Noting that the Turkish economy’s current rank as the 17th largest national economy in the world is not acceptable, Korkmaz says: “Our national economy should be worth $3 billion instead of $1 billion. We should have been ranked better in the overall standing in the world; Turkey has human capital and resources. However, we have suffered from a managerial crisis. The lack of democratization and the polarization between the administration and the opposition have negatively affected the overall economy.”
Korkmaz, who has called for radical changes to existing economic policies, stresses that economic development is more important than growth for countries like Turkey. Stressing that national economic policies should be implemented to achieve this, Kormaz argues that otherwise the recession will last longer. Recalling that globalization envisages speculative capital movement alone, Korkmaz says: “Obstacles to the free movement of labor and goods make the fragility even more serious. The crises we have observed every eight years will repeat every five years from now on.”
Korkmaz spoke to Today’s Zaman on the overall state of the economy:
How do you like being a deputy after serving as a professor at a university for so many years?
Of course, it is nice to contribute to Parliament as an economist. However, involvement in the party organization is exhausting; it does not fit me. I don’t think I’ll stay a deputy for a long time.
So you’re considering quitting politics?
It seems so; I won’t consider running again in the next election.
Your party leader, Deniz Baykal, frequently references your statements or opinions; do you act as a deputy from the opposition party when being critical of the government’s policies?
I do not talk on behalf of the Justice and Development Party (AK Party) or the CHP; I state my views and opinions. I should note, though, that Baykal’s views on the protection of national interests overlap with mine.
Does consistent, constructive criticism cause a change in those problematic areas, for example, with the decline in the inflation rate?
I am trying to state my views without being influenced by my political position; this is actually what the public expects of me. For this reason, I make recommendations when I criticize specific policies; for instance, I delivered the first speech at the plenary session of the legislative term in 2008; in this speech, I outlined everything that Turkey must do to alleviate the impacts of the crisis.
Did any of your recommendations attract attention and acceptance?
Yes, of course; they do not tell me they agree with me, but I observe some of my views being implemented; for instance, my recommendation on the reintroduction of taxing assets was put into action.
Do you have any recommendations to get rid of the recession?
The primary surplus budget policy should be dropped; I would ask for the introduction of a conjectural flexible budget policy instead; otherwise, Turkey will not overcome its recession; the budget deficit would not have mattered if it had been used to this end. However, the amount of investments is in decline despite the fact that your budget deficit exceeds TL 50-60 billion. The best way to deal with the recession is to increase the amount of investments; if more expenditures had been made in education, health and infrastructure, the budget deficit would not have mattered.
But your party seems to not agree with this?
The CHP’s views on this matter do not resemble mine. I say, ‘The deficit does not matter at all, what matters is the reason behind this deficit.’ The efficient use of budget resources and the masterful management of investments matter, because you may deal with budget deficit via production and further employment, but if there is no investment, this means a loss of blood. Turkey should give up on its primary surplus policy and implement effective budget policies instead. This is an approach endorsed by neither my party nor by the AK Party.
Don’t you think each country should consider specific measures that fit their conditions to get rid of the crisis?
Yes, I agree; each country should implement unique policies. This cannot be achieved via the current understanding of globalization. This needs to be changed; a global understanding should include more than just funds or speculation. The new approach should include free movement of goods and labor as well -- this is genuine globalization. The costs of a globalization shaped by speculative capital movement alone will be greater. This will be detrimental to the overall balance and lead to a crisis. In other words, everything is based on balance in the world; if you disrupt the economic balance, you will eventually have to face the dire consequences of this disruption.
Is it possible that our understanding of globalization will change any time soon?
It needs to be changed, but we alone cannot achieve this change. What we need to do is to implement national policies. We may devise new policies by making reference to and putting greater emphasis upon measures to deal with the primary deficit and the costs of portfolio monies as well as production and employment.
You have emphasized balance; how will you assess the economic balances?
Balance is important in economics; if there is no balance between the financial sectors and the real sector, you may not overcome fragility. This will eventually lead to serious repercussions. You may not achieve this balance in an economy governed by the banks. The banks are running the system all by themselves; as long as this goes on, there will be no investment in Turkey, and the country will not get rid of its fragility.
How has this approach emerged?
It has arrived with globalization. The financial actors have a specific approach that puts greater emphasis upon finance; however, there are so many variables in economics. The other side of the coin should also be taken into account. If you neglect some of these variables, you will get the wrong conclusions and results. This is what the financial actors actually do. They do not see the whole picture from the perspective of production, employment and investment.
What do you recommend to make sure this vulnerability does not explode?
