The Kapali Carsi

Orwellian Economics in Turkey

The title is kind of misleading, as the column is not really about the economics of George Orwell’s novels. It rather uses two very famous Orwell quotes. First in the intro:

At the end of George Orwell’s “Animal Farm”, we learn that “all animals are equal, but some animals are more equal than others.”

What holds true for pigs certainly holds true for exports, at least according to the new IMF paper “Structural Transformation and the Sophistication of Production”. The authors build indices for countries’ “sophistication of exports”, as measured by the average income and productivity level associated with all products exported by a country.

And then in the conclusion:

In Orwell’s “1984”, two plus two equals five. In 2012’s Turkey, four plus four is less than eight, as Sabancı University’s Education Reform Initiative has been arguing.

Anyway,  you can read the whole thing here, but I am basically saying two things: 1. Turkish exports are not “sophisticated”. 2. One of the main causes of this is the low level of human capital in the country.

That’s why I discuss the new Turkish education bill, which was a very hot topic when this column came out in the first week of March. Unfortunately, there is not a huge amount of English stuff on the law, but a column by a fellow Daily News columnist has summarized the main points.  I also have a thing or two to say on the apprenticeship part of the bill, especially since I managed a World Bank project on the relationship between business and universities and spent the better part of the summer-fall of 2006 writing a huge report on the subject.

The motivation of the government in pushing vocational training is the observation that there is a huge need for “middlemen”, i.e. guys (and gals, let’s not be sexist here, especially since I wrote about Turkish women the following week) who are in between ordinary workers and engineers. This is exactly what we had found in our study as well. But putting kids into vocational training at the tender age of 10 is likely to do more harm than good: For one thing, they will not be able to acquire general skills. While the government has been using Germany as an example of early vocational training, Ankara think-tank TEPAV has noted that children’s PISA scores are lower in German states where vocational training starts earlier- there may be some reverse causality there, but still…

As a more general point, I have noticed, more than a few times, that the current policymakers are very good at identifying problems, but not so good at finding the best solutions. Think about Central Bank’s rate cut in August or the new corporate governance laws, for example. I am planning a general column along these lines, BTW…

Coming back to the exports story, I have seen several accounts how Turkey managed to shift its exports away from Europe to new markets, the latest being a recent piece in the Daily News. You can see the evidence in the trade statistics, and many firms were able to weather the global crisis that way. In fact, a World Bank – TEPAV study had found that cities where firms had diversified their exports the most had the least employment losses during the 2008-2009 crisis. However, I have yet to see an account of how this diversification could have affected the composition of exports: After all, the new markets are not demanding the same products as Europe, which I had noticed in Amman when I saw the Ulker cookies or the Sarar suits. So maybe such diversification is a curse for export sophistication, as I was suggesting some time ago. Definitely food for thought…

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