Ю В Макогон, В П Шевченко - Проблемы развития внешнеэкономических связей и привлечения иностранных инвестиций - страница 22

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Competences ranged by graduates

Number one - skill to analyse and structure problems of a company and ability to solve them (e.g.



entering to market)



Number ten - determining of micro and macroeconomic elements and their influence on business



organization (e.g. financial systems, monetary systems, domestic markets)



Number nine - definition of functional fields of an organization and determining existing



connections between them (e.g. purchases, production, logistics, finances, marketing, human






Number twenty-two - knowledge of accounting and financial systems and their usage (e.g.



profit/loss balance accounting)



As the table 2 shows only one competence is common (competence number one) for all four groups of respondents. Two competencies (Number sixteen and twenty-two) are common for two groups: competence number sixteen is common for academic personnel and students, while competence number twenty-two is common for graduates and academic personnel. However, it has appeared in the fourth place in the priorities of graduates.

Therefore, research results enable to make considerable conclusions about business education priorities on a world scale. The priority competences for graduates of business education program in Latin American countries are the following competences: operational, tactical and strategic planning skills; Skill of interpreting accounting and financial information in the process of investment decision making process of a company; skill of managing company's financial resources; Skill to develop and manage human resources (talents) of the company.

The first-priority competences in Europe were: analysis, structuring and solving existing problems of a company; skill of learning, e.g.: how, when and where personal development is necessary; Ability to speak, write and read in foreign language; defining and using of adequate instruments (e.g. market analysis, statistical analysis, comparative coefficients).

All four groups of respondents identified the following competencies in Georgia: skill of analysing the company's problems, structuring and problem solution (for instance: entering new market); defining criteria of evaluating a company and comparing them with environment analysis for the future (e.g. SWOT, internal and external chain of values); project management skills (e.g. formulation of aim, defining interrelations between tasks and results, planning of time constraints and their management).

Comparison of survey results in Europe and Latin American countries, despite differences between them, show that the first-priority of business-education must be formation of skills of identifying company's problems and using adequate instruments in the decision making process (operational, tactical and strategic planning skills; accounting and financial information interpreting skills; market analysis; statistical analysis; project management).

So, research conducted within the framework of the Tuning project enables us to make significant conclusions about the challenges of business education in Latin America and Europe.

The following competences are considered of first-priority for graduates of business education programs in Latin American countries: operational, tactical and strategic planning skills; skills of interpreting accounting and financial information in investment decision making in a company; the company's financial resource management skill; skill to develop and manage human resources (talents) of the company.

The following four competences appeared to be of high-priority across Europe: analysis of the company's problems, structuring and problem solving skills; learning skills, e.g. - how, when and where is personal development necessary; writing, speaking reading and understanding in a foreign language; determining and using adequate instruments (e.g. market analysis, statistical analysis, comparative coefficients).

Research results prove that students are those who have better intuitive understanding of labour market demands and types of competencies ensuring competitiveness. Opinions of students and graduates about importance of specific competencies are more different from employers' opinions, than their opinions about general competencies. Difference in opinions of employers and students about specific competencies are greater than that of employers and graduates.

According to the research results, the importance of competencies is higher than the competence achievement in educational institutions. Difference is especially noticed in skill of using knowledge in practice and level of forming this skill.

As research results shows business educational programs should be designed based on the following principles: definition of program profile and competencies formed as a result of learning; implementation of a learning-teaching-evaluating approach; determining the load for students: constant ensuring of quality; encouraging mobility of students and academic personnel for the purpose of gaining international experience; taking students' opinions into consideration in the process of designing the program; increasing the role of internships in the curriculum; organization of consultations between academic personnel and employers in order to bring their opinions closer; involvement of study courses in curricula necessary for formation of first-priority competencies in Europe and the whole world.


