The summer of 2004 has seen a new sense of optimism in Turkey. A stable government has garnered a series of successes both in legislating democratic reforms and in international diplomacy. Long-promised rights and safeguards have been put in place, significantly reducing the authoritarian legacy of the republican state. The eu announced that the country had fulfilled its requirements for political reform, and no longer had to be monitored. It is widely expected that negotiations for membership to the eu will be given the go-ahead later this year and that foreign capital may start to flow in. Inflation has been reduced and the economy is currently in an upswing, registering a growth rate above 10 per cent last quarter. Yet, barely three years ago, Turkey’s political instability—erupting in a public row between president and prime minister—catalysed a financial crisis, with a 50 per cent devaluation of the currency, severe recession and soaring unemployment. A year later, in summer 2002, the coalition government (Turkey’s seventh in a decade) collapsed in disarray. The political and economic outcomes of these debacles unfolded within the context of the Iraq War and us-led occupation, eu pressures to reform the highly authoritarian state system, electoral breakthrough by the populist Islamist akp and intensified imf-led restructuring.

The 2001 crisis itself represented the collapse of a two-decade attempt by Turkey’s traditional elite to shore up its faltering ideological hold through resort to state coercion. The state is a concept with an unequivocal referent in the Turkish context. In its eyes, the nation is an organic totality whose true interests can be known and fostered only by the Kemalist governing elite. It calls for constant vigilance against the forces who would dismantle the country and threaten Turkish national unity. The hegemony of the elite was established through the construction of the nation-state from the ashes of the Ottoman defeat, and sustained through the ordinary apparatuses of school and barracks. It was perpetuated through its control over foreign exchange and credit during the three decades of developmentalism that followed the Second World War. The state’s arsenal of policies and resources dominated a weak bourgeoisie and moulded the largest businessmen into a willing alliance around a strategy of centrally coordinated national development on the import-substitution model.

As in Latin America, development came to an end due to an inability to perpetuate a largely closed economy. The crisis was occasioned by problems in securing foreign exchange. Urbanization and industrialization had ensured that most of the basic consumption items, durable goods included, were manufactured domestically. The Turkish economy produced a sufficient quantity of the staples, such as steel and petro-chemicals. Yet none of these sectors could hope to compete in the world market. State enterprises were burdened with excessive employment, while in the private sector, monopoly positions translated to high profits and high wages. Despite a respectable growth performance, the economy could not generate the foreign-exchange earnings that were needed for essential imports such as oil and new technology.

The response of the Turkish political establishment in the 1970s was to perpetuate national-developmentalist rhetoric, borrow dollars abroad, and continue to protect industry, support agriculture and subsidize consumers. They attempted to control the market by fiat, setting exchange rates and prices at artificial levels, and watched helplessly as shortages grew and a black market flourished. The economic crisis and the social dislocation it instigated fuelled the already raging political struggle between the hardline right and the revolutionary left. The 1980 military coup was thus a response to the economic impasse as well as to political crisis. It ushered in a regime of exception under which the alliance of statist and authoritarian interests succeeded in stalling all attempts to break through its own fog of nationalist ideology.

The chief institutional legacy of the three years of overt military tutelage (1980–83) was the 1982 Constitution. Under this basic law, the powers of a National Security Council (nsc) were expanded to form what amounted to a parallel government, while the State Security Courts became a parallel legal system with jurisdiction over ‘crimes against the state’. Within the nsc, military chiefs of staff met with top cabinet members and dictated the policies to be followed. The nsc was endowed with a permanent secretariat and staff, designed to pool all intelligence and to develop policy to be implemented by the relevant bureaucracy, often bypassing the politically appointed ministers.footnote¹ It gradually extended its authority to cover any issue that could be deemed important in the total war against separatism and the Islamic movement. A Higher Education Council was established to oversee the universities, their personnel and syllabuses, and a similar body to regulate the content of all broadcast media. Virtually everything, from foreign and military policy to the structure of civil and political rights, from secondary-school curricula to energy policy, was eventually decided in the monthly meetings of the nsc, invariably along the lines formulated by its secretariat. The civilian governments that subsequently entered office, beginning with Turgut Özal’s election victory in 1983, essentially concerned themselves with economic policy and the management of the debt. Meanwhile, the State Security Courts served as unabashed organs of the ‘deep state’: their jurisdiction extended to everything political, ranging from human rights to anything that the state construed as separatist propaganda, within which rubric even singing a song in Kurdish could qualify.footnote²

Under the military-nsc regime, a radical makeover of the economy could be embarked upon with minimum resistance. The gradual dismantlement of the import-substituting industrial sector took place against a backdrop of worsening income distribution. The share of wages and salaries in national income dropped from around 30 per cent in the 1970s to roughly 20 per cent in the 1980s. Wages in manufacturing had increased, more or less in line with productivity, over the three decades after 1950; by contrast, the level of real wages remained in 2000 what it had been in 1980, having dropped below that for long periods in between. Manufacturing employment in the public sector fell from 250,000 to 100,000 between 1980 and 2000, due to downsizing and privatization. Workers in the state-owned industries had constituted the core of the labour movement of the 1960s and 70s—organized trade unionists who received relatively high wages and good benefits. With privatization, deregulation and flexible employment, the advantages they had enjoyed in a protected manufacturing sector rapidly eroded. Subcontracting, the spread of smaller enterprises and piecework became standard practices; especially as the service sector gained ground, informal and diversified conditions of work increased.footnote³

At the same time, market liberalization unleashed entrepreneurial energies at every level; traders and merchants were suddenly permitted to do things for which they would have served jail sentences a few years earlier. The industrial structures of the developmentalist era had been characterized by the oligopoly of a few multi-tentacled holding companies, through which the import-substituting bourgeoisie of Istanbul, with their privileged access to policy makers in Ankara, had been able to maintain an iron grip over the economy. With liberalization, a new breed of entrepreneurs emerged who had to compete in globalized markets, and indexed their behaviour to commercial and consumer signals rather than bureaucratic decisions; hence their dependence on policy was less direct. As Turkish exports gravitated toward labour-intensive manufactures, a number of smaller Anatolian cities with craft traditions and non-unionized workforces, where households could be incorporated in subcontracting deals, began to emerge as regional industrial centres.footnote⁴ Most of the production in these towns, the so-called Anatolian Tigers, was located on buyer-driven networks: businessmen contracted directly with retail chains and volume buyers in Europe. Dealings with the economic bureaucracy of the state were considered a burden rather than a benefit.