Turkey - ECONOMY

Turkey - The Economy

THE TURKISH ECONOMY is being transformed in the 1990s from a state-led to a market-oriented economy. As in most economies undergoing market reforms, the process of change has caused severe internal dislocations. External economic "shocks" such as the Persian Gulf War of 1991 and the resulting United Nations (UN) embargo on Iraq have complicated the transition.

The Turkish economy's ongoing and turbulent reorientation has left the economy a study in contrasts. Modern industries coexist with pockets of subsistence agriculture. The major cities of western Anatolia are cosmopolitan centers of industry, finance, and trade, whereas the eastern part of the country is relatively underdeveloped. Several decades of state planning followed by economic liberalization have made industry Turkey's leading economic sector, even as most Turks continue to work on farms. Industry has undergone a fairly rapid transformation as a consequence of the far-reaching market reforms implemented in the 1980s and early 1990s. Despite the reforms, however, public enterprises continue to dominate raw-materials processing and the manufacture of heavy industrial and military goods. The smaller firms that dominate the private sector produce intermediate and consumer goods for domestic and foreign markets. The services sector is perhaps the most diverse, embracing large export-oriented marketing groups and world-scale banks as well as small shops and individual domestic workers.

To a large extent, the last 200 years in Turkey have been marked by its rulers' attempts to transform it into a modern European industrial nation. The Ottoman Empire encountered serious economic problems beginning in the eighteenth century with the imposition of unequal treaties, the capitulations (see Glossary), which affected trade and taxation. The tanzimat (reorganization) reforms of 1839-78, an important component of which was the reorientation of the economy toward development of an indigenous industrial base, led to deepening indebtedness to Western imperial powers by the end of the nineteenth century. This dependence on the West, which was seen as one of the main causes of Turkey's "backwardness," created the context for the economic policy of the new republic formed in 1923. The other important influence on the new leaders of the republic was the example of state planning in the Soviet Union. Given these influences, state planning was the route Turkey's new leaders took to modernize the country.

From the 1930s until 1980, the state pursued import-substitution industrialization by means of public enterprises and development planning. This policy created a mixed economy in which industrial development was rapid. However, during the post-World War II period the drawbacks of excessive state intervention became ever more apparent to policy makers and the public. State enterprises, which came to account for about 40 percent of manufacturing by 1980, were often overstaffed and inefficient; their losses were a significant drain on the government budget. State planning targets were often excessively ambitious, yet they neglected such essential sectors as agriculture. Concentration on import substitution deemphasized exports, resulting in chronic trade deficits and a pattern in which periods of rapid growth, financed in part by foreign borrowing, led to balance of payments crises that necessitated austerity programs.

The rapid transition from an agricultural to an industrial society also produced distortions in the country's labor markets and led to unequal income distribution. As was the case in most developing countries, there was a high birth rate, which contributed to unemployment in the postwar period by causing the labor force to grow rapidly. In addition, the modernization of agriculture tended to make small farms economically nonviable. As a result, many rural people migrated to urban areas. Those who left farming, however, often lacked skills needed in modern industry and could find employment only in the informal sector of the urban economy. Meanwhile, industrial enterprises became more capital intensive, which increased productivity but reduced the demand for unskilled labor. At the same time, firms had trouble recruiting skilled employees.

In January 1980, the Turkish government undertook a major reform program to open the Turkish economy to international markets. Leading the reform was Turgut �zal, then deputy prime minister and minister for economic affairs. �zal became prime minister in 1983, following a three-year military regime, and served as president from 1989 until his death in 1993. �zal's reform program included a reduced state role in the economy, a realistic exchange rate and realistic monetary policies, cutbacks on subsidies and price controls, and encouragement of exports and foreign direct investment. During its early years, the liberalization program achieved considerable success in reducing external deficits and restoring economic growth. Despite significant foreign direct investment during the 1980s and early 1990s, however, Turkey's balance of payments remained burdened by an external debt of more than US$65 billion at the end of 1993. A balance of payments crisis occurred in 1994 in the aftermath of a domestic political crisis in the wake of deep divisions within the administration over economic policy and a sharp decrease in exports to Turkey's beleaguered neighbors, Iraq and Iran. This situation led to a steep fall in the Turkish lira (TL; for value of the lira--see Glossary).

