The Sole “Success” of the IMF: Turkey in the 1980s
At the end of the 1970s, the world economy was caught in a cycle of stagflation. Domestically, Turkey was dealing with an economic crisis due to the deficiencies it faced in foreign exchange, problems in short-term foreign borrowing, and a marked increase in the saving-investment gap. High-interest rates made imports more difficult, which became problematic given that Turkey was dependent on imports of intermediate goods to produce and export. Following this, production fell. Simultaneously, high inflation and issues with public debt existed, harming the country's economic outlook. In these circumstances, Turkey’s difficulties in both borrowing and paying debts had led to the declaration of a moratorium in 1978.
This led the IMF to implement a stabilization program in 1978 and 1979. The program was implemented through 3 channels: Deregulation, liberalization, and privatization.
The program was not only a stabilization but also a structural adjustment program. It was aimed at the adaptation of market mechanisms and the reduction of the public sector share. The structural changes were implemented through reforms in agriculture, energy, public sectors, and capital market to strengthen the financial sector. Additionally, modifications in the promotion of exports and liberalization of imports took place, as opposed to the protectionist and statist Turkey during the 60s. This limited aggregate demand by decreasing wages. The growth of the money supply was in the hands of the IMF.
In 1980, there was a military interregnum in Turkey. The IMF program proceeded under military control, which made it easier to press the labour market.
In general, the program was successful in increasing GDP and exports, while leading to a decrease in private debts. However, it is known that the IMF and the World Bank needed a success story, and Turkey was selected for this (Boratav, 2018). So, Turkey was able to borrow easily from international institutions.
When we look at the details, this success is questionable. The growth was due to foreign sources, and current account deficits were not cured. Together with the increases in exports, imports also increased. Private debts were transferred to public debts. Yet, these new policies were against much of the labour market. The tax system changed from progressive to regressive, which distorted the distribution of income, while unemployment remained high. The agriculture sector, the main sector in Turkey, grew by less than 1%, while inflation still plagued the nation.
With the new government and IMF policies, the structure of Turkey was changed. Neo-liberalism was adopted. The success of the program is questionable because it is only a superficial and glamorous success. When we examine the economy a little bit, we see that many problems have not been solved.
From time to time the IMF makes "experiments" on developing countries. This can be observed in Zambia (Boratav, 2016). Developing countries inevitably hesitate to take the IMF advice. According to Boratav, the "IMF is a super-organ of imperialism". It would not be completely wrong to say that he is right when we look at the implications of the IMF.
Boratav, K. (2016). IMF: Dün ve Bugün. Hacettepe Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 34, 27-46. doi:10.17065/huniibf.309271
Boratav, K., Türkiye İktisat Tarihi. 1908-2015. 23. Baskı. İmge Kitabevi. 2018.
Kazgan, G.,(2017) Tanzimat’tan 21. Yüzyıla Türkiye Ekonomisi. Chapter 12 pp. 309-364.