The addenda just keep coming
Just a small addition to this week’s Hurriyet column, which was also posted here at the blog yesterday: A reader has told me that Ugur Gurses has written about Zafer Caglayan’s speech last week at Radikal (in Turkish). He has also touched upon similar stuff, and he calls the Admiral one-eyed, which for some reason, reminded me the Italian admiral in Evita’s Rainbow Tour:)
Elsewhere, Yapi Kredi, or YKB economists touch upon the minister’s speech in their latest weekly. They also talk about the minister’s claims that high interest rates and the overvalued lira caused the deficit, making the same inflation differential point that I (and Ugur Gurses for that matter) have made. But they also have two additional criticisms of Caglayan’s speech. Since reader Abe_Rudder told me, as a comment to a post, that he particularly liked it, I thought I would share it here:
First,they don’t agree with the minister that the Turkish growth strategy should be export-oriented:
Turkey might be trying to reduce her external imbalances very much like the US is trying to curb global imbalances of which she is the main victim. Yet as far as we have observed in both the intellectual discussions that came during and in the aftermath of the crisis and in practical policy implementations in response to the crisis, it is the importance of unduly neglected domestic markets that enjoyed a reincarnation of sorts. Growth processes leaning heavily on export performances turned out to be fragile. China turned out to be the fastest learner in this respect.
Then, they also criticize the minister’s statement that “the existence of the financial sector depends on the real sector”:
Minister Caglayan emphatically underlined the difference between financial and real sectors as seen by him and did not spare any effort to conceal his overwhelming favoring of real sector over financial. This seems to be a very contagious view among politicians, and it is understandable to the extent that financial sector in Turkey, the banking sector namely, operated more like a hedge fund rather than a financial intermediary for so long. Yet when the assertion comes from an AKP main figure, it sounds a bit counterproductive or the assertion assumes the form of a missed PR opportunity on their part for the following reason: financial and real sectors in a normal economy are mirror images of each other, but only in a normal or ‘normalized’ economy. Though not operative for our purposes here, we would define Turkey as an example of the latter rather than the former. The gist of our argumentation is the following: The AKP should be marketing itself as the political entity that finally put both sectors on the same boat instead of going after the banking sector whenever they feel the opportunity has presented itself. And the opportunity does indeed present itself many times, but those times hardly overlap with the times AKP politicians perceive as due times (one recent example of that, we discussed many times in our publications, was the sector’s failure to understand the joint distribution of reactions to and consequences of the CBRT’s unconventional policy mix) . In short, dependence is not unidirectional but (finally and fortunately) bidirectional. Creation of a banking sector that will be instrumental in the funding of growth is a phenomenon that was born during AKP’s tenure of the last decade. That needs to be properly grasped and, if needed, marketed by the AKP.
Finally, the journalists were the target of their arrows:
These are some of the conviction statements spelled by the Minister during his speech which unsurprisingly led to no further inquiries by the economically most informed audience of the journalism world for the sheer reason that the arguments all sounded very ‘intuitive’. Our reservations above will probably sound extremely counter-intuitive to the same crowd, but as the self-explanatory title of the Weekly more than suggests, it is more of an issue of common intuition rather than intuition per se.
As loyal readers would know, the YKB team has been quite critical of your friendly neighborhood economist in the past, but I am not taking this last one upon myself because I did question Caglayan’s speech right before their weekly was published. Besides, I am not sure if I’d classify as a journalist. The Association of Economy Journalists used to invite me to their events with emails starting with “esteemed colleague”. They do not anymore, so I am not sure if it is because they found out I am not esteemed or that I am not a colleague:)…
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