On defending the market economy

The 65th government of the Republic of Turkey has taken office under Prime Minister Binali Yıldırım's Prime Ministry. The new government has made one of the most important changes in economic administration; more precisely, it has corrected an ongoing mistake in this area. This correction has separated the ministry that is in charge of the economy, the public institutions and state-run banks from the one that is responsible for regulatory bodies. Indeed, it should have been like this from the beginning. I would like to dwell on the so-called criticisms of this reformation.

In Turkey's government organization scheme, the offices of deputy prime ministers are executive bodies designed as ministries of coordination, including the state's strategic institutions. Deputy Prime Minister Mehmet Şimşek was in charge of economic coordination and execution in the 64th government and strategic institutions, such as the Central Bank of the Republic of Turkey (CRBT), state-run banks and the Treasury, were at the helm of his office. However, supervisory boards, such as the Banking Regulation and Supervision Agency (BDDK), the Capital Markets Board (SPK) and the Savings Deposit Insurance Fund (TMSF), which were in charge of supervising the abovementioned institutions, were also subjected to the same deputy prime ministerial office. As such, there was an "odd situation where supervisory institutions and what they supervised were formally administrated by the same authority. However, some circles that consistently talked about the importance of "independent" regulatory and supervisory institutions overlooked this inappropriate situation and did not request that this sphere be re-regulated considering that both supervisory and supervised institutions cannot be administered by a "single authority." The correction of this mistake was somehow assessed as not being a market-friendly step.

Those who continuously argued that the CRBT was not independent and those who ignored instrument independence and mistook it for objective independence did not ask how the minister of state-owned banks and the BDDK could be the same. In some way or another, credit rating agencies referred to regulatory and supervisory authorities in all their evaluations on Turkey and warned the government to protect the "independence" of these institutions. However, we have never seen any complaint about this "odd" situation that continued until the 65th government.

We all know the importance of the issue of independent institutions for global capital. The story of these "independent" institutions goes back to the early 1980s when the state ceased to be a central means of interference in the economy and started abandoning its monopolistic position in strategic areas. For instance, the state left pricing to the so-called "market," while transferring production, distribution and investment functions in energy. However, when it came to the 1990s, it was realized that not the market, but monopolies determined prices through their non-market power. Thus, regulatory institutions started regulating the market through market logic. Indeed, this was the legitimate and theoretical trick of the matter. Such institutions were structured as the direct supervisory bodies of global financial oligarchy, especially in developing countries like Turkey. Furthermore, financial stability committees were organized as structures that were "independent" from elected governments. However, they were affiliated with certain capital circles and accepted these circles' ideological truths. This being the case, "independent" institutions, particularly in developing countries, turned into separate parallel power groups that were like global shadow governments. This led to a dual structure in these economies. Nobody should argue that "independent" institutions have a function that intensifies the market and boosts competition. For instance, only under President Recep Tayyip Erdoğan's leadership has the Competition Authority become an institution that truly observes competition and interferes in monopolistic and oligopolistic structures in the market within the framework of the competition law. However, to the extent that it has succeeded in doing this, the Competition Authority has come under fire from some circles that argue for a monopolistic economy despite claiming to defend a market economy. Likewise, the BDDK and TMSF's obstruction of monopolistic practices and other policies that victimize consumers in the banking sector and the fact that they have started purifying the system of its shortcomings was criticized by the same circles that argued that these were "non-market" practices.

Strong developing countries like Turkey and Brazil are consistently prevented from forming their economies using free will and establishing completely independent institutions. This is the main reason why attempts to push Brazil into retrogression have succeeded today. This would not have occurred if former President Lula da Silva and his successor, Dilma Rousseff, had not failed to establish institutional bodies that were completely independent from the outside world. The U.S. succeeded in this area thanks to former President Franklin D. Roosevelt's New Deal, which was implemented after the Great Depression of 1929. The New Deal policy could be implemented through new laws and independent and market-friendly institutions that were created after 1935. I wonder why developing countries are prevented from establishing these kinds of institutions now?

Let's not kid ourselves and see that the step taken in Turkey's economy administration is a market-friendly one that has been taken to correct a mistake even if it has been late. I advise those who criticize this step to be more careful and coherent, as their criticisms give them away. They must stop defending the market and monopolies in a way that serves their purpose, as we know that they are always monopolists who are against the market.