Then, in this milieu attempting to manufacture a Turkish automobile will not remedy but will even elevate current account deficits.

The Turkish Prime Minister recently spoke at a TUSIAD (Turkish Industrialists' and Businessmen's Association) meeting. He called on the industrialists to manufacture a Turkish automobile. We all loved the idea; it sounded great. But when you sit down and think it through, things are not as they seem. If you design a Turkish brand, the current account might not decrease but increase, for instance. Then, deal with the economic columnists of certain media circles who do not get economics, if you can. They will immediately label those with critical opinions traitors and you will have nothing to do but get prepared for the trouble. On what is my argument based? It would be the example of the iPhone. As a new report by the Asian Development Bank reveals, the current account deficit of the US has been rising as iPhone sales increase. If you want to know what is going on around the world, please read on.

Apple is one of the largest US firms carrying out high-technology production. Their latest inventions, the iPhone and the iPad have messed up the mobile phone and computer market. They have altered the conceptual framework of the business. Apple is one of the most innovative firms of our era. Let me explain some other time what I think about the changes in the US.

Have you ever wondered how iPhones are manufactured? They are manufactured via the common operations of 9 firms on the global scale, in China, Korea, Japan, Taiwan, Germany and the US. Each country produces a different component and the components ultimately are assembled in China. Finally the finished iPhones are shipped from China to the US where they are marketed. As of 2009, China exported US$2 billion of iPhones to the US. This amount contributes to the elevation of the current account deficit of the US against China. Production organized by an American firm, Apple, on the global scale, increases the current account deficit of the US. How about that? The innovation is American, the brand is American, the consumer is American, but the product is made in China and thus in the end the current account deficit of the US grows. Is Apple a traitor? No, this is how the world order works. The way to promote a brand is to establish a global production and distribution chain. This is the first point.

The second point: In the past, the unit of analysis in economics was the nation-state. The whole conceptual framework regarding the current account balance sheet is the fruit of an analysis based on this unit. But we live in a distinct period now. It becomes increasingly difficult to understand today's developments relying on the concepts of the past. Those concepts no longer have the same tone and resonance. We have to think of something new.

The third point goes like this: Nine firms in six countries work to manufacture iPhones. Among these firms none is Turkish. Why is Turkey, the "shining star," not one of these countries? The research and development laboratories of the developed countries have been transferred to developing countries. But none of these have arrived in Turkey yet. Why? Turkey cannot compete with China or Vietnam in terms of cheap labor. But can we not become a rival to Korea or Taiwan with respect to our technical capacity? In 1970, indicators in this account were similar to those of Korea. How is it that they have made so much progress while Turkey still goes round in circles at the 1970 level? That is the question. A recent study by TEPAV reveals that the level of research and development expenditures in Turkey is currently at a level similar to that in Korea in the 1980s.

Then, in this milieu attempting to manufacture a Turkish automobile will not remedy but will even elevate current account deficits. This should be kept in mind.

This commentary was published in Radikal daily on 25.01.2001