Attending as a member of the LSE alumni, I found his thoughts extremely interesting. First, Professor Davies began his deliberations by talking about China, not the United States or a European country. Second, he put Turkey firmly into the picture.He likened the economic meltdown to a drama written by Shakespeare: most of his plays feature five acts and in the final part quite a lot of bloodshed usually occurs. From act number one (the sub-prime crisis) to acts number four and five (the collapse of Lehman Brothers and the ensuing survival of the fittest), we witnessed dramatic, or indeed tragic, events. The act we are in at the moment is the “pumping phase” during which governments try to rescue what is left on the financial battlefield by employing excessive monetary and fiscal stimulus.
Participants included Turkish alumni of the LSE as well as academics and students from Bahçeşehir University. So are there signs of a recovery, and if so can the recovery last?
According to Davies, the centers of economic activity are slowly but steadily moving east. He explained that countries which have a good trade record with China will feel the first signs of recovery faster than those countries that do not. In Latin America, only Brazil is an exception in so far as it is economically in a better position than most of its neighbors. Recent announcements in the US that the economy is on the up again are more of a technical nature.
Referring to his own country, the United Kingdom, he told the audience that the UK is probably the worst hit European country due to its immense financial sector. Comparing it with Spain, the EU country with one of the worst unemployment records he said that the UK is on the way to becoming a member of “Club Med” -- not an allusion to the famous hotel chain, but with regards to rising unemployment and decreasing economic output as is found in a number of Mediterranean countries. He mentioned that at present the UK has a 15 percent fiscal deficit related to its gross domestic product (GDP)!
Out of the various options for approaching 2010 and beyond, Professor Davies argued that a full recovery to the levels seen before the economic meltdown -- a V-shaped scenario, is not going to happen. His belief is that while the downward spiral will not continue, the best we can hope for is a sideways stabilization, accepting huge losses all over the world. Where does Turkey fit into this picture? Turkey is seen as a leading emerging economy, which is of course a compliment when said by an economist of this caliber. If what Professor Davies said is correct and centers of economic activity are gradually shifting eastwards? Turkey will be very well positioned to benefit from this development. This in turn should show Brussels and those skeptical about Turkey joining the EU that if Turkey continues on her path towards becoming an economic power and cleverly uses its location, then the EU would gain a lot from finally having Turkey as one of its core members.
In line with the LSE’s reputation as center of economic excellence, Professor Davies warned against too much government involvement in so far as stimulating the economy by monetary and fiscal incentives may be a short-sighted undertaking. I am wondering whether this implies accepting a laissez-faire type of market economy or perhaps a kind of “third way.” If consumers do not start spending more, who or what can then help us to overcome the crisis? The debate continues!
During the same event, Professor Şevket Pamuk spoke about the state of affairs with regards to the Chair of Contemporary Turkish Studies at the LSE’s European Institute which he currently holds. Courses on Turkey have been offered at the European Institute since its inception. There are 107 Turkish students, most studying for master’s degrees, enrolled at his institution. The chair aims to analyze Turkey from a social sciences perspective. As the LSE is not only a world leader in terms of research but is also very close to the business community, Professor Pamuk’s activities must be seen in a wider dimension. A Turkish-European network of economists is one of his many fascinating, current projects.
It is not every day that two speakers of world renown come to Turkey and agree first on the relevance of discussing roads towards economic recovery and second do so by putting Turkey firmly at the center of all these activities. I certainly learned a lot from Professors Davies and Pamuk.
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