The success of the �zal program was predicated on developing satisfactory relationships with the country's economic partners and continued access to export markets. Rapid development required large capital imports because domestic savings were insufficient for needed investments. Foreign investors, attracted by Turkey's great economic potential and increasingly liberal economic policies, made major commitments to infrastructure projects during the mid-1980s. However, continued high inflation, as well as memories of the political instability of the late 1970s, caused investors to hesitate. These insecurities were heightened after the Iraqi invasion of Kuwait in 1990, the rise of strong Islamist (sometimes seen as fundamentalist) parties in the early 1990s, and persistent macroeconomic problems.

Whatever short-term difficulties Turkey faces, most observers believe the country's long-term economic prospects are good. Mining and agriculture provide raw materials for industry, and the growing and resourceful population provides abundant labor. Turkey is one of the few countries that is self-sufficient in food; indeed it can export food to European and Middle Eastern markets. Economic reforms have led to increases in exports of processed foods, textiles, motor vehicles, and consumer durables. Considerable investments in tourism, the revitalization of banking, and upgraded transportation facilities should allow Turkey to compete in the international services market in the 1990s.

Turkey has made great strides toward building close economic ties with Europe, and Turkey's leaders have promoted the country as a vital link between the industrial economies of Europe and the underdeveloped economies of the Middle East and Central Asia. On several fronts, however, Turkey suffered a number of setbacks in the early 1990s. A critical one was the embargo on Iraq. Because of it, Turkey lost a huge export market as well as fees for allowing Iraqi oil to pass through a pipeline on Turkish territory. In addition, Iran, a major trading partner in the 1980s, reoriented its trade directly with Europe and Asia in the late 1980s and early 1990s. Early expectations for commerce with the Central Asian countries have gone unfulfilled because of the economic and social dislocations they have suffered in breaking away from the Soviet Union. Worst of all, Turkey's political relations with Europe have deteriorated, mainly because of human rights abuses of its Kurdish population and increasing intolerance in Europe of Turkish immigrants. As a result, Turkey's accession to the European Union (EU--see Glossary) appeared increasingly unlikely to happen as targeted in 1995, despite its having been an associate member since 1963 of the EU's predecessor body, the European Community (EC--see Glossary), and having applied for full membership in 1987.

Turkey

Turkey - Growth and Structure of the Economy

Turkey

At the time of the collapse of the Ottoman Empire during World War I, the Turkish economy was underdeveloped: agriculture depended on outmoded techniques and poor-quality livestock, and the few factories producing basic products such as sugar and flour were under foreign control. Between 1923 and 1985, the economy grew at an average annual rate of 6 percent. In large part as a result of government policies, a backward economy developed into a complex economic system producing a wide range of agricultural, industrial, and service products for both domestic and export markets.

Economic Development

At the birth of the republic, Turkey's industrial base was weak because Ottoman industries had been undermined by the capitulations. World War I and the War of Independence (1919-22) also had extensively disrupted the Turkish economy. The loss of Ottoman territories, for example, cut off Anatolia from traditional markets. Agricultural output--the source of income for most of the population--had dropped sharply as peasants went to war. Even the production of wheat, Turkey's main crop, was insufficient to meet domestic demand. In addition, massacres and the emigration of Greeks, Armenians, and Jews, who had dominated urban economic life, caused a shortage of skilled laborers and entrepreneurs.

Turkey's economy recovered remarkably once hostilities ceased. From 1923 to 1926, agricultural output rose by 87 percent, as agricultural production returned to prewar levels. Industry and services grew at more than 9 percent per year from 1923 to 1929; however, their share of the economy remained quite low at the end of the decade. By 1930, as a result of the world depression, external markets for Turkish agricultural exports had collapsed, causing a sharp decline in national income. The government stepped in during the early 1930s to promote economic recovery, following a doctrine known as etatism (see Glossary). Growth slowed during the worst years of the depression but between 1935 and 1939 reached 6 percent per year. During the 1940s, the economy stagnated, in large part because maintaining armed neutrality during World War II increased the country's military expenditures while almost entirely curtailing foreign trade.

