Key words: Turkey, Islamic economy, AKP, social protection of the population

N. Y. ULCHENKO

Candidate of Economic Sciences

On September 12, 2010, a referendum was held in Turkey to amend the current constitution. The amendments addressed issues of the political structure of the Republic of Turkey and the rights of citizens. The first group of them provided for weakening the control of the judiciary and the army over the government as such, and at the time of the referendum - over the current government of the pro-Islamic Justice and Development Party (AKP). Therefore, the favorable results of the referendum for the AKP (more than half of the participants supported the changes to the Basic Law) can be regarded as another vote of confidence in the ruling party from a significant part of Turkish society.

The government's support in matters of political organization would not have been possible without the approval of the mass electorate of the socio-economic policy being implemented. What are its features, and how much are they predetermined by the AKP's identification as a pro-Islamic party? Finally, can we say that the AKP's successful economic activity, in the opinion of a significant part of the electorate, is ensured by the use to some extent of the principles of the Islamic economy in today's Turkey?

IS AN ISLAMIC ECONOMY POSSIBLE IN MODERN TURKEY?

Before looking for answers to these questions, a few preliminary considerations should be taken into account.

First, it is necessary to clarify the content of the term "Islamic economy". Economists from Muslim countries, who are the authors of the concept and developers of the theoretical foundations of the Islamic economy, often define it as a market economy, but guided by Islamic values, such as cooperation, responsibility, and justice. According to them, the Islamic economy is nothing more than an attempt to ensure a balance between the market, the family, society and the state, so the "Islamization" of the economy primarily affects the distribution of income and the fight against poverty, that is, problems that capitalism failed to solve.¹

The principle of social justice is considered as the most essential attribute of the Islamic economy. The interpretation of this principle is based on two provisions. The first provision provides for mutual responsibility, the second-compliance with the social balance. This means that Islam allows for property inequality, but within reasonable limits. It does not approve of a social structure in which a minority lives in luxury, while the majority of the population drags out a starving, impoverished existence.

Secondly, the Islamic economy is often associated with the activities of Islamic financial institutions operating on an interest-free basis. In modern Turkey, there are and, apparently, quite actively develop banking institutions of the Islamic type. They are known as "special financial institutions". In recent years, information on the activities of special financial institutions as a separate part of the national banking system has not been published. All that can be said is that, as of the end of the 1990s, they accounted for just over ²% of the total assets of national banks2. Nevertheless, banking institutions operating on an interest-free basis would probably be more correctly considered as one of the forms of compliance with the general principle of the Islamic economy - the principle of social justice.

The emphasis on general principles, rather than on specific forms of their implementation, is not only due to the desire to avoid a narrow approach, in which the Islamic economic model is sometimes reduced only to the presence of specific financial institutions. It is important to take into account that the secular nature of the Republic of Turkey and the rather long period of strict state restrictions on the influence of Islam on social development significantly weakened both the legal and historical prerequisites for a full-scale revival of the Islamic economic tradition. Famous Turkish researcher Z. Onish writes: "There is no doubt that the much more modest course pursued by Islamists in Turkey in recent years reflects, among other things, the influence of the Kemalist modernization project with its strong emphasis on the principle of secularization."³

As the third most important preliminary premise of the analysis, we should accept the following:-

However, if the principles of Islamic economics are applied to the current economic development of Turkey, the question can only be raised about the likely modification of the general model, some changes in priorities, but not about the full-scale implementation of the economic and legal provisions of Sharia, the official use of the tax system prescribed by it, and so on.

The development of the concept of Islamic economics is still far from being completed, which makes it possible to supplement its more or less officially recognized postulates with logically derived provisions, which are confirmed by the theses of individual theorists or, more importantly, by the economic practice of Islamic (pro-Islamic) governments in national Muslim states. So, for example, the importance of observing the principle of social justice logically implies recognition of the rather significant role of the state as an economic and social regulator in the system of the Islamic economy.

Since the very idea of an Islamic economy is inspired by the desire to create an economic model alternative to the liberal Western economy, it is quite logical that this model cannot or at least should not be implemented with the money of the West, for which, in turn, the feasibility of financing an Islamic economic experiment is not obvious. Therefore, the idea of restructuring the economy in an Islamic way is characterized by a negative attitude towards the use of external sources of financing, primarily funds from Western countries, which are the largest creditors in the global financial market.

