Prof. Ufuk Akçiğit, Lecturer at the University of Chicago underlined the importance of productivity oriented growth in his speech at the Global Relations Forum took place in Istanbul on Monday.
“Bringing resources from abroad and distributing incentives is not quality growth, it is forced growth. However, we need quality organic growth. We need to find companies that will make a difference and support them based on performance and efficiency” Akçiğit said.
Economic development in an era of multiple crises was one of the key topics of the summit, where the future of global relations was discussed from different perspectives.
Speaking at the panel “Economic Development: Global Realities and Challenges”, Prof. Ufuk Akçiğit, a lecturer at the University of Chicago, said in an interview after the panel that the only way for Turkey to escape the middle income trap is productivity-oriented growth. Prof. Akçiğit’s comments are as follows:
We have growth, but how?
“Of course Turkey is growing, but what we should really ask is how Turkey should grow. When we compare Turkey to the richest countries, for example the US, we see that we are stuck at an income level of around fifteen percent. And that is why, according to the World Bank’s definition, we cannot get out of the middle income trap. So what have the successful countries at Turkey’s level done? For example, South Korea grew by nine percent when it was at Turkey’s level. Poland made very serious reforms in the 90s, got rid of cumbersome companies and is expected to overtake the UK economy in 2030. When we look at Turkey, the biggest problem it faces in the long term is increasing its productivity.
In countries that have managed to get out of the middle income trap, there is an increase in productivity first. Then this is reflected in income. When we look at the relationship between Turkey’s productivity growth and income growth, we see a graph that is skidding in time. It is not just a matter of bringing in capital from abroad, of course it is… But that capital needs to be invested in productive places. We worked with the World Bank in a very detailed way in the World Development Report. There was a model we explained there. You can divide the growth story into three. The lowest income countries, average income countries and higher income countries. The lowest-income countries already have no resources, they are poor and need capital. So they need to somehow raise capital from outside, no matter what. In order to raise this capital, it is important for the state to have a presence in the economy so that they can make infrastructure investments. Otherwise, those resources can hardly come together. That’s why the state needs to play a role at the beginning of success stories, whether in South Korea or China, but this is a model that can work for a certain stage. When we reach a certain point, we need to shift gears and establish a new model. At that point, the state needs to withdraw itself from the economy and create an environment where private investors can compete.
Only with a holistic approach can Turkey write its economic growth story. The country has this potential. All we need to do is to realize this and put on the table how we really want to grow. Bringing resources from abroad and distributing incentives is not quality growth, it is forced growth. However, we need quality organic growth. We need to find companies that will make a difference and support them based on performance and efficiency. The growth story of a country should evolve from a low-income business system to a dynamic system. Just as we expect the people in companies to be dynamic and creative, policy makers need to be dynamic and creative as well. Unnecessary regulations in front of companies that can adapt to the changing world need to be removed. It may be exciting for Turkey to grow by six percent or seven percent in one year, but two years later we shrink by ten percent. Therefore, we have a zigzag productivity path. We need to focus on quality and productivity-oriented growth as soon as possible.”
We do not use our resources effectively
“We need to create an environment where there is more competition, more entrepreneurship, more technology and innovation. Young people are asking, “Should I get an education? Should I invest in my career? OK, I should, but what will happen as a result?” For example, in the US, if you have a degree in computer engineering, you can predict what the situation will be. Unfortunately, we do not produce high technology. And because we don’t produce high technology, our companies don’t have a hunger for high technology or have any initiative towards it, so the people who will work in those jobs are not in demand. Therefore, the salaries of educated people remain low. The situation does not change even when these young people stay in academia. The only solution left for these people is to go abroad. There is a very serious brain drain problem and unfortunately the most productive people in Turkey go abroad. Because it is easier for the most productive people to find a job abroad. We are at the top of the OECD in terms of giving incentives to industry. But in terms of scientific output, innovation, R&D expenditures, we are at the bottom of the OECD in terms of both companies and universities. So we are not using our resources effectively. We need to question this.”
Three areas create the opportunity to sit at the table again: Health, artificial intelligence, green transformation
“In today’s world, new opportunities are emerging in three areas. These are health, artificial intelligence and green transformation. These three areas create new opportunities for countries like Turkey, which are stuck in the middle income trap, to sit back at the table in a serious way. Creating policies that are suitable for the changing world plays a very critical role here. Let’s say there is a very serious demand for computers. Have we been able to change our education system to produce enough software engineers or to work in the field of computers? If not, then we are missing the train.
The green transformation creates an incredible opportunity for Turkey. Turkey has great opportunities both in terms of its geographical structure in terms of green energy resources and in terms of the production of green technologies. If Turkey can utilize this opportunity, it can be a part of the global production networks.
On the other hand, more than 50 percent of academic articles written in Turkey are in the field of health. Why can’t we develop a manufacturing industry around this? Today, more than 50 percent of the budget of the research center established in South Korea comes from private sector projects. It is very important to create this organic contact. Countries that pave the way for entrepreneurship will be able to sit at the table very strongly tomorrow.”
I hope we can appreciate Daron Acemoğlu’s award
Prof. Ufuk Akçiğit is one of Daron Acemoğlu’s students. While he was giving his speech at the Summit, the news came that Daron Acemoğlu had received the Nobel Prize in Economics. In our interview after the summit, Prof. Akçiğit described his excitement when he received this news as follows: “Actually, the whole world knew that Daron Acemoğlu would receive the prize. A publishing house in the UK asked me to write an article about Daron Acemoğlu. In the introductory paragraph, I wanted to write about how many citations Daron Acemoğlu had received so far in order to explain how influential he was. A few weeks passed while I was working on the article. I realized that the number of citations had increased by almost ten thousand in just a few weeks. Daron Acemoğlu’s influence is that big. And that day is today. I met Daron Acemoğlu in 2002. I was a student at the university at the time. When Daron Acemoğlu entered the office, I was so excited, my legs were shaking. Twenty-two years later, when I received that news while I was on the dais today, Daron Acemoğlu excited me again. This award is a feast for Turkey, something very powerful to even imagine has been realized today. So I hope we can appreciate it well.”
