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How should Istanbul grow: Via unearned rent or human capital? 02/05/2011 - Viewed 5970 times


The cost of one-year study at Harvard University equals 70 percent of the per capita income in Boston. The cost of one-year study at Koç or Sabancı University is 160 percent the per capita income in Istanbul. It is very worrisome that the income disparity in Istanbul is much greater than that in the USA, where the said problem is quite a challenge. The gap widens further when you move down from high school to kindergarten.

However, despite the wide gap between supply and demand and the ever-increasing difficulty of life, we must give Istanbul its due: if Turkey has grown over the last three decades, it has been enabled by this beautiful city. In fact, let us put it straight: Turkey's growth has been directed neither by a growth strategy nor by an industrial policy. Since we let rivers run their course, Istanbul has had to act as a magnet. As citizens have migrated from rural areas or Anatolian cities to Istanbul and found jobs, overall the productivity of Turkey has increased "automatically." Today, the per capita income in Istanbul corresponds to 155 percent the average in Turkey. The city alone generates 30 percent of the total value added generated in one year in Turkey. More than 50 percent of the production of the services sector and 38 percent of the industrial production is carried out in Istanbul. Moreover, 40 percent of the§ total tax revenues of Turkey are collected in Istanbul.[1]

The figure below, in which the black dots represent the urban population density, reveals that in the twelfth century, the population centered around Sultanahmet and that the density did not increase significantly during the Ottoman era and the first half of the republican era, that is, for 650 years. On the other hand, it is seen that by 2008 the city has grown monstrously over a short period compared to the past. Istanbul is the fastest growing country among all OECD metropolises in the period after the 1990s.

Figure 1: Population density in Istanbul - 1300, 1950 and 2008


Source: NatUrban Study, Arkitera (http://www.urban-age.net/publications/newspapers/istanbul/articles/arkiteraSpatialStudy/en_GB/)

This huge demand for this city, in which 70 percent of the buildings are not zoned, indispensably has generated an enormous and even-increasing pie of unearned rent. Many people have taken a piece, some small and some big, from this pie and prospered. Actually, there were two ways to integrate the immigrants of Istanbul into the urban life: The first was to offer them education at European standards and enable Istanbul to be competitive in the European economy, of which the city has always been a part in history. The second was to distribute shares of this city, the land of which continuously increased in value, to ensure raising the income of individials though unearned rents. In this line, when the increase in the unearned rent revenue slowed down, it was necessary to build bridges and roads for new spaces of unearned rent and to tolerate un-zoned buildings which would later be licensed before elections.

Turkey has chosen the second option. We contended with a level of educational attainment competitive with that in the Middle East and even in Africa in the case of some regions, lolled against the unearned rent-generation capacity of Istanbul and tried to achieve a level of prosperity at European standards. We now have to admit that this, but nothing more, was the only economic policy, income distribution policy or mechanism to cope with the Kurdish issue over the last three decades.

I guess you have understood the point I am trying to make. Instead of writing at length about the Istanbul Channel, or the "crazy project" that was announced on April 27 and that was welcomed with excitement by some press and media organs and was reacted against by some others, I will settle with stressing that Turkey has to make a choice about its growth strategy as well as Istanbul's future.

I think we have three options. We can assess these together with the below figure, which shows the population of Istanbul and Turkey in the 1960-2010 period and the population projections. The figure reveals that in the 1960-1980 period Istanbul's population increased in parallel with that of Turkey, whereas a rupture was seen after 1980, when the population of the former tended to rise much more rapidly. The share of Istanbul in Turkey's total population increased from 7 percent in 1960 to 10 percent in 1980 and 18 percent in 2010.

  • Scenario 1: A second wave of migration to Istanbul. If the pace of expansion of the unearned rent pie in Istanbul differentiates substantially from that in the rest of Turkey, Istanbul will have to assume a stronger role as a magnet. Given that the construction of the second bridge alone triggered un-zoned constructions over an area of 50 thousand hectares, we can estimate the construction activity and rant to be created by a channel that will divide Istanbul from end to end. Under such scenario, the population of Istanbul might exceed 22 million, 30 million with natural hinterlands such as Tekirdağ and Kocaeli, by 2023. Thus, the share of Istanbul in the total population might reach 30 percent, that is, approximately one out of every three citizens might become Istanbulites![2]
  • Scenario 2: Istanbul's maintaining the current pace of growth. As far as I understand, the 1/100,000 scale plan considered as the constitution of Istanbul is based on the assumption that Istanbul will be subjected no longer to any substantial wave of immigration and will maintain the current pace of growth. The key priority of this scenario would be to make the city safer in the case of an earthquake and increase the habitability of the city through investments in transportation and education, with a focus on avoiding major opportunities for unearned rent revenue. By 2023, the population of Istanbul will reach 17 million, corresponding to 20 percent of the total population.
  • Scenario 3: Istanbul growing at a pace similar to that of Turkey. Such a scenario is voiced by no one: since no political power can slow down a monster like Istanbul, this scenario implies that the rest of Turkey has to achieve the pace of Istanbul. That is, if we have the means, we have to employ them to carry out crazy projects not in Istanbul but in Anatolian cities to generate other centers of growth. In a previous commentary, titled "In which Direction Will Turkey Grow?"[3] I tried to emphasize this exact scenario and stated that we have to discuss large attempts such as the Southeast Anatolia project or efforts to make Antalya a center for tourism more frequently. From this perspective, in the presence of an economic growth and regional development strategy, the population of Istanbul might remain at 16 million and the size of the population born and raised in Istanbul but living in a city Anatolian city might increase.

I think there are no other scenarios than the above three. If I were in their shoes, I would go with the third scenario. The realization of the Istanbul Channel project will move us to the first scenario. On the eve of the centenary of the Republic of Turkey, we will manage to make another generation as prosperous as Europe without furnishing them with the skills and qualifications of Europeans.

Figure 2: Population of Turkey and Istanbul (1965-2010) and projections for Istanbul (2010-2030)


Source: TUIK and author's calculations


[1] The data for Istanbul were compiled from the study "OECD Territorial Reviews: Istanbul, Turkey," published in March 2008.

[2] In a short period of time, almost hundred commentaries were published about the project. I believe the most sensible analysis about the issue was made by Tarhan Erdem in a commentary published in Radikal (in Turkish): http://www.radikal.com.tr/Radikal.aspx?aType=RadikalYazar&ArticleID=1047601&Yazar=TARHAN ERDEM&Date=02.05.2011&CategoryID=99

[3] http://www.tepav.org.tr/en/kose-yazisi-tepav/s/2383


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