In the 1960s, Turkey, Korea, and Egypt had the same GDP per capita. Should we compare ourselves with Korea and feel frustrated or should we look at Egypt and be pleased?

In the previous decade, Turkey by 62 percent, the figures say. Did all income groups benefit from the growth equally? Was the process inclusive or exclusive? Has poverty increased or decreased in the meantime? Is Turkey a more equitable country today? How you formulate the question shapes the answer you get. Today I would like to talk about a recent blog post by Martin Raiser, World Bank Turkey Director, who believes that the growth process of Turkey in the last decade was inclusive. True, figures validate that Turkey is performing relatively better concerning income equality, but it is still not doing as well as South Korea. Below is an introduction to the issue with a few observations.

My first observation is that income distribution has become more equal throughout the world in the last decade. This is a global trend, we have to note. We may even talk about the Chinese effect exclusively. For more than a decade of China’s growth, around 30 million people switched from agriculture to industry per year. In a way, a new medium-sized industrial country was added to the world economy each year. As the Chinese economy has improved, more people have broken the chains of poverty. It is calculated that since 1980, 600 million Chinese people have moved out of poverty, with their incomes exceeding the threshold. Again with the Chinese effect, prices of manufacturing goods have declined globally. The access of the poor to these goods was improved and the cost of the consumption basket decreased.

Second, over the last decade in Turkey a structural trend that will enhance income distribution relatively has come into play. The redistribution effect of the budget policy is also part of this process. The share of interest expenditures in the budget transferred to the top 20 percent of the population that has the highest income and the means to save has decreased remarkably in the last decade thanks to the measures of fiscal discipline. Besides, personnel expenditures targeted mainly at the lower income groups as well as health and education expenditures have increased. The fiscal discipline policy carried out in harmony with the IMF agreement has ameliorated income distribution in Turkey. Ignore the populists; this is what has happened in reality. The government’s commitment to the fiscal discipline target and its facilitation of the access of the poor to services via the redistribution efforts has made a positive contribution to the relative improvement in income equality. Please note that the poor quality of education and health services, and the access to and the budget means allocated to these services are two separate concepts.

Third, in the last decade, Turkey was one of the best performers globally. You are welcome to check how the Gini coefficient, which indicates income inequality, has changed for different countries in the last decade. You will see that it is among those that performed well. Fourth, despite the recent improvement, it still trails far behind the OECD and Europe in income equality. Turkey is worse than Norway and Korea; but it is better than Brazil. Fifth, that Turkey has one of the highest child poverty rates indicates that there is a long way to go.

I read Raiser’s blog with these with these feelings and thoughts. He stresses as a positive development that between 2006 and 2011, the growth of consumption of the bottom 40 percent, that is, the growth felt by this income group, was in harmony with the overall rate of growth. As far as I understand, he emphasized that Turkey was not satisfied with income equality because it compared its performance with that of the OECD and EU countries. The glass was half full, Raiser claimed, when you compare Turkey’s performance with that of developing countries. I hope that his article gives way to a fruitful debate. His proposal to compare Turkey’s performance with developing countries is appropriate.

But for some reason, any time I see an assessment of Turkey’s performance in some indicator, I feel the urge to check Korea’s performance first. In the 1960s, Turkey, Korea, and Egypt had the same GDP per capita. Should we compare ourselves with Korea and feel frustrated or should we look at Egypt and be pleased? What do you think?

Don't worry, this discussion will not end here. I am still going to talk about the "no unearned profit, no wealth equation."

This commentary was published in Radikal daily on 26.11.2013