This thesis in this article is the fourth premise of further analysis.

For example, the Iranian leadership has been extremely cautious about external sources of financing throughout the entire period of development since the 1979 Islamic Revolution. But the financing of the Iranian economy is supported by oil revenues, especially in years of favorable price conditions.

As for the Turkish economy, which has been firmly tied to external financing since the Ottoman debt problem, the proclamation of such slogans should be considered either as a manifestation of economic adventurism, or, at best, a conscious willingness to slow down economic growth, unless, of course, there is a more acceptable source of financial support abroad, best of all, having a Muslim background.

Thus, in 1995, the most important component of the election campaign of N. Erbakan, the leader of the pro - Islamic Welfare Party (PB), the AKP's predecessor, was the idea of opposing the West and the European Union. BOP leaders opposed the current model with the idea of self-reliance. State Minister* of the coalition government A. Gul (from the Welfare Party), responding to a question from the Turkish magazine "Ekonomist" about changes in economic policy planned by his government, said:: "Every country resorts to using external sources, to borrowing, but we believe that the main principle that will break the vicious circle is that countries like Turkey are able to maintain dynamism within the national economy."⁴. Hence, the main principle of Islamists in relations with the IMF is " yes "to cooperation on the development of macroeconomic policies," no "to long-term credit cooperation under the "stand by" scheme.

First of all, the social policy features of the current Government of the Justice and Development Party will be discussed below. Secondly, its attitude to the use of external sources of financing. It is also important to find out whether there have been any changes in the nature of relations between Turkey and the Fund during the years of his administration.

SOCIAL POLICY OF THE AKP

At the first stages of the new government's economic policy, there was an attempt to resist the IMF's demands for strict fiscal policy, which was already outlined during the pre-election campaign, which inevitably implied limiting social spending. On April 5, 2003, the Turkish authorized persons signed another "Letter of Intent"**, prepared in connection with the beginning of the work of the Fund's specialists on the next report on the loan agreement with Turkey. The letter stressed: "While remaining committed to the policy of disinflation and stabilization, the Government recognizes that social protection of the most vulnerable segments of the population is vital for the successful continuation of reforms." The AKP, as the party in power, has made no secret of its intention, while remaining within the budget, to increase the role of social spending through more selective targeting of social programs and the use of the bulk of available resources to support the most needy groups of the population (emphasis added).⁵. At the same time, the activity of social policy in reality did not always allow it to remain within the budget.

In the future, cooperation with the IMF became more coordinated. Nevertheless, the Turkish elite did not refuse to continue and even introduce additional social programs, however, quite limited, but invariably compensated for new expenses by increasing taxes and fees. At the same time, the AKP government's approaches to financing social policy fully corresponded to the principles of targeted selectivity and support for the most needy groups announced at the beginning of its rule, which did not lose their relevance in the future.-

* The post of State Minister in the Government of Turkey corresponds to the post of Deputy Prime Minister in the Government of the Russian Federation.

** The letter is an analysis of the state of the country's economy and a statement of the macroeconomic program for the next period.

Table

Amount of payments made by social support institutions in Turkey (% of GDP)

* Expenses under the item "Expenses for providing hot meals and providing everyday food", which is the largest in the structure of expenses of the General Directorate of Waqfs.

** Data on scholarship expenses.

Compiled and calculated by: Hacimahmutoglu H. Turkiyedeki Sosyal Yardim Sisteminin Degerlendirilmesi. DPT-Uzmanlik Tezleri. Ankara, 2009, s. 103.

given with the most important electoral groups), including due to the growth of the tax burden that fell on the shoulders of other social strata.

A certain ambivalence of social policy as an inevitable consequence of its "selectivity" became one of its most important features during the reign of the Justice and Development Party. On the one hand, an important step in the field of social policy was the final approval of the reform of the social insurance system prepared within the framework of agreements with the IMF. Its main directions are as follows: gradually raising the retirement age to 65 years by 2060-2070, ⁶ limiting the level of pension indexation to the level of price increases, and reducing the level of pensions relative to wages to international standards (as of 2007, Turkey had one of the highest relative pension levels among OECD countries). In April 2008, the reform was approved by the Parliament.