1. Support of educational structures in Europe. Contribution of universities in Bologna process. Final report. Pilot project - phase 2. Tbilisi 2008

2. Tuning Latin America. Reflections on and Outlook for Higher Education in Latin America. Final Report-Tuning Latin America Project 2004-2007, Edited by Pablo Beneitone, Cesar Esquetini, Julia Gonzalez, Maida Marty Maleta, Gabriela Siufi, Robert Wagenaar. Printed in Spain 2007

3. Summary of Outcomes - Business. Business Groups. http://tuning.unideusto.org/tuningeu/images/stories/template/Template_Business.pdf. last accessed August 29-th, 2009

4. Materials of Tuning Dissemination Conference II. Competence-based learning: the approach for the future? Brussels, June 12-13 2008

5. Materials of conference "Tuning-Georgia" organized within the framework of tuning project ; Feb-28-2009; Tbilisi Georgia


В статті розглянуто пріоритетні напрямки бізнес освіти в контексті глобалізації


В статьи рассмотрены приоритетные направления бизнес образования в контексте глобализации


In articles priority directions business education in a globalisation context are considered


Oztiirk ibrahim, Assoc. Prof. of Economics Marmara University, Dep. of economics, Istanbul, Turkey


The first stage of globalization took place in the post-1980s, when neoliberal paradigm dominated the economic theory as well as economic policy agenda first in the USA and then in Great Britain. After the collapse of Central Planning Economies, however, it reached an unprecedented strength that never seen before. Moreover, same argued that American capitalism proved her superiority and victory over its alternatives, and in that regard the rise of globalization and demise of the Central Planning was declared as the end of history.

In such a circumstances, the end of the Cold War triggered an extreme pressure on the former central planning economies to push into a market model. The excesses or negative repercussions of the first stage of globalization (i.e., the so-called Washington consensus), however has resulted in many shortcomings in the world. For instance, transition process took place in a rather short time period with a completely unplanned and non-managed nature. In addition to the Russian crisis in the mid-1990s, many other successive economic crises took place in other periphery countries such as Asian Crisis, Turkish Crisis and crisis in some Latin American countries.

Mainstream thinking that dominated the economic society was reluctant to blame globalization for these successive failures. The crisis was attributed to the established crony capitalism, excessive regulation, prevention of market mechanism to function freely etc. in these countries. Based upon these arguments, augmented model of neo-liberal prescriptions suggested even further deregulation and further reliance on market mechanism. Therefore, after a short lived interval, second major waves of globalization have been experienced since 2000 until the outbreak of the last global economic crisis that has been triggered in the American mortgage sector.

In the last two decades, the global financial system has become ever more broadly intertwined with the global economy. As Ben S. Bernanke puts it, "the proximate cause of the crisis was the turn of the housing cycle in the United States and the associated rise in delinquencies on subprime mortgages, which imposed substantial losses on many financial institutions and shook investor confidence in credit markets" (Ben S. Bernanke, January 13, 2009).

Undoubtedly, there are several negative repercussions associated with the crisis. For instance, several direct as well as indirect interventions such as rescue packages, nationalizations and direct money injections into the markets in order to contain the negative waves of the crisis and, therefore, prevent a free fall of prices in the market place might have planted the seeds for other potential crises in the not-too-distant future. Among the prospective problems that loom for the world economy, global unemployment, the return of inflationary pressure and the crowding out effect of the public sector borrowing requirement on private investment activities are quite serious issues.

One should acknowledge that while short-term economy policy tools could postpone the onset of such problems, they may not either provide permanent solutions to the crises or prevent its return. To render the measures effective, necessary medium- and long-term radical measures must be decisively taken within the realm of global cooperation for the purposes of inserting the missing institutional as well as ethical elements into corporate capitalism that, until now, have been based upon the principle of share holder value maximization. There has been an increasing recognition among scholars that the current economic crisis has stemmed from the ethical, rather than market, failures of both regulators and professional managers.

This abusive model is attributed to the search for excessive profits in the short term. This, in turn, has resulted in several derivative models inducing conspicuous consumption. Moreover, obsession with so-called "property rights" (despite a lack of a clear definition of their use) has triggered the thirst for power, undermined regulatory capacity and led to an erosion of the individual sense of rationality.

At the end of the day, the cumulative result of these malpractices has, in our view, greatly damaged humanity as well as scarce resources. Several side effects such as global warming, ethical erosion and the alienation of the individual have risen to alarming levels. These developments have now come to the point of threatening sustainable growth, global distribution and universal peace.

Without doubt, this is not the first crisis of capitalism and it is unlikely to be the last one unless due measures are taken. At this stage, two points must be noted. Despite the current crisis and its dramatic costs, declaring that "capitalism is dead" would be too simplistic and may not be a realistic or appropriate

© Oztiirk ibrahim, 2010 416

strategy. Second, it must be understood that capitalism is not a revealed, God-given, "infallible" or natural process that requires us to avoid any intervention. On the contrary, there are several scholarly works showing that the ancient history of man did not follow the footprints of capitalism. Therefore, in order to fix and provide reliable solutions to the aforementioned problems, we should neither reject capitalism nor declare it as a sacred phenomenon.

