The discussions on the global economic system, which gathered momentum after 2009 crisis, have blazed further with Covid 19 pandemic. Dropping of USA share in the world economy below 15% at the present according to purchasing power parity which increased up to 50% after World War II, attainment of BRIC (Brazil, Russia, India, China) countries to two times more purchasing power than USA have created a structural shift in the global balances of relative power and Washington’s characteristic of hegemon power has become suspicious even for those ones who had faith in US hegemony. Crackling of the so-called US hegemony has brought the future of current economic architecture, in which the institutions under Western hegemony such as IMF, World Bank and WTO take part, up to an open-ended discussion.
When Republic of Turkey’s distant position in the relations with IMF and World Bank, which began after 2009 crisis and pursued during the global economic shock process caused by the Covid-19 pandemic, is evaluated together with ‘the approach on the world is bigger than five’, ‘Asia Pacific declination’, ‘Blue Homeland Doctrine’ and strategic implementations, some clues about Turkey’s attitudes towards global economic architecture of the new age have begun to be clarified.
As well as it is still early to make systemic predictions with incisive lines about the formation which the future economic architecture will take, when the transformation in the balances of power is taken into consideration, it should be expected that our country would have a stronger position in the new age compared with her position in the Bretton Woods era. Turkey, possibly, would be one of the most predominant players of the new world order, if she follows a strategy based on pro-independent, fair, consistent, equitable and multi-polar collaboration, transforms her domestic economic structure by bracketing of national strategy, harmonizes her domestic and foreign strategies in the ‘new Bretton Woods’ discussions in which energy, health and technology fields are going to be articulated, too.
The lessons which could be taken from the past: Young Turkish Republic’s contribution to economic system debates after 1929 Crisis
Our young republic in Atatürk period has shown a pioneer and revolutionary diplomatic approach in order to remove the effects of 1929 Great Depression to which we have been caught at the beginning of our industrialization period. Though it is small, it is a duty of loyalty to economy diplomats of our young Republic to speak shortly of one of the economic diplomacy steps of Turkey which is not valued enough in the field and is worth to bring forth by highlighting.
‘Republic of Turkey brought forward the idea of establishing an ‘International Monetary Fund (IMF)’ and ‘International Credit Bank (similar to World Bank)’ in the World Economic Conference of 1932 in which she participated for removing the effects of 1929 Great Depression and fulfilling the financial needs of developing countries. Thereafter, namesake institutions have been proposed by USA with different motives 12 years later! It is seen that the Young Republic has had a comprehensive economic diplomacy plan and perspective, and, developed systematic policy alternatives towards the removal of the effects of 1929 Crisis.’
Turkey has focused on two options which would have met the investment finance/credit and currency needs of the developing countries particularly who have needed financial resources in the “International Monetary and Economic Problems” meetings and negotiations whose preparations have been conducted by the Secretariat of International Labour Organization (ILO) in accordance with the League of Nations’ Lausanne Decision taken on the 9th July 1932: These were monetary and credit policies, stabilization of exchange rates, issues related with general level of prices and capital movements under the topic of Monetary and Financial Problems, and, discussions of the global production and trade conditions which were effected from the 1929 Crisis and the agreements which limited particularly tariffs, quantitative restrictions and competition among the producers under the topic of Economic Issues.
In 1932 conference, Turkey initiated diplomatic efforts to meet the financial needs of especially developing countries. It can be argued that those proposals were quite innovative and original for that period. Those are;
- a) Establishment of an International Credit Bank (counterpart of today’s World Bank) for monitoring the deteriorating situation in the world economy that emerged after big economic crisis the 1929 (1)
- b) It includes two important and comprehensive (systemic) approaches aimed at bringing a monetary order to the world economy, such as the creation of an IMF like Fund, that will address both the development and the balance of payments (exchange rate) problems of the countries affected by the economic crisis (2)
Establishment of the International Bank for Reconstruction and Development (World Bank) and the International Monetary Fund (IMF) were among the economic pillars of the Bretton Woods system, in which the US laid its foundations for its hegemonic purposes in 1944. With totally different motives from the United States, The Young Turkish Republic, aimed to stabilize the world economy, focuses on the needs of developing economies; so it can be regarded as a modern and pioneering period, 12 years before the Bretton Woods (1944) conference and 25 years before its actual operationalization (1957).
Turkey’s proposal for the establishment of the IMF like institution and International Credit Bank for developing economies was made jointly with a small number of other developing countries (Poland, Belgium) under the League of Nations platform. This shows period of Atatürk’s young Turkey, was not only observing political but also economic conjuncture and developments very well. It also shows that it did not remain passive in terms of taking economic measures against the great economic depression of 1929, it was very actively involved in economic diplomacy (especially it had a vision of self-confident first-class economic diplomacy) which produces independent, accurate, concrete policy options in the global money-credit and financial sphere.
These proposals did not come into force in crisis conditions due to the incompatibility of the interests and opposition of the powerful countries of the period. The renowned economist Charles Kindelberger in his book ” The World in Depression 1929-1939 ”, showed Turkey’s proposals and brought them to light with short footnotes and explanations. It is clear from the documents of the Turkish diplomats that Turkey showed active interest as well on global economic diplomacy and the International Trade Organization negotiations, which began in 1947 in Havana*. Turkey’s WTO Permanent Mission had explained all those affords to the other WTO members under the study of 2009 crisis.
(1) Kindelberger, Charles , The World in Depression(1986), 1929-1939, p. 208,University of California Press, Berkeley ” For a reference to a Turkish proposal for an International Credit Bank, see Department of State, Foreign Relations of the United States, 1933, vol.1, p.570
(2) Proposal for an ’embryonic International Monetary Fund’ in the Washington discussions preceding the World Economic Conference of 1933 were put forward by Poland, Turkey, Belgium, the ILO….”Kindelberger, Charles., The World in Depression(1986), 1929-1939, p. 301…University of California Press, Berkeley
*Turkey’s diplomatic initiatives in Havana about the documents relating to negotiations on this issue (ITO & GATT) remain to be evaluated at Stanford University archives.