On the other hand, pension provision is far from the only and, from the point of view of the AKP government, obviously not the most important link in the social support system. Indeed, in addition to labor pensions, various social payments are made in Turkey. The Ministry of Health, in particular, covers the costs of treatment of citizens who are not included in the category of "paid labor" (through the system of so-called "green cards"). The Social Protection Society pays monthly allowances to citizens over the age of 65, along with regular labor pensions. The General Administration of Waqfs⁷ is authorized to support such projects as the opening of student dormitories, educational institutions, and the payment of monthly allowances to disabled people in need. The Society for Social Protection of Children provides material and monetary support to children from families in need who are unable to meet the basic needs of the child at least at the minimum level for the appropriate age. The Ministry of Education provides some categories of students with free accommodation and scholarships. The Social Assistance and Solidarity Support Fund (SPF), through its extensive system of local social assistance and solidarity branches, provides a wide variety of types of support to those in need, etc.

The analysis of statistical data shows a steady increase in the absolute amount of aid provided through the system of state social support organizations in 2002-2007: the average annual growth rate of payments through these organizations ranged from 30 to 80%, which was many times higher than the annual inflation rate. Even more convincing is the increase in social support spending relative to GDP - from 2 to 10 times (see Table).

Turkish author D. Yildirim notes that while in 2002 the share of material aid in the total volume of budget transfers was 2.64%, in 2005 it was 19.29% ^.8

In December 2004, Law No. 5,263 came into force, which was intended to strengthen the organizational structure of the Social Assistance and Solidarity Support Fund. To manage the Fund, a directorate was created under the office of the Prime Minister. This measure was dictated by the desire to further expand the role and influence of FP in the social support system of the population.

The special attitude of the Government to the Fund is related to the goals and features of its functioning, which are exclusively related to the following:

they are close to the Islamic rhetoric of mutual assistance and mutual responsibility of members of the Ummah. The basic target setting is reflected in Article 1 of the law on the establishment of the FP: "To provide assistance to people who find themselves in a difficult situation or in need of assistance, taking measures to strengthen social justice, to ensure a fair distribution of income, to promote social assistance and solidarity" ⁹.

There are 973 branches of the Fund in the country, located not only in each il, but also in each ilche (i.e., in each territorial division of an administrative district). Flexibility is achieved through the variety of forms of assistance provided by the Fund. So, only its main varieties are five: periodic assistance, assistance for medical needs (for treatment), allocation of funds for special needs (financing of free public canteens, support in emergency situations, maintenance of shelters), assistance in obtaining education (support for students, etc.), food assistance (provided on the eve of religious holidays). Eid al-Adha and Ramadan al-Adha, organization of charity dinners, systematic assistance with food and clothing).

The Fund's large-scale activity is obviously largely ensured by its status as one of the three remaining extra-budgetary funds in Turkey today. This means that the FP's expenditures are not controlled by the Parliament, but only require the approval of the Fund's Board and the Prime Minister. This status of the Fund obviously allows it to be attributed to informal channels of providing assistance, the role of which, according to Z. They are particularly important in the context of budgetary constraints, i.e. restrictions on the use of formal channels of redistribution imposed by the IMF's fiscal requirements.¹⁰

The appeal of the Social Assistance and Solidarity Support Fund for the ruling party lies in the fact that through the Fund it is possible to provide assistance to a specific voter with their specific needs, using an individual approach and thereby establishing effective contact between the needy electorate and the authorities, usually with a positive outcome for the former, and in the longer term-for. The amount of social expenditures under this Fund is very significant and is second only to social payments made to finance the green card system and support senior citizens who do not have the right to an official pension.

Turkish researcher D. Yildirim also notes the extremely important role that the AKP assigns to the Fund and its numerous waqfs in ensuring the growth of social assistance and transfers. According to his estimates, when the AKP came to power in 2002, the number of families receiving, for example, heating subsidies was less than 1 million, in 2007 - already 1.9 million, and in 2008 - more than 2 million. In total, 42.7 million people, or almost half of the country's population, received some form of social support from the AKP from 2003 to 200811.

