The Gini illusion of Turkey
Please cite the paper as:
“Emine Tahsin, (2013), The Gini illusion of Turkey, World Economics Association (WEA) Conferences, No. 4 2013, Neoliberalism in Turkey: A Balance Sheet of Three Decades, 28th October to 16th December 2013”
Abstract
Without any doubt, under JDP (Justice and Development Party) era, the neoliberal policies have also specific characteristics that could be distinguished from the previous decades. After the 2001 crisis (one of the deepest crisis in the history of Turkish economy), the increase in the average growth rates and the GDP per capita has been realized. In addition to these inequalities and macroeconomic imbalances accompanies to this growth process.
Due to these, the redistributive policies and social policies during this period is among the most discussed topics especially after one of the deepest crisis of Turkish economy in order to decrease the inequality gap and poverty. New social policies came into the agenda in some cases on the basis of faith based initiatives but in general it could also be called as neoliberalism with human face.
Under these circumstances the political roots of the JDP and the phase of the neoliberal policies should be analyzed and the relation among them should be defined. Within this framework first of all the paper would try to analyze the specific characteristics of neoliberal era under AKP period. Secondly a brief summary of the redistributive policies and social policies would tried to be defined.
In doing so, the paper would discuss the approaches to inequalities on the basis of the Gini coefficient in real terms. Although there are specific improvements on the basis of the Gini coefficient of Turkey, the approaches to inequalities need to be investigated. Considering the TurkStat and OECD data related with Turkey, the Palma ratio (2011,D10/D1-D4)/approach to inequalities would tried to be applied to Turkey case. After the balance sheet of the last decade on the basis of the Palma ratio, the relationship with the related social and redistributive policies would also included to the analysis. Since the Palma ratio provides to focus on the top, the bottom and the middle income groups, the evidence suggest that it would provide to develop a deeper analysis on the basis of inequalities and neoliberal policies during the last decade.
The study by Emine Tahsin focuses mainly on the effects of Justice of Development Party era neoliberalism on the income distribution. However, there is a secondary issue elaborated in the study. The study questions the empirical significance and consistency of officially announced Gini coefficients. Author proposes to use Palma ratio instead. The paper begins with the analysis of transition from the Washington Consensus to Post-Washington Consensus and the implications of this transition. The basic distinctive feature of Post-Washington Consensus is its allegedly pro-poor orientation. Tahsin asserts that this process could be observed during the JDP period in Turkey and this has serious repercussions upon the income distribution.
As a background to the analysis, a short macroeconomic history of Turkey under JDP is given. In this section, it is shown that, even though the growth rates in the first sub-period were comparatively higher, as a result of contagion effects of global crises, they fell in the second sub-period. In the analytical section, the Palma Ratio is proposed in order to correct the bias of the Gini coefficient against the top and bottom income shares. Using both the Gini coefficient and the Palma ratio, the study conducts a detailed analysis.
However, there is one thesis which seems to be invalidated by the facts from developing capitalist countries. Tahsin indicates that the top 10 % and bottom 40 % are more heterogeneous than the middle 50 %. However, one basic effect of neoliberalism is the increasing size of working class and especially the industrial reserve army. This inevitably results in the piling up of similar households at the bottom. Moreover, there is a symmetric transformation – albeit at a lower level – at the top of the income hierarchy.
This study has one important merit concerning the OECD’s equalized income scheme. This scheme implicitly assumes that survival of adults require more expenditure than the minimum requirement for children. In this context, total income of households is divided by equivalence scales which allocate higher coefficients to adults, rather than by the actual household size. However, applied to the countries like Turkey, such an analysis gives misleading results and this study confirms this.
There is one another important contribution that should be underlined. A new welfare regime has been emerging in Turkey and this new system depends heavily upon the distribution of informal transfers among the poor. This study provides important insight in this regard.
Distributional pattern in an economy is shaped by two mutually complementary policies of the government. Firstly, initial pattern is realized as the outcome of purely economic policies adapted; secondly, this pattern can be modified to obtain ultimate distributional pattern by implementing additional socio-economic policies. Therefore, when speaking about the outcome of a complex governmental set of policies with regards to income distribution two different but mutually related policy phases should be considered separately in order to be able to seperate the effect of pure economic policies, i.e. neoliberal policies as it is referred to in the paper, from the ultimate result obtained by means of implementing socio-economic policies to mitigate the distortive effects of neoliberal policies from socio-economic viewpoint. However, that such a study needs more data for a long time period in addition to some necessarry assumptions prevents one from expecting such an exhaustive research in a paper which aims simply to reflect the ultimate outcome. Evaluating the study from this point of view I am confident to say that the study serves the purpose of enlightining the policies and their results by providing a large set of informative tables and figures. With regards to methodology it is important to mention that, as it is well known, the position of the bulge of the actual distribution line is of great importance, as same coefficient can be obtained with different positions of the actual distribution line. The author, being aware of the handicap, does rightly shifts the method to “the ratios of incomes for the quintales and deciles”, by admiting that “the change in Gini coefficient is more volatile”.
As to some spesific points, I think that the followings are worth mentioning with the aim of improving the study. Firstly, the difference between Gini coefficient calculated on the basis of “disposable income on the one side, and on equivalized household income on the other ceratinly needs further and more detailed explanation. As it has already been mentioned in the paper that Boratav and Sönmez had made some contributions on this particular issue makes one more confident that the author is aware of the problem. In addition to that, Gini coefficient would have been more explanatory if it could have been developed on the basis of 10 percentage income brackets for productive factors. As to the changes in national income, though it is obvious that it has increased during the last decade, the analysis would be more penetrative if it had attempted to explain the reason of a decrease in D10 income and an increase in D9 income. In the same context, the increase in the income level of the least income level group needs further explanation to enlighten the effect of socio-economic policies of the government towards such groups.
In sum, with above points in mind, I welcome the paper as the one presenting a very good bird-view descriptive appearance of the outcome of neoliberal policies pursued by the government while pointing out a very important redistributional social policy specific to Turkey, that is intra-groups income fransfer policy depending on some religious believes in the last decade.