The benefits of rapid growth

In 1995-1997 the Turkish economy grew for three years in succession and gave us hope for the period of sustained rapid growth that we longed for. But first the crises in Asia and Russia and the massive earthquake of 1999 interrupted this process and we experienced a great disappointment.

We supported the stabilization programme which was initiated in 2000 because we thought that it would solve the problems in the economy and lead to a period of rapid, stable growth. But the facts that the economic problems were greater than we had anticipated and it became clear that more than we had realized had been swept under the carpet resulted another economic crisis in the first year of the programme. But maintaining discipline and not deviating from the programme meant that, in the end, it led to the period of rapid growth we had missed. In the period 2002-2005 the economy grew rapidly for four years in a row and equaled the record set in 1950-53. The figures for 2006 have not been announced yet but we forecast that the economy grew by more than 5 percent last year. As a result, the economy has grown rapidly for five years in a row and set a new record.

Time To Reap The Benefits
Some of the statistics which were published by the Turkish Statistical Institute (TURK) in the last week of 2006 show that this period of growth has enabled the economy to begin to reap the benefits that we had mentioned in our previous articles over the years. We are talking about the positive developments in the 2005 Income Distribution Survey, which TÜİK published on 25 December, and the 2005 Poverty Study which was published on 26 December. However much some economists say that these data do not reflect reality, and are even talking of taking TÜİK to court, we think that the positive developments in the statistics that have been published are compatible with the period of rapid stable growth. We see them as the first indication of the benefits that will accrue if the period of rapid, stable economic growth continues.

Let’s look at the studies in the order in which they were published and start with the Income Distribution Survey. Even though studies on income distribution in Turkey date back to the 1960s, TÜİK has only been conducting them since 1987. At the beginning, a decision was taken to conduct these surveys once every seven years. But, due to unfortunate timing, these seven year periods coincided with crises. In later years there was a lot of criticism of the results of the survey conducted in 1994 because it was believed that the crisis had affected the results. For this reason, the study that was initiated in 2001 was suspended when a crisis broke out again. Starting in 2002 these studies have begun to be conducted every year.

Income Distribution Is Improving
When we look at the surveys again after the results for 2005 have been published, we see that there has been an improvement in income distribution since 2002. This improvement is the result of a decline in the highest income group’s share of the total and an increase in the shares of the other groups. It is particularly noticeable that the share of the middle classes has risen faster than the others.

The Gini coefficient is a measurement which enables one to see concrete changes in income distribution. The coefficient runs from zero to one. When it approaches one this means that income distribution is evening out, while when it gets close to 1 this means that the situation is getting worse. When we look at the values for this Gini coefficient, we can clearly see that there has been an improvement since 2002. The Gini coefficient rose from 0.43 in 1987 to 0.49 in 1994. From 2002 it fell continually to 0.38 in 2005. Even though this figure is still a little high when compared with developed countries, we are some distance from the level of 0.5, which is the typical Gini coefficient in the countries of South America.

Poverty Is Declining
TÜİK has been conducting poverty studies since 2002. In previous years some differences in methodology between studies conducted by other institutions and the results of those conducted by TÜİK meant that it was difficult to conduct a comparative analysis. For this reason, we shall evaluate changes in poverty by using the studies conducted by TÜİK, which have been carried out using the same methodology.

When we compare the results of the 2005 Poverty Study we see that there has also been an improvement here. Of the criteria used in the Poverty Study the one that is most applicable to everyday life is ‘food and non-food poverty’. Food and non-food poverty is a statement of people’s inability to meet basic needs such as clothing and housing as well as food. Using calculations made according to this criterion, the number of those living below the poverty line rose from 18.4 million in 2002 to 19.5 million in 2003. The figure fell to 18 million in 2004 and to 14.7 million in 2005. This means that the number of those living beneath the poverty line as a proportion of the total population declined from 26.96 percent in 2002 to 20.5 percent in 2005.

The results of the Poverty Survey show that the majority of the criteria use for measuring poverty indicate that, during the last five years of rapid economic growth, poverty has fallen in Turkey.

A Process Of Convergence
One of the benefits of rapid economic growth is convergence with the welfare levels of developed countries. Before the 1994 crisis, Turkey’s purchasing power parity per capita income was 28 percent of the average of the 15 members of the European Union (EU-15), namely the members of the union before the last two rounds of expansion. Three crises in eight years led to this figure falling to 24 percent, the same rate as in 1980. Rapid growth during the period 2002-2005 resulted in it rising to 27 percent. In all probability, during 2006 it will have come very close to ‘pre-crisis’ levels.

Of course, we shall reap the true benefits if rapid economic growth continues. If rapid growth continues at the same pace, in 10 years, welfare levels will be close 40 percent of the average of the EU-15. If, as happened in South Korea in 1963-1997, we can sustain this rapid growth for over 30 years, then we shall approach the welfare levels of the EU-15.

Of course, if rapid growth continues, we shall continue to reap the benefits in the fields of employment, income distribution and poverty. In addition, we shall see the effects of rapid growth in education and health indicators. Perhaps most important of all, if rapid growth continues, it will enable democracy to take root and contribute to the establishment of long-lasting social harmony. And Turkey will leave behind the days when people are killed just because they think differently.