National Struggle Against Speculation in the Economy

Let's not forget, contrary to popular belief, speculation is also an economic concept. How, like what? Such as structural reform, substitute goods, marginal utility, opportunity cost. Yes, speculation or speculation is an economic term. However, this is not a matter of today, it is a common situation that Turkish people from the past have been forced to endure, it is a vicious circle and it always tends to become widespread. Especially, its tendency to become widespread can be experienced very intensely, like the crises faced by today's economies. Let's say at first glance, these crises are also an important obstacle for the continuity of growth. Today, when the ideological and political aspects of the economy predominate, in this respect, the thoughts of Adam Smith (1723-1790), a Scotsman, who is regarded as the father of modern but capitalist economy, and especially his perspective on growth gain importance once again. Let's also point out that in the 1770s, the concept of capitalism was not used yet. Smith's pessimism in the growth thought stems from his not taking into account the importance of technological development. Although, before the commercial revival that emerged after the union with England, Scotland's main source of wealth was agriculture, while there were developments in relatively simple branches of industry such as coal, nail making and salt extraction. In short, Scotland's level of industrial and commercial development is in an extremely 'primitive' state. Undoubtedly, Adam Smith's analysis, not only by looking at Scotland after the union with England, but also by examining the current situation of England at that time, has focused on the "stagnation" of economic growth - considering that industrial capitalism is still in its developmental stage. Although technological developments have made a significant contribution to growth today, the prominence of financial capitalism has led to a weakening of the feature of capital as an economic factor for production. As a result, in line with the aim of financial profitability, it has transformed into an economic structure that has little contribution to economic growth and causes constant crises. As a result, although it is very different from the period in which Smith lived, today's economic growth is constantly being eroded by crises, and the sectors where growth takes place are also being reshaped.

Dear readers, I am trying to explain why I am saying all this, since the 'Currency Protected Deposit System' (KKMS) or the 'Currency Based Deposit System' announced by President Erdoğan is the primary agenda of the country. As can be seen at first glance, this system should be understood as preventing the escape from TL deposits in banks, and re-establishing the foreign currency inflow required for investment, or more precisely, the flow of foreign capital. Now the question is, can the use of KKMS cause a stagnation in the economy, an increase in the money supply and an acceleration in inflation in the medium and long term? Yes, dear readers, at least as the year 2021 ends, the situation we have experienced in the last month forms a similar basis to Adam Smith's theory. Will this situation result in a conscious or unconscious stagnation similarly in Turkey in the upcoming period? raises the question. Let's examine this situation theoretically with the theories put forward by economic thinkers.

If you consider the period in which Adam Smith lived and the society in which the colonized societies are today, he defines three classes of people in a society. The first is the white-collar bureaucrat and blue-shirted workers who earn their income through salary, the second is the landlords who earn their income through ground rent, and the third is the capitalist class, which includes plenty of speculators, who earn their income from profit. Let us note that this classification made by Smith will form the class basis of later political-economy. Today, let's also consider that we have to add the army of the unemployed as the fourth class. Why? The reason is clear. Sir, our country has suffered a lot from employment. Remember, in the past economic policies in our country, the theories of the leading western economists were both solved, and moreover, the political-economics connoisseurs increased the interest rates and increased the exchange rate with the prescriptions they wrote for the crisis. In addition, the state and companies were downsized, inflation and unemployment increased rapidly. This situation almost symbolizes a "life cycle system". Because capitalism, in its self-renewing structure, includes a development that emerges as "crisis" - "exit from crisis" - "growth" - "re-crisis". While the reason for the crisis is the decrease in the profit rates, the exit from the crisis is possible with the increase in the profit rates. The exit from the crisis can be achieved by increasing the profits through the growth of the market or the increase in productivity. Turkey urgently needs to take this path.

Adam Smith, in his analysis, the limitation of economic growth, the productivity of labor he bent too much on his rune. In an economic structure in which the agricultural sector is prominent, the limited natural resources, inefficient labor and the problem of insufficient capital accumulation have revealed that production opportunities may be limited in this respect. According to him, the most important problem is that the vicious circle of production cannot be overcome. When the situation is considered from this point of view, the inability to overcome the vicious cycle of production causes a crisis emphasis in a sense. (1) This crisis phenomenon can also be considered as the resistance of the economic infrastructure to change, as seen in the example of TÜSİAD, for cultural and/or institutional reasons. Smith also expresses the idea that “there is a natural upper limit to economic growth” in capital letters. According to him, growth is limited in the long run. Although capital accumulation is seen as the main source of economic growth in the production function of the "Neo-Classical Theory of Growth", as capital investments increase, as we emphasized in our article last week, it brings with it the concern that the "law of diminishing returns" will be valid and a stable economic growth will not be achieved in the long run. In other words, as the use of capital increases, the optimum combination ratio with other factors of production deteriorates after a point and its marginal productivity decreases. Today, natural resources have gained importance in terms of economic growth, especially with the emphasis on energy economy. The energy market, which is important in terms of speculative activities, creates a bottleneck for economic growth, especially for underdeveloped economies with scarce energy resources. The rapid changes in fossil fuel prices may also be the cause of the crises. In Smith's thought, the problem of scarce resources, the law of diminishing returns as a result of natural resource supply, is effective.

