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THE ROLE OF THE STATE IN THE NEOLIBERAL RESTRUCTURING IN TURKEY -4-
Opinion(A. H. Yalaz)

Chapter 3

Socio-economic and political developments after the Second World War

Beginning immediately after WW II, the political system, economic strategy of the state, economic and social structure and foreign relations of Turkey underwent fundamental changes at a rapid tempo. The state’s role with regard to economy in general and the accumulation of capital in particular changed considerably. The victory over Nazi Germany had a major impact on the developments in Turkey.

3.1. The economic situation after the Second World War
During WW II the commercial bourgeoisie, the capitalist large landowners and the semi-feudal landlords accumulated enormous capital and wealth, especially through profiteering in black markets and speculation. Profiteering in black markets and speculation were not the only means to accumulate wealth by the commercial fraction of the bourgeoisie. Because of the high rates imposed by the Wealth Levy (1942), ‘Christian and Jewish businessmen not readily able to obtain the sums needed were forced to sell their businesses and real estate to Moslem profiteers.’ (16) The Wealth Levy seriously damaged business confidence in the years after the war. The last years of the war witnessed to further instances of alienation between the state bureaucracy and bourgeoisie, especially the industrial bourgeoisie voiced its discontent at the earliest opportunity (Keyder 1987: 113-114). A new group of trading entrepreneurs arose during the war. This group and the large landowners formed the core of a new political elite that established the Democratic Party in 1946.

In the middle of the 1940s the small farmers made up about 80 per cent of the total population of around 20 million. The number of industrial workers that included many who were really employed in artisanal production was still a very small minority, around 330,000. The position of the commercial bourgeoisie had by the end of the war become so strong that it was no longer prepared to accept the ‘position of a privileged, but essentially dependent and politically powerless, class.’ The large landowners had been alienated by the government’s policy of artificially low pricing of agricultural produce, by taxation on agricultural produce to combat inflation during the war and by the introduction of a land distribution bill (Zürcher 1995: 215-217). The 1945 ‘land reform’ bill involved distribution of state land to the landless and poor peasants. According to Keyder, ‘land distribution amounted mostly to ratification of de facto claims on state land, and that these claims varied with access to material means of production, i.e. tractors and oxen.’ (1987: 126).

As far as economic strategy of the government is concerned, 1946 was one of the turning points in the history of Turkey. In the period 1946-1953 the Turkish state pursued a different economic policy that reflected a different attempt in order to further integrate the Turkish economy into the world economy. Contrary to the economic strategy of the last sixteen years, there was a different conception of economic development that was oriented towards the international market. Priority was given to agriculture, mining, investment in infrastructure and the construction sector. This period was characterised by agriculture-based economic growth that was realised in relatively open market conditions. This was a sign of an integration attempt with the world economy based on agricultural specialisation (Boratav 1989: 80). By so doing, Turkey resumed its role in the1920s as exporter of agricultural commodities, especially to the countries of Western Europe.’ (Singer 1984: 158). Between 1941-45 and 1950 per capita income in Turkey had increased by 15 per cent, while agricultural incomes had increased by 30 per cent.

As Koopmans pointed out, between 1945 and 1950, the government of the Republican People’s Party (RPP) embarked on a more liberal policy with regard to private enterprise, especially trade. The RPP government accepted foreign financial and military assistance. According to the reports of Western experts that contained the ‘modernisational’ explanations, the causes of backwardness of the Turkish economy were internal. They criticised the state industrial enterprises in general and recommended that they be discontinued. The report written by experts from the International Bank for Reconstruction and Development (the World Bank) even recommended the privatisation of the state-owned economic enterprises. Western experts advocated a positive attitude towards free international trade that was supposed to promote the ‘natural’ international division of labour. Western experts, including the ones from the World Bank, stressed the importance of agriculture in the Turkish economy. ‘The reports are rooted in economic liberalism and can be characterized as ‘modernizational.’ (Koopmans 1978: 167-178). According to the model counselled by American experts, ‘the Turkish economy had to live without protectionism and was to specialise within the world market; this new agenda implied investment in agriculture and agriculture-based industry rather than inefficient factories.’ (Keyder 1987: 119). A new economic five-year plan that had been drawn up by the RPP in 1946 and reflected the étatist approach was ditched in 1947 and a new ‘Turkish Development Plan’ was adopted, which, according to Zürcher, echoed the wishes of the Istanbul businessmen and of the DP. ‘It emphasized free enterprise, the development of agriculture and agriculturally based industry (instead of heavy industry), roads instead of railways and development of the energy sector (oil). The RPP congress of November 1947 embraced the plan wholeheartedly. From this time onwards, there was hardly any difference between the economic policies of the DP and of the RPP (...)’ (1995: 225-26).

The position of Turkey in the state system and in the world economy cannot be analysed without taking into consideration of the support of and dependence on the dominant international imperialist power, namely the United States of America. Especially the Cold War played a special role in this context. As Bromley maintains ‘once again Turkey’s position in the state system resulted in support by the dominant international power, as dollar aid flowed into the economy from official loans and grants and military spending. Equally, the post-war regime of accumulation, involving a growing autonomy for the Turkish bourgeoisie and a programme of import substituting industrialization, fitted well with US attempts to sponsor the economic containment of the Soviet Union’ (1994: 126-27).