After 1950 the country suffered economic disruptions about once a decade; the most serious crisis occurred in the late 1970s. In each case, an industry-led period of rapid expansion, marked by a sharp increase in exports, resulted in a balance of payments crisis. Devaluations of the Turkish lira and austerity programs designed to dampen domestic demand for foreign goods were implemented in accordance with International Monetary Fund (IMF--see Glossary) guidelines. These measures usually led to sufficient improvement in the country's external accounts to make possible the resumption of loans to Turkey by foreign creditors. Although the military interventions of 1960 and 1971 were prompted in part by economic difficulties, after each intervention Turkish politicians boosted government spending, causing the economy to overheat. In the absence of serious structural reforms, Turkey ran chronic current account deficits usually financed by external borrowing that made the country's external debt rise from decade to decade, reaching by 1980 about US$16.2 billion, or more than one-quarter of annual gross domestic product (GDP--see Glossary). Debt-servicing costs in that year equaled 33 percent of exports of goods and services.

By the late 1970s, Turkey's economy had perhaps reached its worst crisis since the fall of the Ottoman Empire. Turkish authorities had failed to take sufficient measures to adjust to the effects of the sharp increase in world oil prices in 1973-74 and had financed the resulting deficits with short-term loans from foreign lenders. By 1979 inflation had reached triple-digit levels, unemployment had risen to about 15 percent, industry was using only half its capacity, and the government was unable to pay even the interest on foreign loans. It seemed that Turkey would be able to sustain crisis-free development only if major changes were made in the government's import-substitution approach to development. Many observers doubted the ability of Turkish politicians to carry out the needed reforms.

Reforms under �zal

In January 1980, the government of Prime Minister S�leyman Demirel (who had served as prime minister 1965-71, 1975-78, and 1979-80) began implementing a far-reaching reform program designed by then Deputy Prime Minister Turgut �zal to shift Turkey's economy toward export-led growth.

The �zal strategy called for import-substitution policies to be replaced with policies designed to encourage exports that could finance imports, giving Turkey a chance to break out of the postwar pattern of alternating periods of rapid growth and deflation. With this strategy, planners hoped Turkey could experience export-led growth over the long run. The government pursued these goals by means of a comprehensive package: devaluation of the Turkish lira and institution of flexible exchange rates, maintenance of positive real interest rates and tight control of the money supply and credit, elimination of most subsidies and the freeing of prices charged by state enterprises, reform of the tax system, and encouragement of foreign investment. In July 1982, when �zal left office, many of his reforms were placed on hold. Starting in November 1983, however, when he again became prime minister, he was able to extend the liberalization program.

The liberalization program overcame the balance of payments crisis, reestablished Turkey's ability to borrow in international capital markets, and led to renewed economic growth. Merchandise exports grew from US$2.3 billion in 1979 to US$8.3 billion in 1985. Merchandise import growth in the same period--from US$4.8 billion to US$11.2 billion--did not keep pace with export growth and proportionately narrowed the trade deficit, although the deficit level stabilized at around US$2.5 billion. �zal's policies had a particularly positive impact on the services account of the current account. Despite a jump in interest payments, from US$200 million in 1979 to US$1.4 billion in 1985, the services account accumulated a growing surplus during this period. Expanding tourist receipts and pipeline fees from Iraq were the main reasons for this improvement. Stabilizing the current account helped restore creditworthiness on international capital markets. Foreign investment, which had been negligible in the 1970s, now started to grow, although it remained modest in the mid-1980s. Also, Turkey was able to borrow on the international market, whereas in the late 1970s it could only seek assistance from the IMF and other official creditors.

The reduction in public expenditures, which was at the heart of the stabilization program, slowed the economy sharply in the late 1970s and early 1980s. Real gross national product (GNP--see Glossary) declined 1.5 percent in 1979 and 1.3 percent in 1980. The manufacturing and services sectors felt much of the impact of this drop in income, with the manufacturing sector operating at close to 50 percent of total capacity. As the external-payments constraint eased, the economy bounced back sharply. Between 1981 and 1985, real GNP grew 3 percent per year, led by growth in the manufacturing sector. With tight controls on workers' earnings and activities, the industrial sector began drawing on unused industrial capacity and raised output by an average rate of 9.1 percent per year between 1981 and 1985. The devaluation of the lira also helped make Turkey more economically competitive. As a result, exports of manufactures increased by an average rate of 45 percent per annum during this period.