The goal of the growing flow of social benefits is not limited to the implementation of Islamic principles in the framework of the ruling party's economic policy. According to D. Iyldirim, the growth of social payments, which is characteristic of the neoliberal approach in general, is successfully intertwined with the "Islamization project" in this case, because social assistance, being a kind of message in the spirit of Islam, simultaneously allows the party to fill in the remaining voids (in the electoral space - N. U.). "Understanding the origins of this essential factor in the development of the state of The increase in monetary and material aid coming from the state is due to the realization that the expansion of support for the AKP to related social groups (italics - N.Y.) is based on aspiration. .. to establish a link between populist messages and political plans, " D. Yildirim summarizes ¹².

Similar positions in the assessment of the social policy of the AKP are held by Z. Onish. He sees it as a result of the interweaving of two factors - ideological and pragmatic. The ideological one is based on the concepts of justice and equality, which emphasize the party's connection with the Islamic heritage, while the pragmatic one is related to the need to gain popularity and support.¹³

At the same time, the AKP is not the first political force to use social assistance for political purposes. But the ruling party's innovation is to transform social support from a "tool for reducing the influence of the poor" to a tool for expanding their support, amid a noticeable increase in aid volumes and an increase in coverage. The parallel course of the processes of strengthening (or at least maintaining a high level) support for the AKP from election to election and the growth in the number of recipients of social assistance is quite obvious. Z. Onish directly writes that "the party (AKP. - N. U.) managed to capitalize on systematic efforts to help the poor. .. through various formal and informal channels " ¹⁴.

A very significant circumstance related to the social policy of the AKP government is the following: the growth of absolute and relative aid provided through the above-mentioned social support channels occurs against the background of almost unchanged relative amounts of spending on social services: the share of the item "Health and social services" in the structure of GDP, calculated in 1998 prices, In 2002, it was 1.3%, in 2003 - 1.1%, and in all subsequent years, including 2008, -1.2%. The situation is similar with the amount of spending on educational services: in 2002 - 2.2%, and in subsequent years even decreased to 2%¹⁵. This circumstance makes us once again draw attention to the fact that the strengthening of the social policy of the AKP obviously goes hand in hand with the strengthening of differentiation in the social sphere.

the process of redistribution of GDP. In other words, the principle of selectivity, support for social groups associated with the party (italics - N. U.) with a constant share of spending on social services means ousting "unrelated groups" from the social support system or, more simply, increasing the cost of services for them, the prices of which are subsidized for the "elected" AKP.

D. Yildirim's remark, which, in our opinion, is fair, draws attention to itself: "On the one hand, the transformation of public education into a market commodity, on the other-the implementation of policies in favor of social groups associated (with the AKP) (italics - N. U.)" ¹⁶.

AKP GOVERNMENT AND THE IMF

Since the AKP Government came to power at the end of 2002, i.e. during the implementation of the next stabilization loan agreement with the IMF, its policy towards using external sources of financing has been more consistent than innovative.

The issue became more acute in the summer and autumn of 2004, when it was necessary to decide whether to enter into a new loan agreement with the IMF. This time, a positive decision was made. The country's leadership briefly explained this by the demands of ^the market17. The reticence of officials ' comments was probably due to the fact that once again the government had to make a choice not in favor of its own economic preferences, but in favor of predestination dictated by economic realities.

The agreement with the IMF expired in May 2008. A repeated decision to maintain the previous format of relations with the IMF, on the one hand, could lead to a serious discredit of the AKP's economic principles, on the other - in favor of the possibility of pursuing a more independent economic policy and achieving Turkey's economic stabilization and growth. Already in the final "Letter of Intent" prepared by the Turkish side at the end of April 2008, it was noted that Turkey's public finances have significantly strengthened due to maintaining a high level of primary budget surplus* over the past few years: public debt has decreased to 30% of GDP (by the end of 2002, i.e. at the time of the government's arrival AKP to power, it was 80%) ¹⁸. "This allows us to abandon the goal of maintaining a surplus of 6.5% of GDP, which was considered key in fiscal policy, and replace it with a clear medium-term target." ¹⁹ Thus, it was a question of Turkey's desire to move to a more lenient fiscal policy, which would allow for short-term violations of budget discipline, provided that they are compensated by the results of the medium-term period.

As a result, Prime Minister Recep Tayyip Erdogan allowed himself to declare in several public speeches in 2008 that he was not interested in further cooperation with the IMF, which forces the government to pursue a strict fiscal policy. But the government's resolve was shaken by the global financial crisis.