In order to facilitate American financial assistance and qualify for membership of the IMF, the Turkish state ‘took the so-called ‘7 September Decisions’ of 1947[1946]. Essentially, these meant a devaluation of the Turkish Lira by 120 per cent (the first of many devaluations of the republican era) [in relation to the US dollar] and a number of liberalizing measures aimed at the integration of the Turkish economy into the world economy.’ (Zürcher 1995: 225). At the same time, a number of liberalisation measures were taken regarding international trade in order to facilitate the further incorporation of the Turkish economy into the world economy. The liberalisation of the international trade meant, inter alia, economic penetration of powerful economies of the world capitalist system. Although Turkey had 250 million dollars foreign exchange reserve after the war and there was approximately 100 million dollar trade surplus in 1946, the RPP government looked for external financial assistance. Turkey became a member of the IMF, the WB and the Organisation for European Economic Cooperation (OEEC) in the framework of the Marshall Plan in 1947 (Boratav 1989: 78-79). ‘Having thus become part of the ‘free world’, Turkey was eligible for grants and aid in exchange for military dependence and economic liberalisation. American funds advanced to Turkey between 1946 and 1950 were equivalent to around 3 per cent of GNP, allowing imports to increase by 270 per cent over the war-time average. The largest relative increase was in agricultural machinery (from 1 per cent to 8 per cent of imports) which was consonant with the new economic model counselled by American experts.’ (Keyder 1987: 119).

Since 1930 Turkey had not registered trade deficit, but in a short time after the Second World War it became a country that could not live without trade deficit. This should be seen as a transformation that was determined by the post-war conjuncture (Boratav 1989: 76-79). It should be pointed out that the volume of external trade is an indicator of the degree of dependence of an economy on the world market. Moreover, the excess of imports over exports indicates the extent of net externally financed trade, be it through ‘aid’ or credit.

The period 1946-1953 was, inter alia, associated with some major institutional changes. The victory of the Allies led to climate of ‘liberalism’ in Turkey in the sense of reduced government regulations and the end of control of the government by the Republican People’s Party in 1950, after over a quarter of a century in power. Private sector carried much of the advance in manufacture, but it did so only moderately (Singer 1984: 157).

3.2. Political developments immediately after the war
Regarding the political developments in Turkey after the war, the internal and external factors interacted. There were internal as well as external pressures for political liberalisation and/or liberal democratisation. The so-called Kemalist state (17) was forced by internal and international conditions to embark not only on economic liberalisation, but also on political liberalisation.

As Zürcher pointed out Turkey had ‘a heritage of experiments with parliamentary election since 1876, and of multiparty democracy between 1908 and 1913, between 1923 and 1925 and in 1930.’ (1995: 228). Soon after the war ended Turkey embarked on a multiparty parliamentary system in 1946. Even during the war president İsmet Inönü hinted that there would be a transition to a multiparty system. In his speech at the opening of the parliamentary year on 1 November 1944, he stressed the democratic parliamentary character of the Turkish political system.

In July 1946 a prominent Istanbul industrialist, Nuri Demirağ, founded an opposition party, the Milli Kalkınma Partisi (‘National Development Party’) which was officially registered on 5 September. ‘The NDP’s platform consisted of a call for liberalisation of the economy and the development of free enterprise.’ However, the party was not taken serious by the regime. The four prominent members of the Republican People’s Party who resigned from the party established the Demokrat Parti (Democratic Party) with close collaboration between Inönü and Celal Bayar (a veteran Young Turk). On 7 January 1946, the Democratic Party (DP) was officially registered. In June 1946 two leftist parties were founded: the Socialist Party and Socialist Workers and Peasants Party of Turkey. In December 1946 martial law regulations were used to close down these parties, together with the most active trade unions that were established when the ban on class-based associations was lifted in the same year. One group of members of the DP who considered the DP leadership too moderate and wanted a more uncompromising opposition to the RPP founded the Nation Party in 1948 (Zürcher 1995: 220-26). However, the RPP and the DP were the main contenders for the political power in the second half of the 1940s and in the 1950s for that matter. In other words, there existed in reality a two-party parliamentary political system.

As a consequence of socio-economic developments in the 1930s and 1940s there emerged new socio-economic forces that demanded more political power in order to promote their economic interests. In other words, changes in the economic and social structures and power relationships required changes in the political power structure. The large landowners, the small-town merchants, the small private-sector industrialists ‘made up the social bases of the DP which was formed internally from within the ruling elite.’ The DP emerged with a liberal programme that included rejection of paternalism and control from above, restriction of étatism, acceptation of private enterprise as the organising principle of the new economic order. ‘In the area of interest representation of labour, the programme adopted the principles of free bargaining and the right to strike.’ (Cizre-Sakallioglu 1992: 713). As a staunch protagonist of the private ownership of the means of production, the DP represented the private capitalist and commercial sector in general and the interests of the large sections of the large landowners and the commercial bourgeoisie in particular. In other words, it embodied the strategic alliance of these social class forces in Turkey against the bureaucratic bourgeoisie (the higher echelons of civilian and military state bureaucracy) that controlled a substantial portion of the means of production.

The DP had outside support as well, especially from the United States of America. It was no surprise because the DP was in very much in favour of the economic and political integration of Turkey into the Western world. According to the leaders of the DP, integration into West would be the only way in order to solve all the problems of the country (Kongar 1985: 163-64).

After the war the RPP was forced to make changes in its programme in order to be able to compete with the DP. With respect to a programmatic transformation of the RPP, external factors as well as internal factors played a very important role. ‘In order to stop the erosion of its power base and at the same time to enter into, and receive credits from, international organisations set up in the new international system under the leadership of the USA, the ruling party RPP underwent a programmatic transformation.’ By a decision adopted at the 1947 General Congress of the RPP the principle of étatism was watered down, the scope of operations of the state enterprises narrowed down so as not to hinder the activities of private capital and enterprise (Cizre-Sakallioglu 1992:713 and 727 n.3).