The rapid resurgence of growth and the improvement in the balance of payments were insufficient to overcome unemployment and inflation, which remained serious problems. The official jobless rate fell from 15 percent in 1979 to 11 percent in 1980, but, partly because of the rapid growth of the labor force, unemployment rose again, to 13 percent in 1985. Inflation fell to about 25 percent in the 1981-82 period, but it climbed again, to more than 30 percent in 1983 and more than 40 percent in 1984. Although inflation eased somewhat in 1985 and 1986, it remained one of the primary problems facing economic policy makers.

Economic Performance in the Early 1990s

Turkey benefited economically from the Iran-Iraq War (1980-88). Both Iran and Iraq became major trading partners, and Turkish business supplied both combatants, encouraged by government export credits. With limited access to the Persian Gulf, Iraq also came to depend heavily on Turkey for export routes for its crude oil. Iraq had financed two pipelines located next to one another from its northern Kirkuk oilfields to the Turkish Mediterranean port of �eyhan, slightly northwest of Iskenderun. The capacity of the pipelines totaled around 1.1 million barrels per day (bpd). Not only did Turkey obtain part of its domestic supplies from the pipeline, but it was paid a sizable entrep�t fee. Some sources have estimated this fee at US$300 million to US$500 million.

Turkey's economy was battered by the 1991 Persian Gulf War. The UN embargo on Iraq required the ending of oil exports through the �eyhan pipelines, resulting in the loss of the pipeline fees. In addition, the economy may have lost as much as US$3 billion in trade with Iraq. Saudi Arabia, Kuwait, and the United Arab Emirates (UAE) moved to compensate Turkey for these losses, however, and by 1992 the economy again began to grow rapidly.

The Turkish economy again was plunged into crisis in 1994. The central government's moves in 1992 and 1993 to grant large salary increases to civil servants and to increase transfers to state enterprises enlarged the public-sector borrowing requirement to a record 17 percent of GDP in 1993. This high government spending sharply boosted domestic demand's rate of growth to 6.4 percent in 1992 and 7.6 percent in 1993. In turn, inflation rates went up, with the annual rate peaking at 73 percent in mid-1993. The resulting rise in the real exchange rate translated into increased imports and slowed the expansion of exports. The trade deficit rose in 1993 to US$14 billion, while the current account deficit reached US$6.3 billion, or 5.3 percent of GDP.

Turkey's impressive economic performance in the 1980s won high marks from Wall Street's credit-rating agencies. In 1992 and 1993, the government used these ratings to attract funds to cover its budget deficits. International bond issues over this period amounted to US$7.5 billion. These capital flows helped maintain the overvalued exchange rate. In a market economy, a high level of government borrowing should translate into higher domestic interest rates and even possibly "crowd out" private-sector borrowers, thereby eventually slowing economic growth. But the government's foreign borrowing took the pressure off domestic interest rates and actually spurred more private-sector borrowing in an already overheated economy. Sensing an easy profit opportunity during this period, commercial banks borrowed at world interest rates and lent at Turkey's higher domestic rates without fear of a depreciating currency. As a result, Turkey's foreign short-term debt rose sharply. External and internal confidence in the government's ability to manage the impending balance of payments crisis waned, compounding economic difficulties.

Disputes between Prime Minister Tansu �iller (1993- ) and the Central Bank governor undermined confidence in the government. The prime minister insisted on monetizing the fiscal deficit (selling government debt instruments to the Central Bank) rather than acceding to the Central Bank's proposal to issue more public debt in the form of government securities. The Central Bank governor resigned in August 1993 over this issue. In January 1994, international credit agencies downgraded Turkey's debt to below investment grade. At that time, a second Central Bank governor resigned.

