Neoliberal promises that private ownership can resolve all developmental problems have proven not only economically hollow, but physically dangerous. Consequently, the latest mine disaster in Soma brought back in the debate of nationalisation in Turkey.[1] Liberals were quick to declare the disaster a result of careless ways of making business and as a failure to imitate working conditions in the West. The workers who had to work in the mines (since they had no other way to earn their living after they lost their lands), however, are insistent that there is something wrong with the private ownership of the mines. The District Governor of Soma even had to join the sit in protest of mine workers for the nationalisation of mines on May, 26. He was there to calm the workers and ensure that their protest was not directed at the government and official institutions. He had to then join the chorus of protestors after lengthy discussions: “I am in favour of nationalization”, he claimed and added, “if this is the best for you”.[2] Making mines the property and operational responsibility of the state is a big step, which will save many lives in the future. Yet nationalisation should certainly be only a starting point for a social struggle to end the debt peonage of workers and widespread rural transformation that leaves many farmers unemployed and indebted.

Indeed, it was only after the privatization of mines and the spread of subcontracting relations that the death toll at Turkish mines increased rapidly. State ownership, as the profit mandate was subordinated to the security of the working conditions, provided a cushion against the occurrence of many work crimes, but it was not enough. It never is…

We believe that unless the campaign for nationalization, or making the economy public, is complemented with an ownership and control scheme for alternative ways of doing public, making state enterprises in competition with other enterprises and functioning as a market actor will help little in consolidating public gains for the benefit of workers. We need radical and democratic forms of control over state-owned enterprises to reclaim public productive enterprises, services, and infrastructure and to make them truly in the public interest.

A striking example can be given by way of an analysis of Turkey’s state-owned banks (SOBs). Our study of SOBs in Turkey in 2013 illustrates this point clearly (the project report can be accessed via http://goo.gl/GOWpur).[3]

State-owned Banks: Progressive Roles and Limits

In Turkey state-owned banks have a long history. And, despite current efforts to privatize or restructure them, SOBs continue, nevertheless, to play an important social developmental role. Today three large state-owned commercial banks and three small state-owned development banks still exist.

In the face of financial crises, Turkey’s ruling political coalitions started in the mid 1990s to utilize the SOBs as a convenient financial cover to hide the mounting fiscal deficits of the government. By 1999, these deficits had swelled indeed to 13% of GNP. The exposure of these public deficits together with the ascendency of speculative private banking practices triggered a major financial crisis in Turkey in 2000-2001. In the process, the state-owned banks were blamed for a crisis for which they were not, in fact, solely responsible, and were thereby compelled to undergo further market-oriented restructuring. The DSP-MHP-ANAP coalition government’s Banking Sector Restructuring Program, initiated in 2001, immediately demanded the financial reorganization of the SOBs and sought thereafter to gear them to the imperatives of market efficiency and profitability. The ultimate neoliberal goal of this Program was to privatize the state-owned banks.

Despite such setbacks, as of late 2011, the three large commercial banks that remained primarily publicly owned still represented the second, sixth and seventh largest banks in the country. Their combined assets, which equalled about US$ 180.5 billion, still represented almost 30% of assets in the financial sector.

Despite criticism of Turkey’s SOBs and their subsequent restructuring, have they still provided a viable and valuable alternative to the private financing of development activities? Following is an assessment based on extensive research and interviews conducted in the country during 2013. The conclusion of this assessment is that SOBs have, in fact, played a progressive financial role in at least five different ways.

First, the SOBs have been invaluable vehicles through which direct government transfers have been able to finance the provision of low-interest credits to priority development activities, particularly in the agricultural, SME, municipal infrastructure, and energy fields.

Second, the SOBs have played a critical role during times of crisis and instability in Turkey by purposively expanding, in a counter-cyclical fashion, their loan portfolios. Such interventions have helped counteract the debilitating withdrawal of lending by private banks and have thus prevented larger recessions.

Third, one of the most important contributions of SOBs has been the provision of a nationwide financial network of nearly 3,000 branches. This service has been especially important in rural areas and small towns, where private profit-seeking banks have been reluctant to set up offices.

Fourth, the Turkish population generally regards the SOBs as a ‘safe haven’ for their savings deposits—partly, of course, because of implicit or explicit state guarantees. This view was evident, for example, during Turkey’s financial crisis in 2008-2009 when the public flooded the SOBs with their savings.

Lastly, the operations of the SOBs in Turkey have been just as efficient as private banks, if not more efficient at least in development terms. The SOB rate of return on assets (ROA) has been at least comparable to that of private banks, with the formers’ average ROA since 2001 having ranged between 1.5% and 2.5%. Moreover, unlike many private banks, SOBs have duly paid their taxes to the government. And they have recycled their profits back into public revenue. These practices have helped contribute to the reduction of the government’s debt in recent years.

Nationalization: Necessary but not Sufficient

The state-owned banks in Turkey continue to provide a viable and valuable alternative to the private financing of development initiatives—despite ongoing efforts to prepare the grounds for their eventual privatization. It is clear that SOBs need not rely on profit imperatives in order to sustainably provide a valued range of financial services.

However, unless current neoliberal AKP government plans are overturned and a more progressive vision of the social developmental role of the SOBs is clarified and then implemented, eventually they will end up effectively mimicking profit-maximizing private banks. Furthermore, the corruption practices characteristic of the private sector banking debacles may become more commonplace in the SOBs. And Turkey will end up paying a high price, not only in terms of the lost opportunities for development but also in terms of the heightened probabilities of financial speculation and instability and weakened public support for very viable banking alternatives.

Our case study on Turkey’s SOBs shows that there are benefits and challenges that need to be taken into consideration while defending state ownership. We see similar potential benefits and challenges in regards to calls for the nationalisation of mines – which is a necessary first step for avoiding work crimes and disasters, but it is not enough since state ownership is only the first step of making an institution public and social developmental. In other words, the state ownership of banks as well as mines needs to be defended; but, just as important, new progressive forms of more democratic ownership and control need to be instituted in order to maximize their potential and avoid capitalist profit imperatives regaining ground over time.

 

Thomas Marois, University of London, SOAS Development Studies

Ali Rıza Güngen, Ondokuz Mayıs University, Political Science

 

[1] The disaster took place in the mine run by Soma Kömür A.Ş. The company was using the mine reserved for itself by Türkiye Kömür işletmeleri. In legal terms, the royalty system does not mean privatisation as such, but the mine along with many others in the region is considered as privately owned, because of the privileges provided by the contract.

[2] “Soma işçileri taşerona ve sarı sendikaya başkaldırdı”, sendika.org, 26.5.2014, http://www.sendika.org/2014/05/somada-madenciler-disk-yetkilileriyle-birlikte-kaymakamlik-onunde-guncelleniyor/, (accessed on 26.5.2014).

[3] Thomas Marois and Ali Rıza Güngen, “Reclaiming Turkey’s state-owned banks”, Municipal Services Project Occasional Paper no 22, (December, 2013). See also Thomas Marois, “State-owned banks and development: Dispelling mainstream myths”, Municipal Services Project Occasional Paper no 21, (December, 2013)