In July 1946 national elections were held. The RPP government brought forward the planned elections from July 1947 to July 1946 in the hope of catching the DP before it was fully established. Out of 465 seats the DP contested 273 and won 62 (Kongar 1985: 160-61). There were allegations of massive vote-rigging. Relations between the RPP and the DP went from bad to worse. They were clearly on a collision course. In July 1947 president Inönü intervened and after holding separate talks with the prime minister Recep Peker and Celal Bayar he gave out a statement to the press. ‘This so-called ‘Twelfth of July Declaration’ legitimized the existence of the opposition and called upon the state apparatus to be impartial and to deal evenhandedly with both parties. It was the decisive intervention by the president which made it clear that multiparty politics were there to stay.’ (Zürcher 1995: 224).

The elections of May 1950 were the climax of the whole political transition period in Turkey. There took a political earthquake place. The DP ‘had won 53.4 per cent of the vote against the RPP’s 39.8 per cent. Under the Turkish electoral system this meant that the DP
received 408 seats in the new parliament against the RPP’s 69.’ (Zürcher 1995: 227).

As to the international factors that forced the political rulers in Turkey to liberalise the political system, there were several factors. The Turkish state wanted to be an active member of the ‘Western world’ and in order to facilitate, this the political rulers of Turkey felt obliged to reform the political system. There was also the pressure coming from the big capitalist powers, especially the United States of America, as the dominant world power, to liberalise the economy and to ‘democratise’ the political system. ‘It was clear to the Turkish leadership that, in order to profit fully from the American political and military support and from the Marshall Plan, it would be helpful for Turkey to conform more closely to the political and economic ideals (democracy and free enterprise) cherished by the Americans.’ (Zürcher 1995: 218-19). The collapse of fascism, according to Kongar, had a demonstration effect in Turkey (1985: 158).

Another external factor that affected the internal political developments after the war was the growing tension between the Turkish state and the Soviet Union. A close relationship between the two countries that existed in the 1920s and the 1930s was over. Under the circumstances, the political rulers in Turkey had felt obliged to seek outside support that they found in the US-led Western bloc. Anti-communism had always been an integral part of the bourgeois political culture in the history of Turkey, but after WW II it intensified.

Interest representation in the labour sector
In 1946 the Law of Associations of 1938 was amended and the ban on establishing class-based associations was cancelled. This cancellation was soon followed by the formation of 600 trade unions, numerous other associations, and even two socialist political parties. ‘However, an additional proviso inserted into the same Act prohibiting these associations from pursuing ‘political’ activities, and a legal amendment in 1952 making it possible for the government to close them down without judicial proceedings, both point to the continuation of the RPP étatism.’ (Cizre-Sakallioglu 1992: 713). In 1947 the RPP government introduced an act that laid down the bases for a national industrial relations system in accordance with the prevailing notions of political and economic order. Although ‘the act had liberal pluralist orientations, the model that came out in the end dropped any such pretensions and leaned heavily on the role of the state in regulating the relationship between itself and organized labour and capital.’ (Cizre-Sakallioglu 1992: 713).

3.3. Socio-economic and political changes in the 1950s
With the forming the government by the Democratic Party, Turkey entered a period that witnessed to enormous internal economic, social and political changes that already began between 1946-1950. The position of Turkey in the capitalist world in general and in the international division of labour in particular underwent dramatic changes.

With regard to the economic strategy, the 1946-61 period could be divided into two sub-periods. The period 1946-53, which is already discussed, included the first years of the DP government, for there was a continuation of the pursued economic policies. We have seen that this period was characterised by the agriculture-based economic growth strategy in relatively open international market conditions.

In early 1950s the DP government pursued an inflationary growth strategy. This strategy aimed at a high level of growth rather than at long-term improvements in the productive capacity or development. ‘Inflationary finance was the most obviously available measure, through increasing credits to agriculture, price support programmes, and rapidly growing public investment.’ (Keyder 1987: 134).

According to Boratav, the sub-period of 1954-61 was the period of exhaustion of the economic strategy and the re-adaptation of the Turkish economy to the world capitalist economy. (18) It became obvious that it was not possible to realise a trade balance within the framework of a liberal trade policy. Some measures, such as import limitations, had been taken regarding the international trade regime. However, the trade deficit continued, and even became chronic. It was a period in which the supporting role of the state sector came to the fore with regard to the private sector and an economic structure arose in which the state sector and the private capital accumulation were integrated as a functional whole (1989: 87). Smit and Van Velzen maintain that the industrialisation policy after 1950 aimed at expansion of the private sector and there was transfer of capital from the state sector to the industrial private sector (Smit 1982: 66).

The Democrat Party tried to reduce the state involvement in the economy in general and in the production in particular and paid more attention to agriculture and the private sector. According to Zürcher, ‘the Democrats succeeded in modernizing Turkish agriculture to a certain extent and they vastly increased the industrial base of the country. The majority of the large industrial firms of present-day Turkey have their roots in the 1950s’ (1995: 240). Before 1955, capitalist development was led by the agricultural sector. After 1955, ‘urban industry began to receive de facto protection. Thus all domestic manufacturing output could find markets and high profits. With such incentives the industrial sector began to grow faster than agriculture.’ The accumulation of the 1950s allowed the development of a domestic industrial bourgeoisie (Keyder 1987: 134, 137).