Above all, the costs of mediation and brokerage are high for the banks; to reduce these costs, the law on the Turkish Central Bank should be amended. Hidden interest should be removed; a sector balance should be established; the law on banks should be dramatically changed. The system of currencies should be altered, the state needs to be restructured, relations between the local and central administrations should be revisited and the inflow of portfolio monies should be taken under control via the imposition of new taxes and duties.
You did not hold the same views in 2001?
True; I argued that this should have been controlled in 2001 because interest rates were high back then. This could have had a deteriorating influence on interest rates but this would not happen now.
Why does Turkey seem unable to develop national economic policies?
The primary reason is the partial and artificial relief by short-term policies; of course, the development of a national policy will bring about some additional costs. We may suffer from its repercussions for a few years, but we have to take this. Things will get better eventually -- if the administrators of the economy had preferred long-term policies instead of short-term measures, the national income per capita could have been $20-30,000 by now.
Is this the cost of troubled democracy?
Sadly, we have not been able to conclude the managerial crisis. Back in the 1980s, ours was the 25th largest economy in the world; now we are ranked 17th, but this does not fit the resources and potential of this country; the size of our economy should have been $3 billion instead of $1 billion. Our standing should be even better. Turkey has human capital and resources. However, we have suffered from managerial crises. The lack of democratization and the polarization between the administration and the opposition has negatively affected the country’s economy.
Why do the opposition and the political administration fail to develop an integrated approach and view this problem as a common issue?
This is the general approach. The administration blames the opposition, arguing that it fails to make any recommendations; the opposition makes its recommendations bearing in mind that it should be acting like an opposition actor. In response to this, the administration would never listen to the opposition. They prefer ignoring and neglecting them.
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Banks negatively affected social welfare
What do you think about the profitability in the banking sector?
The prime minister frequently argues that the Turkish banking sector has not been overly affected by the crisis; the sectors have social costs which should be taken into account. If you put the burden of the loss in a specific sector on the whole society, you can hardly notice the dire impact. But overall social welfare does not get better because of this; social welfare has been negatively affected because a total loss of $100 billion was shouldered by the entire society.
Are you referring to the receivables of the Savings Deposit Insurance Fund (TMSF)?
Yes I am; $90 billion in Treasury receivables were forgiven last July. Some of these receivables were transferred from past terms and administrations. But $70 billion out of this $90 billion is due to bankrupt banks, brutally and mercilessly robbed by their founders and owners. Who paid for these losses? The TMSF. Where did it find the money? From the Treasury. How did the Treasury make this amount ready? Via borrowing. What does the elimination of these debts mean? I mean, who will pay for this? The taxpayers will.
Would it be risky if the TMSF still remained as a debtor and the Treasury had not erased these debts?
No, not at all; even the US does not follow the path of Turkey, which spread the whole burden caused by the crisis in 2001 over the entire society; the US administration provides loans to the banks and extends support but never distributes the entire loss.
So you are saying that the banks make profits while society pays for the debt?
This is the actual risk -- the only reason for the current improvement in the Turkish banking sector is the distribution of the entire loss over society. Society normally asks for the provision of profits if it bears the risk of loss. Because of this risky situation, the Turkish banks are in a better position than others in the world are.
Aren’t they in a good position in terms of interest profits?
Sadly no; where else will you see a 106 percent interest rate for credit card use? It is around 50 percent by now; the central bank has recently reduced the interest rate to 7 percent, but the interest rate for credit card use is 50 percent. Society has grown accustomed to this, but it is contrary to the Constitution, which states that speculation and cartelization should be prevented.
Would you elaborate on cartelization?
Banks receive funds from the central bank at a 7.25 percent interest rate; then they lend this out at 50 percent for credit card users. So this is cartelization; others could do this by reliance on lower rates, so it violates the Constitution. If the banks still survive despite this violation of constitutional provisions and distribution of their burden over society, this means that the nation bears the whole burden. These are rare incidents. This is the primary reason for the current improvement of the banks.
Are you lagging behind the financiers as economists?
This is one of the things that sadden me; when you are talking about economics, people think you are talking about finance. Take a look at the daily papers, the coverage of the pages on financial issues and news are more extensive; the Association of Banks briefs, the commission on planning and budget. However, nobody comes from the Istanbul Chamber of Commerce to brief the Parliament. People equate finance with economics. They now hold that financial economists are actual economists. However, there is no such thing as a financial economist. He cannot see what is behind the coin. They review the entire economy from a financial perspective. This means that the financiers administer the economy in Turkey. And inevitably, they prioritize portfolio monies and ignore employment and real production. They consider their own profitability. This should be changed. Globalization should be held responsible for this.
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