Erdoğan's Turkey has a serious productivity issue, MIT's Acemoğlu says

Turkey has a serious productivity problem because its government has compromised the independence of key institutions and failed to encourage the development of new thought and technologies, said Daron Acemoğlu, professor of economics at the Massachusetts Institute of Technology (M.I.T).

Rather than focus on measures to improve productivity, the governing Justice and Development Party (AKP) has sought to grow the economy through investments in construction and real estate, Acemoğlu, who is among the ten most-cited economists in the world, said in an interview with Karar newspaper published on Tuesday.

“Turkey’s economy has grown over the past 13 years but increases in productivity have been zero or negative,” Acemoğlu said.  “This is all about institutions. With better institutions, there will be a bigger space for the development of new and better ideas.”

Turkey’s government is seeking to boost economic activity following a currency crisis that erupted in August 2018, shortly after President Recep Tayyip Erdoğan assumed enhanced executive powers at nationwide elections. His administration has announced a series of economic measures, including cheap lending by state-run banks and incentives to invest in production and property, to boost economic growth to 5 percent in 2020 from an estimated 0.5 percent last year.

Instead of increasing its supervision of society, the Turkish state needs to step back and allow the media, the judiciary and universities to operate without political interference, Acemoğlu said. Turkey, under the new presidential system, is tightening the state’s hold on society, he said.

“With better institutions there will also be more investment in technology,” he said. “We saw these kinds of institutional reforms at the start of the 2000s, right after the economic crisis of 2000-2001. In this short period, Turkey showed great potential for better quality economic growth.”

Acemoğlu may join a new political movement led by former Deputy Prime Minister Ali Babacan, according to some Turkish pundits. Babacan ran Turkey’s economy after the AKP assumed power in 2002 and is a close political ally of ex-President Abdullah Gül, also a former Erdoğan loyalist.

The new presidential system creates a political system with fewer checks and balances and is detrimental to strengthening the capacity of the state, Acemoğlu said.

“This reality is seen most in areas such as the courts and universities. More independence for judges and more autonomy for universities will mean their capacity increases,” he said.

Acemoğlu will take part in Babacan's new political initiative, İslam Özkan, a journalist for Duvar news website, said last month citing a meeting with the former minister. Babacan did not mention whether Acemoğlu would join the party as a member or as an adviser, Özkan said.

Erdoğan's government says it is focused on encouraging new technologies and has invested heavily in education. Last month, Erdoğan revealed the first prototypes of a series of locally-made passenger cars that will start entering production in 2022. The Turkish president has criticised Babacan's record on the economy, saying he took instructions from the International Monetary Fund, which sponsored Turkey's economic reforms after the 2001 crisis, and is a fan of high interest rates.

Turkey-born Acemoğlu is both a Turkish and U.S. citizen and is the Elizabeth and James Killian Professor of Economics at M.I.T. He was born in 1967 and earned his Ph.D. at the London School of Economics in 1992.