Professor Dr. Erinç Yeldan, a faculty member of the Department of Economics at Bilkent University, who delivered the opening lecture at the 5th National Productivity Congress organized by the General Directorate of Productivity of the Ministry of Science, Industry and Technology, emphasized that the state should plan production in strategic sectors.
The 5th National Productivity Congress, held every two years, took place this year. Following the opening speeches by the Minister of Science, Industry and Technology Fikri Işık and the Director General of Productivity Anıl Yılmaz, Prof. Dr. Erinç Yeldan delivered the opening lecture on ‘Sustainable Regional Development in the Turkish Economy’.
Yeldan, explaining the growth trend of the Turkish economy since the 1950s with the basic economic indicators of the Ministry of Development, pointed out that Turkey's growth trend after 1950 has been on a downward trajectory.
Growth Through Production
Erinç Yeldan indicated that the way out of the threats facing the world and Turkish economies in the next 50 years is to increase productivity and take measures to improve efficiency. Yeldan said, “The way out of this situation undoubtedly lies in taking serious measures to increase productivity and create an industrialization and growth trajectory based on productivity increase on the ladder of the world economy and industrialization.” Describing the 1990s as Turkey's lost decade, Yeldan emphasized that there was fluctuation and stagnation in total factor productivity during these years.
Erinç Yeldan, sharing the observation that "a significant portion of our problems stem from the economic repercussions of the path that global capitalism has taken," recalled the developments in total factor productivity that Turkey experienced after 1980. Yeldan drew attention to the productivity increase achieved until 1990 through Turkey's opening up to the world, its orientation towards exports, price reforms, and the opening up of accumulated industrial capacity.
Professor Dr. Erinç Yeldan stated that a new growth and factor productivity drive occurred in Turkey after the 2001 crisis, but noted that these drives were not sustainable.
Erinç Yeldan stated that the increase in total factor productivity in the 2000s was interrupted by the effects of the 2007-2008 global crisis, and underlined that growth after 2010 was mainly due to increased employment and capital.
“Our problem is the development of resources”
Explaining the reason for the comments that "we have fallen into the middle-income trap," Yeldan stated, "This is due to the decline or stagnation in factor productivity after 2007-2008." He emphasized the need to increase economic production opportunities. Prof. Dr. Yeldan continued: “Our problem is not the redistribution of resources, but the development of resources! In this respect, it is necessary to guide the long-term signals of the market, not the short-term signals.”
Yeldan, pointing to a strategic trade policy, emphasized the need for a guiding institutional structure involving exporters in necessary sectors, protection in necessary sectors, incentives in necessary sectors, and cooperation between the public and private sectors. He added that public entrepreneurship should be strategically integrated and organized with private entrepreneurship.
Responding to the metaphor, "The state doesn't produce meat, fish, or milk!", Erinç Yeldan argued that "The state produces whatever it strategically wants to produce," stating: "If the state needs to produce potatoes, it produces potatoes. If it needs to produce intermediate goods in an aircraft factory, it produces them or encourages their production. Therefore, the idea that 'The state should completely withdraw from the economy! Let the market achieve regional development, sectoral development, and trade balance simultaneously through its own free will!' is a complete fantasy. In today's developed countries, you will see that there are organizations based on very serious strategic planning and public-private sector cooperation in strategic sectors."
Manufacturing Industry/GDP Table
“ENCOURAGING INTERMEDIATE GOODS IMPORTS IS SEVERING THE CONNECTIONS OF NATIONAL INDUSTRY”
A country's trade strategy is its industrial strategy. Trade and industrial strategies must be compatible.
I will emphasize the fact that the share of total manufacturing value added in total GDP fell from 20% at the end of the 1990s to below 15% by 2014, or more precisely, starting roughly from 2006-2007. This is one of the manifestations of Turkey's industrialization and growth sectoral priorities shifting away from industry, and market signals directing attention not to industry but to finance, services, and sectors more geared towards domestic demand and closed to foreign trade.
A significant portion of our problems stem from the economic repercussions of the path that global capitalism has taken. The problem is this: Intermediate goods imports, especially investment goods imports, are the most destructive form of import. Because encouraging intermediate goods imports leads to the severing of the horizontal and vertical links of national industry. The low cost of imported intermediate goods and raw materials can lead to the disintegration of national industrial integration, jeopardize our energy security, and endanger the flow of capital goods. The resulting current account deficit, coupled with the increasing reliance on unhealthy hot money financial capital inflows – short-term capital inflows instead of long-term, sustainable investments – is a significant point of vulnerability. Another consequence is the risk of insufficient job creation in Turkey. When you import, you bring value-added produced abroad to Turkey. You are gradually eroding your potential to produce value-added domestically. Therefore, one of the reasons why the contribution of labor to growth in Turkey, during its development path after 1980, has been lower and the contribution of capital higher compared to similar countries is this.
In the short term, it is necessary to move beyond financial indicators trapped by interest rates, the stock market, and exchange rates, and to encourage and strengthen the creation of relative advantages. This shows us that we need a strategic trade policy, that is, an institutional structure where the public and private sectors work together in cooperation, guided by a leader, and implementing import substitution in necessary sectors, export-oriented sectors, protectionist measures in necessary sectors, and incentive programs in necessary sectors, as Asian countries have successfully done for years.
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