Nesrin Nas
Nov 21 2017

Poverty is being institutionalised in Turkey

According to the Organisation for Economic Co-operation and Development (OECD), income distribution in member countries is the most unjust in three decades.

Turkey ranks as the third most unjust country after Chile and Mexico.

According to Credit Suisse's Global Wealth Report, only the number of billionaires in Turkey has increased within the "fragile quintile".

Moreover, this has happened as total wealth in Turkey decreased.

If the vast majority of a country’s citizens are living on the poverty line and most of the income is in the hands of a very small minority, if taxes and other incentives are adjusted only to benefit a minority, if unemployment has been institutionalised, and industry, which helps create more even distribution of income, has collapsed (Turkey fell from the list of world industrial countries in 2010), and if a country’s wealth is gained from rent, then that country is a country that “writhes upon the paw” of income inequity.

Such countries are not rich or developed economies.

The reason why these countries are not rich is neither geography nor culture, nor the ignorance of their citizens and politicians.

The main reason is that the political system, administration and economic institutions, especially the state, are not transparent, accountable, and pluralistic.

Turkey has a poverty rate of 28.5 percent, higher than any other country in the 35-member OECD.

The share of wealth controlled by the poorest 10 percent in our country is just 2.1 percent, while the share of the richest 10 percent is 31.7 percent. So, the income gap between the richest and poorest has reached 15.2 fold.

Poverty among young people in Turkey, where youth unemployment has reached 25 percent, is the worst in the entire OECD. Some 28.5 percent of the 0-17 age group is poor. Poverty is such that it will deprive them of any kind of opportunity to change their lives, such as qualified education, health, work and the environment.

That is to say, they are poor because they are poor.

Those with political power, trapped in their own vicious circle, see this poverty as a means of fortifying power, even though they are aware that it destroys a society’s future, which will accelerate every kind of radicalisation.

This vicious circle means that rising income inequality restrains economic growth; and in turn low growth leads to more income inequality.

According to the OECD, between 1985 and 2000, Turkey lost 4.6 percent of its growth due to income inequality because it curtailed the educational opportunities of disadvantaged groups.

It also reduced the frequency of class changes. Individuals cannot develop skills in line with their competence and cannot create added value.

As value-added production declines, the competitiveness of a country declines and both external and internal deficits grow.

With an unqualified labour force, there is no option other than to remain one of the lowest-ranked countries in terms of competitiveness and living standards.

In countries where there are no natural resources and the only source of wealth is human capital, like Turkey, social unrest caused by poverty that grows and becomes permanent creates extremism and even racism.

It also clears the way for authoritarian, totalitarian populists who say that they will redistribute income and wealth.

For populist leaders, what is important in the short term are spectacular growth figures, not long-term development. So, their focus is not on sustainable growth; but on rent, cheap credit, and a growth model focused on construction and infrastructure.

However, without sustainable economic growth, economies based on the investment and consumption of a few rich, rent-seekers cannot provide just income distribution, nor can it produce real wealth. Because sustainable economic growth always requires labour, land and technological innovation that increases the efficiency of fixed capital (buildings and machinery).

Technology does not just mean better, faster machines. It means more qualified and trained human resources, and business training and skills that produce scientific knowledge, enabling us to create added value and helping us apply these technologies to different business fields.

Here, an open, transparent, accountable, democratic and pluralistic state organisation is a prerequisite.

Sustainable economic growth is also growth that produces added value. If the share of value-added production in the economy falls, the real income of the working majority decreases equally. However, economic growth based on construction means demand for an unqualified labour force, not a qualified one. And unqualified labour means low wages.

As in Turkey; if wealth passes into other’s hands via a rentier economy based on construction, it paves the way for wealth, hence political power, to gather in specific segments of society via zoning, taxation, incentives and monetary policies that boost this part of the economy.

This undermines the distribution of income on the one hand, and on the other hand lays the ground for the construction of a political system that gathers power in the hands of a specific few. And such power will not push for a change to skewed income distribution and wealth.

And this process ends up with a non-accountable government that is biased in its approach, instead of a transparent, open government that works for society as a whole.

Political elites and members of a rentier state fastidiously apply repressive policies to maintain their wealth. There is no demand for a trained and productive labour force, as this selective, rent-weighted growth model does not require quality and innovation. However, this approach destroys concepts of impartiality and justice; it makes poverty permanent and institutionalised, and consolidates the oppressive state. Moreover, it also reduces the cost of military-civilian coups, which are based on de facto regime change. This aspect is also important because coups are not just a change of government and regime of a country. They are also a transfer of wealth and income.

Coups are extremely costly to industrial societies that are based on fair income distribution, a qualified labour force, high added value production and complex trade and finance networks. Therefore, compromise takes precedent rather than conflict, and institutions are forced to be pluralistic and democratic. However, in rent and land-based economies, the economic cost of coups is lower. Furthermore, coups are a means of institutionalising existing injustice or seizing existing income and wealth.

When a society in which there is no fair income distribution is examined, it can be seen that power lies in the hands of a group or person who is not accountable or transparent, and institutions are too weak to control and counter-balance it.

Moreover, the resources produced by such an economic structure tend to be used to establish military and security organisations to defend the absolute political power of its leaders. This, in turn, dissuades much of the population from demanding better living standards.

For example, in Turkey we see that emergency rule, enacted after the failed coup, is becoming permanent, employees’ rights to strike are being curtailed, freedom of information is under attack and criticism and inquiry are treated as treason. We also see the government transferring all major public assets from the control of the Grand National Assembly to an asset fund that has no public accountability.

Hence, the OECD report and its results.