At the point we arrived, it will be useful to assess the situation of the climate of economic recession. The major point of discussion nowadays is: Did the signals of economic recovery spreading around the world in waves come up automatically in itself or did the measures implemented by governments had an effect? What do you think? Let us admit that this question alone is of critical importance for Turkey, because Turkey ranks at top of the list of countries that did not implement worthwhile measures during the crisis. Or, did the Turkish government do the right thing? The answer is: no they did not. Let us see why.

Each crisis can in fact be considered as a fire. Each crisis, just as a fire, can lead to serious damage in economic operation. When a fire breaks out at a certain spot in the forest and if the administration does not take any step to protect the forests and prevent fires, does the fire last forever? No it does not. No fire lasts forever. As there is no more tree or grass to burn down; the fire ends automatically. In the meanwhile, it takes away the regional flora and living space for animals. Fire extinguishing has two main objectives: First, it is pivotal trying to save the flora so that it could be revitalized. Second, if the fire is too strong, you at least try to limit the area it destroys. Your priority would become controlling the area affected by the fire. There are two conclusions to be reached from here: Purpose of fire fighting is to limit the damage it will cause when not intervened. Otherwise, they fire will die down automatically once there is nothing else to burn. This does not imply "then, there is no need for trying to put out the fire". This is the case unless everything is over and you are looking for an excuse for your inertia.

And let us now deal with the economics. Each economic crisis eventually ends automatically. All economic recessions that shook the world ended in a couple of years. During or after each economic recession, a recovery trend has emerged automatically. Where does this emerge from? For instance, it emerges from the depletion of firms' inventories. In periods of recession, demand does not halt but diminish strikingly. Firms maintain inventories in order to provide products to the supply chain without disruption in line with demand. Consider a food firm and think: As a result of the crisis, domestic sales as well as exports drop. If you have four-month production cycle, what you produced and added to the inventory are not sold in that period as was in the past. However, after a couple of production cycles, inventory depletes. Prerequisite for the preservation of market share by firms is the ability to provide new products to the supply chain. Therefore, no firm can operate with zero-inventory even if sales are weak. In periods of economic recession, firms try to achieve a certain level of inventory after a couple of production cycle if not one. This attempt for regeneration of inventory naturally and automatically leads to an economic revitalization. The second conclusion is: As demand does not halt even in crisis periods, for instance as everyone has to eat; depletion of inventories automatically results in a process of economic recovery. Thus, the process of economic recovery we are faced with has a natural cause.

The third conclusion is: Efforts in tackling the crisis must target at limiting the damage caused by the crisis. It is obvious that, when left alone, some firms cannot survive even until the beginning of the period where inventories are regenerated. If firms that does not reproduce the working capital using it as cash to repay debts, carry on to this for two-three production cycles they might become exhausted even before the recovery period. Some other firms do not have the power to regenerate inventories, because they have spent the working capital to repay debts and just managed to survive until recovery.

So, what is the trick in here? It is trying to ensure that the process of recovery begins before firms spend working capital completely. The practice in developed countries is as follows: When compared with the Great Depression of 1929, recovery from the 2008 depression began more rapidly. This is score for active policies to fight the crisis. The fifth conclusion lies here: It appears that policies to fight the crisis have backdated the inventory regeneration process, which is a good thing.

Sixth conclusion is related with Turkey, which lies like a horse head toward the Mediterranean: Turkish firms did not completely have such assistance. The crisis has been affecting in particular financially weak firms and SMEs negatively and accelerating capital concentration. This is not good.

Turkey's economy will certainly enter the recovery process. Even the fire in Turkey will end; but only because there will be nothing else to be burnt. And this is the worst method possible.

This commentary was published in Referans daily on 17.11.2009