• March 2024 (1)
  • December 2022 (1)
  • March 2022 (1)
  • January 2022 (1)
  • November 2021 (1)
  • October 2021 (1)
  • September 2021 (2)
  • August 2021 (4)
  • July 2021 (3)
  • June 2021 (4)
  • May 2021 (5)
  • April 2021 (2)

    Prerequisite for changing the reality is accepting it

    Güven Sak, PhD15 January 2009 - Okunma Sayısı: 1520


    You might be discontent with the reality you face. Changing that reality might be the main purpose of your life. However, you cannot fulfill that purpose by pretending as if that reality does not exist. Recently, in Turkey, we observe "a tendency towards flight from reality" with respect to both economic policy and foreign policy. Since leadership means accepting and trying to change the reality, this tendency is certainly bad. And in fact, it is extremely dangerous. Let's see why.


    We have been monitoring the global economic crisis. At first, it emerged in the US in a relatively small-scale real estate mortgage credit market, as a crisis of credibility. Back then, it was just a sparkle. Later on, the sparkle turned into a fire and surrounded the American financial system as well as the housing market. And the fire did not stop there, but jumped on the financial systems of other countries. Finally, now, it showed itself in the form of deteriorating demand in the markets of the US and the EU. It took almost a year for the fire to cross over the Atlantic to the other side. But, it managed to do so anyway. Now, we observe that, as a result of the reduced demand in the markets of the US and the EU, the demand for goods produced here in Turkey as well diminished. And it is not over, yet. Decreasing demand throughout the world led to a fall in oil prices. Economy, as evident, is such a system composed of interlocking cubes. With the fall in the oil prices, the demand within the Russia and the Gulf Countries also slowed. At first sight, it seemed okay, but, nowadays, we should have be recognizing that it is not okay at all. The crisis, almost at the end of the second year of its emergence, arrived here in Turkey.


    It arrived, and all exchanges stopped. Why was it so? No firm knows how and to what extent it, the neighboring firms or its customers are affected by diminishing demand from Europe or oil-producer countries. And even if it knew, nothing would change: In economy the thing that matters is whether one makes the payment he is liable to make to the other one in time, or not. This is exactly what is unknown: Nowadays, everyone is keeping the cash and foreign exchange he has. Everyone, unable to estimate what will go on in the future, is just waiting. The crisis has arrived in Turkey in form of a rising silence. Not even a leaf is waving. Don't you hear the sound of silence?


    Let me state the first point: 2001 crisis was not like this. In 2001, there existed a path to follow, and a shelter to get protection along with some hopeful developments. Today, none of these exists. There is no foreign market to enter via lowering prices when domestic market shrinks. There are no channels of external financial facilities to look for in case domestic facilities exhaust. There is no economic program framework that has proved successful in practice. There is not even an IMF agreement providing external support for such a program. Therefore, circumstances are not more favorable when compared to those in 2001. And the mentioned circumstances will be soon reflected on economic indicators.


    It is obvious that, as compared with yesterday, the number of lacking items are significantly higher. What should be changed despite this is exactly the situation itself. This is the reality. It is tough, but not hopeless anyway. There are paths and possibilities. Turkey has steps to take under any circumstances. Today, however, among a number of possibilities, our decision makers appear to believe in the realization of the easiest one. And, this is an extremely optimistic assessment.


    What is this optimistic scenario? If Obama administration manages to gather the pieces of the US economy in the first quarter and if the US economy begins to recover within this framework during the second quarter; and if at the same time oil prices begin to rise and ensures favorable effects on Russia and other alternative markets, if tourists decide to get on a boat and get here right away this summer, things will be better in the Turkish economy in the second half of the year. Yes, it is among the possibilities. Nonetheless, let's admit that, it is a considerably small possibility that every single thing goes well simultaneously. Making the calculations based on the assumption that everything will go wrong is more relieving. What if things, as most probably do, go wrong? What would you do in that case if you did not take any precautionary measures? You would just wait and watch what is going on.


    Portfolio managers might use the extremely optimistic scenario mentioned above to market Turkish stocks to their customers. Nonetheless, leadership means accepting and trying to change the reality. You cannot design economic policies if you are fighting against the reality. The dominant tendency towards ignoring the reality is not good.


    This commentary was published in Referans daily on 15.01.2009