Mounting concern over the disarray in economic policy was reflected in an accelerated "dollarization" of the economy as residents switched domestic assets into foreign-currency deposits to protect their investments. By the end of 1994, about 50 percent of the total deposit base was held in the form of foreign-currency deposits, up from 1 percent in 1993. The downgrading by credit-rating agencies and a lack of confidence in the government's budget deficit target of 14 percent of GDP for 1994 triggered large-scale capital flight and the collapse of the exchange rate. The government had to intervene by selling its foreign-currency reserves to staunch the decline of the Turkish lira. As a result, reserves fell from US$6.3 billion at the end of 1993 to US$3 billion by the end of March 1994. Before the end of April, when the government was forced to announce a long-overdue austerity program following the March 1994 local elections, the lira had plummeted by 76 percent from the end of 1993 to TL41,000 against the United States dollar.

The package of measures announced by the government on April 5, 1994, was also submitted to the IMF as part of its request for a US$740 million standby facility beginning in July 1994. Measures included a sharp increase in prices the public-sector enterprises would charge the public, decreases in budgetary expenditures, a commitment to raise taxes, and a pledge to accelerate privatization of state economic enterprises (SEEs). Some observers questioned the credibility of these measures, given that the tax measures translated into a revenue increase equivalent to 4 percent of GDP and the expenditure cuts were equivalent to 6 percent of GDP.

The government actually succeeded in generating a small surplus in the budget during the second quarter of 1994, mainly as a result of higher taxes, after running a deficit of 17 percent of GDP in the first quarter. The slowdown in government spending, a sharp loss in business confidence, and the resulting decline in economic activity reduced tax revenues, however. The fiscal crisis resulted in a decline in real GDP of 5 percent in 1994 after the economy had grown briskly in 1992 and 1993. Real wages also fell in 1994: average nominal wage increases of 65 percent were about 20 percent below the rate of consumer price inflation.

Analysts pointed out that despite the fragility of the macroeconomic adjustment process and the susceptibility of fiscal policy to political pressures, the government continued to be subject to market checks and balances. Combined with a stronger private sector, particularly on the export front, the economy was expected to bounce back to a pattern of faster growth.

Structure of the Economy

In the years after World War II, the economy became capable of supplying a much broader range of goods and services. By 1994 the industrial sector accounted for just under 40 percent of GDP, having surpassed agriculture (including forestry and fishing), which contributed about 16 percent of production. The rapid shift in industry's relative importance resulted from government policies in effect since the 1930s favoring industrialization (see fig. 8). In the early 1990s, the government aimed at continued increases in industry's share of the economy, especially by means of export promotion.

Services increased from a small fraction of the economy in the 1920s to just under half of GDP by 1994. Several factors accounted for the growth of the services sector. Government--already sizable under the Ottomans--expanded as defense expenditures rose; health, education, and welfare programs were implemented; and the government work force was increased to staff the numerous new public organizations. Trade, <>tourism, transportation, and financial services also became more important as the economy developed and diversified.

Turkey

Turkey - Human Resources and Trade Unions

Turkey

In the early 1990s, Turkey suffered from serious structural unemployment, although the country continued to lack skilled workers and managers. The number of people engaged in subsistence agriculture and in informal labor complicated efforts to make accurate estimates of unemployment and underemployment. In the absence of direct surveys, available statistical data only broadly indicated trends in labor markets (see table 5, Appendix A). In 1992 the civilian labor force totaled almost 18.5 million; the government estimated that unemployment was about 8.7 percent, but unofficial sources put it at 15 percent for 1993. In a study, the State Institute of Statistics estimated that unemployment in urban areas among those aged fifteen to twenty-four was 30.2 percent. According to official figures for 1992, about 44 percent of those employed worked in agriculture--down from more than 75 percent in the early 1960s. Employment in industry and construction amounted to about 20 percent in 1994, and the services sector employed about 35 percent.

During the postwar period, as agriculture modernized and grew more productive, many agricultural workers became redundant. Many now-jobless farmers, attracted by higher wages in the urban economy, migrated to the cities. Although industry and services grew rapidly after 1950, these sectors did not create enough jobs to meet the demand.

