San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

Economic History of Turkey


The history of Turkey needs divided into the history of the Turkish people and the history of the land, Anatolia, now occupied by the nation of Turks. The original homeland of the Turks was north central Asia. This is also the homeland of the Mongols with whom the Turks have been closely assoicated culturally, linguistically and politically.

The language of the Turks and the language of the Mongols belong to the same linguistic family, Altaic. The third member of the Altaic family is Manchu-Tungusic. The languages of the Altaic group are agglutinative, which means thoughts are expressed by appending suffixes to root verbs. Both Turkish and Mongolian languages exhibit vowel harmony and there is a notable similarity in vocabulary. It is therefore difficult to distinguish between Turks and Mongols on the basis of linguistic evidence.

The Turks originally were nomadic herdsmen-warriors. They apparently appeared in ancient times in various places and known by various names. The Xiungnu (Hsiungnu), the warrior people who raided the northern frontier of China. They must of been a notably ill-behaved lot because Chinese parents two thousand years later still admonish their children when they are behaving badly that they are behaving like Xiungnu.

When the Chinese built the Great Wall the Xiungnu headed west where they drove other nomadic tribes to the frontier of the Roman Empire. When the marauding tribes appeared in eastern Europe they were called The Huns. The identity of the Xingnu and the Huns is not certain. They could have been the Turks but they also could have been Mongols. Roman ambassodors to the Hunnish Empire of Attila spoke Hunnish but they never recorded the language. The names of the Huns monarchs and generals were recorded and those names that are not Germanic, like Attila, appear to be Turkish, but they could also be Mongol. The contemporary physical description of Attila appear to be describing a Mongol rather than a Turk.

When Temujin (Genghis Khan) raised his army of world conquest half or more of the warriors were Turkish.

When the Empire of Genghis Khan declined some tribes of Turks set out on their own to conquer and control territory, notably the Seljuk Turks and later the Ottoman Turks.

The Ottoman Turks set their sights on the conquest of the Eastern Roman Empire with its capital at Constantinople. Eventually they prevailed in 1453. When the Turks occupied Constantinople it became known as Istanbul. It is widely believed that the Turks renamed Constantinople and there was a popular song of the 1950's to that effect. In reality the Turks did not rename Constantinople, Istanbul is simply the way Turks pronounced Constantinople.

The Turks were a martial people and originally they were technologically backward and primitive, but in the course of conquest they became proficient in military technology and efficient organizers and administrators. This was true of two other primitive cultures that made global conquests, the Arabs and the Mongols.

The Ottoman Empire

The Ottoman Empire had its origins in the 13th century when the leader of a small tribe of Oguz Turks allied himself with the Sultan of Rum in Anatolia. The ghazis (holy warriors) of Oguz were assigned to conquering the Byzantine strongholds to the southwest of the Sea of Marmara. They proved to be such formidable warriors and other warriors joined. The original leader died and the leadership passed to his son Osman, who was designated a sultan. Osman set about founding a state and a dynasty, the Osmanli or Ottoman dynasty.

The expansion of the Ottoman domain was rapid.

Early Expansion of Ottoman Empire
Ottoman SultanYears of Reign
Conquests and Victories
Osman I1284-1324Territory southwest of Sea of Marmara and the Byzantine city of Bursa
Murad I1360-1389Thrace
Serbs at Kosovo
Bayezid I1389-1402Bulgaria
French-led Crusaders at Nicopolis
Mehmet II1444-46,1451-81Constantinople
Selim I1512-1520Syria, Palestine, Egypt
Süleyman I1520-1566Belgrade in Serbia, Rhodes, Buda in Hungary, Tripoli in Libya, Tunis, Algiers, Kurdistan, Mesopotamia

It is notable that the Ottomans were victorious against the Byzantines and other Europeans but were defeated by the Mongols under Tamerlane at Ankara where Bayezid I was captured and later died in captivity. Nevertheless the Ottomans under Mehmet II were able to conquer the defenses of Constantinople in 1453. In addition to outright conquests there many areas by the end of Süleyman I's reign that were vassal states of the Ottoman Empire. The Ottomans sought a cosmopolitan state under Ottoman rule but with religious tolerance for Christians and Jews and trade relations with Europeans.

The martial power of the Ottomans reached its peak under Süleyman I. After his reign the Ottoman forces began to suffer defeats such as the naval Battle of Lepanto in 1571.

