It is always a delight to see hypocritical politicians unmasked. Today is Turkey’s turn. It so happens that the new-and-improved Incentive System approved last July, produced some 5567 certified investments to date, or so the Hurriyet Daily News announced in its article “New incentive system increases investments in Turkish economy”. The message is clear. Turkey: When Everything Fails Go Austro-Libertarian.
It is obvious that Turkish economy is doing OK, or so would seem, but not near the 2010 and 2011 levels. The annualized GDP forecasted for this year is about 4.4.% but its current account balance is about -6.8%. In other words, Turkey is spending abroad more money than the wealth is producing. Hummm…. Do you think this is sustainable?
Well, in your world, if you spend more money that you earn, what do you think will happen? Bankruptcy perhaps? Well… not in the funny, funny world or high finance, particularly when it comes to countries. They just keep going and going accumulating debts.
Is then a surprise that the Turkish government is desperate? Of course not!
The Turkish government, being a good government just like any other government, is firmly convinced that the economy needs to be “managed”. Keynesians of the world unite!
And so, being a good government, they applied all sort of Keynesian recipes, the old and tried and untrue that we have seen time and time again. Of course, they are like Alchemists: cursed to repeat the same processes time and time again in the hope they may one day work. They didn’t, they don’t and they won’t.
So, once the Keynesian book is exhausted, what’s left? What is left is “out of the box” thinking. What’s left are special conditions and development areas, considerations and privileges, or, as they call them in Turkey: the Incentive System.
Strange, we have never seen Keynesians advocating for special considerations. What may this Incentive System be? It seems to be working. Could it be that Turkey has finally cracked the Keynesian secret to economic prosperity? After only about 100+ years of experimentation? Let’s take a look.
Turkey’s Incentive System is divided in four categories:
- General Investment Incentive Scheme
- Regional Investment Incentive Scheme
- Large Scale Investment Incentive Scheme
- Strategic Investment Incentive Scheme
Which seems complicated enough. But what do these schemes have in common? Glad you asked:
- Value Added Tax – Exemption
- Customs Duty – Exemption
- Tax Reduction – Granted
- Social Security Premium Support – Granted
- Income Tax Withholding – Exemption
- Interest Support – Granted
- Land Allocation – Granted
- Value Added Tax Refund – Granted
So, let’s see. Under this new Incentive System a company does not pay taxes, does not deduct taxes from their employees and does not have to pay social security for their employees. In addition, they are given land and a the government pays a percentage of an industrial loan.
We smell a rat. Let’s see:
- No taxation = Austrian Economics
- No payments to social security = Austrian Economics
- Free Land = Absolute Austro-Libertarian
- Interest payments decrease (to compensate for inflation) = Austrian Economics
Yes, that’s right! The Turkish government has “borrowed” (actually stolen) some of the key Austrian Economic ideas. And what’s worst, they are working. Blasphemy!!!
Keynes must be revolving in his grave. But then again, politicians lie all the time and will take credit for anything and blame others for their failures. What else is new?
And so the Turkish government is spinning this new-and-improved system as their wonderful idea. Not to us. This does not pass the smell test. It stinks!
But that’s our job. To point out what is going on and clarify it for you so that you may have peace of mind, knowing that no, politicians are creating this mess and it is not your imagination.
Austro-Libertarian systems work. If they are Absolute, the better. Now you are in the know. Spread the word. Or not. Your choice.
Note: please see the Glossary if you are unfamiliar with certain words.