Demographic trends portend continued unemployment problems. Population growth rates declined somewhat after the 1970s, but in the mid-1990s demographers were predicting that the active population (those between fifteen and sixty-four years of age) would increase at more than 2 percent per year until at least 2000. The labor force grew at an estimated average annual rate of 2 percent during the 1960s and 1970s, at 1.5 to 2.0 percent during the early 1980s, and at 2.2 percent per year from 1985 to 1992. The several austerity programs since 1980 exacerbated the unemployment situation in the mid-1980s, with an estimated 3 million Turks unemployed in 1985. The recovery of the economy in the late 1980s appeared to improve the overall situation; manufacturing employment increased 3.4 percent per year. However, the economic crisis of early 1994 and the austerity program once again were expected to slow employment growth.

The labor force would have grown even faster during the 1970s and 1980s had it not been for a fall in the work force participation rate from about 73 percent in the 1970s to 35 percent in the early 1990s. This decline resulted from increased enrollments in secondary and postsecondary education and from the tendency of rural women who migrated to the city to refrain from entering the work force. Most demographers believed that participation rates would continue to fall as a result of higher overall school and female education rates. By 1991 the secondary school enrollment ratios, particularly for females, lagged significantly behind primary school enrollment ratios, implying room for higher future enrollment. Even if participation rates continue to fall, however, projected population growth rates will make unemployment a continuing problem.

Unemployment has caused distortions in rural and urban labor markets. Many farmers have remained on unproductive farms to avoid more uncertain fates in the cities. In addition, the large postwar increase in employment in the services sector probably reflects wide-scale underemployment, as unemployed persons resort to working as street vendors and domestic workers. The largest groups of the unemployed include educated youths from urban areas, migrants dislocated from the villages and living in shantytowns, and Turks returning from working abroad.

Emigration has provided a partial safety valve for excess labor, especially during the period between 1969 and 1973, when more than 100,000 workers left each year to seek jobs abroad. The capital-intensive, labor-short countries of northwestern Europe began recruiting workers from southern Europe and the Mediterranean basin in the 1950s. Turkish workers began emigrating to Western Europe in large numbers in the early 1960s, as the demand for labor increased in northern Europe and as the supply from southern Italy dried up because of increased domestic demand. Although Turks worked in many European countries, most went to the Federal Republic of Germany (West Germany). Many Turkish workers also went to France, Austria, and the Netherlands. The number of Turkish workers going abroad peaked near 136,000 in 1973. The oil shock of that year and the 1974-75 recession led to restrictions on new guest workers throughout Western Europe, including a ban in West Germany. These measures caused a sharp decline in Turkish emigration to Western Europe--which averaged only 18,000 per year from 1974 to 1980--and became an important issue between Turkey and the European Community. Despite the restrictions, in 1981 there were still about 1 million Turkish workers in Western Europe, half of them in West Germany.

After the unification of Germany in 1989, pressure mounted to return so-called foreign workers to their home countries even though many had been born in Europe. High unemployment rates, especially in eastern Germany, spurred neo-Nazi political parties to agitate for forced repatriation, and some groups used violence against immigrants. In one celebrated case in Rostock, members of a Turkish family were burned to death in their own home. Other European states also witnessed a rise in hostility toward guest workers, including Turks. In France, the National Front Party, led by Jean-Marie Le Pen, gained much support for its anti-immigrant stance.

After 1975 Turkish workers went more often to Arab oil states than to Western Europe. Each year from 1980 through 1982, more than 24,000 workers went to Libya and more than 10,000 to Saudi Arabia. During the same period, a yearly average of only 370 Turkish workers went to West Germany. By 1982 about 150,000 Turks were employed in Saudi Arabia, Libya, and the small Arabian Peninsula states. However, economic difficulties faced by oil-producing states in the mid- and late 1980s reduced opportunities for further Turkish emigration.

