Mahfi Eğilmez: China, often cited as attracting foreign capital without the rule of law, is 20 places ahead of us

Economist Mahfi Eğilmez, who penned an article titled "Our Place in the World Economy," stated the following:

"There are many reasons for our current situation, ranging from incorrect economic policy implementations to the refusal to accept mistakes, from irrational decisions to an obsession with interest rates, from a flawed tax system to the poor application of incentives, and from sidelining science to a decline in the quality of education. Perhaps the most important among these reasons is the gradual loss of the rule of law principle. In the Rule of Law Index, where Denmark ranks first and Venezuela last, Turkey is in 117th place out of 142 countries. China, which is often said to 'attract foreign capital even without the rule of law,' is 20 places ahead of us."

Eğilmez's assessments are as follows:

We do not yet have the year-end data for 2023, so we must use 2022 data to determine our place in the world economy. In doing so, I believe it would be meaningful to compare our situation at the end of 2022 with our situation in 2000 and 2010 in order to see our development. For this purpose, the table I prepared using major economic indicators is below.

GDP, Per Capita Income at Current Prices, and Per Capita Income According to Purchasing Power Parity:

In the 2000s, Turkey fluctuated between 17th and 19th place among 178 countries in terms of GDP size. There is no success here. In fact, its decline from 18th to 17th place and then back to 19th can be highlighted as a serious failure. A similar example of failure exists in the calculation of per capita income at current prices. Moreover, this is the case despite very high inflation and a USD/TRY exchange rate that is kept under pressure. When calculating GDP at current prices, goods and services are accounted for at market prices. As a result, GDP appears quite high. Then, the GDP in TRY at current prices calculated in this way is divided by the annual average USD/TRY exchange rate. Since this exchange rate is also kept below where it should be through various pressures, GDP in dollar terms appears higher than it is. In other words, our high GDP is achieved through high inflation and a low exchange rate.

In contrast, there appears to be significant success in per capita income calculated by purchasing power parity (PPP). How is it that while there is a decline in per capita income calculated at current prices, there is a significant rise in rank for per capita income using PPP? If income had increased, then the same success should have been seen in per capita income calculated at current prices. Are the prices of purchased goods falling, causing the income calculated with PPP to appear high? It is clearly visible from market prices that this is not the case. The mystery behind the difference here stems from the fact that the prices of goods and services entering the PPP basket are calculated based on the low prices compiled while calculating the CPI, rather than the prices taken when calculating GDP. Thus, when the TRY is shown as if it can buy more goods and services against the Dollar and other currencies, and that basket is used as the basis for the PPP calculation, per capita income according to PPP appears to have risen rapidly in recent years.

Growth: Turkey is a country capable of rapid growth. In the three years we used for comparison, the lowest growth occurred in 2022, which is still a quite high growth rate. On the other hand, it is noteworthy that despite growing by 5.6 percent, there are 49 countries that grew faster than it. A topic as important as the rate of growth is its quality. The quality of growth is related to the question of what kind of contribution this growth will make to the country's economy. If growth is based on the production and export of high-tech goods, and if there is an increase in productivity, then growth is for the future...