Why Turkey is lagging

Turkey is lagging behind? Sounds perplexing, doesn’t it? Especially when one considers that Turkey’s growth in 2011 has surpassed even that of China. That is when I started hearing questions like “Is Turkey an economic exception amid the global crisis?”

The true economic character of a country, however, can only be portrayed by its experience, and Turkey’s is there to analyze in numbers. The figures indicate that relative to the GDP per capita of the United States, Turkey performs badly when compared to Greece, Spain and Portugal. We only appear invincible because we no longer lag as badly behind Southern Europe as we used to. The culprit behind this misperception, a new study says, was Turkey’s low agricultural productivity in the 1960s and 1970s.

The study by Ayşe İmrohoroğlu, Selahattin İmrohoroğlu and Murat Üngör has received the inaugural Merih Celasun Award of the Economic Policy Research Foundation of Turkey (TEPAV). The study, entitled “Agricultural Productivity and Growth in Turkey,” can be downloaded from TEPAV’s web site (www.tepav.org.tr).

It is a refreshing read amid senseless Ankara gossip. I would rather reflect on Turkey’s long-term experience than to speculate on the political stability implications of Erdoğan’s post-surgery health problems. I want to see more studies on Turkey’s growth performance over the years. No mere number-crunching but real analyses like this one.

There is a debate in economic literature on whether structural transformation occurs as a result of increases in industrial or agricultural productivity. Industrial growth pulls employment into its sector, while growth in agriculture pushes employment out. Both sectors are performing badly in Turkey when compared to Europe. The relative decline in agricultural productivity in the 1960s and 1970s however, is more visible.
Two types of countries emerge in Europe when indexed to the U.S.’s per capita GDP: good and bad performers. The good performers are Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom. The report shows that these countries’ GDP per capita was, on average, 45 percent of that of the U.S. in 1950. Then it fluctuates around a comfortable 60 percent, which is the period after World War II. The second group is composed of Greece, Spain and Portugal. Their per capita GDP was around 22 percent of that of the U.S. in 1950 and reached 54 percent in 2008. Turkey looks like the second group. In 1950, Turkey’s per capita GDP was around 17 percent of that of the U.S. and still lingers around 28 percent today. What struck me while reading the paper is that Turkey’s GDP per capita started from 77 percent of that of Greece, Portugal and Spain and then declined to 50 percent by 1977. Note that this is before the bad performers became EU members. The time frame and research question were wisely chosen in this paper.

Turkey lagged behind Greece, Spain and Portugal due to low productivity in agriculture, which meant a slow decline in agriculture. According to the study, if Turkey had had Spain’s agricultural productivity between 1968 and 2005, it would have “de-agriculturalized” faster and had a much higher per capita growth today. There are always better paths and better policy alternatives.

So much for the debate on “Turkey as an economic exception.” Turkey is a country of policy failures, making the country a useful case study for our neighbors these days. That is what I call experience, the collection of past policy mistakes. We have plenty of them, just like any normal country.