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Pre-accession Economic Program (PEP) is not the expected exit strategy
This is how the mankind is; it starts to search for a 'green shoot' in the middle of the wreckage. Remember the life-at-out-blue-planet movies after post-atomic bomb cold war period. People left the shelters and walked around in demolished cities. There shined green shoots over steel skeletons of ruined giant buildings. And the life began again. All disaster movies ended with the birth of a glimmer of hope. This is the main feature of the mankind: We are specie that can be hopeful about the future. Hope gives us breath of life in the least expected time. This is good and necessary. The energy necessary to deal with the crisis is already hidden in our genes. Hope is necessary though is not sufficient. A manmade crisis can only be tackled with a manmade exit strategy. Seeds of hope that has been cumulating in the genes of the mankind since its existence do not turn to green without an exit strategy.
Along with the beginning of spring, 'search for global green shoot' has begun. The search for green shoot in concrete terms refers to the aim to answer the question "Did the downturn end?" After all, if the free fall has ended, we can dress our wounds and move on; just as we are familiar with from the post-disaster parts of those movies. And the issue also has a Turkey dimension. As in the global argument, a similar question is also asked in Turkey: "Did the free fall end?" This is the question posed. Did the global free fall actually end? Where are we as Turkey?
Let us answer the questions immediately: Global free fall does not seem to end at all. And in Turkey, we are at the beginning of the start; not even at the end of the start. So, it is wise to make our calculations accordingly.
First, I would like to begin with a warning note: The author of these lines is optimistic by nature. However, he believes that the search for green shoots already seems to spread at the global scale is too optimistic. The mentioned search for green shoots is based on "what worse can happen after all we have encountered so far" expectation rather than the "analysis of concrete conditions". Therefore, it is imperfect. Where does this imperfection stem from? It stems from the fact that the meaning of the crisis which we go through and feel the impacts of is not properly comprehended yet. Let us proceed from this point.
This crisis is not similar to those we are familiar with. When defining the crisis last year, we emphasized that what we were to face was not an instant but a slow death scenario. This is what the current crisis poses. Widespread and intense unemployment is the most fundamental feature of this crisis. This would be instant death: Along with the crisis, rapid price adjustments take place and exchange rate goes up rapidly and then goes down. Here, the important element is pace. Instantly, the system reaches a new equilibrium point. Everyone comprehends the new equilibrium and then builds a new life according to it. Life starts over; those that cannot survive disappear. Price system fulfills its coordinating function, market mechanism works. While some sectors have employment losses, some accomplish employment gains.
This is not how this crisis works. When compared to old crises, the impact of this one is more prevalent. What does this mean? For the national economy, this is a crisis that hit all sectors and enterprises simultaneously. And for the national economy, this is a crisis that hit all countries simultaneously. So, it is hard to continue operations shifting from one sector to another or develop alternatives within the market mechanism. This is what diffusion indexes for growth and employment prove. Diffusion index study still carried out at TEPAV illustrates that this crisis is worse than 2001 crisis as regards its prevalent impacts on the manufacturing industry sector. This is the first point.
Second point to state must be: Before a crisis which has such prevalent negative effects, governments must provide the corporate sector and households with a detailed exit strategy. In an environment dominated by such a prevalent crisis, the market mechanism does not allow the corporate sector and household develop alternative strategies alone. If the market mechanism fails to coordinate the behaviors of the corporate sector and households alone, another actor, i.e. the public sector, shall step in to solve the coordination problem. Therefore, the most crucial responsibility must be undertaken by the governments. Otherwise, there will be no way out of the crisis. The American government appears to be the one acknowledging this.
The third point is specific for Turkey: Pre-accession Economic Program (PEP) does not provide any exit strategy for Turkey. In this sense, PEP is not an informative policy text. PEP is among the documents that must be announced periodically during the European Union accession process. 2009-2011 PEP is the eighth document prepared in this context so far. That the publication coincided with the crisis does not make the PEP an economic roadmap. PEP is a sincere assessment document, but is not a exit strategy. In particular two points strike attention. First, it is not clear why the economic contraction will be limited at 3.6 percent. The measures will be implemented to limit the contraction at that rate are not clearly stated. Second, PEP does not involve any measures that will improve the competitiveness of the Turkish economy in 2010 and 2011. It is quite striking and depressing that there are huge gaps in particular in structural reform sections for 2009, 2010 and 2011. At this phase our only wish is that the Medium Term Fiscal Problem to be announced in the forthcoming weeks will be a more pleasing document with respect to Turkey's exit from the crisis.
Here, providing an exit strategy does not necessarily refer to designing an active national public intervention program. For example, you might say "There is nothing we can do. Economy will not recover unless current export markets recover. It is where we must monitor." Even at this way it is possible to provide an exit strategy. However, it you follow this way, you have to implement measures to limit loss of market share in export markets. Turkey ranks at top among the countries most rapidly losing market share in the European Union. This is what the studies carried out at TEPAV show. And it is this imprudence and negligence atmosphere that is depressing.
It is early for the global search for green shoots. And it is too early for that search in Turkey. For those wondering "Where are we?" the answer is: We are at the beginning of the start.
This commentary was published in Referans daily on 21.04.2009