II. The Economy
In a liberal economy, the driving force is the individual and individual enterprise that freely operates in the free market system based on competition. Thus, the individual talents will be valued in the best manner and the creative power of the individual will be the major factor in the unfettered emergence of dynamic institutions. The social and economic structure that will develop as a result is the strongest and most realistic guarantee of human welfare and happiness.
We believe that a state, which interferes and intervenes in an economy (statism), is against the interests of the individuals and thus, the society. This includes people working for the state. State, with the taxes collected from the people, can not and has not been able to produce neither product, nor service that in turn meets people’s requirements of good quality and optimum price. Furthermore, inspire of the fact that the cost of these services and goods produced is borne by the peoples in the form of taxes, the benefits, if any, always go to a very few.
In the liberal model, the state does not engage in any economic activity including industry and commerce and only steers it at a macro level through means of i.e., tax incentives. Although the state may undertake certain infrastructure projects, which the private sector may find not profitable even then it is necessary to investigate into the possibility of having them, carried out by the private sector and/or introduce schemes to encourage it.
In this model, the state does not need large budgets. Therefore, inflation does rot occurs and taxes are reduced to reasonable and/or minimum levels.
With this understanding, we aim to make radical changes in the structuring of the economy that will primarily increase Turkey’s entrepreneurial and competitive power in domestic and international markets.
The Recent Past
Economic life is determined by political will that is, by political choice. Therefore, we feel that it is necessary to first make an evaluation and/or criticism of Turkey’s recent past with regard to political choices vs. economic development. However, let it be known that we are primarily concerned with the present and not the past because, we believe that the Turkish people (yesterday) have learned their lessons and their concern is for tomorrow.
The fact that Turkey stayed as a developing country since the founding of the Republic is due mainly to the statist mentalities that governed her. With the exception of two short periods when liberal policies in economy were even if partially employed (1950-60 and 1983-87), Turkey always chose a closed economic system with the pretext of developing her own economic institutions. The opportunities offered for rapid economic development during the period following World War II were unfortunately not seized. Similarly, the governments that resumed office during the 60’s and the 70’s when global trade was fast expanding failed to carry out the much needed reforms for Turkey to benefit and Turkey fell behind even South Korea.
At this point, we would like to emphasize the constructive efforts of both the Democratic Party (DP) of 1950-60 and the Motherland Party (ANAP) of 1983-1987 with regard to liberalization of the economy.
DP, even before it came to power in 1950, facilitated the transition to the multiparty parliamentary system through highly constructive efforts as the opposition. When it was in power, DP helped prove the entrepreneurial skills of Turks as a nation by implementing liberal economic policies between the years 1950-54. We remember the DP governments of this period and particularly, Adnan Menderes with gratitude.
Similarly, radical liberal economic reforms were attempted by ANAP in the years between 1983 and 1987. Although not completed, Turkey thus opened up to the world for the first time. Even in this partially free market system based on competition, the country seized the opportunity for rapid development inspire of the fact that protectionism was on the rise all over the world.
The main weakness of this period was again the statist mentalities, ingrained also by political circumstances, resulting in continuing intervention of state in the markets. The state in this period continued to be the ardent, most ruthless rival of individual enterprise and the private sector. Privatization programs launched were not brought to a successful conclusion; huge infrastructure, defense and energy projects were undertaken by the State with the idea, nay the deceit, of the “social state” and the people were condemned to unbearable domestic and foreign debt burden.
The governments led by Turgut Özal in the 80’s were also unsuccessful in carrying out fully the political, economic and structural reforms that were required by the competitive, free market system and the opening up to the world. ANAP governments failed to make the radical reforms in the Constitution, the state administration, bureaucracy, financial and fiscal institutions, their programs foresaw.
However, we must admit that the 1980’s once again tested the entrepreneurial character of the Turkish people and Turks successfully passed this test proving that they can create miracles in a fully open system. We would thus also like to emphasize that we also remember Turgut Özal with gratitude.
The political instability around the world starting 1980’s and continuing to early 1990’s had great impact on economic life. We feel that the opportunity to build on the outcome has also been wasted. The unique opportunity presented to Turkey following the collapse of the communist block has not been utilized; resolute and courageous steps have been taken in neither political, nor social, nor economic areas.
Today
Today, the public sector debt which is a product of the statist mentalities governing Turkey has reached 15% and the national savings which rose up to 26% at the end of 1980’s fell to about 15%. This means that the borrowing requirement of the State is greater than all the savings in the economy. It is estimated that the public sector’s domestic debt, together with interests, will reach 570 trillion TL by the end of 1994. Similarly, foreign trade and budget deficits in the first half of 1994 have grown in a frightening measure as compared to the previous year.
Especially with regard to the present economic system, it is difficult to understand what has been relied upon in incurring this enormous debt burden. This burden is placed on our backs: On the backs of 60 million Turks. The even more dramatic aspect of this reality is this: The present economic system blunts the entrepreneurial power, the creativity, and the potential productivity of our people. The privatization program is dragging on; the taxes are not being collected at the rates at which they were assessed as they were to start with based on a very unfair and unrealistic system and the non-taxed economy is continuing to grow. What then? Who is to pay for the Debt State is incurring, courageously incurring?
