Following the 2000-01 crisis, Turkey implemented an orthodox strategy of raising interest rates and maintaining an overvalued exchange rate. But, contrary to the traditional stabilization packages that aim to increase interest rates to constrain domestic demand, the new orthodoxy aimed at maintaining high interest rates to attract speculative foreign capital. The end result was shrinkage of the public sector, deteriorating education and health infrastructure, and failure to provide basic social services to the middle class and the poor. Furthermore, as the domestic industry intensified its import dependence, it was forced to adapt increasingly capital-intensive foreign technologies with adverse consequences on domestic employment. In the meantime, transnational companies and international finance institutions have become the real governors of the country, with implicit veto power over any economic and/or political decision that is likely to act against the interests of global capital.

February 9, 2009.