No Directorate General Statistics E R Lingeman I The tatistical Abstra Turkey Publication No Directorate neaof Statistics Princeps Eco Trends S U S figures estated esented In The Aorld Aanac New York World Telegr New York adiUSreau Census pages All figures converted dollars presemt official exchange Turkish dollare For determining purchasing power wholesale price indices Fie Estated rkish natio income adapted estimates Bilr pages V National income estimates United States taken Bureau Census VS Figures govern mental expendltes takenfr those sources Figure V above Ticaret IstatistikHulsas TezI Money FoeignCoroeforAUsti Dtorate neral Statistics Ankara Table Supra Supra I Net Gean Turklsh trade financed ERP assed A later letter explain drawi situation As Je barter compensation trading again restricted specified items latively little significance expert picture Econemlc Developments Tke Juary Financial Report Tey U S bassy Report No Aust Zafer newspaper October I onthl Trade Journal Br Chber Of Coerce Istanbul September GEN_ERAL0 Unlessotherwisenoted allikrkishlirafigures converted dollars official exchange existi concerned The schedule follows liras dollar I I Through eptember Par value liras Received New York I0