In brief, Turkey today has once again entered a period of severe instability and uncertainty in the economic and of course, political and social aspects of life and we are experiencing the perhaps most troubled period in the history of the Republic.
Such an environment ties the hands of the people, of the individual who, we believe, can be made the engine of the economy; whose productivity we rely upon. This environment destroys individual enterprise, creativity and thus, productivity and has an extremely adverse impact on economy. The man on the street is hopeless, unhappy, worried and highly pessimistic regarding near future. Individual and social welfare and happiness seems to be further away than ever.
Turkey, possessing the resources she does (ref. A General Assessment) has the potential to become one of the leading countries of the world and in a very short time. The problem lies in not being able to carry out the radical reforms in state administration and thus, in the economic system.
Turkey needs to firmly establish a liberal system that values the individual, that puts the individual first and sincerely believes in his/her productive power with regards to development of her institutions and she needs to do this with young and faithful political and bureaucratically cadres.
With the belief that man is both the end and the means of economic development, the Liberal Democrat Party aims at establishment of a rational economic system where the individual and institutions created by the individual are fully liberated and at radically restructuring the economy to this end.
II.l. The Place of the State in the Economy
II.l.l. In line with the policy that the state does not execute, it governs; the State will not engage in economic activity. In this way, state expenditure will dramatically fall and public deficits which paralyze the economy will be eliminated.
II.l.2. Activities of the State will be governed by the principle of efficiency at all levels and the limited number of public employees will be remunerated on the basis of productivity and performance.
II.l.3. The Central Bank will be made autonomous. Its duty will only be to issue as much money as is needed by the economy. This need will be determined according to the rate of growth of the economy.
II.l.4. All state-owned enterprises will be privatized. Those that can not operate rationally will be closed down.
II.l.5. Prevention of the formation of monopolies and trusts is regarded as one of the basic duties of the State in the economy. This will be done by way of laws enacted and courts specialized in this area.
II.2. Taxes and Incentives
II.2.l. Absolute tax exemption will be granted to domestic and foreign financing. In this way, we aim at significantly reducing the cost of finance and accelerating economic activity.
II.2.2. Tax legislation will be simplified. The scope of taxation will be narrowed down. Taxes will be reduced to levels of about 10a/a. In this way; we aim to encourage tax payments as well as to extend collection. Prevention of unfair competition in a given sector will be made possible through taxation.
II.2.3. Progressive taxation (the system of taxation where tax rates increase as level of income increases) will be abolished. In this way, a practice that serves only as a means of punishing the rich will be abandoned.
II.2.4. Tax inspection and tax collection will be carried out through privately owned organizations, using the most efficient systems. Those who fail to pay their taxes will be severely punished.
II.2.5. Incentives will be abolished and all state organizations established for this purpose including State Planning Organization (DPT) will be closed down.
II.2.6. Regional and sectored incentives will be provided through taxation policies.
II.2.7. National and international mass communication (media) and culture sectors will be encouraged through total tax exemption. In this way, similar investments in Turkey will be encouraged thus, facilitating Turkey’s globalization and transition into the 2lst century. We believe that the creation of such an environment will also contribute to Turkey’s image abroad
II.2.8. Keeping companies operating in the needy regions exempt from tax or taxation will provide regional incentives.
II.2.9. In tax incentives, the State will guarantee an incentive period.
II.3. Financial Markets
II.3.l. Taxation of organizations and institutions in the finance sector, i.e. banks, will end with the understanding that these organizations channel people’s savings into the economy. These organizations will pay no other than annual income tax. In this way, cost of financing will be brought down dramatically.
II.3.2. We believe that the basic objective in practices related to the financial markets is to achieve democracy in the economy.
II.3.3. One of the fundamental conditions of democracy in economy is to develop competition in financial markets. In line with this view, the market mechanism will rule financial markets. Money and, capital markets and institutions specific to these markets will be restructured as a whole. Aiming at consolidating trust in the financial markets, this approach will ensure that they perform their primary function of providing resource to the economy, effectively.
II.3.4. It will be ensured that the financial markets of Turkey integrate with the global financial markets and arrangements will be made in these markets to protect the investors.
II.3.5. Legislative changes that make it easier for companies to go public will be made with the aim of developing and stabilizing the capital markets. This will help spread capital ownership and improve the income distribution.
II.3.6. The Turkish capital market will be brought up to international standards. In this way, it will be ensured that the market develops in an open, reliable and stable environment.
II.3.7. In order to enlighten and inform the public, arrangements will be made to enable investors to have inexpensive access to correct information used in the decision making process.
II.3.8. Legal arrangements will be made to protect the rights of the investors with regard to financial institutions.
II.3.9. In this context, private sector insurance companies will ensure bank deposits. Each bank will be expected; to let the public and the depositors know clearly, the insurance company that insures its deposits and the coverage of such insurance.
II.3.10. Banks that do not have their deposits insured would also be allowed to operate but they will be required to warn their depositors of this fact.
II.3.11. It will be made legally and red tape wise easier to establish a bank.
