We have talked to a Turkish economist, Professor Eser Karakas, currently living in France, about Turkey’s economy and possible prospects of the noticed trends.

Eser Karakas was born on October 18, 1953, in Istanbul. 

He graduated from Bogazici University in 1978. He completed his master’s degree in Economics at Istanbul University, Department of Economics in 1980.

Karakas earned his Ph. D.  from the Department of Finance of the same University in 1985. He was appointed as assistant professor at Istanbul University – Faculty of Economics between 1987-1990, then as associate professor in 1990 and became a professor in 1996.

Between 1993 and 1996, he served as Deputy Director of the Finance Department at Istanbul University and between 1996-1999, as the head of the Finance Department.

Between 1993 and 2003, he served as the Dean of Bahcesehir University, Faculty of Business Administration. 

Between 2003 and 2007, he served as Vice- Rector at Bahcesehir University. He also served as Head of EU Affairs at the same university.

— What risks and opportunities do you see for the Turkish economy for the coming years? How is the Turkish economy developing?

— I have serious doubts about the future, there are solutions, it’s not that they are completely absent. We have seen that during the modern history, but development of the economy in the current political environment raises serious concerns. In other words, what we call an economy, actually means growth in the long run. So, will the Turkish economy grow or not? Economic growth alone will not solve every problem like a magic wand. The picture may change in case of 5,5-6% stable growth. A number of issues, such as income distribution, social solidarity and internal stability can be resolved in the medium term if we can maintain a 6% growth rate. But what we call economic growth, is also not so magic. Growth is a very simple equation. It’s a simple equation, something about a resource. The first condition is the resource. There can be growth if there are sufficient and stable resources. The growth rate will be high in the medium term. If you do not have internal resources, and Turkey, unfortunately does not have, the level of savings may be low. It is not even possible to raise it in a day. Hence, Turkey will have a low growth rate in the medium term.

When we look at the history of the republic, we see a very low, 3% growth on average. This is a low rating for a country with such a population growth rate like Turkey. Therefore, the first problem that Turkey should solve is the issue of resources. Internal resources are not sufficient for Turkey’s steady high growth. This is my personal opinion, it can be criticized a lot, however I am one of the people who think that this approach is right: Turkey needs external resources. It constantly needs external resources. First of all, internal resources mean internal savings, saving is a key word here. The way to attract non-Turkish citizens is to make Turkey a legal country. This is a simple thing. Now, law and economics are two completely interconnected concepts. And I even think that the law is completely in the first place, as I said, if Turkey were a real legal state, it would be stable in terms of attracting foreign resources. So let me be clear: it’s impossible to attract foreign resources, until the rule of law is resolved.

One of the criteria is that the property right is guaranteed. Foreign resources do not come in a place, where property rights are not respected and can be violated easily. I give this interview to an Armenian website and when looking at the past, I do not say, you know better than me, what happened to the property of Ottoman, Greek and Armenian subjects and how they were used in Turkey after 1915 and 1922. Unfortunately, Turkey is a country, where property right is not guaranteed.

The first step in the rule of law in Turkey must reapply to property rights. For instance, more than 1000 highly valued assets came under state control in the period following July 15, 2016. So, what is this? The state managed people’s real estate. This is a simple violation of property rights. Now, in a place where the property rights of others can be easily endangered, one shouldn’t expect that external resources will come easily. Therefore, the issue of property rights must be resolved first. The rule of law is the key word here.

Property rights, the right to free will, the right to hold demonstrations, rallies and marches are denied in Turkey for the last 10 years, and therefore, a state is formed outside the law and state, which I, as a man working in a public economy field, do not call a state. The thing is that it is a group instead of a state, but I cannot call it a state, as I am a man who takes the word state seriously, so there is no rule of law, when there is a group instead of a state. There is a second obstacle to the economy development: the level of education. The ideology of education is not based on efficiency, good education, good equipment, but on getting an acceptable image of a citizen. When you affirm the ideology of education on getting an acceptable image of a citizen, rather than good equipment, the first thing it will do a harm, is economic growth, cause you do search for efficiency and high qualities in the image of an acceptable citizen.

Many different images of acceptable citizens were designed according to the periods. In other words, each period has its own type of image of an acceptable citizen. During the years of the foundation of the republic, there was another type of acceptable citizen. In the last 10-15 years, an image of another type of acceptable citizen appeared, however none of them contribute to the growth. What does this mean? As growth now means innovation, innovation increased productivity and brings wealth, and there should be absolute freedom for innovation. Where there is no absolute freedom, great freedom, people do not search for the nova, that is the new. Certainly, in this case, productivity in the economy doesn’t increase. Economic development means the rule of law and education. In a country, where there is no rule of law and the quality of education is law, as I have said, it’s impossible to have a stable growth of economy in the medium term.

— What priorities can be brough to the fore in the context of Turkey’s regional policy? In other words, what changes are expected in the Turkish economy due to regional developments?

— I do not expect anything, as the term regional economy does not make much sense to me, I just said that the main issue of Turkey is the rule of law. Turkey needs to create a legal state. But the government cannot make Turkey a country of law. We know it very well. Why cannot Turkey ensure the rule of law in the country, since there is no law requirement in Turkey? The average citizen of Turkey does not demand the rule of law. Why doesn’t he/she demand the rule of law? This isn’t because of ignorance or illiteracy. We call it a rational ignorance. What does it mean? If a person doesn’t pay taxes for some reason, it means that he doesn’t want a legal state. For instance, when he is a taxi driver, although the technology allows, equipment, taximeter and so on. If he is taxed not on real but on simple grounds, then he doesn’t want to have a legal state. There is almost 35% informal, shadow economy in Turkey. What does it mean? If you work in shadow economy, you do not pay income tax on the work you do and you do not pay insurance. Even if you are an informal employee, your boss is less likely to fire you because your boss’s expenses are thus reduced, hence everybody is happy with the informal, shadow economy, except the state. However, the state turns a blind eye to it, as he is afraid. There are huge problems in Turkey in this regard. There is a huge amount of illegal electricity consumption. As I have mentioned before, there is a huge pressure on property rights. The thing is that when I come and form a political party in Turkey and make them believe us, that if we come to power, we will create a state like France, we will get only 2% of the votes, despite all the credibility. As the citizens do not want that, I say it very clearly. So, is there a way out? It’s not easy. The only way out is if we make our interests universal with the European Union and if the EU laws prevail. Only then can the economic problems be solved. That is, Turkey should join the EU, in order to be a state governed by the rule of law, otherwise such a thing is not possible.

— There is a lot of talk about imposing economic sanctions on Turkey. In your opinion, which areas of the Turkish economy could suffer the most in that case?

— I do not look at the issue from that point of view. Various field influences are not important, that is not the problem. Of course, because of Turkey’s policy, the United States and the European Union, in other words, the West threatens Turkey with sanctions. When saying West, we mean the center of the world financial system. If they impose sanctions on Turkey, the most important and the biggest sanction will be the restriction of the access of foreign resources to Turkey. See, if in 2011, the national income in Turkey was $12,500 per capita, now it has dropped to $8500. That is, the citizen of the Turkish Republic has lost almost 1/3 of his income in about 10 years. Is there a bigger sanction than this? This is the sanction. Otherwise, field sanctions and so on, are not so essential. The most essential sanction is that the West does not give a green light for foreign capital to enter Turkey, to attract foreign resources and investments. The consequences and results of this are obvious.