By December 2008, Ankara had nevertheless announced its decision to enter into an agreement with the IMF "in order to increase investor confidence and meet its external financing needs." ²⁰ However, the Turkish side began to raise the issue of using the Fund's funds not for financial stabilization purposes, but to cover the government's increased capacity to deal with the crisis budget deficit.

On September 16, 2009, Turkey's Medium - term Development Program for 2010-2012 was announced. Based on the results of the crisis year 2009 Not only did Turkey not plan to achieve any level of primary budget surplus, but, on the contrary, the size of the deficit even before taking into account interest payments on public debt was supposed to be 2.1% of GDP. In 2010, the primary budget was again planned to be reduced to a deficit. Turkey planned to return to the primary budget surplus only in 2011, which resulted in a surplus of 0.4% and 1% of GDP in 201221. The Turkish press assessed the program's macroeconomic indicators as "far from the IMF's expectations" ²².

However, in a statement following the release of the program, Rachelle Van Elkan, head of the IMF mission in Turkey, noted:: "We are encouraged by the medium-term program, which aims to gradually correct the deteriorating state of the country's public finances... The program, based on the serious impact of the global crisis on the Turkish economy, sets real macroeconomic goals and includes the important task of stabilizing the ratio of public debt to GDP by 2011 and further reducing it in the future. " ²³ But, apparently, according to the Turkish government, the program was still intended to be a kind of challenge to financial parameters, "imposed" by the IMF.

In response to this challenge, Strauss-Kahn, the Managing Director of the International Monetary Fund, said at a press conference on October 2, 2009, that the IMF is a bailout institution and does not deal with countries that do not want it.: "If they don't feel the need for help, it's good for us. The IMF is not a bank and does not seek clients. " ²⁴

For some time, the parties ' relations remained uncertain. Turkish economist O. Ulagay explained the protracted nature of the negotiations as follows: "Erdogan continues to play this game, as it is very suitable for Turkey in its current situation. First, his willingness to put relations with the IMF on the line is paying good political dividends. Secondly, the fact that the agreement with the IMF remains unsigned allows the authorities to increase government spending irresponsibly. Third, what is the relationship with

* We are talking about summing up the budget balance, which does not include expenses on interest payments related to servicing the national debt in the expenditure structure.

The IMF does, however, allow it to flirt with the market, which attaches great importance to the agreement with the Fund. For all these reasons, Turkey, if it does not face new economic shocks, may wish to continue this game. " ²⁵

The "game" was stopped at the initiative of the IMF. On March 11, 2010, it finally became known that due to the inability to reach an agreement on certain points, the parties refused to sign a new agreement on the stabilization loan. In an effort to calm public opinion, Turkish State Minister A. Babacan noted that Turkey has been moving without the IMF program for two years and is quite capable of continuing to move in the same way. "The stabilization loan agreement with the IMF," he said, "is a door that you cannot close to the 192 member countries for a long time." ²⁶ Babacan stressed that from now on, economic policy will be determined by Turkey's medium-term Development Program.

What are the possible economic consequences of the government's decision? During the crisis, Turkey obviously failed to carry out a structural adjustment of the economy aimed at increasing its competitiveness, the need for which has been discussed in the country for quite some time. But then the resumption of economic growth will automatically mean an increase in the current account deficit. By the end of 2009, the deficit was $13.8 billion ²⁷, by the end of 2010 - $25 billion ²⁸. Thus, we are talking about a return to the pre-crisis development scenario, when economic growth was largely based on external sources.

Representatives of big business in Turkey noted that the country's leadership has serious work to do to eliminate the shortage of external sources of financing. F. Gill, a Turkey analyst at Standard & Poors investment agency, said the reasons why the government agreed to take on the risks associated with the aggravation of this problem: "2010 is taking place in a pre-election atmosphere. The government wanted to free itself from the IMF's tight financial constraints. " ²⁹ And since some experts predict that social problems will worsen as a result of the global crisis in a number of rapidly developing industrial countries, ³⁰ such preventive measures may probably be useful for strengthening such an important area of the AKP's economic policy as social protection of the population.