This economic strategy was not the product of self-brainstorm of the government on its part. In its report on the Turkish economy in the early 1950s, the World Bank ‘placed two major conditions which had to be met if Turkey expected to draw any funds from the Bank:
(1) state investments in industry had to be substantially reduced, and (2) Turkey should seek to finance
its development largely through external sources (i.e. through foreign loans and private foreign investments). The Bank also counselled Turkey to expand agricultural production, light metals, leather and forest products, building materials, light chemicals, ceramics and handicrafts industries, and not make any investments in heavy industry (iron and steel and chemicals) or the cellulose and paper industries.’ (Berberoglu 1982: 81, n.1).
In line with the recommendations of the World Bank, the government decided to privatise the state-owned economic enterprises and many state enterprises were offered for sale to private entrepreneurs at less than the market price (Berberoglu 1982: 67). However, it proved to be impossible to privatise the state-owned economic enterprises ‘because there was not enough private capital and because these shares were not expected to be as profitable as investments in real estate and trade’ (Koopmans 1978: 306). Not only because of the lack of capital, but also due to the reluctance on the part of private investors the privatisation of the large state enterprises was an almost completely dead letter (Zürcher 1995: 236). However, the Petroleum Law in conjunction with the Law for the Encouragement of Foreign Capital, (19) both passed in 1954, ‘accelerated the denationalisation process by transferring the petroleum industry from state ownership to private (foreign) capital. As a result, Mobile, Shell, Esso, Caltex, and a number of other major oil companies came to own large shares in the Turkish petroleum industry.’ Not only in the petroleum industry, but also in a number of other key industries numerous foreign ‘corporations were all participants in the new externally directed industrialization process instigated by the Democratic Party regime from the beginning of the 1950s.’ (Berberoglu 1982: 69-70).

The Law for the Encouragement of Foreign Capital made it possible for foreign capital to invest in Turkey with virtually no restrictions and to enter into joint ventures with Turkish companies. According to this Law, all areas of the economy open to Turkish private initiative were also open to foreign capital; foreign capital was not obliged to go into partnership with native capital; foreign corporations operating in Turkey may repatriate all of their profits to their home country, add to their principal investment, or invest in another corporation of their own choosing (Berberoglu 1982: 68). During the 1950s and early 1960s foreign investment in Turkey was concentrated in the petroleum (i.e. raw material) sector wherein the United States of America enjoyed the predominance. Berberoglu emphasises the role played by the penetration of foreign capital into Turkey regarding the dependent development of a capitalist class: ‘The penetration of foreign capital into Turkey and its close relations with Turkish capital in a number of key industries meant the gradual integration of the newly emergent indigenous industrial bourgeoisie into the worldwide production process, becoming part of a dependent capitalist class subjected to the dictates of the metropolitan transnational bourgeoisie (...)’ (1982: 68).

The trade deficit, together with the debts incurred through foreign financing, had a negative impact on the balance of payments and necessitated external borrowing. In addition to bilateral agreements with the imperialist states, Turkey received loans from international financial institutions such as the WB and the IMF. The extension of additional credits was contingent upon the acceptance of the so-called stabilisation programme imposed by the IMF. This programme was adopted in 1958 (Berberoglu 1982: 72). (20) This so-called stabilisation programme was a forerunner of the IMF packages of the 1970s.

In the period 1954-61 the policy of neo-colonial capitalist development continued, but with different policy instruments. In Keyder’s words ‘the exceptionally liberal trade regime of the early years was abandoned in 1954 and some of the statist measures of control readopted. Import restrictions once again provided manufacturers with sufficient incentive to produce for the domestic market’ (1987: 134). In the second half of the 1950s, the government was forced by the economic conditions to pursue an import-substitution industrialization, especially realised as state investments (Boratav 1989: 85). As Singer pointed out ‘beginning around the mid-fifties and accelerating in the 1960s, the Turkish government encouraged a program of industrialization through protective tariffs and a reliance on domestic markets.’ (Singer 1983: 307). This re-adoption of statism or the ‘new statism’, however, differed from the ‘old statism’ in that it occupied somewhat of a less prominent place in the economy and was more politically directed. It laid great emphasis on production of consumer goods and social overhead capital, such as roads and dams. Some private investments made during 1955-59 initiated Turkey’s more contemporary import-substitution industrialization (Singer 1984: 158). This policy was consistent with the promotion of the private capitalist sector as building infrastructure, such as roads, dams, etc. helps to create the conditions for capital accumulation.

The 1950s witnessed, inter alia, to the increasing political differentiation of the capitalist class and its growing independence from the state bureaucracy or the bureaucratic bourgeoisie. As Bromley points out ‘in the new domestic and international conjuncture, the spread of capitalist relations was rapid. Wider use of market forces, rapid economic development, urban growth and populist mobilization ensued. The ascendancy of the Democrat Party and the growth of the market marked the increasing political differentiation of the bourgeoisie and its growing independence from the bureaucracy’ (1994: 127).

During the 1950s a favourable climate to private enterprise was established that continued in the 1960s and the 1970s. The economic and political power of the commercial bourgeoisie, especially the comprador fraction of it, and the large landowners grew in the 1950s. In this, what I call, the dominant domestic class alliance between these two social forces, the commercial bourgeoisie was the dominant one. Until the second half of the 1950s the position of the industrial fraction of the bourgeoisie was weak in relation to the above-mentioned social forces. It other words, as explained before, the model of accumulation worked in favour of the commercial bourgeoisie. As far as the relationships between the economically powerful classes are concerned, in the period 1954-61 the economic positions of the industrial bourgeoisie and the fraction of the commercial bourgeoisie that involved in marketing of the industrial products were strengthened in relation to the large landowners and the fraction of the commercial bourgeoisie that involved in foreign trade (Boratav 1989: 93).

