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Turkey: Liberal Interlude
Country Study > Chapter 3 > The Economy > Role of Government in the Economy > Liberal Interlude

LIBERAL INTERLUDE


Scholars traditionally have stressed the significance of state intervention in the economy during the early years of the republic, but more recent research indicates that Turkish economic policy was relatively liberal until the 1930s. The government made significant investments in railroad and other infrastructure projects, but the Law for the Encouragement of Industry of 1927 and other measures encouraged private enterprise. Moreover, Turkey's economy was relatively open to international markets during the 1920s. Under the provisions of the Treaty of Lausanne of 1923, the capitulations were abolished, but Turkey could not introduce protective tariffs until August 1929. As a result, tariffs remained low, and the Turkish lira was convertible and floating. Foreign interests invested in both public and private enterprises, helping to initiate industrial development. During these early years, economic growth was satisfactory, but the country ran chronic foreign trade deficits despite the continued fall in the value of the lira.

Turkish economic development reached a turning point with the Great Depression. By 1930 foreign markets for Turkish agricultural products had collapsed, causing sharp declines in the prices of agricultural goods and a corresponding decline in national income. Dissatisfied with the slow development of industry, Turkey's leaders began to look for alternative policies. During the late 1920s and the early 1930s, economic and political thinkers discussed alternative approaches to national economic development. The interventionist trend in Western economic thinking, represented by works such as John Maynard Keynes's The End of Laissez-Faire (1926), influenced the theoretical debate. The apparent successes of the Soviet Union's drive to develop heavy industry under its First Five-Year Plan (1928-33) also impressed Turkish thinkers, although in the end Turkish policy borrowed primarily from the West.

Data as of January 1995




Last Updated: January 1995


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Turkey was first published in 1995. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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