Sustainable growth and Turkey (1)

In his recent book “Development as Freedom,” Indian economist Amartya Sen suggests that rather than focusing on income and wealth or on mental satisfaction (by utilitarians) or processes (by libertarians), “focus should be put on capabilities-substantive human freedoms.” And he argues for a broad view of freedom, one that encompasses both processes and opportunities and for recognition of “the heterogeneity of distinct components of freedom.” In his approach, freedom is both constitutive of development and instrumental to it. In his words, “Instrumental freedoms include political freedom, economic facilities, social opportunities, transparency and security,” which he argues are all different but interconnected.

The same arguments can be found in E.F. Schumacher’s perspective. His famous philosophical book “Small is Beautiful” has become one of the famous classical publications that gives priority to human-centered growth. While delivering the Gandhi Memorial Lecture at the Gandhian Institute of Studies at Varanasi in 1973, having been deeply influenced by Mahatma Gandhi, Schumacher was described as the people’s economist whose economic thinking was compatible with spirituality as opposed to materialism.

There has been increasing evidence that this line of thinking is now part of daily discussions in certain countries. However, this issue is still quite a luxury for many countries, including Turkey, as they are still struggling with the basic constants of growth and development. My argument is that by utilizing the benefits or chances of being latecomers to development today’s developing countries should be able to derive the necessary lessons from the experiences of the pioneering countries in development and therefore refrain from repeating the same mistakes.

Without ignoring the emerging discussions mentioned above, in Turkey our priority still has to be increasing the means and realm of higher growth across the economy to alleviate poverty, improve income distribution mainly through minimizing unemployment and increase per capita gross domestic product (GDP).

This issue is directly related with the concept of “sustainable growth.” This is important in the sense that constraints and costs associated with economic growth need to be clearly understood and evaluated. It is obviously possible for an economy to register a high rate of economic growth for a while by continually utilizing larger inputs such as more capital and labor. However, as we mentioned above, this in turn generates a variety of persistent imbalances jeopardizing long-term growth. This is what we mean by the term “sustainability.”

We should also note that the relative importance of different constraints and costs would vary from one situation to another, from one period to another, from one country to another, depending on the prevailing economic structure, sociopolitical setup and other “initial conditions” such as at the level of development, demography, natural and national assets, etc. Despite this diversity, however, there are several basic factors that are defining the capacity of sustainable growth in a country.

As V. Pandit mentioned in his earlier article “Sustainable Economic Growth for India: An Exercise in Macroeconomic Scenario Building,” a sustainable growth trajectory has to be consistent with a plausible pattern of investment behavior, measures of structural changes, productivity growth and manageable within a realistic spectrum of parameters like rate of saving, exchange rate depreciation, external debt, fiscal balance and per capita domestic food availability. Tomorrow, I will continue with analyzing how volatile economic growth has been in Turkey and what the country should do to ensure accident-free growth in the years to come.