The relationship between independence and budget balance during the Atatürk era

According to Atatürk, the only way to ensure economic independence and make the state treasury reliable both domestically and internationally is to achieve an annual balanced budget. Accordingly, the state's ordinary expenditures must be met by its ordinary revenues, and recourse to domestic and foreign borrowing should be avoided.

In another speech in 1933, Atatürk expressed that he viewed a balanced budget as a guarantee for the survival of the state. “I believe that your high assembly will attach special importance to taking every measure to protect and ensure budget balance. The fact that the Grand National Assembly of Turkey, which knows the countless drawbacks of a deficit budget, is determined to ensure a balanced budget is a great guarantee for the financial and even general policy of the state.” İsmet İnönü, who served as head of government for four terms in the Republic of Turkey until 1930, stated in his memoirs that achieving balance in the budget was a necessity and that there was no financing tool other than taxes. For this reason, he expressed that the habit of spending beyond appropriations should be prevented, the method of closing budget accounts should be changed, and there was no other way than to establish balance by exerting pressure on appropriations. While revenues exceeded expenditures in the budget during the 1923–29 period, the principle of a surplus and balanced budget was maintained between 1930 and 1938, with the exception of 1929. When the data for the relevant period is examined; it is seen that while the budgets of the 1923–29 period gave a surplus every year, the 1930 budget and the budgets of 1936 and subsequent years gave a surplus in the 1930–38 period, the 1933 budget was balanced, and the 1929 budget had a deficit.

The budget deficit arose mainly due to two reasons; the first was the impact of the crisis, and the second was the public investments made in accordance with the principle of etatism. Although it became quite difficult to create a balanced budget within the environment of the crisis, this goal was not abandoned because a balanced budget was seen as the foundation of financial independence and sovereignty.

Atatürk viewed inflation as one of the greatest problems a country's economy could face; he was aware of the negative effects of inflation and always avoided printing money. The total amount of emission made until 1938 remained limited to 10 million TL. Similarly, there is no other example of a country that emerged from a war of independence without inflation. In this sense, the importance Atatürk placed on protecting the country's economy from inflation is clearly demonstrated. In 1931, the “Balanced Budget Principle” was included in the Republican People's Party program. With the crisis, while the initial appropriations of the budgets were reduced in parallel with the decline in the public's purchasing power and income, budget realizations were found to be well above these appropriations. Budgets cannot be shrunk in practice; therefore, the share of budget expenditures and revenues in the GNP increases. While every measure to reduce expenditures is taken on one hand, it is seen that expenditures have reached a limit where they can no longer be reduced. It is not considered appropriate to reduce state expenditures, and measures are taken to prevent the decline in revenues. By 1933, the goal of the Balanced Budget Policy was achieved. The state was strengthened, the financial system and monetary order were established, a balanced budget was achieved based on domestic resources, and foreign trade deficits were closed. Turkey showed its political power and determination to the whole world both with the policies it followed and the results it achieved.

When the years 1930–38 are evaluated in general, while the world economy was struggling with the effects of the crisis and this depression was pulling many underdeveloped countries down, it is possible to say that Turkey managed to remain outside the crisis to some extent and took important steps in the name of industrialization. It achieved this in the light of an economic policy that was as closed to the outside as possible and accompanied by the state's efforts to plan the investments of industrial enterprises.

Prof. Dr. Duran BÜLBÜL