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  • hbanziger

F - 68 : No Turkey without Ataturk

Updated: Jun 14, 2022

Photos from space are beautiful. The view of our blue planet always makes me wonder why there are so many conflicts on earth. Our planet is unique. An oasis of life in big, cold and black space. My favorites are night photos. They are so rich in information.

The Aegean and Anatolia at Night - NASA photo from 2014

The photo above shows the Aegean and Anatolia in 2014 but could have been taken a hundred years earlier. Clearly visible is Athens on the left and Thessaloniki to its north. Then Istanbul on the Bosporus and Izmir at the center of Anatolia’s west coast. These bright spots would have been visible in 1914 had there already been satellites. But humanity had to wait to 1957. The street lights indicate high density of population and strong economic activity. As then, the bright spots are Athens, Thessaloniki, Istanbul and Izmir. There are two new bright spots though. Ankara, a provincial town before it became capital in 1923, and Antalya to the south, today the center of Turkey’s large tourism industry.

The Ottoman Empire in 1914 before the First World War

The satellite picture masks deep changes though. Before the First World War, the Ottoman Empire had a size of 1.6 million sq km. Turkey today is just half. By 1914, around 18.5 million people lived in Turkey. Ten years later, the number was 13.5 million. More than 325’000 Turkish soldiers and 2 million civilians (mostly Armenians) had died during the war. Turkey had lost the Levant (Palestine, Lebanon, Syria), Mesopotamia (Iraq), the Red Sea coast (Saudi Arabia) and Yemen. There were even more dramatic changes. In 1914, 29% of the population were Armenian or Orthodox Christians. Today, the country is entirely Muslim. The 18% Kurds are the only significant ethnic minority. Since Armenians and Greeks dominated large parts of the Ottoman economy, these changes cut deep (see my blog on cosmopolitan Istanbul).

Due to the armed Resistance of Turkish Nationalists under Kemal Ataturk, the harsh Treaty of Sèvres was later modified in the Treaty of Lausanne

After the First World War, Turkey was reduced to an agricultural society with little industry, no merchant navy, very little capital and a severely depleted elite. The Christians were expulsed and the cream of Turkey’s young men had died in the trenches. The country was forced to sign a humilating peace treaty like Germany. The French and English knew that Turkey was too poor to pay reparations but insisted that the Turkish Republic assumed the old debt of the Ottoman Empire. The Turkish Armed Forces were limited to 50’700 men, the Navy to six torpedo boats and the country was not allowed to have an air force. It was a bad start. But Kemal Ataturk, the new President, was not one to give up easily. He did not in Gallipoli. So why should he now? Ataturk set out on a radical program of reform to bring Turkey to the 20th century and make it a proud nation again. He would change the backward-looking culture and then modernize the country with the help of its citizens.

Liberating and Integrating Woman was a major Part of Ataturk's Cultural Reform Program

Ataturk’s reform projects (new alphabet, liberation of women, modern body of law, reform of the Turkish language etc.) got off to a good start and was helped by the fact that the old debt was mostly denominated in German Reichsmark and old French Francs, both gone up in smoke with hyperinflation. By 1929, Turkey was debt free, not any longer constraint by "capitulations" which had ring-fenced tax and custom revenues. But its luck run out. By the early 1930s, the international banking system collapsed and the Great Depression set in. Turkey’s access to foreign credit dried up. The reforms Kemal Ataturk had embarked on were not followed by a rapid, private sector led industrialisation. Even worse, Turkey's agricultural exports, fetched less and less in the deflationary environment. Badly needed foreign exchange stopped coming.

Zaman, Turkey's Time Man, rips the Year 1933 of the Calendar, for a more prosperous 1934

President Ataturk had to change course. Impressed by the rapid industrialization of the Soviet Union under Stalin, he implemented a policy called Etatism which combined Soviet-style central planning and Western-style market economy. Turkey’s first industrial plan for 1934 – 1938 emphasized import-substituting production (see my story on Turkish Tea) and developing industries based on agriculture and natural resources. Punitive import tariffs were imposed to support domestic production. Also, to save foreign currency, a barter trade regime was established with Germany. From 1930 to 1939, the share of German imports increased from 20% to 51%. Turkey’s economic policy made it dependent on Nazi Germany.

President Ataturk speaking under the Six Arrows,

Symbolising Republicanism, Populism, Nationalism,

Laicism, Etatism and Reformism

From 1929 to 1938, total industrial production increased by 80%. Coal production doubled, steel production rose from zero to 180’000 tons a year, sugar from 5’200 to 95’200 tons and cotton from 70 to 3’773 tons. New railway lines were laid. Entire new cities built around the new factories. The policy of Etatism gave Turkey time to breath and to survive. The industries established were not the most efficient ever – but Turkey did not yet have the engineers and technical know-how it has today. The Turkish State provided finance through a restructured banking system. It kind of worked and laid the basis for Turkey’s development after 1945. We tend to forget that Turkey was the world’s largest textile producer until China took the market.

Kemal Ataturk visiting one of the new Textile Factories built under his policy of Etatism

With the outbreak of the Second World War, Turkey’s economic prospects got worse. Germany could not supply machine tools any longer, access to raw material from abroad was difficult if not impossible, international trade had come to a stand still and both Allies and Nazis bullied Turkey to join their side. Staying neutral came at a cost. The small Turkish Army had to be modernized. After defence spending, there was not much money left in Treasury. The Great Depression and World War II had stopped the modernisation of Turkey. Luckily, Kemal Ataturk's successors - he died in 1938 - stayed the course. His structural reforms bore fruit after the end of the 2nd World War. He had made the Turkish economy compatible with the West.

Turkey's Aviation Industry also has its Roots in the Etatism Policy - here the first Training Planes for the Turkish Air Force are built in the late 1930s

In fact, relief came with the Marshall Plan in 1947, the Jet Set who discovered the beauty of Turkey in the 1960s and Turkey’s free trade association with the EU in 1995. Most other attempts to accelerate economic growth failed, particularly the debt financed binges which made Turkey a serial defaulter in capital market and a country with an unstable financial system. In the end, nobody can grow faster than the long-term savings rate. Growth requires a) capital, b) labour and c) technology. Turkey had little of a), plenty of b) and as fully-fledged NATO member access to c). Marshall Plan, Mass Tourism and EU access eventually set Turkey on a path of sustainable growth. Turkey is one of the most attractive holiday destinations in Europe and the manufacturer of our durable goods. Turkish growth over the last 20 years is impressive indeed.

Turkish GDP measured in USD - the Drop is due to the rapid Devaluation of the Turkish Lira

Over the last thee years though it looks as if Turkey wants to grow too fast. Lots of white elephants were built under President Erdogan. One good examples is the airport in Gocek. Half of it is empty and never opened. The bill for its construction still had to be paid in full. With its easy monetary policy and no independent Central Bank, the government made money available without the necessity to use it efficiently. Once wasted, it remains wasted but stays in circulation. No economist is surprised that it results in an inflation rate of > 70% and a rapid depreciation of the Turkish Lira.

Izmir has one of the most modern Industrial Complexes in Europe and produces most of our Flat Screen TVs, White Goods and Car Parts

But still, Ataturk's vision from the early 1920 is alive and strong today. Had it not been for him and his vision, the areas around Istanbul and Izmir may be much dimmer on the satellite photo than they are today. And Antalya and Ankara may have remained dark spots.

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