Under the leadership of the Köprülö family who filled the office of Grand Vizier the Empire during the period from 1656 to 1703 remain formidiable. It attacked Vienna but was repeatedly unsuccessful. After a disasterous sixteen-year war with Russia and the Holy League of Austria, Poland and Venice the Ottoman Empire lost much of its conquests in southeast Europe. Russia took away some Turkish territory to the north of the Black Sea.

After the fall of the Köprülö family the decline of the Empire became inexorable. During the seventeenth and eighteenth century the Ottoman Empire was decrepit. Piece by piece former conquests were lost. Military defeat followed military defeat. As collapse of the Empire became a real possibility some European powers began to support the Empire for fear of the changes in the balance of power that result from the dismemberment of the Empire.

By the early twentieth century the German Empire was befriending the Ottomans. A railroad from Berlin to Baghdad was undertaken.

World War I

The Ottoman Empire without much justification entered World War I on the side of Germany. The motivation was primarily that its arch enemy, the Russian Empire, was on the other side. Thus with little to gain and a great deal to lose the Ottoman Empire entered a high stakes game. It did this by allowing warships of Germany that were interned in the Dardanelles to sail forth under Turkish flags but with German crews and shell the Russian Black Sea city of Odessa. Russia declared war and following the Allied alliances Britain and France also declared war on Ottoman Turkey.

The decision to enter the war against Britain and France probably is the crowning evidence of the ineptitude of the Ottoman Empire rulers. Very quickly, by direct invasion and by supporting local rebellion the Ottoman Empire was stripped of its Arab possessions. Even the Anatolian heartland was in danger of being lost. It probably would have been without the skill of the best Ottoman general, Mustafa Kemal, later to be known as Kemal Atatürk.

Kemal Atatürk

Kemal Atatürk

If ever there was one man who was father of his country that man was General Mustafa Kemal (Kemal Atatürk). He had to rally the Turkish military to simultaneously overthrow the decrepit Ottoman Empire and campaign against invading foreign armies. He successfully forestalled the dismemberment of the Anatolian heartland. But the world and the Republic of Turkey would probably have been better off if he was a somewhat less effective general for he managed to capture not only the ethnic Turkish areas but also part of Armenia and the land of the Kurds. These areas have given enormous headaches for the Turkish government and very little benefit. The atrocities that were perpetrated in holding onto them have alienated the rest of the world, particularly the Europe that Turkey has always hoped to join.

Ironically Mustafa Kemal Attaturk was born in Greece (Macedonia) when it was part of the Ottoman Empire. It was in Salonika in 1881. His birth name was just Mustafa since this was before the adoption of surnames. His family was poor and his father died of tuberculosis when Mustafa was only seven. He, his mother and a younger sister then went to live with an uncle on a farm. But Mustafa was too restless a soul to be happy on a farm. At age 12 he joined the army, the only feasible career for a poor boy of ambition and ability. A teacher gave him the name Kemal which means perfection At about age 21 he was commissioned as a lieutenant and assigned to training at the Staff College of the Ottoman Empire Army in Istanbul. He completed the training in 1905 and received his commission as captain. His first military assignments were in suppressing rebellions against the Sultan of the Ottoman Empire. By this time he himself had great doubts as to the efficacy of the Sultanate. In 1910 he visited France as part of an Ottoman delegation to observe military maneuvers. This was his first taste of the life of Western Europe. In 1913 he became a military attaché in Sofia, Bulgaria. His experiences and the military defeats of the Sultanate Government of the Ottoman Empire built in him a conviction that the Turkish people would have undertake revolutionary change to survive and match the achievements of the West.

The Sultan of the Ottoman Empire allied the Turks with Germany and Austria in World War I. It was a disasterous decision and one that Atatürk opposed. The forces of Britain, France and Italy dismembered the Ottoman Empire. The one major victory of the Ottoman forces was at Gallipoli in 1915 under the command of Atatürk (at that time he was still Mustafa Kemal). He went on to win smaller victories against the Russians. But the Ottoman Empire was nevertheless defeated and the Allied Powers occupied Istanbul and parts of Anatolia. The Treaty of Sévres of 1920 proposed the partitioning of the Anatolian portion of the Ottoman Empire as shown below.

