The mother of all problems

Are you following the organizational mess surrounding the earthquake in Van? Those coordination failures highlight Turkey’s underlying problems. What, really, is the mother of all problems in Turkey? The Kurdish issue comes to mind, doesn’t it? Or the Armenian question, perhaps? I don’t think that these 19th century leftovers will challenge Turkey in the first half of the 21st century. The challenge is the economy. Let me explain: The challenge lies in the country’s institutional capacity in preparing the grounds for a new beginning. Turkey will either rise to be a high-income country or get trapped in its current middle-income state. But all reforms that can contribute to the former outcome have been postponed these past 10 years. Not ideal for a new beginning.

We managed to change the structure of our economy in the past 30-something years. Turkey has transformed itself from an agrarian society into a mid-tech industrial economy. The customs union agreement and relative economic and political stability have contributed to the increase in urbanization rate to its current 75 percent level. But Turkey’s transformation failed to enrich and empower the population of the country as a whole. We cannot solve our 19th century problems without empowering the population.

Take a look at the figures of the 20 largest economies in the world. Turkey was 25th in 1980. We rank 17th today, right above Indonesia, the second Muslim-majority country on the list. The political leadership is now aiming to become the 10th largest in 2023, which is easier said than done. Turkey enjoys the cushion of a large domestic economy in these times of crisis, but qualitative indicators are pointing towards the need for structural reforms.

Currently, output per worker in Turkey is about a third of that in developed countries. It is definitely five times larger when compared to China and India, but we still need a productivity boost. Up until now, productivity growth has largely been coming from internal migrations that speed up the process of reallocation of resources from low to high productivity activities, more specifically from agriculture to services and industry. It is time to focus on intra-sector productivity. And that is the hard part. Rapid growth is not possible from here on without structural reform.

Looking at age, the young population is out there with an average age of 28.5. That’s younger than China’s average of 35.5. Average schooling is around six years in Turkey, one the lowest in the list of the first 20 largest economies of the world. That means our population is young but uneducated. If you compare English proficiency results on that list, Turkey definitely ranks one of the worst. We can’t speak English, which means we’re not connected to the world. We also rank dead bottom in the women’s labor force participation ratio. The ratio in Turkey is 24.5 percent, far behind Indonesia’s 52 percent.

Young, uneducated, unequal and unconnected: That dismal list spells out Turkey’s challenge in the 21st century. Is rapid productivity increase in the face of severe structural limitations doable? Yes, but it requires our immediate attention. The problem is that our decision makers are preoccupied with 19th century problems. If they would focus on the real challenges, perhaps they would understand that the problems of old are, in reality, non-issues.