Early this week the nation woke up to very good news indeed: The official rate of unemployment had come down to 11 percent, a significant drop of 2.6 percent (figures correct for the month of May 2010). Analysts will now have a chance to decide whether this is a one-off event or already part of a continuous trend. If the latter assumption is correct, Turkey will soon enjoy an unemployment rate of less than 10 percent. It is not impossible that Turkey’s rate of inflation will over time be brought down to 5 percent, too.
An inflation rate at 5 percent and an unemployment rate below 10 percent is a very promising economic outlook, indeed. If only macro as well as microeconomics were that easy to predict. What can go wrong on Turkey’s path to becoming a role model for how to manage an economy, at least when compared with the most recent (12 in total) new member states of the European Union? A lot!
Not necessarily before a referendum, but definitely before a general election, any government would be forgiven for becoming a “big spender.” There is one European country in particular from which Turkey and all other economies should learn from about how not to run an economy -- I am talking about the United Kingdom and the massive public debt its previous governments accrued.
Spending public money looks good on paper and in most cases keeps the electorate happy, too. Promising improved public services (ideally at no cost), continuing a near-free healthcare system and employing more and more people in the public sector aims at winning just another election. Up until a certain boiling point, that is -- and as we witnessed in the UK a few months ago -- today’s electorate is very well aware of the fact that similar to a private household, limitless borrowing and, subsequently, spending lead to only one thing: a household’s, or an entire nation’s, bankruptcy.
Most important is to find a balance between allowing a government to provide for the basic needs of its citizens (access to healthcare, access to education, the right to work as only a few of supposedly numerous “administrative” tasks) whilst at the same time stimulating the economy, and not by becoming a state entrepreneur but by allowing for private initiative to be much more rewarded. I am talking in particular about the emerging middle classes and small and medium-sized business owners (SMEs). The SMEs need as little a government as feasible, flexibility in making decisions about what to manufacture and hassle free cross-border trading. They also need money ideally not in the form of grants, but repayable loans with favorable conditions (deferred repayment periods, increased financial volumes).
When I talk to Turkish people about the state of the economy I often hear criticism -- but only from those groups in Turkish society who are afraid of losing some of their privileges. These are the people who are against lifting the headscarf ban at Turkish universities while at the same time “employ” women who wear a headscarf as their nanny or domestic (cleaning) staff. The vast majority of people, though, have begun to realize that over time their purchasing power has risen, minimum wages will continue to rise, more educational opportunities exist for their children and they, the individual, have become the focus of the government’s attention.
Besides, if a country’s economy depends on a combination of state monopoly capitalism and a few large holdings, citizens become mere workhorses and nothing much besides.
If this and future administrations understand that only a strong middle class will not only end the bigotry described in the paragraph above but will solidify the ever-improving Turkish economy, this week’s economic indicators will form part of a wider picture. Let us not forget that individual economic activity only thrives in a stable democracy. Referendum, elections and one day a brand-new civilian constitution all go hand-in-hand with establishing a flourishing, stable national economy.
Seasonal adjustment or long-term trend? I would suppose it’s the second option.