As a starting point it should be noted that many assumptions of the capitalist philosophy towards the market and individual is ideological and therefore like any other humanly devised paradigms the truth and realism of these assumptions or core elements are relative, meaning that scientific verification many not be applicable at all.

As Amartya Sen (Financial Times, May 12*. 2009) notes, modern economic theory has several institutional as well as ethical weaknesses. They are simply taken as exogenous (i.e., as given). Moreover, economic agents who are living through a complex web of values are separated from their natural as well as social surroundings and are reduced to an "economic individual" (homo economicus) who is motivated almost solely by consumption, and, therefore, has become alienated from himself on the ontological plane. These two ideological inclinations have a place in economic theory.

One of the problems with central planning was its denial of the market as the basic economic coordination mechanism. However, capitalism, rather than denying, it may occasionally target it directly in order to abuse it or to completely repress it depending on the situation. In that regard, both communism and capitalism pull the game "out of the market." While the former acts entirely ideologically and commissions the economic interactions among billions of people to bureaucrats sitting in the center, claiming this in the name ofjustice, equality and labor, the latter assumes that the "invisible hand" will solve the basic economic issues and, therefore, leave the arena to "big players" who may well leave the process in disarray.

Capitalism reduces the market economy to a Darwinist understanding of the "survival of the fittest" in which big fish gobble up small ones. This view is legitimized by the expected efficiency provided by competition. By the same token, the "economic individual" as the subject of economic theory is deemed to maximize his or her utility. Thus, we have a hedonist, profit-seeking and consuming "typology," who strives only after short term goals. This type of focusing assumes man to be a non-educable entity who cannot be directed by rational preferences.

Several crisis in the last century show convincingly that, like the case of noncompetition, uncontrolled competition may have as much of a devastating effect as the inefficiency of central planning. In order to permanently fix all these problems and to achieve a more sustainable path in development, the global construct and the philosophy behind the system should be fundamentally revised with a sincere attitude. This is not only possible, but also a necessary task for us.

An economic system reflects the interaction and participation of individuals, organizations and institutions in the process of production, consumption, exchange and distribution. This process is governed by a set of rules and laws specific to that system. Different viable economic systems can exist simultaneously, each with its own specific laws and rules. In historical processes, issues like corporate law and capital accumulation were approached with different views, thereby resulting in dissimilar economic structures and levels of development (Kuran, T., 2003).

Therefore, in order to carry out economic activities with their desired effectiveness, each system makes its own assumptions about human behavior and accordingly establishes its own institutional and organizational mechanisms. What we need here is a clear institutional approach since, in the process of satisfying wants/desires and achieving their economic targets, economic agents interact not only individually but also through the organizations and institutions they create. An organization, in turn, develops its own structure, shape, and mode of operation. Institutions are the rules of the game in a society. They are the humanly devised constraints that shape human interaction. They are composed of formal rules (statute law, common law, and regulations), informal constraints (conventions, norms of behavior, and self imposed codes of conduct) and the enforcement characteristics of both (North, D., 1990 and 1992).

In this regard, institutions guide human interaction and therefore structure economic life. This is because they organize the process of decision-making arrangements and reduce uncertainty; they devise a mechanism that provides information and coordinates decisions made by economic actors so that the production and consumption of the proper array of goods and services are guaranteed; they define the nature and enforce the use of property rights in the sense of who is entitled to own and utilize what; and finally, they provide the material as well as moral incentives to regulate the activities of economic agents. In the final analysis, by facilitating exchange, institutions reduce transaction costs and increase potential gains from trade that, therefore, leads to better economic performance (Hodgson, G. M., 2006).

Based on these expectations, good economic institutions should have three characteristics:

They should be capable of enforcing property rights for a broad cross-section of society so that a variety of individuals have incentives to invest and participate in economic life.

They should be able to constrain the actions of elites, politicians and other powerful interest groups so that these people cannot expropriate the incomes and investments of others or create a highly uneven playing field.

They should provide some degree of equal opportunity for broad segments of society, so that individuals can make investments -- especially in human capital -- and participate in productive economic activities.

