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Concepts are not the same anymore
Last week we started to emphasize that in the going period of economic depression, the meaning of concepts is not the same anymore. In the past, we lived in a world we know. The meaning of a fall in inflation was definite. We would know what happens if interest rates go down. Even appreciation of Turkish lira had a specific meaning about stability. Each tool and/or indicator has a meaning within a generally accepted conceptual framework. But it was yesterday; and now it ended.
Now, we need a new conceptual framework which will attach new meanings to the tools at hand. Otherwise we might be feeling extremely happy whereas the indicators drag us to hell. So, what are the characteristics of this new period? The new period is a period of economic depression. And the prominent characteristic of economic recession periods is the presence of employment losses. Just as yesterday's indicators were in line with yesterday's story; today's indicators are in line with today's story; i.e. economic recession. So, our ears and minds must be coordinated with this new framework. Today, let us take a look at the figures about the new framework.
Have you checked the latest statistics provided by Social Security Institution (SSI)? Ratio of the people not covered by the social security system to population increased from 17 percent in June 2008 to 20 percent in June 2009. Here is a figure demonstrating the characteristics of the process we are in. So, what does this mean? First, as the figure reveals, around 2 million people have been left out of the social security system with the crisis we encountered. This is the first point indicating the social cost of the crisis. Second, the starting point of the process during which around 2 million people were left out of the social security system is the lay-off of insured employees. As figures announced by SSI suggests, in the given period, around 1.2 million formally employed people have lost their jobs. What does it mean if a formally employed person loses his/her job? Considering that formally employed people are more qualified and skilled, SSI data indicates that firms even lay-off skilled personnel. And this is bad.
Third, that people paying premiums to the social security system loses their jobs means that more than 1 million people will not be paying the mentioned premiums anymore. The result of this is the emergence of a growing social security gap. And in fact this is exactly what happens nowadays. Climate of economic recession reduces the number of actively insured employees paying premiums whereas it cannot influence the number of actively insured receiving retirement pension. In that case, social security gap automatically widens in the climate of economic depression, bringing us to the fourth point: Social security gap obscures the exit strategy we have to put forth. Growing budget deficit tests the determinateness of the administrators. Are not the structural problems of Turkey which leaves us with "the need for the IMF"?
So, are these figures about yesterday? Is not Turkey's economy in a recovery period in which such outcomes resulting from the period of rapid contraction can be overcome? No, no it is not. Let us underline the message fifth point gives: Turkey is right at the beginning of the economic contraction period. The important thing to do in this period is obviously to make observations and collect data on economic dynamics. However, two things are clear as the blue sky: First, there is no justification for expecting to see rapid recovery dynamism in Turkey as it is also absent all over the world. In terms of growth process, Turkey will not experience long-term averages in the near future. 2010 will be better than 2009; however, 2011 will not be better than 2010. This is the first sub-finding about the fifth. Second, as a result of the productivity gains during recovery periods, recovery in growth will not translate into the recovery in employment at the same pace. Then, it can be concluded: During the recovery period; Turkey will follow developed countries and employment will follow economic growth. In that case, observing positive signs about employment will take a long time. This is the second sub-finding of the fifth point. And the third sub-finding is: Turkey's budget problem is serious and it will not correct itself automatically if left to time.
The virtue of the day is to notice the change. What we need is courage; the courage to see things with a different angle!
In the lenses of the real sector, the picture seems completely different.
This commentary was published in Referans daily on 11.08.2009