Monday, June 28, 2010

Weekly Hurriyet Column: Republican economics for the people

Below is the unedited version of my column for this week. You can read the final version at the Daily News website, but since I have been editing my columns myself on the Daily News website since March, you won't see much of a difference between the two. The title is just a cheesy word-play, but you know by now that I am a cheesy kind of guy...

As for the column, you'll see that many questions remain on CHP's economic policy, as Kılıçdaroğlu has chosen to speak about only a handful of topics. For example, I would like know the the following: What is CHP's take on capital flows? What role do they see for Turkey in the G-20? What is their take on the fiscal rule? On an independent revenue administration? How about energy or the environment?

In fact, as you'll see (or rather read), Kılıçdaroğlu does not tell much about the few topics he chooses to discuss, either. So  my long-running goal of doing a lengthy interview with the CHP’s top brass in economic policy is alive and kicking. Anyway, here we go:

In my heated arguments with die-hard Republican People’s Party, or CHP, supporters, where I almost always end up being labeled as a closet Justice and Development Party, or AKP, sympathizer, I try to defend myself, when my political arguments fail, highlighting that we know nothing about CHP’s economics policy.

But with the new leader Kemal Kılıçdaroğlu, things seem to be moving in a new direction, and a good direction at that, in terms of economics. For one thing, Kılıçdaroğlu has made economics one of the main items in his agenda after he took over the main opposition party following a dramatic episode of sex, lies and videotape. In an interview with our sister daily Referans last week, he outlined CHP’s economics agenda.

Although we do have to see more details, Kılıçdaroğlu is right on target by placing transparency and accountability at the pillars of CHP’s economics program. While his suggestion of printing, on the back of tax returns, where taxes were spent last year will be a drop in the ocean, he is correct in stating that when you set politics out of the accountability domain, you cannot prevent corruption.

That’s how the developed world handled corruption in the past. It is a little-known fact that today’s richest country was once one of the most corrupt ones. There is a huge economics literature on how the U.S. dealt with corruption in the era of the Robber Barons. While it is difficult to single out one or two policy recommendations out of that episode and others, accountability, transparency and rule of law always seem to come out on top as the main pillars of any anti-corruption strategy.

Another useful suggestion comes for tackling poverty. Although he again does not provide any details, Kılıçdaroğlu’s suggestion that the level of poverty should be determined by experts is a necessary first step in overhauling the current multifaceted poverty reduction strategy, which does not allow for meaningful impact analysis and is appallingly open to pork-and-barrel politics.

On the other hand, I see traces of CHP’s old guard with Kılıçdaroğlu’s handling of the Kurdish problem. While his suggestions of subsidies, incentives and zero-interest credit are sweet music to many, I am not sure, despite being a die-hard economist who sees the dismal science everywhere, that those are the real binding constraints. But since I don’t want to be the latest Ergenekon casualty, that’s all I have to say about that.

As for Kılıçdaroğlu’s family insurance scheme, it reeks of the old guard all over. For one thing, unconditional cash support or minimum income guarantee for poor families (it’s not clear which he has in mind) would not only be providing the wrong incentives, it would also disrupt efforts to fix poverty reduction strategies. As for the state preferring those on this insurance in its hiring decisions, it is the worst economic policy recommendation I have heard in a long time.

But Kılıçdaroğlu might be onto something when he says that all state projects would be analyzed in terms of social welfare. I doubt that he has in mind a building full of people drawing supply and demand curves and calculating areas of rectangles, trapezoids and triangles, but goal-oriented spending and impact analysis are the big deficiencies of Turkish fiscal policy at the moment. If CHP would enact an institute similar to the U.S. Congressional Budget Office, they would steal my vote on that alone.

As for being labeled as a closet AKP sympathizer, I have learned to live with that, especially after I was able to document the degree of polarization in the Turkish society in the KONDA surveys I have been working on as a consultant.

Emre Deliveli is a freelance consultant and columnist for Hurriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at

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