Taking the advantage of the current crisis, in the creation of a new global economic structure, we should focus on these issues. After briefly focusing on the nature of crisis and the possible path towards substituting a more equitable and effective system, the next section focuses on the potential threats as well as opportunities of globalization.


When we look at historical experiences on globalization, we observe that this process brings both potential benefits as well as serious drawbacks. Neither benefits are automatic, nor are its negative repercussions easier to avoid.

Globalization essentially implies the integration of the countries through trade, finance, and production networks as well as convergence of cultures through communication and transportation means. This might be good news provided that transportation and communication costs decline, artificial barriers obstructing the movement of goods, services, capital, information, technology and, in a more restricted sense, humans across the borders are eliminated. Viewed from this context, globalization appears to have been largely beneficial for humankind, yet the facts tell a different story.

Generally speaking, globalization has developed as an unjust "fait accompli," here opportunities have been allocated to the West and burdens to other nations. The income and welfare gaps between the developed and poor countries are widening each day. While the richest 20 percent of the world population had 30 times the income of the poorest 20 percent in 1960, this figure climbed 82 times by 1997. According to United Nations data, 86 percent of the world's consumption is accounted for by the richest 20 percent of the world's population. While the number of people with a daily income of $1 or less was 1.2 billion in 1987, this number had increased to 1.5 billion by 1997 (Oztiirk, І., Giir, N., and Cologlu, Z., 2008).

Based upon recent experiences in global economic integration, a blend of these criticisms is provided below:

i. Narrowing Realm Of Governance: Increasing economic, political and socio-cultural integration due to globalization narrowed the realm of governance of the nation-states excessively. As nation-states can no longer control and isolate the impact of external factors, domestic policy instruments lose impact in taking effective decisions about their future (Falk, R, 2005, Oni?, Z., 1994). More precisely, in addition to rising impact of several multilateral organizations on the future of countries, parallel to the rise of trans-border transactions, MNC's are also becoming more influential in the process of both political and economic decisions making (Drucker, P.F., 1997).

ii. Increasing dependency in production: With globalization, the share of manufactured goods in the national income and exports of developing countries (DCs) is increasing. However, globalization does not develop in a way so that these countries will one day produce their technology; rather, the dependency syndrome deepens. The dependency of these countries on imported technology results in unhealthy foreign payments stock and exposes them to frequent foreign shocks.

iii. Homogenization and alienation: Globalization eliminates differences in the world and brings forward uniformity. As local cultures that cannot cope with it recede, social alienation and stress increases. In response to this, anti-globalization movements appear in some places. However, mere reactions cannot help to rescue nations from the damages of globalization or develop alternatives to it (Martin, H. P. and Schumann, H. 1997).

iv. Unfair globalization triggers economic nationalism and protectionism: An unbalanced and one-sided globalization process that results in recurrent global crises would trigger waves of neo-protectionism and may also lead to some excessive regionalization that does not promote freer trade. The continuing struggle in the WTO might be seen as an early signal of this.

v. Capital movements that hinder production but destabilize national economies: Capital movements are another potential threat that knocks at the door. It is known that foreign capital movements that change volume and character have negative impact on the economies of the DCs and cause macro-economic imbalances. Despite extremely liberal and theoretical claims, capital movements usually bring instability and have little contribution to both employment and savings performance (Feldstein, M., 2002).

vi. Waves of global unemployment: Unfair globalization causes high unemployment in developing as well as developed countries and in, the unqualified workforces are overwhelmed by the relentless competition. As developed countries cannot bear the competition of DCs in labor-intensive sectors, they resort to protectionism in these areas. On the other hand, they firmly reject protectionism in sectors where they have a competitive advantage.

vii. Unfair income distribution: With globalization, one observes that injustice in the distribution of income increases. In this process, the shift of production factors to countries where taxes are lower and yields are higher might gain more importance than the nature of the trade between developed and DCs.

viii. Nation States vs. Rising Bargaining power of MNCS: As the bargaining power of MNCs may dominate that of the host country government, the benefits for the MNC and the host country may not correspond. Therefore, positive impacts of foreign direct investments (FDI that are carried out by MNCs on the host country's welfare are not guarantied. For instance, in case of their activities take place in an environment where asymmetric and/or incomplete information dominate, their activities would result in excessive market failures. Not only may global production networks undermine the static advantages in the host countries, but excessive investment by MNCs may also lead to price distortions and the sidelining of local firms.