In general, the Turkish government has looked favorably on worker emigration, despite concerns that skilled workers are being lost because it is better-educated Turks who tend to emigrate. In 1994 an estimated 1.1 million Turkish workers were in Western Europe, of whom about 750,000 were in Germany. More than 200,000 were in Middle Eastern countries. Workers in Europe usually stay abroad several years, remitting funds to relatives in Turkey. Most eventually return with their accumulated savings to start a small business or buy a farm. Turks working in the Middle East, in contrast, tend to work for Turkish construction firms and typically return after each project is completed; these workers tend to remit a larger share of earnings to their families. The flow of workers' remittances became financially significant after 1965, when they reached the equivalent of US$70 million. By the early 1990s, this figure had reached US$3 billion per year.

Like most developing countries, Turkey lacks an adequate number of trained and skilled personnel. In the early 1990s, the demand for educated and skilled workers exceeded the limited number of technically and scientifically trained graduates.

Trade unions play an important role with reference to labor in the more modern sectors of the economy. Most agricultural and service workers do not belong to unions, but a substantial part of the industrial labor force in larger enterprises and some workers in other sectors, such as transportation, trade, and finance, are unionized; public-sector workers are the most likely to join a union. In the 1960s and 1970s, the wage and benefit gains of unionized workers exerted a positive influence on the income levels of nonunionized workers. After the 1980s, however, the labor movement weakened. Not only are unions smaller in terms of membership--Ministry of Labor and Social Security figures for 1985 suggested that unions included about 1.8 million workers, or about 10 percent of the civilian work force--but severe limits on their activities have kept them politically weak. As a result, during the 1980s organized labor suffered large cuts in real earnings.

By the mid-1970s, Turkey had about 800 unions, many of which had memberships in the hundreds. Few were what might be called nationwide unions; several had extensive membership in a particular industry, which gave them a leverage that most unions lacked. Many unions joined national federations to exert more influence. Before the 1980 coup, four main trade union federations with differing political orientations dominated the labor scene. The main union organization, the Confederation of Turkish Trade Unions (T�rkiye Is�i Sendikalari Konfederasyonu--T�rk-Is) was politically moderate, adhering to legal limits on its activities. The other major union group, the Confederation of Revolutionary Workers' Trade Unions of Turkey (T�rkiye Devrim�i Is�i Sendikalari Konfederasyonu--DISK), originated from a faction of T�rk-Is in 1967. DISK was much smaller than T�rk-Is but more militant. In addition, small numbers of workers belonged to the pro-Islamist Confederation of Turkish Just Workers' Unions (T�rkiye Hak Is�i Sendikalari Konfederasyonu--Hak-Is) and the right-wing Confederation of Turkish Nationalist Workers' Unions (T�rkiye Milliyet�i Is�i Sendikalari Konfederasyonu--MISK). After the 1980 coup, all union federations except T�rk-Is were banned for a period. Subsequently, the government allowed the other union groups to resume their activities.

Figures on trade union membership vary, but Ministry of Labor statistics at least give an idea of the relative sizes of the unions. According to this source, in 1992 T�rk-Is had a membership of about 1.7 million, Hak-Is had about 330,000 members, and DISK had about 26,000 members. In addition, Turkey had twenty-four independent unions that did not belong to federations. The size of their memberships was uncertain in early 1995, but organized labor totaled almost 2.2 million workers in 1992. Workers could legally belong to more than one union, which explains some of the confusion surrounding membership statistics.

Established in 1952, T�rk-Is includes many workers employed in SEEs and was the only union group actively involved in large-scale collective bargaining in the early 1990s. Strongly centralized, T�rk-Is is dominated by a few large, conservative unions; the social democratic unions that figure among its thirty affiliates have little say in federation affairs. In adherence to the law, T�rk-Is has remained technically aloof from party politics but is interested in issues affecting labor. T�rk-Is is affiliated with the American Federation of Labor-Congress of Industrial Organizations through its membership in the Asian-American Free Labor Institute, which provides training for union leaders. Since 1980 T�rk-Is has generally refrained from calling strikes, perhaps because of fears that labor conflicts might lead to layoffs of surplus SEE personnel.

Against a background of growing labor unrest in 1994, related to deepening economic problems, budget cuts, and privatization, T�rk-Is coordinated wage talks with the government at the end of the year. Although accused of earlier and questionable cooperation with the government, T�rk-Is faced widespread pressure from affiliated unions and their members not to agree to the increase the government was offering. Both DISK and Hak-Is had strongly opposed a pay increase of 102 percent for the T�rk-Is-affiliated Teksif union at the end of 1994 on the grounds that the size of the pay increase did not meet the much higher inflation rates and the agreement was co-optive.

