The industrialization movement in the early years of the Republic

The Ottoman Empire began its efforts toward modernization—that is, the attempt to reach the level of contemporary Western powers—nearly a hundred years before Mustafa Kemal Atatürk took the helm. What made Atatürk unique in this process was his ability to successfully implement reforms that society had resisted and that, consequently, could not be carried out before his administration. 

“Industrialization” is an exception in this context. The Ottomans always considered a large and powerful industry to be one of the prerequisites for being a modern state, and there was no resistance to industrialization from any segment of Ottoman society. Despite this, for various reasons, industrialization in the Ottoman state progressed at a snail's pace, and no significant move was seen until Atatürk took the reins. In this respect, like other reforms, industrialization was also a part of Atatürk’s revolutions.

Atatürk and his followers agreed that the independence won through military victory and the subsequent diplomatic victory would not be secure without financial independence. In the 20th century (as in the 19th), the heart of financial independence lay in having a strong industry. Indeed, although the Ottoman Empire was theoretically an independent state, its dependence on European industry had made it a semi-colony in practice. This dependence could only be eliminated through Turkey’s industrialization. This reality was an obsession for Atatürk and his followers, and even before the Treaty of Lausanne was signed—that is, before the capitulations were abolished—the roadmap for industrialization was drawn up and officially adopted at the İzmir Economic Congress.

According to the decisions taken at the Economic Congress, priority in industrialization would be given to products for which Turkey had raw materials, which could be easily produced, and which had a sufficient market within the country. In line with this, cement, textile, and sugar factories were to be established first. Heavy industry products that could not be easily produced and required more specific planning were left for later.

It was decided at the Economic Congress that industrialization should be left to private entrepreneurs. After the proclamation of the Republic, the state assumed supportive roles such as providing credit and land and granting tax exemptions to industrialists, while avoiding initiatives such as directly establishing factories.

In line with the strategy followed, developments were indeed seen in the manufacturing industry, and although the industrialization movement progressed slowly due to the post-war poverty of the public, the Turkish industry began to feed the domestic market as much as it could over time.

However, unfortunately, this policy could not be long-lasting. The Great Depression of 1929 reversed the trend, and with the entire world entering an economic crisis, private sector investments in Turkey also came to a halt. Although Turkey experienced a significant shock during this period, it would emerge from the depression by turning the crisis into an opportunity. Due to the conditions of the era, Turkey had to turn inward economically, which meant that Turkish firms were less affected by competition from outside the country. With the cessation of private sector investments, a policy change was immediately implemented, and the state took over the task of establishing factories from the private sector. In this environment where competition decreased, the demand for Turkish goods would increase, which would accelerate industrialization.

In 1933, the First Five-Year Industrial Plan was implemented with aid received from Italy and especially from the Soviet Union. The plan was entirely based on establishing industrial facilities to meet the country's needs, and as in the İzmir Economic Congress, exports were not targeted. Furthermore, the heavy industry moves that were postponed at the İzmir Economic Congress were brought to life with the Five-Year Plan. Investment priorities were basic consumer goods such as textiles and sugar, and intermediate goods such as coal, iron-steel, and paper.

With industrialization coming under state control after 1929, import substitution increased significantly compared to previous years. Following the success of the First Five-Year Plan, the Second Five-Year Plan was implemented in 1938. In this period, when the effects of the economic crisis were diminishing, although the Second Five-Year Plan also included support for the private sector, the private sector chose to stay away from investments during these years due to the uncertainty created by the Second World War, which would break out in 1939.

Although critical steps were taken in the field of industrialization in the process from the proclamation of the Republic to the Second World War, Turkey was still far from being a heavy industry country. Furthermore, the products produced were not of high quality, there was little variety, and because firms used customs tariffs as a shield, prices were well above the global average. However, the importance of the success achieved becomes even more evident when considering the weakness of the industry inherited from the Ottoman Empire, the fact that the culture of industrialization was almost zero, and the necessity of investing from scratch in almost every field.