Can Turkey Escape the  Middle Income  Trap?  Famous economist answers

Pointing out that Turkey has been stuck in the middle-income trap for many years, Arnold C. Harberger Professor of Economics, Prof. Dr. Ufuk Akçigit of   University of Chicago pointed out that the primacy of bringing down inflation obscures micro- and structural impediments to sustainable economic development.

 

He was interviewed by Sehriban Kirac. The below are the salient points Akcigit made:

Akcigit emphasizes that while discussing Turkey’s inflation problem, we should not ignore the real problems that we should focus on in the long term.

One of the reasons why the private sector does not spend on R&D is the lack of a competitive environment. Our production processes do not include high technology and we cannot train enough technical staff for our companies. In addition, the relationship between universities and the business world is unfortunately almost non-existent.

The proportion of individuals with a master’s degree among the working population is decreasing compared to OECD countries. We  not only can’t employ policies that will foster competition across the board,  but we are also inadequate in training talent that will contribute to productivity in the workplace.

 

Turkey needs a miracle in the current conjuncture for productivity growth.

 

If Turkey had maintained the momentum in the economy in 2012, it could have been among the rich countries today. However, as long as productivity-based growth is not achieved, any economic improvement will remain temporary.

 

The Zero Productivity Problem

One of the most important characteristics of countries which escape the Middle Income Trap is their ability to maintain a stable growth process for many decades. Turkey’s growth rate in the last decade has remained only around 3% and productivity growth has dropped to zero in the last ten years.

 

Akcigit states that we should focus on quality rather than quantity regarding brain drain. For example, the departure of one productive academic is equivalent to the departure of 100 unproductive academics. Most of the academics brought to Turkey from abroad are also unproductive.

While the productivity of an academic who returns to Turkey decreases by 10%, the productivity of an academic who goes abroad increases by 30%. This demonstrates the  need to focus on salaries, scientific opportunities and freedom of thought.

The fact that academics at Istanbul University cannot find a travel allowance to attend conferences abroad reveals the lack of resources. It seems very difficult to increase productivity in such an environment.

Universities Being Ignored

Akcigit stated:  “In our research, we examined how many academics in universities in Turkey publish. The results indicate that many universities publish at almost zero levels. Especially in most universities opened after 2006, if they do publish, the research cannot find a place in quality refereed journals”.

 

Turkey completely ignores universities when forming its economic policies. However, universities are places where research begins and is developed. As long as the salaries and working conditions of professors are not discussed, we lose sight of the bigger picture.

 

Appropriate Policy Development

When there is a health problem, it is first necessary to correctly identify the problem and then determine the appropriate treatment methods. Industry 4.0 discussions are also important in this context. The necessary foundations need to be laid and strategies need to be determined to develop technology.

 

We need to focus on more data and performance-based industrial policies. He emphasizes that we need to separate industrial policies from social welfare policies and support the companies that will create the most value.

“Unfortunately” he concluded, “I see no signs of serious action being taken in this area. These issues need to be addressed urgently for Turkey’s economic future”.

 

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.