1954-1961: Readjustment

Alper Duman
November 2011

Alper Duman
1954-1961: Readjustment

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Once again, liberalization ended in terms of frustration in
international acounts.
The interventionist measures were employed in order to
decrease the nance gap.
The end result was a slower growth period (4.4% annual
during the period) in which state had to play a bigger role
than envisaged

Alper Duman
1954-1961: Readjustment

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The fundamental shift was observed in terms of cultural and
ideological background of the ruling elite
Menderes brought out the rst wave of Anatolian social and
economic power brokers.
DP secured fatwas from eminent sheikhs rearming the
sanctity of private property in Islam thereby keeping the
possible benets of land reform o the agenda and successfully
obtaining the support of numerous south-eastern landowners.
As a result, the DP won 34 out of the 40 seats in the
south-east
Political mobilization via insider-outsider networks sustained a
mass movement supporting Menderes; i.e. Vatan front

Alper Duman
1954-1961: Readjustment

Table: The Birthplace of Political and Bureaucratic Elites

Birthplace

1943
Pol.
Western
54
Central
26
Eastern
8
Outside of Turkey 12

Alper Duman
1954-1961: Readjustment

Bur.
62
33
0
6

1946
Pol.
44
36
14
5

Bur.
51
44
6
2

1954
Pol.
31
45
17
7

Bur
41
43
13
2

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In dollar terms, the imports had declined by 40% between
1953-1958
National Defence Act was reenacted. However, was not
successful
Despite the great incentives for FDI, there was little FDI
coming.
The lion's share of foreign resources were in terms of credit
and partnerships with local rms.
The share of foreign resources in the xed capital formation
declined to 10%.

Alper Duman
1954-1961: Readjustment

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Import dependency of industry and other sectors became a
bottleneck.
The industrial growth rate could only be 4.3% annually.
Due to the control of the international trade regime, the share
of consumption goods in imports declined from 23% to 11%
A disguised form of import substitution was pursued by the DP
government.
Industrial share of nondurable consumption goods (textiles,
foods, etc.) reached 75% of total industrial output.

Alper Duman
1954-1961: Readjustment

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More importantly, despite the great momentum gained in
earlier period the agricultural growth rate was merely 1.8%.
Given the population share in agriculture, that growth rate was
a push factor for internal migration.
The lack of infrastructure in urban areas opened up new
informal sectors: dolmusculuk, gecekonduculuk.

Alper Duman
1954-1961: Readjustment

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The rst IMF agreement of 1958 brought a full package of
conditionalities, with a huge devaluation of TL
The internal price controls were removed and the
interventionist measures on international trade was upheld.
In return, the unpaid debt was restructured and new credit
lines were opened.

Alper Duman
1954-1961: Readjustment

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The internal terms of trade between industry and agriculture
had two counterveiling periods. Till 1958, industrial prices
were kept lower but then agricultural prices were hit hard.
The share of wages seemed to be constant in terms of value
added.
The 'informal/marginal' sector had emerged as an important
venue.
The landlords who could make use of mechanization and
commercialization had gained substantially.

Alper Duman
1954-1961: Readjustment

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The money supply had increased dramatically from 1954
onwards.
Ination began to be a major problem.
The credit expansion was mostly channelled to service sectors.
Rapid urbanization meant a larger internal market with two
dierent basis, formal and informal.

Alper Duman
1954-1961: Readjustment

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During DP governments, the share of direct taxes declined
from 35-40% to 25-30%.
The ills of the economy was not dealt with, only postponed.
Black markets emerged.

Alper Duman
1954-1961: Readjustment

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What were the reasons for the failure of 'liberal integration'
into the world economy?
How much did the share of industrial employment increase
during 1955-1960? Why?
Why did the lion's share of credit expansion end up in largely
unproductive sectors?

Alper Duman
1954-1961: Readjustment

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