Formative Years of Turkish Republic: 1923-1933

1923 1929 1933

Great Depression

Formative Years of Turkish Republic: 1923-1933 Principles of the period were determined

by two events:

İzmir Economic Congress (1923)

Lousanne Agreement (1923)

İzmir Economic Congress (1923) Aim: To determine the problems and needs of the society in a collective manner

Economic Nationalism

To encourage private entrepreneurship

1135 Delegates

Lousanne Agreement (1923)

Capitulations were abolished

Cabotage right

Foreign debts will be started to be paid in 1929

Current custom duties will be applied for 5 more years

Economic Policy in 1923 Balanced budget

Balance in international trade

Constant money supply

Fiscal Policy in the period The aim of fiscal policy: Balanced budget

Revenues: Indirect taxes after abolishment of Aşar Salt, tobacco, sugar taxes

Expenditures: Infrastructure (railways) Domestic/foreign debt payments

Agriculture Aim: To increase production

1925: Aşar was abolished

Private land ownership

1927: First population and agricultural census (82% percent of the labor force is employed in agriculture)

Agriculture No mechanization

Prices are volatile

The credit markets are unorganized Ziraat Bank: 1888 Agricultural Credit Cooperation: 1929

Technical schools, model farms

Industry 1925: Sanayii ve Maadin Bank

1927: The Law for encouragement of industry

1929: Independent custom duties

Duty free imports for export oriented industries

Industry Agriculture : 43%

Textile : 24%

Mining and Machinery: 22%

International Trade During the period:

Exports decreased Imports increased At the end of the period: trade surplus

The fall in export prices were sharper than the fall in import prices, so terms of trade deteriorated.

International TradeExports Imports Balance

1923 85 145 -60

1924 159 194 -60

1925 192 241 -49

1926 187 235 -48

1927 158 211 -53

1928 173 223 -50

1929 155 256 -101

1930 151 147 +4

1931 127 126 +1

1932 101 86 +15

National Income Volatile

Depends on agricultural production

Share of agriculture: 40-50%

Institutional Arrangements 1921: The first constitution

1926: The Central Statistical Department

1928: Ministry of Economics

1929: Milli İktisat ve Tasarruf Cemiyeti (National Economy and Saving Association)

The downfall in 1929 Domestic Factors:

The fall in cereal output because of whether conditions. Turkey started to import cereals.

Rapid rise in import demand because of the new import duties that will be implemented in 1929.

The rise of import demand because of railway construction

Moratorium (First installment of the foreign debt)

The downfall in 1929 External factors:

The Great Depression: Incomes of our export markets fell

The downfall 1929 Measures:

1930: TCMB 1930: The law regarding the protection of the

T.L. 1931: Import quotas 1932: Clearing agreements

The Great Depression: 1929 The beginning of the

Great Depression in the United States is associated with the stock market crash on October 29, 1929, known as Black Tuesday.

Picture from the Franklin D. Roosevelt Library, courtesy of the National Archives and Records Administration.

The Great Depression: 1929During this time (in US):

the prices of stock fell 40% 9,000 banks went out of

business 86,000 businesses failed The unemployment rate

went from 9% all the way to 25%, about 15 million jobless people.

The Great Depression: 1929Although the depression wasworld wide, no other country except Germany reached so high apercentage of unemployed.

The poor were hit the hardest. By 1932, Harlem had an unemployment rate of 50 percent and property owned or managed byblacks fell from 30 percent to 5 percent in 1935. Farmers in the Midwest were hit by economic downturns and the Dust Bowl.

Dust Bowl The Dust Bowl was a series

of dust storms causing major ecological and agricultural damage to American and Canadian prairie lands in the 1930s, caused by decades of extensive farming without crop rotation among cotton, corn and grain farmers using techniques that promoted erosion coupled with severe drought.

The Great Depression: 1929 In the 1920s, in the U.S. the widespread use of

purchases of businesses and factories on credit and the use of home mortgages and credit purchases of automobiles, furniture and even some stocks boosted spending but created consumer and commercial debt.

People and businesses who were deeply in debt, when demand for their product decreased, were in serious trouble. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged.

The Great Depression: 1929 Banks which had financed a lot of this debt began to fail as

debtors defaulted on debt and bank depositors became worried about their deposits and began massive withdrawals. Government guarantees and Federal Reserve banking regulations to prevent these types of panics were ineffective or not used.

Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade.

The Great Depression: 1929Families on the road with all their possessions packed into their trucks, migrating and looking for work. (Circa 1935)

The Great Depression: 1929 Unemployed: Typical

picture capturing the number of people who were unemployed and looking for a job. (Circa 1935)

The Great Depression: 1929 Breadlines: long line

of people waiting to be fed- New York City: in the absence of substantial government relief programs during 1932, free food was distributed with private funds in some urban centers to large numbers of the unemployed. (Circa February 1932)