This treaty was not implemented because of the perceived strength of Turkish Republic forces under Atatürk. From 1919 to 1921 the nationalists under the leadership of Mustapha Kemal (Atatürk) fought against Greek forces for the Anatolian heartland of the Ottoman Empire.

(To be continued.)

The secularist program that Atatürk almost single handedly imposed upon Turkey was inspired and correct. Few would have had the genius to conceive it and fewer still would have had the courage to bring it off. Only Atatürk had the charisma to lead turkey along this difficult path.

(To be continued.)

The Economy

In 1923 when the Republic of Turkey was formed the vast majority of the population lived by subsistence agriculture. There was virtually no industry. The out migration of Greeks, Armenians and Jews left Turkey with very few entrepreneurs and business managers. The few enterprises that existed such as for producing flour and sugar were foreign-owned businesses.

With the return of peace after the years of turmoil of World War I and the collapse of the Ottoman Empire there was full recovery of agriculture and the growth of new industry. This relative economic prosperity continued until 1930 when the worldwide Great Depression destroyed the markets for Turkish agriculture. It was then that the Turkish government assumed a major role in planning and directing the economy. This philosophy of state intervention was given the name of etatism.

Over the years the government programs of development gave Turkey industry but it has been an unbalanced development, as all government investment and planning efforts tend to be. The strategy of the government development programs was import substitution, a very flawed strategy.

Because investment was planned rather than driven by market incentives there were numerous instances of what were called contradictions. For example, investment was made in capital intensive techniques of production while there was chronic unemployment of unskilled labor and shortages of the skilled labor required for the capital intensive operations.

While the published growth rates looked impressive the planned development was not balanced and the neglected sectors began to be bottle-necks in the productive process. The state enterprises were had excess workers and low productivity. By 1980 these state enterprises accounted for 40 percent of manufacturing output. Generally they ran at a loss and the government had to subsidized them.

By the late 1970's Turkey was facing serious balance of payment problems and was not earning enough foreign currency to pay the interest on its foreign-owned national debt.

Turgut Özal

At the beginning of 1980 the government under Deputy Prime Minister Turgut Özal undertook a program of economic liberalization aimed at integrating the Turkish economy into the world market economy to promote export-led growth. Özal was a hydroelectric engineer who had studied economics and who worked at the World Bank and at the State Planning Office of Turkey. Özal's program consisted of several parts:

Özal's program brought a substantial increase in export earnings and while imports also increased they did not increase as much as exports and so Turkey's balance of payments problems were alleviated. Turkey was once more able to meet the required payments on its foreign-owned national debt. But inflation remained a chronic problem. The annual rate of inflation fell under Özal's program but was still 25 percent. The unemployment rate was reduced but still amounted to about 11 percent of the work force. In part, the difficulty in reducing unemployment was due to large increases in the labor force from past high birth rates. The effects of the liberalization policy of Özal's program were obscured by the military takeover of the government in 1980.

The military takeover in 1980 was prompted by political turmoil due to leftist labor union and university student activism. There was also a perception that politicians were not able to put national welfare above their own political self-interest. Atatürk had decreed that the military should not be involved in politics so even though the military had taken control in 1980 it was accepted even by the military that military control would be only a temporary measure. A new constitution was written and accepted in 1982 to curb the problems that had led to the military takeover.

Although Özal's program alleviated the balance of payments problems of Turkey the chronically high level of unemployment continued. There continued the emmigration of Turkish workers to foreign jobs. Before 1975 Turkish workers primarily went to Western Europe, with the majority going to West Germany. After 1975 the labor outflow was to the Middle Eastern oil states. The remittances, the money sent home by Turks working outside of Turkey, became an important source of foreign currency for the Turkish economy.

State-Owned Enterprise

At the time that economic policy principles for Turkey were formulated it was believed that even in non-socialist states government intervention was necessary and desirable. In particular, it was believed that state-owned enterprises were superior for economic development to profit-seeking pivate market enterprises. This has again and again proved to be false but nevertheless Turkey ended up with a large sector of state-owned enterprises. As around the world, these state-owned enterprises are overstaffed and unproductive. Furthermore they require state subsdization and the funds for these subsidies must be raised one way or another. If they are raised from taxation of viable businesses they endanger their viabiliity. The other alternative is to subsidize state-owned enterprises through the creation of new money, but that may lead to inflation. Turkey has had chronic inflation.

(To be continued.)

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