“In order to better understand the advantages of our way of life.”
“So that Communism or Socialism never becomes established in America.”
what is capital?
capital as raw material, but as productive resources, energy and technology
money at work producing things — capitalists are the ones in charge of the process
capitalism as a system for producing new wealth
different kinds of capitalism
state capitalism
monopoly capitalism
American capitalism as quite unique
three great pillars
private ownership of property
home ownership –
this is the target of Communists
the profit motive –
stimulus that brings private ownership to life – investing profits – everyone can be involved – all Americans can participate – we all look for profits – desire for learning – this is part of all human behavior
the open market
competitive markets – competition breeds technological developments and lower prices – the difference between early cars and recent models – the free market produced this – Henry Ford
American capitalism
is far more productive than all other systems — unprecedented way of producing wealth – unique in human history
“Socialism is good”
Sonmez, “Can Turkey’s New Economic Plan Restore Foreign Investor Confidence?” Al-Monitor, 2023
Meanwhile, the program forecasts that the country’s current account deficit will fall to $30 billion over three years. This, too, is ambitious, not least because this year’s gap could hardly be limited to $42.5 billion as the program projects.
**Current Account**: The current account is a key component of a country’s balance of payments (BOP). It measures the flow of goods, services, income, and current transfers between a country and its trading partners. The current account can be broken down into several components:
1. **Goods**: This covers the trade of tangible items, often referred to as “trade in goods” or “merchandise trade.” This includes things like machinery, food, and raw materials.
2. **Services**: This pertains to the trade of intangible items, often referred to as “trade in services.” Examples include tourism, banking, and software services.
3. **Income**: This refers to earnings from investments and labor. For instance, if citizens of Country A own assets (like property or businesses) in Country B, and they earn income from those assets, that income would be recorded here.
4. **Current Transfers**: These are one-way transfers of assets, where nothing is received in return. Examples include remittances sent by foreign workers to their home countries, or international aid grants.
**Deficit in the Current Account**: A current account deficit means that a country is importing (buying) more goods, services, income, and current transfers from the rest of the world than it is exporting (selling). In other words, the total value of imports exceeds the total value of exports.
**Why does it have a deficit?** Several factors can contribute to a current account deficit:
1. **High Domestic Consumption**: If a country’s residents are consuming more than they produce, they will need to import the difference.
2. **Strong Currency**: A strong domestic currency can make imports cheaper and exports more expensive, leading to an increase in imports and a decrease in exports.
3. **Lack of Competitiveness**: If a country’s goods and services are not competitive on the global market, it might struggle to export.
4. **Economic Growth**: Faster economic growth compared to trading partners can lead to increased imports. As income rises, consumers may demand more imported goods and services.
5. **Investment Surges**: If a country is an attractive destination for investment, it might import more capital goods.
It’s essential to note that a current account deficit is not inherently “bad.” It can indicate that a country is an attractive place for foreign investment or that it’s going through a phase of economic growth and expansion. However, sustained and large deficits might indicate structural economic problems and can lead to vulnerabilities, especially if financed by short-term capital flows or excessive external borrowing.
Reduced Import Capacity: A country needs foreign currency to pay for imports. Depleting reserves can reduce a country’s ability to import vital goods like oil, machinery, or even basic necessities.
Potential for Financial Crisis: In extreme cases, rapid depletion of reserves, especially if accompanied by large short-term debt obligations, can lead to a balance of payments crisis. This may necessitate drastic measures like imposing capital controls or seeking bailouts from international organizations.
Policy Tightening: To restore confidence and stabilize the economy, governments might introduce tighter monetary policies (like higher interest rates) or fiscal austerity measures, which can slow down economic growth and lead to higher unemployment.
“Analysts and economists say the policies Turkey has adopted are an outgrowth of Erdogan’s worldview – a combustible mix of Islam and paranoia, combined with a poor understanding of economics.”
“The big problem basically is that Erdogan refuses to raise interest rates,” says Gallia Lindenstrauss, a senior research fellow at the Institute for National Security Studies in Tel Aviv. “One reason is religious objections. Another is that he believes there’s a world interest rate lobby that’s seeking to weaken Turkey, and that rate rises are only good for the lobby. Another is that [he believes] his policies will increase exports and spur economic growth that will compensate the public for inflation.”
The “interest rate lobby” has been a bugbear of Erdogan’s for some time and explains why he is so determined to wean the Turkish economy off foreign capital. It carries antisemitic overtones, which have never been articulated by the president himself. However, they do surface in the pro-Erdogan media, which speaks, among other things, of a coalition of Jewish financiers allied with the Catholic Opus Dei and the Illuminati (the mythical secret society often cited by conspiracy theorists).
Liam Peach, a senior emerging markets economist at Capital Economics in London, says reducing Turkey’s reliance on foreign capital will be a Herculean task. The country suffers low rates of savings, and runs persistent and sizable current account deficits that need to be covered with outside investment.
“The only real hope investors have in Turkey,” says Peach, “is a change when the election happens next year – a new party comes into power with a more credible economic policy.”