Political economy, social democracy and the power of ideas

On January 24, 1980, the economic reform program prepared by Turgut Özal, then-Undersecretary of the Prime Ministry, and adopted by the Nationalist Front government headed by Süleyman Demirel, was a public announcement of a structural transformation that went down in history as the ‘January 24 Decisions’.

Neoliberalism instead of the import-substitution system

The import-substitution system, which had offered a development strategy to developing countries, particularly in Latin America, since the 1960s, was implemented in Turkey for about 20 years. However, it collapsed after a major currency crisis. Turgut Özal, who wanted to implement in Turkey the neoliberal economic policies pioneered by Ronald Reagan in the US and Margaret Thatcher in the UK in line with the global economic and political system, implemented a radical economic reform package which was prepared in this direction.

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The new political order and ideological doctrine created by the military coup of September 12, 1980, together with the restructuring of the economy in line with neoliberal reforms, created a new political-economic order that is still valid in 2022. One of the most prominent features of this new system, which has many goals and consequences, such as the systematic contraction of workers' rights, the suppression of trade union activities, the continuous growth of capital at the expense of labour, and the domination of labour, and the reduction of real wages, has been the redefinition of the duties and responsibilities of the state.

Since 1980, the state apparatus, which was supposed to serve as a mediator, arbitrator, and bridge between workers and employers, or between the constitution and citizens, has allied with capital in almost every field against workers, citizens, and disadvantaged segments of society, while all institutions and law regulating the economy, politics, and social life have been designed by this job description.

Patching instead of reforming

In this period, when we are about to enter the 100th anniversary of the Republic, the opposition parties that want to overthrow the authoritarian AKP government, which has been in power for 20 years, and rebuild a ‘democratic-secular-egalitarian’ Turkey have failed to produce a vision that would radically change the dominant ideology and political-economic order established in 1980, even though they have produced policies to reorganise the economy, politics and social life and prepared a constitutional amendment package for a radical reform, especially the opposition alliance. This blockage is most prominent in economic policies.

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The policies proposed by the opposition parties to get out of the economic crisis, which has been going on since 2018, but has been dragging the middle and lower classes of society towards the hunger line since last year, do not fundamentally change the system. No reform package would reorganise the distribution of both income and wealth, revive the collapsing welfare state, and act as a mediator/arbitrator between labour and capital rather than siding with capital against labour. The economic reform packages and crisis exit prescriptions proposed by the CHP, İYİP, and DEVA Party do not propose a new economic model, but emphasise the idea that the current system is not working due to the wrong policies of the government and that the system can be put back on track with the right policies proposed by them.

For example, Ali Babacan, the leader of the DEVA Party, states that during his ministerial term there was a large inflow of foreign resources into Turkey, but as a result of the authoritarianism of the government and the elimination of the rule of law, the inflow of foreign resources stopped and outflows began. While this proposition is partially true, Babacan's proposals for solutions and reforms for the Turkish economy do not go beyond suggesting that once his party comes to power, capital inflows to Turkey will increase again and per capita income will rise.

Likewise, CHP leader Kemal Kılıçdaroğlu thinks that he can solve Turkey's chronic unemployment problem by ‘appointing a university graduate assistant to every muhtar’ or finding the solution to Turkey's low savings rate or current account deficit problems by attracting foreign investors from London to Turkey.

These examples demonstrate that the opposition parties that want to overthrow the AKP government, which has ruled Turkey for 20 years, and build a new Turkey are unable to move even one step away from the dominant political-economic order and ideological domination that was put in place in 1980 and which experienced both its peak and collapse with the AKP. Created 42 years ago, we have repeatedly experienced that it is not possible to make a fundamental reform and create a new political, social and political-economic order with the existing institutions that regulate economic life in Turkey, one of the most advanced countries in the world in terms of income inequality, in a vicious and narrow political arena whose borders have been narrowed day by day during the AKP rule.

Lessons to take from the Swedish model

Previous experience shows how difficult it is to make a fundamental reform, build consensus among social actors, and create a new balance between capital and labour. But there are many examples to show that these are not impossible. In this sense, the political and economic transformations that took place in Sweden from the 1920s to the 1990s, even though the country is socially, politically, geographically, and economically very different from Turkey, will give us an idea of how it is possible to build a new system.