II.4. External Economic Relations and Foreign Capital
II.4.l. Priority in external economic relations will be given to Turkey’s neighbors. A poor and unhappy neighbor is of no use to anyone and that the well being and happiness of our neighbors is as important for us as our own. With this belief, border trade will be freed.
II.4.2. Economic relations with foreign countries will be in general within the framework set by liberal policies. While full freedom will be granted to the entrepreneurial power of the Turkish people, it will be granted to foreign entrepreneurs in Turkey. We believe that this will greatly contribute to intensification of movement of money, goods and labor among peoples of the world and will bring about wealth and peace.
II.4.3. Turkey’s geo-strategically advantage of being a bridge between the East and the West, as well as the North and the South will be fully utilized and doors will be opened up to entrepreneurs of all countries without discrimination. We believe that the key to our country’s prosperity is our geographical position on the world.
II.4.4. We believe that Turkey should keep her economic relations with the entire world alive and developing and must rid her of all taboos. This is truer as the world goes into the 2lst century where global trade will be dominated by great blocks.
II.4.5. With this belief, customs will be opened up and duties reduced to zero levels. Effective customs inspection will be carried out for weapons and drugs only and those who are engaged in the trading of such will be severely punished.
II.4.6. Full membership to The European Union’ will not be relied upon. Turkish customs will be brought down not only for the European Union member countries but also, for all countries of the world. We believe that Turkey should not abandon her present objective of full membership to EU but should refuse to wear the bureaucratic straitjacket of this organization.
II.4.7. The Cabotage Law will be repealed and navigation fully liberalized, along with the privatization of all ports and piers.
II.4.8. No limits will be imposed on foreign capital. Foreign capital will be treated like local capital and be subject to similar legislation. Turkey will be applying zero taxation to foreign financing as well (ref. II.2.l.) thus becoming a very attractive country for foreign capital.
II.4.9. No incentives will be granted to exports (ref. II.2.5., II.2.6.) because, we believe that abolition of customs in foreign trade will serve as the greatest incentive.
II.4.10. It will apply to imports. All goods except, arms and drugs and/or narcotics will be allowed to enter Turkey with zero customs and zero taxation. Tax will be levied on the domestic sale of these goods.
II.5. Agriculture and Industry
II.5.l. 40% of Turkey’s population is currently engaged in agriculture. Mechanization and modernization in this sector is a primary objective.
II.5.2. The agricultural sector will receive incentives through tax exemptions and/or zero taxation in inputs and the sector will be regarded and made of a part of commerce meaning, tax incentives will be extended to those who are engaged in the trading of agricultural goods. Tax exemption will also be granted to those who purchase, store and process agricultural goods. In this way, we hope to ensure that their benefits rebound to the producer.
II.5.3. State organizations such as Soil Products Office (TMO), Nut Producers Union (Fisko-Birlik) etc. will be abolished and an end be put to the practice of floor prices in agricultural production. Although the duty of such organizations is speculation, we believe that this important task has never been effectively executed. Turkey’s agricultural produce has always been bought either too cheaply or too expensively from the producers by these organizations only to be burnt or rot and with whose money but the tax payers! Neither the producer nor the consumer has ever been satisfied and happy.
II.5.4. Speculation in agricultural production will be permitted in such a way as to enable speculator organizations with large capital to establish future contracts. In this way, the producer will know the price he/she will receive for his produce earlier in time and more precisely through a modern and efficient system. We will not allow agricultural production to waste thus satisfying both the producer and the consumer.
II.5.5. The State will not pursue a particular policy in regard to industrial production. In the liberal system, the private sector industrialists will make their own decisions and act upon them more effectively than the State ever will. We believe that the sound investment decisions of the private investors will automatically reflect to realistic industrialization of the country in general.
II.5.6. As a result of above the mentioned policies adopted in finance, commerce and transportation sectors, industry will be provided with much cheaper resources for fast development. The marketing advantage offered by Turkey’s geostrategic position is believed to be another source of incentive for the industrialists.
II.5.7. The State will transfer all enterprises in the defense industry to the private sector. The needs of the country in the area of defense will be provided locally or from abroad, depending on competitive prices offered. We aim to equip the Turkish Army with arms of latest technology but do not adopt a policy of producing them locally (ref. I.6.2, I.6.3.).
II.6. Infrastructure
II.6.l. The State will completely withdraw from infrastructural investments in transportation, communication and energy. It will be ensured that such investments be undertaken primarily by private sector organizations. The State will undertake only those investments, which the private sector finds unprofitable i.e., village roads.
II.6.2. State will not pursue a specific energy investment policy either. We believe that energy is subject to supply and demand, just like any other commodity and that this area should also be left to free market conditions. In the liberal system, energy will also be bought from producers who offer the most competitive prices, be it local or international.
II.6.3. The same will apply to primary energy production and consumption, i.e. petroleum, coal, natural gas.
II.6.4. The role of the States in regard to energy will be limited to the protection of consumer rights and the environment. As stated earlier on, this duty will be supported by specialized judicial courts, which operate within a sound legal framework (ref. I.2.5.).
