So what followed was an era of ultra-cheap credit globally – the Heineken era, in which credit reached the parts of society it previously had not reached. Levels of debt, in particular among households, rose pretty much exactly in line with levels of inequality. Rising credit meant expanding bank balance sheets. To maintain this expansion, banks began to manufacture new financial products, slicing and dicing loans to meet investor demand for high yield. The acronyms we have now come to know and loathe – the CDOs, the ABSs and the CDOs of ABSs – emerged to meet this demand. Manufacturing high-tech loans was a lucrative business. Returns to banking rose to their highest levels since the roaring ‘20s. Those designing and selling these new financial gadgets saw their salaries sky rocket. In 1980, an investment banker was paid roughly the same as a similarly-skilled professional in any other industry. By 2007, they were earning nearly four times as much.1 Those salary differences were particularly pronounced at the top of the pyramid. In 1989, the CEOs of the largest US banks earned 100 times the median US household income. That is quite a gap. Yet by 2007, that multiple had risen to 500.2 A similar gap emerged for UK and European bank CEOs. These widening discrepancies within banks compounded the widening discrepancies between banking and other industries. Banks, especially the top of banks, became first among unequals.
The main reason for the growing deficits of recent years is not the ageing of the population, but early retirement. The pension system deficit has been growing rapidly since 1992, when the minimum retirement age requirement was abolished. A new bill to correct this situation has already been approved by parliament. As regards privatization, public enterprises still play a central role in Turkey. We all know that a stronger privatization program would reduce the state’s involvement in commercial and industrial activities, and that this in turn would reduce the budgetary burden of subsidies and deepen the capital markets by encouraging wider ownership of shares. Since privatization has come to be seen as a key element of policies aimed at improving resource allocation, it will be essential to modernize Turkey’s legal and institutional framework for privatization and to bring it more in line with EU norms and the norms now prevailing in some of the region’s more successful transition economies. An adequate legal foundation will be the key element of such reforms. Important steps have recently been taken in this direction, and the constitution has been amended to reduce the legal obstacles obstructing the privatization process. And in order to attract foreign investors who could be interested in privatization, long awaited amendments to the constitution concerning international arbitration have also been approved by parliament. The agricultural sector is especially important in Turkey. It still contributes around 15% of GDP and accounts for about 42% of all employment.