ABSTRACT
Introduction The Turkish economy entered 2008 with a changing global tide that had been in its favor since the 2001 crisis. In particular, the US sub-prime mortgage crisis has escalated with no end in sight and with an estimated cost of over $1.3 trillion (as of September 2008) to the global economy (International Monetary Fund (IMF) 2008a). In this crisis environment, developing countries, in particular, are “vulnerable to a credit pullback, especially in those cases where domestic credit growth has been fueled from external funding sources and large current account deficits need to be financed” (IMF 2008b: IX). As a result it is indeed a timely exercise to look at the accumulated evidence since 2001 to decide whether the recent performance of Turkey represents a demarcation line that marks its transition from semi-periphery to the center. The ambitious program of deregulating and liberalizing goods and assets markets was assumed to bring about stability, enhance business confidence, facilitate portfolio diversification and better risk management, generate new investment and employment opportunities, and stimulate growth in developing countries. In retrospect, however, it has become almost impossible to describe the countries that adopted this laissez-faire ideology (or utopia) as success stories given the bitter memories of the last decade, including the Argentine (1995, 2001), Brazilian (1999), Mexican (1994/1995), Russian (1998), South East Asian (1997) and Turkish (1994, 2000, 2001) crises.1 In fact, even the most die-hard advocate of unfettered liberalization and deregulation of financial markets, the IMF, now argue that the current financial crisis is the result of regulatory failure to guard against excessive risk-taking in the financial system and lack of prudential regulation, accounting rules and transparency, including a lack of public scrutiny over credit rating agencies (Strauss-Kahn 2008).
