The Young Republic and Publicism

Prime Minister İsmet Pasha, in 1934, the year the Republic made its first major breakthroughs in industry, said the following while laying the foundation of the Kayseri Weaving Factory:

“We must never forget the convincing and true meaning of the Turkish Revolution. This will be the meaning given by the new family of labor and the collection of factories. The most convincing evidence in the country's liberation movement will be the service and merit we show in establishing and operating factories.”

While the foundations of the Paşabahçe Glass, Keçiborlu Sulfur, Isparta Rose Oil, Konya Ereğli Weaving, and İzmit Paper factories were being laid in August 1934, the Turhal Sugar Factory and Bakırköy Textile Factory were opened in October.

The young Republic; while making these breakthroughs on one hand, was also paying off Ottoman debts and enriching its Treasury, achieving this with a balanced budget sensitivity and inflation of almost zero.

Sümerbank, Karabük Iron and Steel, Seydişehir Aluminum, Turhal Sugar, and many others are industrial facilities of a country that, until recently, could not produce flannel or weave shroud cloth. Moreover, these industrial facilities were pioneers not only in economic terms but also in social and cultural terms. With their theater troupes, choirs, sports clubs, afforestation campaigns, balls, and fairs, they were also institutions that instilled civic consciousness and accelerated nation-building.

The young Republic, in the words of Gazi Mustafa Kemal Atatürk, was becoming an economic state in those years. The founding cadre, especially Atatürk, were well aware of the reasons for the collapse of the Ottoman Empire, including economic bankruptcy, and were conscious that there could be no strong state, strong politics, or strong foreign policy without a strong economy.

THE RELATIONSHIP BETWEEN FINANCIAL SOVEREIGNTY AND NATIONAL SOVEREIGNTY

Since a state without a strong financial structure cannot have a strong political structure, national sovereignty and financial sovereignty are intertwined.

Because if public finance is weak, taking on foreign debt is inevitable. Those who provide foreign debt do not just lend; they demand financial, political, and judicial concessions and request privileges. There are countless examples of this. Let us not go far; let us give an example from our own history, the Ottoman Empire.

1854 is the year the Ottoman Empire received its first foreign loan. The Crimean War (1853 – 1856) was ongoing. The state's financial situation was poor. This debt would be closed in 1954, exactly 100 years later. After the Crimean War ended, the financial crisis continued. The Ottomans tried to pay off debt with debt. After a while, the state went bankrupt. As a result of the Decree of Ramadan (1875) and then the Decree of Muharrem (1881), it lost its economic and financial independence. It fell into a semi-colonial state.

The Public Debt Administration (Düyun-u Umumiye), established with the Decree of Muharrem, was like a state within a state. This structure, consisting of the creditor states that lent money to the Ottoman Empire, seized and managed the state's revenues and decided on the new debts the Ottomans would take. Since the Ottoman Empire opened its markets wide to foreign capital and foreign goods, local producers, merchants, tradesmen, and peasants were crushed and lost their chance to compete. Especially after the 1838 Treaty of Balta Liman (Ottoman – British Trade Agreement), as the Ottoman Empire became an open market for the British, British influence over the Ottoman economy, and therefore its politics and foreign policy, increased even further.

When discussing British influence in the Ottoman Empire, one must not forget the Ottoman Bank. The Bank was an important institution that allowed Britain, which had great influence over the Ottomans, to establish control over the economic and financial structure of the Ottoman State. As it functioned as a Central Bank, it determined the state's monetary policy until the start of World War I in 1914. After the war, significant efforts were made to break the influence of the Ottoman Bank. First, the İtibar-ı Milli Bank was established (1917), and this bank was merged into the Türkiye İş Bankası (founded in 1924) in 1927. The Central Bank of the Republic of Turkey was established in 1930.

When describing the state of the Ottoman economy, one should not skip the Regie Administration. The Regie, which held the tobacco monopoly, was a monopoly that restricted cultivation areas and was the sole buyer and seller of tobacco in the country. It practically ruined the Ottoman peasant. The Regie Administration, which had its own law enforcement power, was organized like a state within a state.

THERE IS NO INDEPENDENCE WITHOUT ECONOMY

When foreigners manage and audit the state's finances and foreigners seize the state's revenues, it is impossible for the state to act independently. It cannot even make the most basic investments or the most basic expenditures. That is why Mustafa Kemal Pasha convened the Turkey Economic Congress in İzmir between February 17 and March 4, 1923, with the participation of 1135 delegates, even before the signing of the Treaty of Lausanne and the proclamation of the Republic.

The Republic; from customs duties to import-substitution policies, from the abolition of the Tithe (Aşar) tax, which placed a heavy burden on the peasant, to the protection of industry against foreign competition, and from the established banks to the Law for the Encouragement of Industry, aimed to create a sound and national economic order, which is the foundation of being an independent state and a strong nation, in all the steps it took in economy, finance, industry, and trade. While the First Five-Year Industrial Plan (prepared in 1933, implemented in 1934–38) was successfully implemented, the Second Five-Year Industrial Plan could not be implemented due to the start of World War II in 1939.

With the Democratic Party coming to power in 1950, as US influence in politics, economy, and foreign policy increased, the reports of US advisors also came to the fore. Indeed, the famous Barker Report suggested the sale of state economic enterprises (KİT), the limitation of state economic intervention, and the abandonment of railway construction.

One must be very careful when implementing publicist economic policies. When import-substitution policies and protectionism are preferred in industry, opening up to the outside and supporting exports should not be neglected. It should not be forgotten that in cases where import-substitution policies are applied very strictly, local industry stays away from competition with the outside and focuses on the domestic market. Since this situation negatively affects the competitiveness of local industry abroad, careful planning must be done to avoid falling into this situation.

LESSONS LEARNED BY THE REPUBLIC FROM THE PAST

The early Republic; while implementing economic policies, fiscal policies, and monetary policies, both learned the necessary lessons from the past and followed the world closely. Since the 1929 Great Depression affected Turkey just as it affected many other countries, and exports and imports decreased, the economy inevitably became more closed and more protectionist. The speech made by the Prime Minister of the period, İsmet Pasha, in 1929 regarding the encouragement of the use of domestic goods and the consciousness of savings is important.

It should be noted that this policy was not unique to Turkey, nor was it unique to that period alone. These and similar policies were implemented by different countries at different times. The decrease in exports, the inability to achieve the expected savings within the country, the lack of capital inflow from abroad due to the depression the world was experiencing, the inability to obtain loans or credit from outside, and the start of World War II put the young Republic under economic pressure. Despite all this, between 1923 and 1938, the Republic achieved great economic successes, opened factories, and created an industrial culture on a national scale. The increase in production and trade was also reflected in employment.

Statism requires the state to intervene in the economy and the market, to be an entrepreneur itself when necessary, and not only to plan industrial production but also to establish, manage, and operate industrial facilities itself. Statism in the economy, statism in industry, and planned industrialization also prepared a serious infrastructure for the private sector. Thanks to statism and planning, capital was transferred to the private sector, the private sector grew, and for many years, it obtained its trained, experienced, and qualified managerial resources from State Economic Enterprises (KİT). In this respect, statism and KİT also paved the way for the development of the private sector.

In summary, the principles of statism and populism in the revolution program of Gazi Mustafa Kemal Atatürk, who knew very well that an independent state, a strong nation, and a dignified foreign policy would not emerge from an externally dependent economy, a weak and uncompetitive industry, and high foreign debt, as well as publicist and planning-based economic policies, are still current and valid today.