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Patterns of Adjustment under the Age of Finance: The Case of Turkey as a Peripheral Agent of Neoliberal Globalization

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  • Erinc Yeldan

Abstract

Turkey experienced a severe economic and political crisis in November 2000 and again in February 2001. The IMF has been involved with the macro management of the Turkish economy prior to and after the crisis, and provided financial assistance of $20.4 billion between 1999 and 2003. Following the crisis, Turkey implemented an orthodox strategy of raising interest rates and maintaining an overvalued exchange rate. The government was forced to follow a contractionary fiscal policy to attain a primary surplus of 6.5% of the GNP, and promised to satisfy the customary IMF demands: reduce subsidies to agriculture, privatize, and reduce the role of the public sector in economic activity. Contrary to the traditional stabilization packages that aim to increase interest rates to constrain domestic demand, the new orthodoxy aimed at maintaining high interest rates to attract speculative foreign capital. The end result in Turkey was shrinkage of the public sector; deteriorating education and health infrastructure; and failure to provide basic social services to the middle class and the poor. Furthermore, as the domestic industry intensified its import dependence, it was forced to adopt increasingly capital-intensive, foreign technologies with adverse consequences on domestic employment. In the meantime the transnational companies and the international finance institutions have become the real governors of the country, with implicit veto power over any economic and or political decision that is likely to act against the interests of global capital.

Suggested Citation

  • Erinc Yeldan, 2007. "Patterns of Adjustment under the Age of Finance: The Case of Turkey as a Peripheral Agent of Neoliberal Globalization," Working Papers wp126, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp126
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    File URL: https://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_101-150/WP126.pdf
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    References listed on IDEAS

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    1. C. Emre Alper & Ziya Onis, 2002. "Emerging Market Crises and the IMF: Rethinking the Role of the IMF in the Light of Turkey's 2000-2001 Financial Crises," Working Papers 2002/03, Bogazici University, Department of Economics.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, pages 473-500.
    3. C. Emre Alper, 2001. "The Turkish Liquidity Crisis of 2000: What Went Wrong..," Working Papers 2001/11, Bogazici University, Department of Economics.
    4. Diaz-Alejandro, Carlos, 1985. "Good-bye financial repression, hello financial crash," Journal of Development Economics, Elsevier, pages 1-24.
    5. Grabel, Ilene, 1996. "Marketing the third world: The contradictions of portfolio investment in the global economy," World Development, Elsevier, vol. 24(11), pages 1761-1776, November.
    6. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Aşıcı, Ahmet Atıl, 2015. "On the sustainability of the economic growth path of Turkey: 1995–2009," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1731-1741.
    2. Tropeano, Domenica & Michetti, Elisabetta, 2008. "Exchange rate policy and income distribution in an open developing economy," MPRA Paper 6642, University Library of Munich, Germany.
    3. Mathieu Dufour & Ozgur Orhangazi, 2009. "The 2000-2001 Financial Crisis in Turkey: A Crisis for Whom?," Review of Political Economy, Taylor & Francis Journals, pages 101-122.

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