ix. "Chain" for labor, "freedom" for capital: Needless to say, unlike goods and capital that can freely move across the borders, labor is restricted to the nation-state's borders. Therefore, the mobility of all the factors of production, including also labor, is critical in improving national welfare.

x. Environmental destruction and global warming: It is well-known that in addition to the cheap factors of production in DCS, the environmental regulations in developed countries also motivate MNCs to shift their operations to poor countries where environmental regulations are weaker. Strikingly, MNCs generally operate in sectors which damage the environment and whose negative externalities are intense, like coal, wood processing and paper, engine parts, chemical materials and petroleum products (Perkins, J., 2004).

Despite the negative aspects of globalization discussed so far, it would offer also numerous opportunities not for only developed countries but also for



3.1. Neoclassical Convergence Hypothesis

One of the theoretical arguments behind globalization is the Convergence Hypothesis that based on the neoclassical growth model developed by Robert Solow. Provided that certain conditions are fulfilled, it argues, latecomers with low income will grow faster than high income countries and, therefore, can succeed in catching up to them in attaining convergent income levels (Loayza, N. V., 1994). Based upon this thesis, the following factors are put forward in favor of globalization.

i. Structural transformation: The biggest expectation of globalization is that it will contribute to the structural transformation of DCs so that efficiency would be enhanced and welfare increased in the long term (Rodrik, D., 1998). In a similar vein, despite the restrictions on the movement of labor, free movement of other factors of production contributes to the comparative advantage via specialization and global division of labor. In other words, factor movements will work in favor of welfare enhancement. (Stiglitz, J. E., 2003). In the process of specialization along the lines of comparative advantages, improved means of transportation and communication would definitely play critical facilitating role.

ii. Bigger export market for small countries: Free trade will allow DCs to reach wider markets and cheaper capital resources, which will help them complete their development process (Greenaway, D., 1993, p. 208-22). As a matter of fact, the rise in the volume of cross-border transactions will give rise to economies of scale, specialization and this, in turn, will lead to efficiency and competitiveness.

iii. Foreign expertise and technology transfer: Owing to the integration of production, and attraction of FDI, particularly in terms of green field investment, DCs can benefit from foreign expertise, know-how, technology and integrate their economies to the global value chain.

iv. Employment creation and prevention of immigration: In the global competition environment, the pressure of international immigration can be alleviated thro two major channels: First, as developed countries transform into service societies, the manufacturing industry quickly moves to periphery countries and this provides jobs to a young and relatively cheap labor force in those countries. Second, it can be prevented by the concentration of qualified labor in sectors open to trade and unqualified labor in sectors that are not open to foreign trade.

v. Financing the growth: DCs would close their saving-investment gap by accessing to cheap and long-term financial resources, while developed countries would shift their surplus funds to higher-yield markets in DCS. (Fry, M., 1997, p.754).

As the linkages between countries grow deeper, local problems gain international character and require international cooperation. This may contribute to the development of local democracies and the emergence of effective solutions in crises and problems in governance (Fischer, B., 1998).

3.2. Conditional Convergence: Testing Turkey

3.2.1. The "lost decade" in 1990s: There are many researches; however, showing that above mentioned potential benefits does not work automatically. In order to activate them and reap the benefits of globalization and therefore achieve income convergence, low income countries must grow faster than high income countries by raising their capital-labor ratios through investment as it would allow capital productivity to rise.

Therefore are certain conditions that need to be fulfilled before convergence in terms of income can be achieved between nations. These conditions are termed, appropriately, "conditional convergence," a rubric which excludes single factor explanations and relies upon multifactor models. Among the most important factors, macroeconomic stability, technology parameter and human capital are critical.

Not only recent economic history, but also theory of endogenous growth (Romer, R., 1998), rather than natural resources, development has become increasingly related with quality of human and physical capital as a means to achieve higher productivity and therefore increase living standards. Obviously, knowledge that can be achieved through education, research and development, and innovation has become more important than capital accumulation in raising per capita output. Based on these basic lessons, national governments must provide the legal framework, institutions, the public goods and services to compensate for incomplete information by providing insurance and guarantees. By so doing, less developed countries can begin to close the gaps between themselves and their richer cousins through the globalization of knowledge.

