Monday, 07 December 2009

Demographics Account for Turkey's Growing Clout

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By Rafis Abazov (vol. 2, no. 22 of the Turkey Analyst)

Recent Turkish foreign policy initiatives have asserted the country’s growing influence in its neighborhood.  One of the important, yet overlooked, factors that underpin Turkey’s growing clout in international affairs is the demographic dynamics. Today’s Turkey is a country of about 76 million people, up from 56.5 million in 1990, making it the second largest European NATO country after Germany. However, the recent report by the UNFPA estimates that by 2050 the population of Turkey will reach 100 million people, making it the largest country in Europe outside Russia. This change has important implications that will affect the new geopolitical and geo-economic balance in Europe. However, although demographics offer Turkey an advantage, it also calls for well-balanced economic policies.

BACKGROUND:  Nothing better illustrates the scale of the demographic changes in Turkey than the autobiographic essayIstanbul by Turkish Nobel Prize winner Orhan Pamuk. In his book, Pamuk laments the city of his childhood, just 30 or 40 years ago. In the 1970s, Istanbul was a relatively small and sleepy city of about 2.1 million people. Today, it is a bustling mega-polis of about 12 million and counting. One of the most popular descriptions of Istanbul among foreign journalists and writers is the image of an awakening giant in the eastern corner of the Mediterranean.

Turkey experienced an unprecedented demographic explosion during the twentieth century. The first official population census was conducted in 1927, four years after the country was established as a republic; it registered about 13.5 million people. Turkey’s population first doubled between 1927 and 1960, growing to about 27.7 million, and again between 1960 and 1989, up to roughly 56.5 million people. By 2009 the country had added another 18 million inhabitants. Not only is Turkey becoming the largest country in Europe after Russia, many of its cities have become larger than some states in Europe. For example, Ankara alone with its population of about 4.5 million is larger than most newly independent states of the former Yugoslavia. The population is the youngest in Europe, too, with almost 27.2 percent of the population – or about 18 million people – below the age of 14 in 2009.

However, the population growth has been quite uneven. Most of the families in large urban centers in Turkey, like Ankara, Istanbul and Izmir, have about 2-2.5 children, just above the reproductive rate. In sharp contrast, in the rural areas the families are much larger and it is not unusual to see five or six children marching with their parents to schools or bazaars in small towns and cities. The population growth in the rural areas creates a huge pressure on the labor market as a large cohort of young people of the Turkish baby-boomer generation – those born between 1980 and 1990 – are entering the job market right now. In turn, this creates huge pressures on the Turkish government which has to develop job-creating economic policies.

In fact, the Turkish government conducted quite painful structural adjustment reforms in the late 1980s and throughout the 1990s. Some missteps in policy implementation cost the Turkish economy dearly, causing high inflation and the near collapse of the Turkish currency. Yet, once reforms and changes were in place, the Turkish economy grew at the fastest pace in Europe between 2002 and 2007, with an average annual economic growth rate of about 5-6 percent. By 2008 the Turkish economy had become the 17th largest economy in the world (according to the 2008 World Bank estimate) ahead of Poland, Switzerland and Sweden, though behind Spain and the Netherlands. Therefore, taking into consideration the growing economic and demographic factors, it is not surprising to see the increasing role of Turkey not only in the region but also in the international arena.

IMPLICATIONS: In the past, development economists considered fast population growth to be a liability. During recent years, however, many economists have revised some of their assumptions and approaches and have begun claiming that a growing population and a younger workforce are indeed valuable assets for a country with sound and balanced economic policies. There seems to be four major advantages: First, the population growth is good for national economies as it leads to growth in consumption and drives many sectors of the national economy. In the post-industrial world, where service sectors and consumption turn into the most important driving forces of economic development, having more consumers is an obvious plus.
 
Second, the size of the consumer market often attracts foreign direct investments (FDIs), as it is among the decisive factors in calculating return on investment. In the case of Turkey both the population and incomes have been growing steadily for about two decades and once Turkey weathers the global financial crisis the growth is likely to continue.

Third, the growing size of the economy and its various sectors leads to the competitive advantage of economies of scale. Large economies are usually more flexible and able to produce more internationally competitive products simply because of the advantage of targeting both domestic and international markets. Fourth, Turkey with its young workforce has a better economic perspective against the background of the rapidly aging population in the European Union. The shift in demographics in Europe will probably lead to an important geo-economic change taking place. According to some economic predictions, there will be a significant decline in domestic consumption and in economic growth across the EU in the coming decades, making it necessary for the countries of the European Union to turn to the Turkish market for growth by outsourcing some of their industrial production, development of care industries and a number of other services.

CONCLUSIONS: Demographic indicators suggest that the population growth in Turkey is here to stay. However, this trend should be addressed very carefully with well-balanced economic policies. Every year during the next decade or two, about 2-3 million young people will need appropriate education and social services before entering the job market, in order to be competitive in the new economy. And then, there will need to be jobs for these people. Thus the most important economic issue that needs to be addressed by the Turkish government is to stimulate job creation through various policy measures and initiatives, especially by attracting FDIs, new technologies, and outsourced industrial production from Europe. It is especially important as the global financial and economic crisis has affected the country particularly negatively. According to the Turkish dailyHürriyet, recently the unemployment rate in the country reached a decade-high level exceeding 13.4 percent among the general population and a mind-blowing 23.5 percent among the youth. 

The Turkish government needs to develop business-friendly relations with its neighbors in order to stimulate its trade and to attract international investors willing to participate in the establishment of new enterprises, especially in export-oriented small and medium enterprises sector, which play a crucial role in job creation. And just as EU members in all probability will need access to the Turkish market in the near future for their economic growth and expansion, Turkey will need access to the EU market for exporting its own goods and services.

Rafis Abazov teaches at the Harriman Institute of the School of International and Public Affairs at Columbia University in New York. He is author of The Culture and Customs of Turkey (2009) and the Palgrave Concise Historical Atlas of Central Asia (2008). In 2009 he contributed to the UNDP and UNFEM reports on the impact of the global economic and financial crisis on migration in the CIS and Eastern Europe.

© Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center, 2009. This article may be reprinted provided that the following sentence be included: "This article was first published in the Turkey Analyst (www.turkeyanalyst.org), a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center".

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The Turkey Analyst is a publication of the Central Asia-Caucasus Institute & Silk Road Studies Joint Center, designed to bring authoritative analysis and news on the rapidly developing domestic and foreign policy issues in Turkey. It includes topical analysis, as well as a summary of the Turkish media debate.

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