Aid, privatization, and development: Turkey, 1979-1990

The research is an analytical study of the ideological, political, and socio-economic aspects of the privatization process in a rent-seeking setting, which explains the problems facing political leaders in developing countries in making the transition from a planned to a market economy. The dissertation defines the terms aid, development, and privatization in a contextual manner to illustrate the difference between the donors' perceptions of these terms and that of the recipients, which explains the problems occurring between them. These contextual definitions become effective throughout the study that seeks to emphasize some of the macro-economic and sociological concerns that determine decision-making during and after crisis. The research extends the rent-seeking theory as studied by Anne O. Krueger and later developed by other political economists to analyze the negative-sum results of rent-seeking on the privatization process. The crucial questions that are addressed in the research is: Does privatization eliminate or lessen rent-seeking? Are governments rent-seekers or are they growth-maximizers and through effective use of aid can allocate the resources efficiently to achieve development? To answer these questions, the study analyzes the obstacles (political, social, economic, legal, and technical) facing the privatization process, during the initiation and implementation stages. The theoretical argument is substantiated with empirical evidence by studying extensively the Turkish experience from 1979-1990, the years which witnessed the radical changes in the structure of the economic policies from an inward, import-substituting industrialization to an outward orientation with emphasis on import-led growth strategy and free market. Turkey's efforts to privatize collided with a fifty year concept of a paternal state where the government created the state-owned enterprises as part of the social contract to achieve national production and serve the social goals. Drawing on the empirical case study, the dissertation argues that privatization is a political socio-economic process of change. The success of these economic policies is anchored in the ability of its key actors to promote the concept by building powerful coalitions of public support, politicians, bureaucrats and interest groups, while containing the rent-seeking phenomenon to enhance development and eliminate social and economic waste.