TURGUT OZAL, WHO LED TURKEY FIRST AS PRIME MINISTER AND LATER AS PRESIDENT, BROUGHT ABOUT CHANGES SECOND ONLY TO those of Atatürk. His party, the Motherland Party (Anavatan Partisi), was the first to come to power after the 1980 military coup. Ozal was a technocrat who had worked in the World Bank and private industry before returning to government. He had campaigned on a policy of liberalized economy and openness to world markets.
Turkey's economic policy, set first by Atatürk, had been called "statism." It was a mixture of socialism and protectionism, created in reaction to the Great Depression of the 1930s. Most basic industries were in the hands of the state — mines, steel mills, the largest textile producers, railroads, the telephone and telegraph system, and other industries. In addition, domestic industries were protected from foreign competition by high customs duties. Goods imported from other countries could easily double in price and importers faced a host of bureaucratic rules that made it difficult to import. Even if a buyer was willing to pay twice as much as the goods cost, he found it very difficult to import them.
Government ownership and protectionism were by no means unique to Turkey. Major industries had been nationalized all over Western Europe. Of course, the Communist countries had almost completely socialist systems. In the Depression, the United States and European countries had led the way with protectionist tariffs. European consumers were denied Turkish goods just as surely as Turks were denied European manufactures. By the time Ozal took power, however, these practices were being disowned by the Europeans. Led by Britain, nations began slowly to dismantle government ownership of industry. Western Europe created the Common Market (later the European Union), which cut tariffs and encouraged trade. World leaders created the General Agreement on Trade and Tariffs (GATT) to stimulate trade between countries. They had decided that trade and private ownership would lead to enrichment of their countries. While this was not always the case for less developed nations, it definitely proved to be the case for the Europeans.
Ozal set Turkey firmly on the European path. Turkeys currency had been protected by an artificially high exchange rate that made Turkish goods more expensive overseas. Ozals government began the transition to a completely exchangeable currency (completed in 1990), one in which the value of the Turkish Lira was set by the world market. To support the government, he adopted the European system of Value Added Tax. Customs duties were greatly reduced and free trade agreements negotiated with other countries. Imports began to arrive in great number in Turkey. Exports also grew rapidly. The government began a policy of favoring "export-oriented" industries. Export industries were subsidized and excused from paying customs duties on goods needed for exporting industries. Bureaucratic hurdles were greatly lessened. Tourism was also favored. Modern hotels began to spring up, especially along Turkeys Mediterranean coast and in Istanbul. Both exports and tourism brought in foreign currency, which in turn made it possible to buy foreign goods.
Privatization of government industries, which was a key part of European economic reform, was not very successful in Turkey. Investors simply did not want to buy the old-fashioned government companies. Instead, the government ended the monopolies that had kept the government industries in business. Private companies soon began to produce everything from beer to textiles. Investor-owned airlines carried Turks across the country. Where before there had been only state television, Turks now watched multiple independent stations.
Like any radical change, the Ozal reforms had a negative side. As business improved and great amounts of money were made by entrepreneurs, the gap between the rich and the poor grew. Devaluation of the currency led to constant inflation, which savaged the salaries of those on fixed incomes. The presence of new money inevitably led to in increase in political corruption as businessmen bribed government officials for favors and political parties increasingly became dependent on donations. Lack of effective oversight of the financial industry led to first the creation of banks that were poorly-run or, worse, illegally diverted funds to their owners. (In the late 1990s, during an economic crisis, these banks failed at a great rate.) The danger increased of citizens who felt the state was not theirs, but the property of the rich. This has not been unknown in other countries.
Despite such problems, the Ozal years were resounding economic successes for Turkey. The gross domestic product rose by an average of more than 5% a year. Exports increased five-fold. When the Ozal Government began its reforms Turkey primarily exported agricultural goods, but by 1990 three-fourths of Turkeys exports were industrial goods.
The Ozal government revived Turkeys long moribund application to become a member of the European Union. This was the beginning of a long process, but it showed Turkeys commitment to become part of Europe and the West. Turkey had altered the economic policies of Atatürk to meet a new age, but it had kept his commitment to acceptance as a European state.
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