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    We are 16th now but used to be 15th

    Fatih Özatay, PhD22 May 2012 - Okunma Sayısı: 1030

     

    But what is the meaning of Turkey being the sixteenth largest economy for the man on the street? The answer is quite simple: it has no meaning at all.

    Sometimes – I hope this happens from time to time, really – I become really uncomprehending and linger on a single issue. I somehow fail to acknowledge that thing and move on. The latest example of this was the “issue” about the international rank of the Turkish economy.

    Treasury’s “The Turkish Economy” report that is updated on a weekly basis and is a good source of information on the country starts with the chapter titled “Turkish economy in the world.” According to 2010 results, Turkey is the sixteenth largest economy of the world. This rank obviously gives an important message to foreign investors. Also it matters for foreign relations. But what is the meaning of Turkey being the sixteenth largest economy for the man on the street? The answer is quite simple: it has no meaning at all. Why is that?

    Switzerland, Sweden, Norway and Denmark are not on the list. Because their economy is not big enough! And I am sure their citizens are really upset that their countries which have the lead in terms of almost all indicators that deeply affect and interest the men on the streets are not in the list of top economies. According to the list of top-twenty economies, Iran ranks seventeenth, Mexico eleventh and China second. I am sure the Swiss or the Norwegians are envying of the Mexicans who are forced by drug barons to commit homicide, the Chinese who live under constant oppression and the Iranian women who are taken in since a piece of their hair or leg shows.

    Think of two countries: the size of the economy of Country A is 100 units and of Country B worth 75 units. That is, the former is larger than that of the latter. If their populations are 100 and 25 respectively, which one is richer? Citizens of Country A or Country B? Per capita incomes in country A and B are 1 unit and 3 units, respectively. So, country B is three times richer than Country A in terms of per capita income, implying that economic size does not necessarily have a meaning for the prosperity of citizens.

    It is evident that comparisons based on per capita income are more meaningful than those based on the size of the economy. Assume that you are sitting in a kebab place. Total population in the place is 50 people, which have a total income of 50 liras. Then, the average per capita income is 1 lira. If a renowned rich man with a total income of 450 liras walks in, the total income of the fifty one people inside will become 500 liras and average per capita income will become 9.8 liras. Wow! Just as he walked in, those who were already in became 9.8 times richer. Unfortunately, the dream will not last long: the rich man will eat his kebab and leave the place and per capita income will fall back to 1 lira.

    Then, the size of the economy per se is not a good indicator of the people’s wealth. Per capita income is better but still insufficient as the distribution of per capita income is also of critical importance. Is it accumulated by a few or distributed almost equally? Thus, we have to investigate per capita income together with income distribution. Even this analysis might prove insufficient. For example, we have to know if the environment was degraded when generating national income. Or the quality of drinking water and air. But who cares, right? Let’s just keep on bragging about being the sixteenth largest economy or argue that we used to be the fifteenth just until recently. I wish you all the very best of luck!

    This commentary was published in Radikal daily on 22.05.2012

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