Turkey is Beating Inflation

The latest figures are way below expectations. The annual target inflation rate was achieved in the third month of the year: The increase in wholesale prices is 7.97 percent and 11.83 in consumer prices. These rates will likely decrease even further by the end of 2004.

The 5.9-percent growth rate in 2003, announced recently, has seen a drop due to the inflation figures. Hence, this drop is one that has not been realized by stopping the engine but rather while the car is still in motion, so to speak.

The best inflation figure before this was 34 years ago. In 1970, an 8.1-percent inflation rate was realized both in wholesale and consumer prices. We have not seen inflation fall to below 10 percent ever since.

Turkey came face to face with inflation in the real sense in the 1940s. It witnessed two-digit figures during the World War II years and three-digit figures (104. 4 percent in wholesale prices) were experienced in 1946. Although the following years passed quietly, two-digit figures resurfaced in the 1970s when anarchy was all over the place. In 1980, when instability was at its highest level, a historic inflation record was broken with a 115.6-percent increase in consumer prices.

The 1980s were the years that Turkey changed its course and opened up to the outside world but inflation could not be beaten, nonetheless. On many subjects, the 1990s have gone into record books as the 'lost period' in history, when the Gulf War and the fluctuations in world economy were experienced. The highest inflation figures ever seen was during the 1994 crisis: 149.6 percent in wholesale prices and 125.5 percent in consumer prices.

When we look at the averages, we see an upward trend in inflation since 1970. The average in the 1970s was 25 percent, in the 1980s it was 50 percent and in the 1990s, about 70 percent.

During these periods, so many promises were made and so many programs and packages were initiated for the sake of curbing inflation. But all of them ended in fiasco. A determined, disciplined, coordinated and permanent fight [against inflation] was never sustained. Many of us still remember remarks by governments regarding inflation, such as, 'we have stopped it, curbed it, broken the back of inflation, we have grabbed it and are taking it down.' Campaigns initiated by civil society organizations with good intentions did not produce any tangible results. The bleeding wound somehow could never be closed up. Due to high inflation, which became chronic, the injustice in income distribution became worse and the tax system bankrupted.

Weren't there times that inflation seemed to drop? Of course there were. Particularly, the figure that was over 115 percent in 1980, reduced to 21 percent when the late Turgut Ozal was appointed to take over the reins of the economy; however during the years when Ozal was the prime minister, inflation could not be pulled down to below 34 percent.

Such that, Nobel economy laureate, Prof. Merton Miller, predicted when he visited Turkey in 1985, saying, "Inflation cannot continue at this level forever. It will either get out of the hand or get zeroed out," but he admitted 15 years later that he was wrong and said, "this situation is really a hard puzzle to solve in economy."

Since the late 1980s, Turkey became acclimatized to living with a two-digit inflation. Nothing changed in the 1990s but the rates increased a little bit. The 21st century began with problems; we had a situation even worse than the war years due to the 2001 crisis. In 2000, the inflation rate fell below 40 percent after a long time; however, this was not a healthy drop. Even though many people and institutions issued warnings, the administrators of the economy went their way. I do not forget businessman Sakip Sabanci's statement just before the crisis: "We have been spoiled by reducing inflation. Unemployment has increased, production has stopped, exports have slowed down, these should not continue."

Today, Turkey has grabbed a very important opportunity. On one hand, it is maintaining economic growth, and on the other hand, it is unrelentless in its efforts in pushing inflation down to the zero threshold. This is a healthy and realistic decrease. The Turkish lira has got a big boost for the first time ever, because hitherto the populace was foreign-currency obsessed. Interest rates continue to fall. These are in no way small achievements. Now inflation has been shackled for good. But it should never be set free again. Let's end the article with a slogan of an anti-inflationist campaign, that was initiated in 2000 but shelved because of the crisis: "Turkey is Beating Inflation."