Bureaucratic oligarchy in developing countries: Turkish example

One of the most distinctive an significant features of the current crisis is that developing southern and eastern countries are rapidly catching up with the developed ones and increasingly closing the development gap between the East and the West through their quick pace of growth. Does this process really indicate the hints of a new period that makes up regional inequalities? We cannot give a precise answer to this question for the time being as the answer depends completely on the new political formations in developing countries and the democratic structuring of states in these areas.

Daron Acemoğlu and James A. Robinson stress in their work, "Why Nations Fail: the Origins of Power, Prosperity and Poverty," "Economic achievements of countries depend on the rules which determine the operation of the economy and impulsions which motivate individuals." The hypothesis is absolutely true because developing countries chose to create a bourgeoisie through the help of the state differently from the West and assign the wealth to this statist bourgeoisie in privileged ways provided by the state itself. This deed creates a statist and closed economy where any investors other than the owners of local capital chosen to be rich by state are denied access to investment opportunities and the market.

The economy was shaped in parallel with this approach of bureaucratic development since the beginning of the 20th century in Turkey after the Ottoman Empire collapsed and in Russia after the tsar fell. This approach seems like two separate fronts in two separate countries. However, it created a closed autocratic system which bears the same results for both. Vladimir Lenin of Russia was a genius who recognized the danger in 1918. Lenin's strategy of the Novaya Ekonomiçeskaya Politika (New Economic Policy or NEP) was an alternative way out for the closed nation state paradigm that was increasingly creating a bureaucratic oligarchy.

However, this solution was destroyed by Joseph Stalin after Lenin's death in 1924. When it comes to Turkey, the Kemalist dictatorship laid the foundations of a closed society arbitrated with coups as well. The Constitution of 1924 was created as the basis of a centralist dictatorship and bureaucratic oligarchy which centered all authority in Ankara, the capital of Turkey. From then on, Turkey resorted to create a closed, statist and autocratic economy under the single-party Republican People's Party (CHP) dictatorship. This preference, in fact, was not much different in essence from the bureaucratic socialism woven by Stalin for Russia. The dominant class in Russia was the elites of the party and the state while it was the statist, elite and lumpen bourgeoisie in Turkey who despoiled the property of foreigners and got rich with the help of the state itself.

The big monopolies who manage the main resources are structures originating from this process. These structures trained bureaucrats bound by them since the beginning and put the bureaucrats in the most strategic positions. To set an example, a Turkish Armed Forces' company, OYAK Holding, was downgraded during the rule of the AK Party after acting as a monopoly in many areas and exempted from taxation.

OYAK is a concrete example of unfair competition in Turkish markets.

Nevertheless, OYAK is just one example.

Until recently, all big monopolies in Turkey had a retired general on their boards. Those retired generals dealt with the work related to the state bureaucracy by using their privileges.

Thus, monopoly structures and the state bureaucracy were entwined.

The first objection to this situation was from Prime Minister Recep Tayyip Erdoğan last year. Erdoğan clearly stated there was a bureaucratic oligarchy inside the state that obstructs free access to markets, creates barriers for foreign investors and manipulates the capital market. He vowed the government will fight against the bureaucratic oligarchy.

Correspondingly, independent auditors of Turkish economy like the Banking Regulation and Supervision Agency (BDDK), the Capital Markets Board (SPK), the Energy Market Regulatory Authority (EPDK) and the Competition Authority started to be reregulated rapidly with new decrees and laws.

Erdoğan's government is currently aware the bureaucratic oligarchy as a heritage of Kemalist dictatorships should be removed and the state should be restructured as a democratic one in order to enable foreign direct investment in Turkey and ensure competition and openness to come into being in all markets.

Nowadays, market-friendly regulations to be made in all strategic institutions of the Turkish economy, including the central bank, are being discussed.

Let me quote again from the work of Acemoğlu and Robinson. "Inclusive economic institutions create inclusive markets which provide people with both the opportunities to find jobs proper for their abilities and an equal environment to provide this choice," they wrote. In Turkey and perhaps in many other developing countries, this was missing up to now. Erdoğan's government now tries to develop independent market-maker institutions which will make anti-monopoly regulations within the framework of a fully open economic strategy and inactivate the bureaucracy that puts barriers on the markets.

This, undoubtedly, is the beginning of a transition to a new economy and an antimonopolistic, market-friendly strategy. We should remember that the most important but silent target of Erdoğan's government is to discharge the bureaucratic, monopolistic oligarchic structure inside the state. From now on, steps against this target will be more rapidly taken.