As far as the distribution of the national income is concerned, the industrial and the commercial fractions of capital that marketed the industrial products benefited the most in the period 1954-61 as a whole. In the same period the share of workers and the salaried sections
of society in the national income increased (Boratav 1989: 93). From 1955 onwards, worsening inflation negatively affected the relative position of the wage- and salary-earners. Inflation as a policy instrument served to transfer income from wage- and salary earners to industrial and commercial fractions of the capitalist class and the large landowners and capitalist peasants.

Organised interest representation in the labour sector
The first important source of urban employment in Turkey after 1954 was services, then industry replaced it. At first small-scale manufactures emerged, after the middle of the 1950s larger factories began to emerge, ‘with the number of workers in plants of more than ten workers doubling from 163,000 to 324,000.’ (Keyder 1987: 135-136). According to International Labour Organization’s Yearbook of Labour Statistics, 1965, cited by Berberoglu, there were 643,000 industrial workers in 1951. ‘By 1960, this number had risen to 975,509 - a 52% increase over the 10-year period. The proportion of industrial workers to the total labour force grew from 5.1% in 1950 to 7.5% in 1960.’ The size of the working class as a whole totalled 2, 437, 135 or 18.7% of the labour force in 1960 (Berberoglu 1982: 73).

In the period 1948-58 the number of workers increased by 113%, while the increase in the number of unionised workers was 405%. ‘Accordingly, the percentage of unionized workers in Turkey increased from 15.8% in 1948 to 37.4% in 1958.’ (Berberoglu 1982: 74). According to Cizre-Sakallioglu, ‘the DP government shaped, dominated and incorporated the labour movement into the political system along lines similar to that of its predecessor, the RPP.’ In other words, ‘the DP government continued structuring the interest representation system in labour sector more by imposing strict controls and constraints rather than by granting organizational and policy inducements in exchange for the political cooperation of labour.’ (Cizre-Sakallioglu 1992: 714).

In 1952, the Confederation of Turkish Labour Unions (Türk-Is) was founded with assistance from the International Conference of Free Trade Unions (the ICFTU).Through centralisation of the trade unions, the Turkish state managed to co-opt the labour movement. The DP government opted for integrating the potentially dangerous working class into the system by the ‘legalising’ and ‘regulating’ and ‘depoliticising’ role of the state. Banning political activity on the one hand and co-opting trade union leaders into the system on the other hand set the pattern of dependency of labour unions on the state for any organisational and policy benefits. ’It seems appropriate to define state-labour relations under the DP as one subtype of inclusionary state corporatism, whereby it is the state which legalizes and regulates the unions and co-opts its leadership for the purpose of depoliticizing, weakening and dominating labour.’ (Cizre-Sakallioglu 1992: 715-16). In other words, there was a class collaboration on the part of the trade union bureaucracy with the capitalist class through the agency of the capitalist state that, as the embodiment of the collective capital, represented state capitalism and defended the interests of private capitalist sector, especially the industrial fraction of capital against the working class.

Political developments
Many national and international students, observers and politicians regard the landslide victory of the DP in 14 May 1950 elections as a watershed in the Turkish political history. There were a number of differences between the two main parties, the RPP and the DP, as far as the social background of parliamentarians is concerned. ‘The most striking difference’ of the DP representatives ‘from the RPP was the virtual absence of representatives with a bureaucratic and/or military background. It was clear that a significantly different section of Turkey’s elite had come to power.’ (21) (Zürcher 1995: 231). Another difference concerned the state and the party relations. As Zürcher pointed out, under the RPP, the state apparatus and the party organisation were merged. During the DP period, at least in the early 1950s, this link between the state and the party as one of the controlling and steering instrument with regard to society was broken. The DP government wanted to establish control over the bureaucracy and the military and in the process the state and party tended to intertwine with each other again. This time ‘the party dominated the bureaucracy, not the other way around’ (Zürcher 1995: 232).

In 1954 elections the DP increased its majority in the parliament, 503 seats for the DP against 31 seats for the RPP. From 1954 onwards the DP government took a number of measures that reflected the growing authoritarianism of the government. Opposition to the authoritarian line of the DP government and Adnan Menderes, even within the DP, started to grow. In December 1955 the ‘liberal wing’ broke away from the DP and formed the Freedom Party and became the biggest opposition party. ‘The Freedom Party seems to have had the support of big business, which by now wanted a more sophisticated economic policy with a degree of planning which Menderes would not provide.’ The early elections in 1957 produced a major setback for the DP. It had 424 seats, the RPP had 178, the Freedom Party had 8 and the ‘ultra-conservative’ Republican Nation Party had 4 seats (Zürcher 1995: 242-243). The DP ‘had been brought to power on a programme of economic and political liberalisation but from 1954 onwards the latter was to a large extent sacrificed to save the former.’ (Zürcher 1995: 241).

