Basak Kus

The informal road to markets: Neoliberal reforms, private entrepreneurship and the informal economy in Turkey

Purpose - – The informal economy has expanded across developing countries during the last decades. Focussing on the Turkish case, the purpose of this paper is to examine the role of neoliberal reforms in this development. The author argues that neoliberal reforms produced a double-edged transformation in the regulatory environment of Turkey. On the one hand, the legal rules that constrain the operation of market forces decreased giving way to more entrepreneurial activity; while on the other hand, the states effectiveness in “policing” the market declined. As the regulatory barriers to private entrepreneurship decreased, the regulatory barriers to informality also decreased. Private sector growth and informalization emerged as the concomitant outcomes of neoliberal reforms. Design/methodology/approach - – This paper examines how the states changing regulatory relationship to the private sector under neoliberal reforms fostered informal economic activities through a close study of the Turkish case. Findings - – At the end of the 1980s, the Peruvian economist Hernando De Soto popularized the view that informalization resulted from government regulations imposing rigid constraints and costs on economic actors, and so would be restrained by decreasing or eliminating them. The economic developments of the past few decades challenge this view, however. The size of the informal economy has expanded in developing nations at a period when government regulations have been declining. How can we explain the increasing volume of informal economic activity in developing nations over the past few decades? And more, how can we explain that this has happened during a period when the private sector has grown, and regulatory rigidities have declined? This paper argues that the states changing regulatory relationship to the private sector under neoliberal reforms was an important factor in the expansion of informal economic activities. Originality/value - – The implications of neoliberal reforms for economic processes have been widely studied in the social scientific literature. Only a handful of studies have explored their implications for the informal economy, however. These studies singled out factors such as the decline in public employment, weakening of labor unions, or capitals enhanced ability to exploit labor in contributing to informalization of developing country economies in the neoliberal era. By discussing how the changing regulatory contours of the state-economy relationship played a role in the growth of informally operating private enterprises, this paper adds to the existing knowledge of this relationship.

Neoliberalism, Institutional Change and the Welfare State: The Case of Britain and France

Neoliberal turn in economic policy involved an attack on the welfare state in some countries but not in others. This article provides an institutionalist explanation of the causes of this variation through a comparative analysis of the transformation of British and French economic policy from the end of the Second World War through the end of the 1980s. The author shows that in both nations the transition to neoliberalism accompanied the economic crisis that took place in the 1970s. However, consistent with the differences in the way the two countries came to diagnose the nature of their respective crises; the policy manifestations of neoliberalism remained different in each. In Britain, where the crisis was diagnosed as one of Keynesianism, neoliberalism emerged as a radical antiKeynesian movement that sought to dismantle major Keynesian institutions and policies.In this context, the welfare state, a fundamental Keynesian institution, was identified as a part of the ‘problem,’ and became subject to the neoliberal ‘solution.’ On the other hand, in France, where the crisis was perceived to reside in the declining competitiveness of the dirigiste policies, the neoliberal reorganization of the economy focused on industrial policy. The welfare state was not associated with the problems of dirigisme, and remained largely resilient. Through this analysis, the author attempts to develop a general theory of the relationship between neoliberalism and national policies and provide insights into the process through which paradigmatic ideas such as neoliberalism translate into concrete policy preferences in different national contexts. Data for this study come from a combination of content analysis of major government documents concerning the economy and social policy, political party election manifestos, opinion papers, OECD statistics and secondary literature.

Credit, consumption, and debt: Comparative perspectives

In the context of the recent economic crisis, it became clear that social scientists did not pay sufficient attention to several very critical questions concerning modern market economies. These questions include the following: How do nations regulate their credit markets? Why did household indebtedness increase substantially, and why did it grow more in some nations than others? What are the implications of access to credit for lowerand middle-income households’ lifestyles? How do different nations handle overindebtedness? And finally, how exactly are the macro-level processes that underlie global debt economies linked to the experiences of actual individuals? Recently, a vibrant field of research has begun to emerge around these questions. The findings are transforming our established understandings of the political economy of advanced societies and opening new outlets for comparative research. Some key questions and issues, briefly outlined below, were discussed extensively over 2 days at the Dublin Workshops1 on Financialization, Consumption and Social Welfare Politics in the May of 2012. Subsequent to that conference, we attempted to develop a special issue of International Journal of Comparative Sociology (IJCS) from the articles presented there, with the participants invited to submit their articles for review to the journal. Two articles from this conference are included in the current issue of the IJCS as a special section (immediately following this introductory essay). This new field of scholarship on comparative credit, consumption, and debt is a variegated one, woven together by some common themes and animated by the big questions noted above. Several lines of inquiry need to be mentioned in this regard. First, there is the question of how credit markets operate. Nations maintain distinct approaches to regulating their credit markets. While some attempt to limit access to credit, others facilitate credit use. While some nations emphasize ‘consumer choice’ in credit market transactions, others emphasize ‘consumer protection.’ Some nations heavily rely on disclosure regulations, assuming that market actors will act rationally on the basis of the information they have. Other nations put restraints on the actual credit products that can be bought and sold on the market, not leaving it to market actors to determine the level of risk that can be assumed. Comparing the United Kingdom and France, Ramsay (2012) shows, for instance, that in the United Kingdom, maximizing access to 504280 COS54310.1177/0020715213504280International Journal of Comparative SociologyKus 2013

Consumption and redistributive politics: The effect of credit and China:

This article attempts to bring consumption into the study of redistributive politics. Analyzing data from 20 OECD countries over the period 1995–2007, I investigate whether factors that allowed lower and middle-income households to sustain their consumption had any impact on governments’ redistributive efforts. The article focuses on two factors in particular: access to credit and access to cheap imports (notably, imports from China). I argue that by enhancing consumption these mechanisms moderated the effects of income inequality and suppressed public discontent with increasing income inequality, thereby lessening the political urgency of redistribution.

Weak States, Unruly Capitalists, and the Rise of Étatism in Late Developers: The Case of Turkey

Understanding why some nations turned to étatism in the early stages of economy building remains central to political economy. A general consensus, although it comes in different versions, holds that étatism became the developmental policy in nations where indigenous entrepreneurial classes were weak and small. Traditional accounts of Turkish turn to étatism in the 1930s generally draw on this premise. This article challenges these perspectives that associate étatism with a strong state and a weak entrepreneurial class. I argue that the turn to étatism in Turkey did not simply result from the developmental shortcomings of the newly emerging private sector. The states own shortcomings at governing the newly emerging class of self-interest seeking entrepreneurs, and instituting order in the markets was a major factor.