Turkey, the World Bank and the IMF

There is a difference between hosting meetings and signing agreements, though. While working with the World Bank and the International Monetary Fund (IMF) brings great benefits to beneficiary countries, at the same time the receiving end is asked to implement stringent economic measures to curb government spending. This sounds like an easy formula, but we must take into account that more often than not World Bank and in particular IMF loans require too much austerity in times of crisis, and this bitter pill is very difficult to explain to any given electorate, the Turks being no exception to the rule.

Let me focus on only two economic indicators: minimum wage and regular salaries. Under previous IMF regimes it would have been impossible to substantially raise the national minimum wage, but I argue that this is exactly what is required, and urgently so. Why? Because without it the building of a solid and sustainable middle class would become a near impossibility. This in turn would make democracy prone to illicit attacks from various circles as was witnessed in this country more than once up until very recently. I am not suggesting simply compensating for the annual inflation rate. Turkish economists will know which maximum amounts are possible but need clear guidance from the central government on this issue.

Away from the minimum wage another issue has arisen: Let us assume that the number of civil servants will decline over time, as is the case in most other Western countries, and let us furthermore acknowledge the fact that Turkey has embarked on its path towards a knowledge-based economy where a majority of employees will soon manipulate symbols instead of machinery. Salaries must reflect the changes in the workplace.

Recently a young Turkish woman at an İstanbul reception sponsored by Sabanci University for Lord Dahrendorf -- former director of the London School of Economics (LSE) and one of Europe's most well-known commentators on educational policies; someone who knows that good work demands good payment -- told me about her training and degrees. I asked her about her current profession: She was unemployed despite having obtained three academic degrees! Salary expectations? TL 1,100 net, in her own words. A few months later I met with a professor from an İstanbul-based university with take-home pay of TL 1,500. I myself had come across a company in İstanbul where “former successful family holding representatives” pay less than TL 500 for a full-time secretary. Food for thought? Yes. Enough money to put food on the dinner table? Not necessarily. Earning a decent wage means young people can leave their parents' homes earlier and start an independent, more creative life of their own. This in turn will make them more competitive and ultimately more successful, and this is what would suit Turkey quite well.

Private Turkish companies, and in particular Turkey's large family holdings, must start paying sensible salaries to their staff because if they do not, employees will look for work elsewhere and contribute to a much unwanted brain drain. Economic growth must first and foremost benefit the people who make it in the first place: blue and white-collar workers. If you think that for the purposes of this column I have swapped sides and became a supporter of central casting, please reconsider: The more money employees earn, the more they can invest back into the economy as consumers -- a liberal market philosophy indeed. What delegates to the İstanbul meeting and those observers represented in the roundtable discussions should tell the World Bank and IMF directors is that emerging economies in particular need financial stimulus, not undue restraint.

Let me play devil's advocate: Does Turkey really need a new deal with or IMF stand-by agreement? Has it economically and politically matured enough to live without this cooperation, often referred to as an “anchor”?

It is up to the Turkish government to decide, and it seems chances are a deal can be struck soon. Sometimes IMF and World Bank sticks are larger than the carrots promised as an attached bonus.