Turkey’s Economy: The Case for Industrial Policy

    This paper focuses on how middle-income countries can successfully transform their economies to developed status, opposing views about the role of government in overcoming the middle-income trap and some of the notable success stories from East Asia.

    In the last two decades, Turkey has experienced a successful growth performance. However, as the benefits of neoliberal restructuring has been exhausted and Turkey’s sectoral transformation from agriculture to manufacturing mostly completed, Turkey now needs to embark on a new path of reformation in order to overcome middle-income trap and maintain its high growth trajectory. Following the example of East Asian growth miracles, Turkey should formulate its own Industrial Policy and use selective government interventions rather than a ‘hands-off’ approach in the economy. In that respect, a paradigm shift in policy-making in favour of more government activism in the economy is already visible. Proactive policies to protect and support a number of carefully-selected strategic sectors have a central role in this endeavour. Export-oriented sectors should be pushed forward in the economic agenda, and growth should depend more on sophisticated, high-value-added, high-tech production, a task to which the current government seems to have already committed. In the process, the Turkish economy can improve its productivity levels and transition to the high stage of economic development.

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