The egalitarian and inclusive economic model created in Sweden, which has one of the strongest welfare systems in the world, is based on a long-standing state-capital-labour coalition. The state, which plays the role of mediator/arbitrator between capital and labour, is also the guarantor of the Swedish welfare model.

The SDP (Social Democratic Party), which wanted to find a solution to the economic crisis of the late 1920s and to create an economic model targeting full employment, organised public hearings, and forums across the country to ensure that the ideas on which this new model was based were accepted by the society as well as politicians and bureaucrats. In this economic model, which emphasised full employment, strong social welfare mechanisms, and capital incentives; the state, which acted as a mediator between workers and employers, also reformed institutions and created new ones by this economic and political order.

The point to highlight here is that, to fix the old system that was in a crisis, first of all, an idea to implement a new system should be put forward, and forums, meetings, and open sessions should be organised to ensure that it is accepted by all components of society, and then the existing institutions should be reformed according to the new order. To carry out a fundamental reform, it is necessary, first of all, to generate the ideas on which a new system is to be built, and for this to be accepted and adopted by society.

Another important role of the state was to formalise and protect the informal agreement between workers and employers in the new economic model. In the economic order created with the goal of stable economic growth for employers and full employment for the working class, institutions were structured in line with these objectives. After about 20 years of institutional transformation and establishment of order, by the 1950s, the institutions that created the welfare state model in Sweden were in a stable state of functioning. The Swedish model of social democracy was based on the ideas of full employment, equality, and welfare.

‘Without these ideas, the construction of such an institutional order would have been impossible.’ says Prof. Mark Blythe, who has done important work in the field of political economy, about the social democracy implemented in Sweden. Today, we see that the CHP claims to create an ‘equal and just economic order’ by emphasising its social democratic identity. However, the implementation of social democracy in Turkey can only be achieved if the existing institutions and the political and economic system undergo a radical change and the idea of social democracy is embraced by social actors. Therefore, it does not seem possible to change the current economic system based on deep inequalities by making small changes to the existing system or adding new ones to the existing institutions.

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In the 1970s, as the working class demanded greater rights and employers saw their profits decline, the social democratic system that had been established in Sweden in the 1930s began to slowly break down. Although major developments in the global economy, particularly the oil crisis, had an impact on the Swedish economy, it was the breakdown of the consensus between workers and employers that started the transformation of the system. While the employers had reached a consensus among themselves to change the existing system, in 1976, a pro-capitalist centre-right coalition came to power by overthrowing the Social Democratic Party. Under normal circumstances, the centre-right coalition was expected to make a radical transformation of the economy, taking into account the demands of the owners of capital.

In a political and economic system in which the institutional structure established in the 1930s was functional, the right-wing parties failed to implement the reforms expected of them and faced a strong reaction from the owners of capital. The prime minister of the time is quoted as saying ‘Because we are still bound by the ideas of the working class.’ when asked, ‘Why do we still produce policies in favour of the working class despite having a pro-capitalist government?’. To overcome this intellectual and institutional entrapment, employers pursue long-term policies, creating a new economic model that will produce results in favor of capital through think tanks and sharing it with the public, while at the same time carrying out promotional activities with large advertising budgets so that the ideas of the new model are accepted by both politicians and society. They fund academia in the same way, constantly funding studies on the effects and benefits of neoliberal policies. As a result, both the establishment and the transformation of social democracy in Sweden are only possible if strong ideas about a new economic order are created and accepted by society, politics, and economic actors.

Being able to go beyond the current boundaries

In the 2023 general elections, we see that the opposition alliance, which set out with the goal of rebuilding a democratic Turkey, could not go beyond the political and economic boundaries established in the 1980s, which are still dominant today. In an economic order where social income inequality is increasing day by day, the establishment of a system based on social democracy, as the CHP claims, can only be possible by producing a new idea, reaching a consensus between workers, employers, and the state, and reforming the entire institutional structure according to this new consensus.

We can say that the same change is valid for the constitutional amendment package. The constitutional amendment package, which was prepared only by reaching a consensus among the party staff, will not be more than a small patch on the existing system unless it reflects a social demand and a social consensus is reached. If we want to redraw the boundaries of politics and build a new economic model based on equality, prosperity, and production, we need to come up with a strong and new idea to build these elements upon.