Turkey's foreign policy, the new government and asymmetrical information


Anew government will be in power on the day Turkey's new president, Recep Tayyip Erdoğan, is inaugurated. The current Foreign Minister Ahmet Davutoğlu will become the next prime minister of this government. However, even now, Ahmet Davutoğlu's rule looks like it will purposefully become slurred and distorted.Turkey is certainly not giving up on its target to become a permanent member of the European Union, and is only adding two main political visions to its current policies. First of all, Turkey is underscoring the fact that "even though full membership to the EU remains one of the main targets of Turkey's foreign policy, this process will progress as a collaboration based on the new status of the EU and Turkey's interests." For example, Turkey does not want the full membership process to continue and be concluded under the same conditions. For instance, it requires the current Customs Union regulations to be revised.Secondly, Turkey will also try to improve its relations with the East. It will set new foreign policy and integration targets in line with its own interests and the interests of the Islamic world and local communities, independent of the West. This is a zero-problem policy that is trying to establish itself with the local communities in the region.This new era in foreign politics is also closely related with the recent discussions on the relation between economics and politics in Turkey. In other words, one of the major issues being discussed lately is whether Ali Babacan, who has been in charge of the Turkish economy for a long time, and his team will remain in their seats or not. However, the concern expressed by international credit rating agencies and capital markets after the presidential election is not only directed toward those names.The underlying concern of these circles is the fact that after the Turkish economy becomes a production-based, competitive, open economy, it will no longer be transferring funds to these circles. The main reason behind Turkey's structural economic problems, such as the high current account deficit, inflation and high unemployment rates could not be eliminated due to palliative monetary and financial policies that are usually applied by most political powers as an extension of neoliberal policies. While local currency exchange rates remained at high levels as a result of high interest rates by way of artificial design, Turkey encountered a vicious circle due to the high inflow of short-term funds. Short-term hot money inflow caused local currency to appreciate; thus, it prevented Turkey from entering the global competition while also lowering export rates. Although imports became a more profitable business than exports, production-based investments plummeted and the country's growth was only based on an import-based short-term spiral, which did not have any positive impact on unemployment rates. In other words, these neoliberal policies caused both unemployment and inflation rates to increase, and caused such issues to deepen and merge into the main structural problems of the Turkish economy.Turkey now needs to switch to a new growth program that will enable the country to become an export-based, industry-information society, which, in fact, is the only way to eliminate structural economic problems such as the high current account deficit, high inflation and unemployment rates.The need for such transformation is the underlying reason behind the discussions taking place immediately before the government reshuffle. Turkey needs to question the neoliberal policies causing high inflation, and should switch to a new growth program. At the same time, an open economy should be supported so that the Turkish economy can become a market-friendly one. This may be more comprehendible if explained using the Asymmetric Information Theory.The concept of asymmetric information was first mentioned in George Akerlof's 1970 article "The Market for 'Lemons:' Quality, Uncertainty and the Market Mechanism." Akerlof tries to explain this concept through the second-hand car market: "There are two types of goods in this market; the good and the bad products (if someone purchases a car that they think is good but it turns out that it has many deficiencies unknown at the time of purchase, the person is said to have bought a 'lemon')." Whether a car is a good or a bad one cannot be comprehended by the buyers, only sellers know it. Therefore, buyers enter into the market with an average price in mind, and considering that they may encounter a bad car, they try to negotiate for the lowest price possible. While this does not bother the sellers of bad cars since they receive a higher price, the sellers of good cars are hurt by a reduced market price for their quality vehicles and can no longer justify staying in the market. Now, only overpriced 'lemons' remain in the market. In other words, in a market where there are unfair profits and overpriced "high quality products," there will always be overcharged buyers. How can this be prevented? Only if the information belonging to buyers and sellers is known to both parties.This can only be achieved in democratic societies with open markets and an infinite number of entrants into the markets. Monopolies constantly offering 'lemons' and preventing such free flow of information should be replaced by effective, competitive businesses, and the public sector should act as a market-friendly regulatory authority. This is not a statist economy but rather the contrary; it is a market-friendly open economy. George Akerlof, Joseph Stiglitz and Michael Spence won the Nobel Prize in 2001 for their research that was inspired by this article. The economic equivalent of Ahmet Davutoğlu's revolutionary foreign policy would result in not only the elimination of monopolies within national borders, but also within the region. The new Energy Exchange Market, the new Silk Road and the fast train networks that have been established are a result of the newlyestablished energy corridors, anti-monopolistic regulations and the competitive price mechanism.