The worsening economic crisis, increasingly repressive methods of the DP government, increasing social discontent and unrest led to a military coup on 27 May 1960. The military take-over opened a new phase regarding the through planning institutionalised ISI as the dominant mode of capital accumulation. The failure of the economic model of the fifties to provide stable accumulation, according to Bromley, led to military coup of 1960. ‘(...) The new regime initiated a more technocratic and planned form of development, inaugurating a national capitalist programme of import-substituting industralization through the state allocation of foreign exchange and credit, combined with an expansion of welfare entitlements in pursuit of social and industrial co-operation (...)’ (Bromley 1994: 127).
The military coup d’état, in Keyder’s words, ‘ended the preliminary phase of import substitution and inaugurated a period of an overt policy of industrialisation.’ Now, we turn to examine this economic model of the 1960s and 1970s.

3.4. Climax of the import-substitution industrialisation
The period between the 1960s and the middle of the 1970s was a period of further and rapid expansion of capitalism and the import-substitution industrialisation as the dominant mode of capital accumulation in Turkey. The Turkish state and the large-scale industrial concerns embarked on an economic strategy of ‘inward oriented’ or towards internal market oriented growth based on protectionism and import substitution. Before we deal with this period in detail let us say a bit more on the import-substitution industrialisation as a mode of capital accumulation.

Import-substitution industrialisation as a mode of capital accumulation
The import-substitution industrialisation is an economic, or rather an industrial, strategy that aims at building national industrial capacity behind protectionist walls to replace imported goods with locally produced ones. It is an inward-looking economic strategy based on domestic mass production and consumption. The import-substitution mode of capital accumulation requires a protected domestic market. Protectionism in the forms of tariffs and subsidies means state intervention in the accumulation process. The state provides protective walls so that a country can build its domestic industry. The state plays a crucial role in this mode of capital accumulation. This economic model gives great powers to the state officials or the bureaucratic bourgeoisie regarding the allocation of resources. Because of the protective measures inherent in this economic model, the industry is internationally not competitive. Therefore, the import-substitution accumulation model of capital is essentially based on production of absolute surplus-value, rather than relative surplus-value which require higher technological level and thus higher labour productivity.

Because of the terms of trade for industry improve in relation to agriculture, ISI works in favour of the industrial fraction of the capitalist class, at the expense, above all, of the agricultural sector in general and the peasantry in particular. Through this particular mode of accumulation resources are transferred from agriculture to industry, e.g., from the rural social classes and strata to the urban social classes and strata. In this economic model the urban population forms the target group: mass production and mass consumption in the cities.

The coup of May 1960: an intervention in the process of capital accumulation
This was the first military coup d’état in the history of the ‘Turkish Republic.’ The military take-overs represent, inter alia, one of the most striking manifestations of the direct state intervention in the class struggle in general and in the economic relationships and the conditions of capital accumulation in particular. The coup of May 1960 was not different. Basically, it was a direct intervention in the interests of the rising large industrial fraction of the capitalist class in the face of insistence of the DP government to stick to its old line of giving priority to agriculture and trade. According to Keyder, ‘although it was the prime beneficiary [of inflationary growth], the larger industrial bourgeoisie did not seem happy with haphazard policies of protection and credit.’ (1987: 134). As far as the burgeoning industrial capitalists of Istanbul are concerned, the military intervention ‘promised a rational and planned allocation of scarce resources, especially of foreign exchange, in service of rapid development.’ (Keyder 1987: 145).

The 1960 coup served the interests of the imperialist capital as well. The DP government of the 1950s had faced criticisms with regard to its economic policies not only from within, but also from without, especially from the economic and financial representatives of the big imperialist powers, such as the IMF, the WB, the OECD. They even urged the DP government ‘to form a planning board in order to impose some logic and control over public spending and the allocation of foreign exchange’ and in 1959 a planning board was covertly formed ‘since Menderes had always denounced any such activity that had statist overtones.’ (Keyder 1987: 135).

Keyder argues that forcing the Turkish government to adopt more planning meant that the hegemonic power, i.e., the United States of America, exempted Turkey from the liberal market model. Keyder is right when he states that ‘the protectionist scheme, aided by planning, could only mean a policy of import substitution.’ (1987: 135). After the coup, the State Planning Organisation (SPO) was founded. The long-term allocation of resources was determined by the investment policy which, in its turn, was determined by the plan targets (Boratav 1989: 95). As Ahmad maintains ‘the conservative politicians understood planning to mean ‘growth planning’, whose purpose was to achieve certain quantitative targets without altering the status quo in any drastic way. It was not to be an overall system of intervention. Its function was to be limited to the support-and therefore the development- of the private sector. Thanks to the efforts of the SPO, the sixties were the golden years of Turkish capitalism.’ (Ahmad 1977: 275-76).

