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

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 both prior and after the crisis, and provided financial assistance of $20.4 billions, net, between 1999 and 2003. Following the crisis, Turkey has implemented an orthodox strategy of raising interest rates and maintaining an overvalued exchange rate. The government was forced to follow a contractionary fiscal policy towards attaining a primary surplus to the 6.5% of the GNP, and promised to satisfy the customary IMF demands: reduce subsidies to agriculture, privatize, and reduce public sector in economic activity. Contrary to the traditional stabilization packages that aimed at increasing interest rates to constrain the domestic demand, the new orthodoxy aimed at maintaining high interest rates for the purpose of attracting speculative foreign capital from the international financial markets. The end results in the Turkish context were the shrinkage of the public sector in a speculative-led growth environment; deteriorating education and health infrastructure which necessitate increased public funds urgently; and the consequent failure to provide basic social services to the middle classes and the poor. Furthermore, as the domestic industry intensified its import dependence, it was forced toward adaptation of increasingly capital-intensive, foreign technologies with adverse consequences on domestic employment. In the meantime the transnational companies and the international finance institutions (the socalled IFIs) have become the real governors of the country with an implicit veto power over any economic and or political decision that is likely to act against the interests of global capital. Thereby the fragile Turkish democracy has been placed under siege by the agents of the newimperialism.

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