However, such strategies call for the broadening of the role of national governments. In that regard;

the cyclical and transitory needs of government's involvement is a necessity,

• as the risk brought by globalization increases, besides its benefits, programs such as public employment, social security funds and income guarantee mechanisms are vital for worker protection,

• the supervision and renewing of institutions such as accounting rules and judicial institutions are critical,

• as, in the final analysis, national governments are solely responsible for the welfare of the people, the flow of capital cannot be left to the equalizing of the marginal rates of return, and finally,

• to reiterate our main point, the public good that is knowledge shows the need for national strategies.

These observations underline the importance of domestic or national factors in benefiting globalization. Empirical evidences show that, although income and the standard of living have increased in the last couple of decades, the benefits of globalization have not been uniform across the countries. Among the beneficiaries of global convergence, East Asia has been the leader as they have enjoyed the highest growth, whereas income growth has stagnated in many Latin American and African countries. Moreover, despite this relative convergence, absolute convergence in less developed countries has not seen in particularly as they have failed to close the income gap.

As a matter of fact, if Turkey's experience in globalization since the early 1980s is examined within the context of the so-called convergence/conditional convergence paradigm, it could provide important insights some of which might be used as applicable policy lessons in other transition as well as other emerging market economies is term of maximizing opportunities and minimizing possible threats of global integration.

Turkey's initial experience of opening up started after 1980s with some measures of trade liberalization and entered a new phase by the end of the decade with the liberalization of capital movements. Throughout 1990s, Turkey failed in her first serious test of major neoclassical theoretical arguments in favor of liberalization, openness and global integration. The negative experience of Turkey in this phase of global integration shows the following characteristics:

1. By the beginning of the 1990s when Turkey's opening process accelerated and deepened in trade and finance, we observed increasing deterioration in the domestic balances. In that regard, the rise in saving-investment gap was mainly due to public sector budget deficits, a process which resulted in an unsustainable public sector debt spiral. This process was also motivated by the availability of easy short term but quite expensive financing channels.

2. This method of financing through short-term and volatile capital inflows destabilized the resulted in two major financial crises in 1994 and


3. Financial liberalization was presumed to have an encouraging effect on national savings, yet this has not been observed; in contrast, external resources have started to substitute domestic savings.

4. Proponents of globalization argue that not only loanable funds are abundant abroad compared to DCs where financial markets are small and underdeveloped, but also cost of financing is comparably lower due to interest rate differentials. It is also expected under these conditions that in addition to the lower financing cost of growth, the maturity will also be longer. Experiences on Turkey during this phase of openness do not confirm these expectations. Despite external financial conditions being positive in general, the opening of the economy did not allow the cost of the debts to decrease and the term of the maturity of public debts to extend beyond certain limits. In fact, due to accumulated economic and systemic risks, the opposite developments have been observed.

Moreover, the convenience of external finance gave a chance to the ruling authorities (unstable coalition governments were in power throughout the 1990s) to postpone the reforms and, therefore, avoid real challenges, a process resulted in excessive short sightedness and bad governance. As a result, not only did foreign debts rise substantially, but, in addition, more compensation spending has been made available by the public sector in order to overcome domestic social problems due to this opening.

The most important expectation from the opening was the export of company bonds to create reliable and sound external source of finance. These, however, did not occur with much regularity; instead, we have seen increasing public debts and treasury guaranteed debts.

5. Operating dynamics have ruined the distribution of income in the country throughout the 1990s.

6. As the channels of fair competition were not fully permitted, this opening was further unable to increase productive as well as "allocative efficiency" throughout the economy. Therefore, the overall level of total factor productivity neither rose nor did the quality of goods improve significantly. Instead, profit margins at most of the sectors that are not exposed to global competition did not decrease and, as a result, the consumer was at an increasing disadvantage in this imperfectly competitive environment.

7. Finally, it was also expected that opening of the country would bring stability to the country. On the contrary, after Turkey's opening, periodic fluctuations in the economy have increased and deepened. All these observations underline once again that benefiting from opening and globalization have several conditions to be fulfilled.

As most of these conditions were not satisfied during the "lost decade" of Turkey, the process of opening full of contradictions and inconsistencies resulted in a dramatic collapse in 2001. The collapse of financial stability at public as well as banking sectors, the loss of price stability, the unmanageable debt burden, the widespread inefficiencies in the entire economy, an uncompetitive economic environment, an economy that does not create employment and the exorbitant deterioration of income distribution comprised the main problems. (Oni?, Z. and Rubin, B., 2003).