Extensive and intensive development of industrial capitalism in Turkey
It may seem strange to some to hear that the nerve centres of the international capital forced the Turkish government to adopt an import-substitution industrialisation model that is protectionist by definition. However, there is no need for astonishment, since this model is not independent from but, on the contrary dependent on international capital. It does not represent a rebellion against the world economic order, but functions within its framework. ISI does absolutely not represent an attempt to reduce absolutely the degree of integration of the national or domestic economy into the world economy. It is dependent on the importing of technology, producers’ goods, and frequently primary and intermediary inputs, and ‘aid’, credit, foreign exchange, etc. In other words, without external ‘feeding’ this strategy cannot function and survive. As we shall see, the Turkish economy became so dependent on imported inputs, including capital, that it experienced severe crisis. Because of all these I incline to call this economic strategy as ‘import-dependent import-substitution industrialisation.’ It does ‘not constitute an obstacle to the functioning and evolution of the world economy’ (Keyder 1987: 152). As Keyder argues
‘(...) the relocation of certain standard-technology industries to countries pursuing an ISI strategy was
desirable from the point of view of international capital pursuing a world-wide strategy. In particular, since the domestic markets of countries following the ISI strategy were not closed to foreign capital, which could be invested in order to exploit this protected market, such a relocation of production might have corresponded to a globally rational strategy from the point of view of international capital (...)’ (1987: 151-52).
ISI is neither an anti-imperialist nor an independent development strategy. It does not promote economic independence of the domestic economy from international capital. On the contrary, as the case of Turkey shows, it requires the involvement of foreign capital, expands and deepens the economic ties with it. The development of capitalist production and expanded reproduction and capital accumulation in Turkey was and still is very dependent on the location of the economy in the world division of labour. It finds itself in a situation of dependency on imperialism and in the post-1945 period as a whole the imperialist capital had very substantial influence upon the economic development. Smit and Van Velzen describe this phenomenon short but to the point when they argue that the foreign influence on the production process increases in accordance with the increase in the size of production. They are right when they say that a part of the Turkish private sector cooperated with the foreign companies, while another part became increasingly dependent on international financial sources and imports. Consequently, the functioning of a considerable part of the Turkish economy was codetermined by the availability of foreign exchange and the international financial organisation had an important voice in the economic policy (In Smit 1982: 54).

In Turkey, this strategy, as a rule, took the form of a joint venture in the 1960s and 1970s. The foreign company supplied technological know-how and the necessary licences and most of the time part of the components and raw materials, while the Turkish partner supplied part of capital, the labour force, the distribution system and the influential contacts (Zürcher 1995: 279).

In terms of economic growth, the import-substitution strategy was successful. The average rate of growth between 1963 and 1976 was 6,9% (Zürcher 1995: 279). In the 1963--77 period the annual growth of industrial production was more than 9% (Hale 1981: 147). The share of value added of the manufacturing industry in national income was 10% in 1963 and 19% in 1970 (Kepenek and Yentürk 1996: 322). In terms of share in industrial production, the role of the state economic enterprises was still of considerable importance which produced about 40 per cent of total industrial production

The state, the industrial bourgeoisie, labour and the mode of accumulation
As we have already seen the export-led economic growth based on agricultural expansion during the early 1950s in Turkey had created the preconditions for the implementation of an inward-looking economic strategy. These preconditions included ‘an accumulation of capital in private hands, a sufficiently large internal market, largely resulting from transformation of the agricultural sector, an infrastructure, and a technological background on which new industrial investment could be based.’ (Keyder 1987: 152-53).

According to Keyder, the politicisation of certain economic allocation mechanisms and the constitution of a domestic market provide the two defining features of the political economy of Turkey during 1960-80 period. ‘Both of these dimensions involve, separately and in their intersection, a regulation by the state of the mode of accumulation. This mode of accumulation served the needs of the industrial bourgeoisie while also responding to the demands of the state functionaries and the intelligentsia who had been eclipsed during the previous decade.’ (Keyder 1987: 150). The protection of domestic industry was the defining feature of ISI in the 1960s and early 1970s which primarily benefited the domestic industrial fraction of the capitalist class. The consumption patterns of the ruling classes and of the groups that control the political decision making process were determining factors regarding the allocation of ‘scarce’ resources. One of the characteristics of the period 1962-76 was the ‘populist’ distribution policy of the political regime. The bloc of the ruling forces (large landowners, big commercial and industrial bourgeoisie) dominates the political power and all economic policies. However, this happens within the framework of constraints necessitated by the parliamentary form of the political regime which requires concessions to the masses of workers and peasants (Boratav 1989: 95, 99).

The Turkish governments used several instruments to implement this state-led private-sector-favouring strategy. These included extensive import restrictions, high protective tariffs, manipulation of the exchange rate of the Turkish lira, bank credits to provide incentives to favoured industries to engage in capital formation and exports, tax rebates, high guarantee prices for agricultural produce, the relatively high industrial wage levels in state sector and large manufacturing private sector, etc. Keyder summarises the expansion of the modern capitalist sector in the 1960s:
‘ (...) From a small base in the late 1950s, the modern capitalist sector expanded at a rate well above the average for the whole of the manufacturing sector, which was around 10 per cent per annum. During this expansion modern industry not only came to employ most of the organised labour force, but it also created a non-basic population of petty producers and services around its domination. This was a process of continuing colonisation accompanied by the destruction of previously existing forms of production (...)’ (1987: 153).
Like many other scholars and students of Turkish economy, Richards and Waterbury emphasise that the economy’s ability to earn foreign exchange was the Achilles’ heel of ISI, whether under public or private auspices (1996: 183). In other words, ‘new industries were heavily dependent on imports of foreign parts and materials for production, and thus on the availability of foreign reserves to pay for them’ (Zürcher 1995: 280). The struggle for ‘scarce’ financial resources between different fractions of capital in general and between the big industrialists in particular intensifies as the financial dependence on external sources increases. How should the resources be allocated? Who decides what to get, and how to get the necessary funds in order to survive and to carry on with the production? At this juncture, the role of the state becomes clear concerning the functioning of ISI, for foreign reserves were held largely by the government. The influential contacts or access to the right bureaucrats in the state apparatus, rather than industrial and commercial qualities become vitally important. The becoming of the large industrial bourgeoisie as the dominant fraction of the capitalist class in the 1960s shows that this fraction benefited the most from the allocation of ‘scarce’ foreign exchange. Through ISI the big industrial bourgeoisie substituted for the big commercial bourgeoisie concerning the leadership of the capitalist class.