DISK, T�rk-Is's chief rival, draws its members primarily from the private sector and from municipal workers. In the mid-1990s, it seemed that supporters of left-wing unions such as DISK were shifting to Islamist-oriented ones. Nonetheless, DISK-affiliated unions continued to exert some influence as part of overall labor pressure to maintain wage and employment levels.

Before 1980 Hak-Is was reportedly tied to the pro-Islamic National Salvation Party (Milli Selamet Partisi--MSP), whereas MISK supported the Nationalist Action Party (Milliyet�i Hareket Partisi--MHP). In 1980 the two federations claimed memberships of 68,000 and 290,000, respectively. After 1984 they played only a minor role in collective bargaining because they lacked sufficient membership to be considered representative under new labor legislation.

The 1980 military intervention severely restricted trade union activities. The 1982 constitution and the laws on union organization, collective bargaining, strikes, and lockouts passed in 1983 have made Turkey's unions the most tightly controlled in noncommunist Europe. To have the right to represent the workers at a given facility, unions must prove that they have the support of at least 10 percent of union membership within the industry and a majority at the particular workplace. Political and general strikes and many forms of industrial action, including secondary strikes, work slowdowns, and picketing, are prohibited. About half of the unionized workers, including those in the gas, water, electricity, mining, and petroleum industries as well as those in banking, urban transit, garbage collection and firefighting, are allowed to strike. Strikes can be called only after a written announcement to the government, which may require a ninety-day cooling-off period followed by compulsory arbitration. Workers who strike illegally may be punished with as much as eighteen months in prison, and those who participate in such strikes can be fired, with the loss of all accumulated financial claims, including pensions.

Following the 1980 coup, the military government prohibited collective bargaining until May 1984, after which time officials continued trying to restrain wage settlements in order to limit inflation. Although private-sector wage settlements in 1984 and 1985 included increases ranging from 25 to 60 percent, pay adjustments generally continued to run behind the inflation rate, resulting in declines in real wages. The government took a more relaxed attitude in the late 1980s, but by 1994 the authorities were once again using antistrike regulations from the early 1980s to stop strikes and other job actions.

In the public sector, the government has been even more successful at holding the line against wage increases, although large increases in 1992-93 led to a sharp jump in government expenditures. With a limited endorsement by the IMF, government employees' wages were targeted as the primary means of achieving budget cuts in 1994 and early 1995. As part of this strategy, Prime Minister �iller attempted to use illegal strikes as a pretext for liquidating certain public enterprises; unionized workers also would be notified that there were plenty of unemployed people willing to do their jobs for lower pay. In early 1995, unions for public-sector workers outside the public enterprises faced the possibility of being abolished altogether. Also, seasonal workers with part-time jobs working on village roads, irrigation projects, and other infrastructure components were to be placed under the authority of provincial authorities, an arrangement that would cost them their labor rights. People employed with "worker" status, who therefore had certain rights under the law, were reclassified as "public servants" with no right to bargain collectively or to strike. Members of this group fared badly in the mid-1990s, with declining wages accompanying their loss of rights.

Turkey

Source: U.S. Library of Congress

Turkey - ECONOMY

Turkey - The Economy

Turkey - Growth and Structure of the Economy

Economic Development

Reforms under �zal

Economic Performance in the Early 1990s

Structure of the Economy

Turkey - Human Resources and Trade Unions

Turkey - Role of Government in the Economy

Liberal Interlude

Etatism

State Economic Enterprises and Privatization

Development Planning

Budget

Turkey - Agriculture

Turkey - Agricultural Policy

Turkey - Irrigation

Turkey - Land Use

Turkey - Land Tenure

Turkey - Cropping Patterns and Production

Turkey - Livestock

Turkey - Forestry and Fisheries

Turkey - Industry

Industrial Policy

Turkey - Energy

Turkey - Mineral Resources

Turkey - Manufacturing

Turkey - Banking and Finance

Turkey - Tourism


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