The steps to be taken within the first hundred days at the beginning of periods of great transformations are like the future scorecard of a government. I have been thinking on former U.S. President Franklin D. Roosevelt’s New Deal, which, for me, is one of the most authentic programs in the history of politics, in the days when Turkey’s first hundred days program has been announced. But before that, it is worth looking to the quest for a way out before the Great Depression of 1929.
It is a very significant experience for nations to try to overcome the crisis and find a new way for themselves before and after the 1929 crisis.
At that time, it was a widely-accepted view in economics that “All institutional rigidities that prevented the market mechanism from spontaneously functioning and adapting on both national and international levels should be removed. For instance, in the event that prices fall on the national level, wages should also fall. There should be no institutions in the labor market that prevent wages from falling. On the international level, each nation should not take measures that protect its production against the competition of other countries. Another way of expressing this balance-seeking approach is the need to prevent economic boom or ensure relative balance in order to prevent economic depression.”
However, even in a world where the gold standard was in effect, such spontaneous market stabilization was not possible, so the U.K. had to abandon the gold standard. In other words, the market mechanism that the liberal economists trusted so much did not work and the world had to overcome the crisis with a new war on sharing. At that time, there were debates similar to the present ones: The rapid rise of the customs walls in the 1930s was a dynamic that would further deepen the crisis. The U.K., the representative of the liberal economy, suggested in all commissions gathered under Keynes’ chairmanship in 1930 that imports should be controlled and customs should be raised. Thus, the volume of global trade rapidly fell and the countries radically tightened their fiscal policies. That is, everyone destroyed “market” together, inviting a global deflation, hence, a global war.
At this very point, I should note that the U.K. abandoned the gold standard, the most important badge of the empire, in 1931 and reduced the value of its currency by 30 percent, achieving an advantageous position against the dollar and the French franc.
At the same time, then U.S. President Herbert Hoover put the New Deal policies into effect. As of 1932, the U.S. redefined the state and the market under the New Deal. The state waged war against monopolistic structures that blocked the economy and disrupted the entire price mechanism. “Rising prices and the concomitant inadequate demand were one of the main reasons for the crisis, and the reason for this was monopolistic structures.”
When Roosevelt came to power, the crisis was the most intense and the first hundred days plan was just announced those days. The 13 major laws regulating the banking system and real business areas were included in the first hundred days program. Again, within these hundred days, very important regulatory bodies were created.
When we look at the regulations and institutions here, we see that regulatory mechanism out of the market was rapidly coming to the fore. However, unlike Europe, this did not aim at establishing economic welfare by means of the state and creating a common social security mechanism. The Roosevelt administration also aimed to strengthen union structures against cartels and thereby establish a new balance in the labor market. That is, the state undertook union activities in order to eliminate wage rigidity in the labor market.
This was the opposite of the understanding of Continental Europe which hails from the tradition of civilian-political struggle. In the same period, Germany’s Heinrich Brüning government wanted to follow a policy that highlighted anti-monopolistic and small businesses. However, as this policy faced the opposition of the Nazis, it did not stand out as a permanent solution for Europe like the New Deal for the U.S. So, Europe disappeared in the darkness of national-socialism.
The reason for the U.S.’s advantage after World War II was not that it was the victor of the war. However, what brought economic leadership and superiority for the U.S. was its innovative policies that were different from Europe and that went beyond traditional pro-market understanding before the war.
I am saying all this to emphasize the following current situations and the Turkish reality.
1. The current global crisis is bigger, more inclusive and deeper than the 1929 crisis and it is continuing to deepen, let alone end.
2. The idea of overcoming the crisis through protectionism that prevailed in developed countries in and after 1929 is also present today.
3. As in those days, this understanding will not work today, but will deepen the crisis and quickly drag the current monetary system to a failure.
4. At that time, the U.S. undertook a role that helped recover both itself and the system with unique policies like the New Deal under qualified politicians like Roosevelt. Now, politicians like Roosevelt are just a dream for the U.S. Even if Roosevelt is resurrected, he cannot save the U.S. because we have now the spirit of the time that produces politicians like Donald Trump.
5. Now, the spirit of the time is in favor of countries like Turkey which is one of the countries to write a new development story and produce the New Deal of this time.
6. Depending on all this, as we said at the beginning of this article, “In a period of time where regional-global balances are changing rapidly, the repetition of some stereotypical words too often does not properly tell your path to your friends and foes.” In this sense, the understanding that “market solves everything and the more pro-market we seem, the more solution-oriented we are” was completely wrong in 1929. This understanding is even wrong today. After all, the market does not solve everything. As Karl Polanyi said, it knots everything most of the time and drives things to as far as to fascism like in Europe.
7. In this regard, if there are some problems in the Turkish economy that we need to urgently solve, be sure of that they stem from the fact that some big companies and the economic bureaucracy misconceive the market. What we call market is not about all kinds of non-market indirect games. Unfair competition is not about imposing any kind of price based on this unfairness and not about subtlety of dismissing staff in the country and continuously opening branches abroad. Capital export is something else and it should be supported in terms of national interests. However, the understanding that all countries, including the U.S., oppose to is that companies invest abroad without achieving sufficient investment satisfaction in their home country.
8. Finally, requesting countries to grow below their potential in order to prevent this economic depression – the crisis – means smoothing over the cracks. Accessing and even going beyond the potential and progressing by solving problems should be the basic approach for the first hundred days and later.
As a result, Turkey has entered a new political era, even a new history. The economy is not independent of this, either. In this era, Turkey will develop unique solutions on both macro and micro bases (from companies to households) and continue its new development path with the institutions of the new era. In the first hundred days, we will quickly bring up reforms that will improve the investment environment for everyone, prevent wrong, inflationist and monopolist prices, deepen financial markets and support companies on the capital markets side. Turkish assets are the most appropriate in terms of price and purchase for the moment because the new economic program will give all kinds of investors a historic opportunity.