It must be borne in mind that, as far as the pursued economic model is concerned, the state bureaucracy (civilian and military) in Turkey has developed a sense of own interest over the years. It is not a simple servant of the economically powerful social classes, but it became self-conscious with its own interests regarding the pursued economic strategy and the issues related to it. In the 1960s the civilian section of state bureaucracy in Turkey controlled and still controls a significant portion of the economy through expenditure of revenue as well as through direct control over a substantial portion of the means of production as the very existence of the state economic enterprises shows.

Interest representation of labour
In the 1960s and 1970s, in accordance with the requirements of ISI, the state legislated and institutionalised collective labour rights and a social security system, excluding unemployment insurance. These served to incorporate a segment of the working class, namely the unionised workers of large industrial enterprises and the state economic enterprises, as well as to expand the protected domestic market without which there could be no ISI.

High rates of growth in industrial production in the 1960s were accompanied by an increase in the size of the working class. ‘While the number of workers in industry totalled 975,509 in 1960, it doubled to 1,918,601 by 1970. The proportion of industrial workers in the total labour force grew from 7.5% in 1960 to 12.1% in 1970.’ (Berberoglu 1982: 97).

The period 1960-71 is a milestone in the working class movement in Turkey, not only in terms of many legal obtained rights, but also in terms of growing class-consciousness, unionisation and militancy of a small section of the working class. The second Labour Code enacted in 1963 legalised the right to strike in sectors of the economy that did not ‘jeopardize national security.’ There were 409 unions in 1966 and in 1970 this number reached to 717. The ‘union membership stood at 250,000 in 1959, it increased to 300,000 in 1963 and to 600,000 in 1965.’ (Berberoglu 1982: 101).

Türk-Is as ‘representative’ of the labour in relation with the capital and the state was, being under influence of American type job unionism, instrumental in channelling working-class struggles into narrow economic concerns. Politicisation in the society in general and growing dissatisfaction with the policies and actions of the Türk-Is leadership and militancy in the working class movement in particular led to establishment of Confederation of Revolutionary Trade Unions (DISK) in February 1967.

Real wages in modern industrial sector rose by approximately 50 per cent in the 1960s and 1970s. These gains were reserved for a limited part of the labour force: the workers in large industrial firms. These workers ‘developed into a kind of labour aristocracy.’ The vast majority of the labour force which worked in small establishments was largely unorganised and earned much lower wages (Zürcher 1995: 286). The protection of the domestic market and granting relatively high wage rises to a small segment of the working class were related. It
would serve to expand the domestic market for the products of the protected industry on the one hand, and it could buy off industrial and social unrest on the other. Moreover, thanks to the protectionism, high wage rises could be easily translated into price rises for industrial goods and that was what happened during the 1960s and 1970s.

In the 1960 and 1970s ‘presentation of the interests behind the new model of economic regulation’, according to Keyder, had ‘relegated the working class to a passive status without any contribution to the designation of policy . Neither through increasing wage demands nor as a political force was the organised labour active during the 1960 transformation.’ (1987: 149). Cizre-Sakallioglu thinks somewhat differently from Keyder. Although he subscribes to the idea that the labour sector was structured from above, he argues that the process involved the neo-corporatist mechanisms of trade-offs in terms of both restrictions of liberty and benefits (1992: 717).

Towards the end of ISI
Since the ISI strategy was dependent on external financing through ‘aid’, loans and workers’ remittances, whenever there was a bottleneck, the Turkish economy faced balance of payments problems as it was the case in the late 1960s. Growing politicisation, polarisation, radicalisation, strikes, factory occupations, mass demonstrations were all manifestations of the worsening economic situation and social unrest. ISI was in deep trouble and the IMF prepared another classic program for the ailing Turkish economy in August 1970.

This was no cure and on 12 March 1971 the military high command issued a ‘memorandum’ demanding then prime minister Demirel’s resignation. This was the second coup d’état that aimed at, inter alia, to regulate the process of capital accumulation. Under semi-military dictatorship from 12 March 1971 until October 1973, the so-called technocratic governments ‘ruled’ the country. Strikes were banned, collective bargaining was suspended, wages were frozen, many political activists and intellectuals were killed or jailed, the trade union leaders who opposed the economic policies of the government were persecuted and jailed. In October 1973 general elections were held and civilian government was installed. However, all these were not enough to provide the necessary economic, social and political conditions for setting the tracks right regarding ISI. The combination of the structural deficiencies of ISI and the oil crisis of 1973- 1974 signalled the end of a period.

Read more... Chapter 4

(16) Non-Muslims were assessed at ten times the Muslim rate.
(17) The Turkish state is called ‘Kemalist’ because, Mustafa Kemal (alias Atatürk), the leader of the Turkish Independence War, was the principle founder of it and it is supposed to have a distinct official ideology called ‘Kemalism’.
(18)In September 1953 the government established import and foreign exchange controls. This marked the end of the five-year period of gradual opening up and rapid integration into the world economy (Zürcher 1995: 239).
(19) This law was largely prepared by the president of the American Committee for Foreign Trade, Clarence Rendall (Koopmans 1978: 179).
(20) The DP government used Turkey’s strategic position in the Cold War to get financial aid and easy borrowing terms (Zürcher 1995: 239).
(21) I make a distinction between having the political power and forming the government. As long as the bureaucracy and the military are not politically controlled by the party that forms the government it cannot be said that that party has the state power.