As a factor of production that Smith did not include in his analysis, "capital" constitutes the driving force of economic growth together with technology that affects the productivity of labor in modern economies. However, with the transformation of industrial capitalism, the capital production factor came to the fore mainly in the form of financial capital; increase in crises, transformation of the sectoral structure, decrease in the share of the real sector in total production, etc. negative effects on the sustainability of economic growth. Undoubtedly, in the definition of capital, besides physical capital, human capital is also important. The prominence of human capital also coincides with Smith's idea of ​​increased productivity of the workforce as a result of the division of labor. To correct this situation, "increasing yields" instead of "decreasing yields" may be in question in the long run in the use of information in the production process. Continuous growth can only be achieved when a new production process is started as a result of technological advances. Turkey has made the transition to this ground with the successive breakthroughs it has made during the global epidemic process, this is an extremely important situation of superiority.

Although Smith exhibits an interview implying that he thinks that the advances in information-technology will always expand the borders of economic possibilities, it is a fact that he could not completely go out of the mental framework of the physiocrats who opposed the state's intervention in economic life. Physiocrats, who first voiced the principle of "laisses-faire, laisses passer" (let them do it, let them pass) of classical liberal economy, claimed that natural laws would work in the economy, giving weight to the ideas of free market and free international trade. On the other hand, the British economist John Maynard Keynes, who gave an important role to the state in an economic life, argued that state intervention in the market was necessary instead of the "laisses-faire, laisses passer" system, which did not allow state intervention. Keynes not only said that public expenditures are a direct element of total demand, but also made a very accurate definition by putting forward the hypothesis that consumption increases or decreases depending on income. Undoubtedly, these criticisms brought by Keynes to capitalism are not aimed at destroying capitalism, on the contrary, it is aimed at eliminating the deficiencies of capitalism. In a sense, he took his place in the history of economics as an economist who saved capitalism. Although he was somewhat successful in creating employment with the thesis of "Don't Stay Idle Work" in order to get rid of the Great Depression, he could not be successful in the liquidity problem of converting any economic asset into money when desired without any loss or damage. The asset with the highest liquidity is money.

Now, let's sit crookedly and speak correctly, Turkey, since the 1947 Marshall aid - let's name it for the sake of determining the milestone - Turkey's entry into NATO Since 1952, it has taken its way towards colonization with a consumption-based monetary-financial political system, step by step. As a result of this policy, primarily the defense-oriented manufacturing industry collapsed in our country, followed by the other manufacturing sector, and Turkey suddenly it has turned into a rope paradise, unemployment has increased, the purchasing power of our people has decreased. Low exchange rate-high interest policy leads to demand inflation by increasing the government's debt, to cost inflation by increasing the current account deficit; It has caused and is causing the revenues of the nation and the state to flow to the domestic rentier with high interest and to the foreign rentier with hot money. This is a vicious circle. In short, the colonization of the Turkish economy was the low exchange rate-high interest policy implemented to prevent inflation. So what should be done in this situation? First of all, the first thing to do in this situation is to get rid of the low exchange rate-high interest, current account deficit spiral. It is the unavoidable exit from this system, which has disrupted the division of labor and monetary-financial policy of the Turkish economy. Let's face it, the low exchange rate-high interest policy has made our economic policy amorphous amorphous. So how can this be fixed? It is thought that unemployment and inflation, which are the economic crisis in our country, can be solved with a functional monetary policy and an effective fiscal policy. (2) Yes, this is indeed an important finding.

Another important issue is the thesis that "merely achieving price stability without providing stability in foreign exchange and other securities markets will not be sufficient to ensure macroeconomic stability". The main factors of the recent crisis show once again that it is not due to inflationary pressures in the product markets, but the fact that it is caused by the swelling and instability in the values ​​of financial assets. Turkey has for a long time brought hot money to the country at high interest rates, risking lack of production in return, and paid a high price. High interest-low exchange rate is not a solution to the situation we are in, and it has also created the biggest obstacle for the private sector not to invest. The obligation of Turkey to continue on its way with a determination to increase its production power with its own resources and possibilities has finally become a government policy. Although it is not clearly stated, it is understood that a transition to the "import substitution model" had to be made. In an environment where the government made the foreign currency cheaper in order to increase exports in the past years, Turkish industrialists and business people imported semi-finished and finished intermediate goods, almost to the level of incentives by the government. Turkey has been in the position of a country that has a large amount of foreign trade deficit for 19 years but has not experienced an economic depression. There is no other country that can come close to these figures, and it seems almost impossible for any other country to withstand this situation. In order to be able to meet these imports at the present crossroads, Turkey has to process a certain part of its raw material imports, export them abroad and provide foreign currency inflows in this way. The Turkish industry, which heavily imports export input goods, has to understand the fact that it cannot maintain the current account balance with a competitive exchange rate. The Turkish industry should quickly move away from the easy buy-sell and assembly industry and turn towards production with high added value. Within the scope of the domestic and national industry move, it has to quickly switch to areas other than the defense industry.

Yes, dear readers, in addition to the lack of resources that caused Smith's pessimistic view on economic growth during his lifetime, as well as the speculators, the industry and business people should once again reveal their nationality against those who resisted the tight monetary-financial policies that the state had to endure with the people to improve the economy. they have to. If this problem cannot be prevented, it is considered that inefficiency may occur in production. Although the Turkish economy is quite different from the century Smith lived in, it is thought that the negative situation in economic growth that emerged in the early periods of capitalism can still be experienced today.

Footnotes

(1) Barış Aytekin, “Looking at Today from Adam Smith's Idea of ​​Economic Growth: Continuity of Crises” Journal of Business and Economic Studies, ISSN:2147-804X, Vol 5, No. 1, 2017, p. 30

(2) Internet Haber, "The architect of the new economy model, Şefik Caliskan, spoke for the first time: What is Turkey trying?" 14.12.2021; https://www.internethaber.com/yeni-ekonomi-modelinin-mimari-sefik-caliskan-ilk-kez-konustu-turkiye-neyi-deniyor-2224793h.htm/Access Date 26.12.2021/