My favorite news features from the last week was those which read "We could not see what the Honorable Prime Minister saw; we did not notice that the crisis missed Turkey." The features were related with the rising profit rates of the corporate sector. But first, let me what I think: I call this the 'our elephant needs company' syndrome. Do you remember this Hodja Nasreddin narrative? It was back when Timur 's army oppressed the whole Anatolian region; i.e. it was after the Battle of Ankara in 1402. Timur wins against Bayezit I and tyrannizes the Anatolia. In the meanwhile, he sends an elephant to the village where the Hodja lives so that it can be fed and taken care of. But the residents of the village are tired of taking care of the elephant as it eats all they have for their subsistence. They come together and say "This is not bearable anymore. We should appear before Timur and tell him to take the elephant!" So, they agree to form a complaint group of ten people headed by the Hodja. They arrive at Timur's place to appear before him. The group parades after the Hodja to enter the room. But when he enters the room, the Hodja seas that he is all alone! The others have turned back at the gate and he happens to be the only one inside. Timur sits to hear what the deal is. He wants to hear what is demanded. We all know that he is a heartless cruel man. So, he is not willing to hear anything he is not willing to hear. It is so that, if surveys were invented back than, pink surveys indicating that the public supports him 100% would be prepared. In a way, it is not foreseeable how he will behave when he hears something he does not like. In this respect, the Hodja will be in trouble whatever he says. He, the group leader, therefore says "Great Timur, the elephant you left in our village is all healthy and happy. We all adore it. But recently we are concerned that he has a problem. The poor animal feels lonely. If you would allow, we will be more than happy if you send another elephant to keep him company." At the end, Timur gets enthusiastic and orders his men to send another elephant to the village. He is proud that he solved another problem. The Hodja on the other side is happy that he fell on his feet this time. I believe that the comments 'We could not know. We could not foresee the future successfully as the Prime Minister did' should be assessed in this lens in line with the history of the Anatolia. And I should say that a number of Timur's are worn away in Anatolia.

Let us get to the point after a long introduction. As well as criticizing the comments, I have to make a comment myself on the issue. Profits of the corporate sector increased as data by Istanbul Chamber of Industry reveals, right? Then, what kind of a crisis was this? Why did business people keep complaining? Today let us focus on this exact point and put the main idea on top: "Rise in profits of the corporate sector does not necessarily imply that things are on track." It only implies that the specific firms are managed skillfully. That specific firms are managed skillfully does not imply that thinks are fine for the whole economy. Unfortunately, tens of thousands of unemployed as well as households that faced income loss are not a delusion but the reality. Do, today let us take a look at the rising profits of the corporate sector issue.

In addition to the data announced by Istanbul Chamber of Industry, Istanbul Stock Exchange periodically shares data on the performance of the corporate sector. According to this, things are going better for the corporate sector. Or let us correct my statement: things are on track for large firms. The number of firms that face losses decreases. After all, average is a concept lacking character. Some firms face losses while some enjoy profits. However, the number of firms facing losses tend to decrease compared to the period where the crisis was felt to the highest extent. Conditions were quite bad in the last quarter of 2008; but things started to get back on track for corporate sector as of the second half of 2009. Therefore, times goes by and firms enter to a phase where things work out better. They were right while they were complaining yesterday. In fact, if banks did not hold their end up in that period, a higher number of firms would have been wasted in this shift between phases.

So, is this good for all of us? I guess if it was, not this many firms would be wasted on the way. Large firms could enjoy liquidity more rapidly with the help of banks. They could reduce the share of production and inventory in the operating capital. That is, they reduced the operation volume. Whatever were they doing, they started to do it less frequently. They kept smaller inventories and extended a lower amount of commercial credits. On the other hand, they started to hold higher liquidity. They suspended activities and increased liquid assets. In the meanwhile, they dropped down the debts of the banks. What did they do in short? They slowed down activities and eased problems for themselves. They also eased losses as a whole. This is what the figures we have been talking about demonstrate. So, they did not wait for the government to implement measures and survived on their own. And they did well.

Then, what do they do now? Considering the first quarter of 2010, they wait. They keep their profits in their pocket and avoid investment out of cash accounts. They do not plan to increase operation volume. They wait. They do not do what they did during the most intense period of the crisis anymore. They now know the pain and do not feel it that severely. With this lens, it appears that the pre-crisis level of production could be achieved not before 2012. We, however, could not reach to such point yet. Global conditions are not foreseeable, domestic milieu is blurred by a policy uncertainty dominated by the fiscal rule comedy. This way, we reached the policy uncertainty phase even before the crisis. And I guess we know why. In the meanwhile, we finance current account deficit with portfolio investments. May it be easy!

Economics is like communicating vessels. You encounter a price or quantity adjustment even if you do nothing. The trick is to reach the result that will maximize the social utility. Turkey failed to do this. Turkey is incompetent in this sense. Otherwise, everyone would come up with a solution that will solve their own problem. And you shift from one equilibrium to another. Corporate sector's decision to run in the idle mode caused some people to lose their jobs. It reduced the income flow for some households. In the meanwhile, firms deprived of commercial credits left the market. As the weakest actors left the market, their market shares were distributed across the large firms. So, we came to a new equilibrium. Evidently there are some satisfied with this. But this is the reality.

Last week I talked about the tone of Bart Simpson. In that angle, there is no problem that is of interest for the government, of course. An e-mail from one of my readers added up something which completes the picture. Let me add it too. Bart, when did something wrong says: "I didn't do it.  Nobody saw me do it! You can't prove anything!"

I started to like this metaphor more and more.

Politics is accountable to all of us. Our problems cannot be overcome unless all politicians that are not aware of their responsibility are retired.

This commentary was published in Referans daily on 31.08.2010