3.2.2. From Crisis to Rising Opportunities : Recurrent crisis in Turkey throughout the 1990s that resulted in the most devastating one in 2001 was turned into an opportunity in Turkey as it motivated citizens to destroy the established "crony capitalism" among the members of statuesque. In fact, in the post-crisis era, Turkey succeeded to drive major lessons from her recent history of unsustainable global opening and bad governance.

These lessons can be summarized under three major heading. In addition to market conforming reform measures in trade and finance that have been carried out in a rather partial and contradictory manned since the early 1980s, Turkey also stated substituting market conforming institutions that were fully ignored. Finally, a real market culture that was not allowed to grow in an isolated country where state monopolies and protection dominated for many decades was started to be cultivated via trial and error methods and/or learning by doing activities in a environment under global competition.

To sum up, (i) major fundamental reforms in almost every sectors of the state system, (ii) political stability that came with a dedicated single party administration and a strong leadership quality, (iii) a fostering global surrounding such as abundant funds and expanding markets, (iv) Turkey's close affinity with global institutions such as IMF and World Bank, European Union's anchor in the process of negotiation for full membership, all have been quite decisive in creating a credible environment in the way of alleviating backward expectations with more positive sentiments over time.

Based upon this positive surrounding, significant steps were taken towards achieving macroeconomic stability; Turkey achieved high and uninterrupted growth since 2002 until the end of 2008, when global crisis erupted. The average annual real growth rate which was 3.23 percent in 1991-2000 climbed up to the 6.8 percent range in 2002-2007. This enabled Turkey to achieve a real convergence towards the EU, for the first time in its recent history. In addition to high growth, Turkey also achieved a robust fiscal stability in financial and public sectors. Finally, Turkey's achieved historical success towards achieving price stability for the fits time in the last 30 years or more. The rate of consumer price inflation declined from an average of 70 percent between 1990-2001 to single digit since 2004.

Figure.1 Big Picture: High Growth, Fiscal Discipline, and Price Stability

Source: Compiled and organized by the author from Central Bank, ministry of Finance, Treasury.

3.2.3. Side Effects: However, this process also has not continued without any risks and side effects. The repercussions of the global imbalances as well as Turkey's own domestic structural bottlenecks resulted in many problems that increased Turkey's overall risks. What should be noted is that as compared to the rest of the global economy, particularly small and medium size DCs are insignificant so that even if they try their best, it is unlikely to keep their balances in correct equilibrium unless external factors are not supportive enough. Therefore, well-prepared domestic or national economic environment at time of opening is quite strategic for benefiting from globalizations is required on the one hand; the sine qua non condition of managing the globalization process is support of external conditions, on the other. Unless both facets overlap, it is unlikely that DCs can manage the entire process by their own efforts.

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UrrempkryrrKnt rate [%)

Figure.2 Side Effects of Globalization: High Growth, High Unemployment, Unsustainable External Deficit

Source: Compiled and organized by the author from Central Bank, ministry of Finance, Treasury.

While Turkey achieved mentioned priorities with a considerable improvement in macroeconomic stability and an attractive investment environment, some serious side effects (Figure.2) such as external deficit have continuously deepened, while some others such as unemployment problem persisted. In other words, an economy model emerged which achieved significant growth but failed to create satisfactory employment and also domestic deficits of public sector in the past were replaced by the external deficit of the private sector now. Major reasons behind these side effects can be enlisted as follows:

First, high level of unemployment has been the result of the nature and priorities of the model. In this model, a heavy and radical structural transformation was targeted. In terms of unemployment, rapid transformation of agricultural sector has been the major cause. Moreover, unlike the "good old days" in 1990s, when Turkey achieved "more employment with less investment" at the expense of widespread and unsustainable inefficiencies in the public sector, in the post- 2001 crisis era, however, less employment has been created with more investment not only in Turkey but also in the world, due to overemphasis on productivity under the pressures of global competition. As a matter of fact, productivity, for the first time in Turkey, was given priority particularly because of foreign domination in the industrial sector. In Turkey's rising import dependency, particularly in terms of intermediate inputs, multinational companies have been at the center as they outsourced production process to their chain of subcontractors scattered several places on the globe (Figure.3).

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