Turkey Stumbles

After the First World War, which heralded the end of the already much-weakened Ottoman Empire, Turkey attempted modernization under Kemal Atatürk. While some limited successes were achieved, Turkey remained a very poor country. Turkey was widely seen as the sick man of Europe for a very long time, being its least developed country and showing little dynamism. Corruption and military coups were distinguishing features. But things started to improve as North Atlantic Treaty Organization (NATO) membership transformed Turkey into an important strategic partner of the West, from which it benefited in its dealings with institutions like the IMF and the World Bank. The IMF extended its first credit to Turkey in 1961, and seventeen others were to follow. The World Bank and the OECD were also actively involved, but results were generally modest. This began to change around 1980 when Turkey’s proactive Prime Minister, Turgut Özal, ushered in some important reforms. Still, the country’s economic structure remained weak and its macroeconomic policies tended to veer off track regularly. Moreover, political instability discouraged foreign investment. By the time the crisis in Mexico broke out, Turkey was in a vulnerable position.