We don't believe in election economies." The best reason to take Mr Babacan at his word is that there is new evidence that far being able to vamp up the economy in anticipation of a general election this year, the government be forced to slow things down. The theory is not that Turkey doesn't have election economies; simply that it has them in the wrong years. That at least is a proposition put forward at a meeting in Ankara organised by the business confederation TÜSIAD along with Koç University. The idea was to gauge the economy's natural speed level; assess whether it was moving to fast or whether the Central Bank could put its foot a little bit more heavily on the gas. The idea of a speed limit is basically the rate of growth at which the economy can cruise without tipping the rate of inflation into the danger zone. European economies chug along at around 2% growth per year. In the US, growth is slightly higher. Getting the right trajectory for an economy like Turkey's is more difficult to calculate. A conclusion of a paper delivered by TÜSIAD's Zafer Yavan and Yasemin Türker Kaya of the Banking Regulation and Supervision Board (BDDK) was that contrary to common belief, the economy was running too fast and not at under-capacity. The further conclusion is that unless it exercised even greater prudence, the government's cherished and hard-fought disinflation program could be in jeopardy.
Certainly many analysts believe the government inflation target for this year of 4% is unrealistic, given the current rate of 9-10%. However, the indices at which the authors looked was at the rate of unemployment versus the rate of structural unemployment, i.e. how many people were in work compared to how many people "ought" to be in work, given the dynamics of the economy and of the labour market. What the figures showed is that even though unemployment figure in Turkey are bad - just under 10% of the working population need jobs - they are better than they have a right to be. The level of structural unemployment called NAIRU (Non-Accelerating Inflation <http://en.wikipedia.org/wiki/Inflation> Rate of Unemploymen <http://en.wikipedia.org/wiki/Unemployment> t) is actually higher. Of course how you calculate NAIRU is a complicated matter of which there was much discussion. But if the analysis is correct, then here are more people in work in Turkey than the tempo of the economy can comfortably sustain.
The obvious inference is that any attempt by the government to further stimulate an already excited economy between now and polling day will be punished by the markets in the form of a higher interest rates and softening of the currency. The deduction which follows from this is that the government will not go its full term until November but try to call an election as soon as feasible. One of the first duties of the new president elected at the end of April may be to send MPs off to their constituencies. Late spring is a good time for a poll as the warmer weather brings with it the blessing of lower food and fuel costs and inflation would dip down to around 7.5%.
Of course, the notion that there are "too many" people in work is an uncomfortable one. For so many reasons in a democracy, it is the clear priority of government to make full employment its top priority. Will the parties be putting forward realistic strategies when the leave for the campaign trail.
Some of the measures would be unpopular - like introducing greater flexibility into the labour market (an interesting proposition in an economy where so much is unrecorded). Other measures, like giving young people practical qualifications and retraining older people excluded from work. A well-thought through comprehensive program to reduce structural unemployment might be incompatible with a traditional boom-bust election economy but it would certainly get my vote.