* * *

So, the social and economic policy of the Justice and Development Party largely corresponds to the general slogans and attitudes of the Islamic economy, which ensures the formation of a positive image of the party among a significant but mostly marginal electorate. But in the long term, the effectiveness of its main areas raises, in our opinion, great doubts and even certain concerns related either to the possibility itself or to the ways to maintain a stable economic situation in Turkey.

^{Iqbal A.} 1 Islamic economy remains undefined: US report -www.dawn.com

² Calculated from: Banks in Turkey 1998. Istanbul, 1999, p. 11-28.

^{Onis Z.} 3 The Political Economy of Islam and Democracy in Turkey: From the Welfare Party to the AKP. Revised Draft-May 2005. Istanbul, 2005, p. 1 - http://home.ku.edu.tr/-zonis/ONIS_WelfarePartvtotheAKP.pdf

⁴ Ibidem.

⁵ См.: Gozden Gecirmeye Eliskin Niyet Mektubu - www.hazine.gov.tr

⁶ Until recently, there was no concept of retirement age in Turkey. The basis for receiving a pension was the number of years of work experience, which allowed people to receive a pension who had barely passed their 40th birthday.

⁷ The General Directorate of Waqfs was established in 1924 on the basis of the Ottoman Ministry of Waqf Affairs. Performs state control over the activities of waqfs (charitable foundations). Waqfs transfer 5% of net profit to the Main Department as a fee for audit and inspection, which is used to invest in various commercial projects. The profit received from them, in turn, is used for the needs of waqfs (for example, for the maintenance of real estate objects belonging to them), as well as for various social programs and projects.

^{Yildirim D.} 8 AKP ve Neoliberal Populizm // AKP Kitabi. Bir Donusumun Bilancosu. Ankara, 2009, s. 97.

^{Hacimahmutoglu H.} 9 Turkiyedeki Sosyal Yardim Sisteminin Degerlendirilmesi. DPT-Uzmanlik Tezleri. Ankara, 2009, s. 142.

^{Onis Z.} 10 Conservative Globalism at the Crossroads: The Justice and Development Party and the Thorny Path to Democratic Consolidation in Turkey. Revised Draft - December 2008. Istanbul, 2008, s. 23 - http://home.ku.edu.tr/~zonis/m_politics.pdf

^{Yildirim D.} 11 AKP ve Neoliberal Populizm.., s. 97 - 99.

¹² Ibid., s. 99 - 100.

^{Onis Z.} 13 Conservative Globalism.., s. 23.

¹⁴ Ibid., s. 4.

¹⁵ See the website of the Turkish Statistical Society: www.tuik.gov.tr/PreIstatistikTablo.do?istab_id-993

^{Yildirim D.} 16 AKP ve Neoliberal Populizm.., s. 92 - 93.

¹⁷ Milliyet, 30.07.2004.

¹⁸ TOBB. Ekonomik Rapor 2007. Ankara, 2008, s. 143.

¹⁹ See the website of the Treasury of the Republic of Turkey: www.hazine.gov.tr

²⁰ Turkey once again seeks help from the IMF / Back to the fund // The Economist, 12.12.2008 - http://www.economist.com/agenda/displaystory.cmf&story_id=12711068

²¹ Orta Vadeli Program (2010 - 2012). 16 Eylul 2009, Ankara, s. 22, 27, 28 - www.hazine.gov.tr

²² Milliyet, 23.09.2009.

²³ Statement by the IMF on Turkey. Press Release N09/307, September 16, 2009 - www.imf.org/external/np/sec/pr/2009/pr09307.htm

²⁴ Transcript of a Press Conference by International Monetary Fund Managing Director John Lipsky and External Relations Director Caroline Atkinson. Istanbul, October 2, 2009 - www.imf.org/external/np/tr100209.htm

^{Ulagay Osman.} 25 IMF ve AB 'capa' oyunu // Milliyet, 02.06.2009.

²⁶ Ibidem.

²⁷ TOBB. 2009 Ekonomik Rapor. Ankara, 2010, s. 136.

²⁸ Hursit Gunes. IMF neve yarayacak? // Milliyet, 09.02.2010 // www.milliyet.com.tr.

^{Yakin Secin.} 29 IMF uzak // Milliyet, 11.03.2010.

³⁰ See, for example: Rapoport G., Hertz A. Global economic crisis 2008-2009: sources and reasons / / Voprosy ekonomiki, 2009, N 11.

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