As a new trading week begins, I would like to remind some friends, who have been making bold arguments about the USD/TRY, of some important points.
First of all, TRY gained in value only in certain occasions since the foundation of the Republic of Turkey, which were the period where Turkish politics were strong with stability, each and every citizen in Turkey was able to wrap their head around Turkey’s determination of becoming an EU member, a certain progress was attained in “soft power” elements including science, arts, sports etc., and of course where the World conjuncture was rather concurrently calm and stable.
This goes to show that a direct or indirect intervention by the CBRT or other authority is not enough to provide stability in exchange rates; because, in order for exchange rates, in other words, Turkish Lira can keep a stable trend; both political, social and economic environment must be calm and have a promising for the future simultaneously. That’s why we need to take another look at the difference between growth and development.
Growth is easy, because, using the resources properly in order to grow is only an option. Ensuring or not ensuring the efficient use of resources is not the top priority of a growth-thirsty government. In such case, growth can also be achieved at the risk of disrupting the macroeconomic parameters. Development, however, is a notion way too different than growth.
Development can only be achieved through the efficient and proper use of the resources. And knowing how to do that requires some specific talents and qualifications including level of education, technology, innovation and fields of activities that create high value-added. Development is not attained at the risk of anything and it is perhaps the most useful, yet low-cost progress where the society would pay the minimum price.
Political institutions, however, may not be as patient as they should to achieve development, because, the first rule of the development sets forth that the Government must provide strong infrastructure for the producers of goods and services while the private sector must focus on investing in education to create high value-added activities.
According to a number of politicians, the reason why citizens cannot appreciate the infrastructure investments including underground fibre optic cable installation, sewerage system construction, water and natural gas works, is because they mostly remain beneath the ground, not above the ground where they can be clearly seen by the citizens. That is why the politicians believe that showing off with mega construction projects would be a great help in influencing the voters’ political preferences.
The economic situation of countries where the politics are seen as the ultimate purpose, not as a mean to achieve progress, is usually no different than the way I have explained above. As you may remember from my last week’s report discussing the great similarities between the populism and the elitism, although making decisions on behalf of the whole society would not bring any growth-related problem, yet it would cause the whole country to fall behind the world in terms of development.
In this context, I must sadly admit that barren discussions involving exchange rates or interest rates are specific to Turkish people only. It looks like I will have to focus on these same issues again in tomorrow’s report.
