Is it possible that Erdem Başçı did not participate in the design of the unorthodox monetary policy in effect?

Let me begin with a phenomenon the readers of this column are familiar with: available studies suggest that the differences in institutional structure are quite important for understanding the income gap among countries. This can be read as follows for the case with Turkey: one of the major reasons why the welfare gap between developed countries and Turkey did not change considerably must be traced in the institutional structure.

Of course this is a quite broad concept; you can divert the focus to any aspect you like. So let us avoid this and not divert the focus. Reading this phenomenon as it is, the reality is evident: we are not aware about the critical importance of the institutional structure.

You do not even have to make effort to prove this point; it is enough to take a look at the developments. For instance, take a look at the comments about the handing over of the governorship post in the Central Bank of Turkey (CBT). The comments read as if the former Governor Durmuş Yılmaz alone took all the policy decisions of the CBT, designed all the policies implemented throughout the crisis period and planned the entire change of monetary policy framework since the second half of 2010. 

Yılmaz had a single vote

The interesting part is, Mr. Yılmaz, who was highly successful during his governorship, always stressed with all his modesty that he had a single vote and tried to highlight the institutional structure of the CBT. Even in his address in the handover ceremony, he drew attention to the strong personnel structure of the Bank.

The processes in the CBT legally run as follows: interest rate decisions are made by the Monetary Policy Council. The Council has seven members one being the governor of the CBT. Until recently, the decisions about the required reserve ratio, another important monetary policy tool of the CBT, were made by the Bank Assembly. The recently enacted mixed law might stipulate this authority to another body deemed appropriate, which is apparently the Monetary Policy Council. The Bank Assembly also has seven members one being the governor. The mentioned bodies approve decisions by unanimity of votes. In this sense, the governor has only one vote.

On Tuesday the headline of the both Dünya and Radikal newspapers involved a quotation from the Financial Times. Both newspapers highlighted the British Financial Times' article as "Başçı has an overflowing in-tray" with the quotation: "Yılmaz bequeaths an unorthodox monetary policy on his successor."

Mr. Başçı headed the directorate general
Mr. Başçı was the deputy governor from 2002 until Tuesday. What is more, he was the head of the directorate general for monetary policy design since 2006. Is it possible that Erdem Başçı did not participate in the design of the unorthodox monetary policy in effect? As a person that served as a deputy governor at the CBT for five years together with Mr. Başçı, I am sure that he had a major role in the designing of the new framework, let alone participating in the process.

The origins of this attitude which features the persons and ignores the institutions might be an interesting research subject. For instance, is this unique for countries which were dynasties and empires in history and which could not complete the transformation to democracy? Do the countries which succeeded in important reforms and development attempts demonstrate this attitude at the same degree? Or, what is the relation between this attitude and the fact that voting for the MPs candidates decided by only a few person is called democracy here?

This commentary was published in Radikal daily on 21.04.2011