The global response

The coronavirus has plunged the global economy into a new phase of uncertainty and created extreme shock which made all its other problems look smaller. Since emerging in the Chinese city of Wuhan in late 2019, the virus has spread to almost all countries and territories in the world. To stem further spread, authorities around the world implemented measures to lockdown countries to varying degrees, which include closing borders, shutting schools and workplaces, and limiting large gatherings. Those restrictions, which the IMF called the “Great Lockdown”, brought much of global economic activity to a halt, impacting businesses and jobs.

To understand and explain the dramatic impact of the Covid-19 pandemic, one needs to look first at the economic structures of neoliberalism. The neoliberal phase of capitalism rests on fictitious capital, a vast expansion in debt creation, deregulation, outsourcing, and privatization of almost all public services such as energy, water, trains, health, education, roads and prisons. Neoliberalism treats healthcare as a private good for sale rather than a public good paid for with our taxes. This relocation of healthcare from the state to the free market has a detrimental effect both on access to healthcare services and the quality of what is affordable for many people. In many countries, the number of hospital beds were reduced, sections of essential healthcare were privatized and/or outsourced, and serious cuts were made in health budgets. Forty years of neoliberalism across the continents, especially in the so-called “advanced” western economies, have left the countries ill-prepared to deal with a public health crisis of this kind. Preventative medicine is a massive undertaking that requires heavy investment in research and development and only states can afford such undertakings, but neoliberal policies have meant that public investment in infrastructure, equipment, research and development of vaccines, medicines and skills has been significantly reduced, whereas private pharmaceutical companies have little or no interest in non-remunerative research on infectious diseases such as Covid-19.

The global crisis initially inflicted a serious blow on the Turkish economy. Although the banking and financial sector proved quite robust, the real economy was significantly impacted. There was a sharp reduction in Turkish trade. A lack of global demand was the most important factor that adversely affected Turkey's exports. Those from the automotive and durable goods sectors were the most severly hit. External demand contracted rapidly, and the growth of the Turkish economy, which had been based on export-led production, was abruptly stalled. In the first quarter of 2009, the Turkish economy declined to −14.3 per cent, the sharpest quarterly decline of the past three decades, and to −7 per cent in the second quarter. On top of such sharp GDP contraction, unemployment increased steeply in the second half of 2008 and the country's economy recorded the highest unemployment levels, 16.1 per cent and 15.8 per cent in February and March 2009 respectively.

Turkey's high economic growth in the period after 2002 was mainly based on Turkish exports of manufactured goods, especially cars and electrical appliances (see Chapter 4). From 1996, when a customs union agreement became effective with the EU, more than 50 per cent of Turkish exports were destined for European Union member states. After the outbreak of the global crisis, and with the decline in EU demand, Turkey's exports decreased by 25 per cent in 2009 (Kalkan, Dündar & Dinççağ 2010: 1). As a response to this sharp fall in EU demand, Turkish companies and business associations increased their efforts to counterbalance the shrinking demand in the EU and marketed their products in other areas, mainly Africa and Middle East, and exports to both areas gradually increased significantly between 2008 and 2009.

Several measures introduced by the government to boost the financing of exports were quite effective. Between November 2008 and September 2009, just like many other central banks in the world, the Central Bank of Turkey cut its interest rates (11 times), and the borrowing rate was reduced from 16.75 per cent to 7.25 per cent (Uygur 2010: 29). Tax reductions were launched from mid-March to mid-June 2009 to encourage sales of motor vehicles, white goods and furniture.

If Indians and Asians had been the leading producers and traders in the first global economy, as chapters 2 through 5 argue, then chapter 6 considers who they were as well as where and how they operated so effectively. It uses the Multānīs as a key example of Indian trading firms that plied the overland caravan routes. This gains added significance because Eurocentrism presumes that the so-called European-dominated High Seas displaced the trade on the overland routes. The chapter places special emphasis on critiquing the Eurocentric model of the Asian pedlar by revealing the rational methods and activities of the large-scale Multānī firms. Indeed, these matched the scale of leading European firms and bankers such as the Rothschilds and Warburgs. And it also problematises the Eurocentric Oriental despotism thesis by revealing the many ways in which the major Asian states—Mughal, Ottoman, Safavid and the Central Asian Uzbek Khanates—provided a highly conducive environment for the Multānī firmsto flourish.

Chapter 11 is the first of two that explains why Britain industrialized and why China and India did not. They provide a non-Eurocentric answer to the famous ‘Needham problem’, which boils down to asking ‘why China (and to an extent India), which had been a pioneer of technological development for over two millennia failed to industrialize whereas Britain, which had been a laggard for several millennia, succeeded? To answer this I bring out surprising resemblances and differences in the ‘developmental architectures’ of the three aforementioned countries, which factors in state-society relations and the modes of: production, empire, warfare, taxation and epistemic construction. In this chapter, I argue that differing global and domestic contexts can account for the ‘second great divergence’ in cotton-textile production. In essence, my solution to the ‘Needham problem’ is two-fold: first, neither China nor India were on a trajectory into a cotton-based industrial capitalism owing to the nature of their developmental architectures, especially the nature of their systems of production and class relations. Second, there was neither a desire nor a need to industrialize partly because there was an absence of imperial- and global-economic pressures and partly because these societies were ‘historical capitalist satisficers’.

Chapter 5 considers Indo-European relations in the first global economy (FGE). It argues that Indians and Asians likely transported and sold far more Indian cotton textiles (ICTs) throughout the Indian Ocean system than did the Europeans, thereby undermining the Eurocentric assumption that it was only the Europeans who breathed life into the Indian Ocean trading system through their hyper-agency. It also reveals the manifold ways in which the Asians were able to circumvent European attempts at monopolising Asian trade, all of which was connected to the specific properties of the FGE. It highlights the ways in which it was the Europeans who were, under the influence of Indian structural power, in effect ‘incorporated’ into the ‘historical capitalist’ FGE and the Indian Ocean system, thereby inverting the standard Eurofetishist belief that it was the Europeans who incorporated the Asians into the European-led capitalist world-economy. Rather than suffering European domination, the Europeans learned very quickly that they had to form ‘partnership relations’ with the Indians simply to maintain their trading presence in the Indian Ocean system, though until the eighteenth century they were very much the junior partner.

Chapter 9 is the first of two chapters that provides a non-Eurocentric explanation of the rise of modern industrial capitalism in Britain—focussing here on the ‘global-Atlantic production driver’. This chapter argues that the Atlantic production sites comprised an important source of British industrialization. While the empire, especially in the Caribbean, was particularly important, as was the post-imperial United States after 1793, nevertheless the role of Black slavery provided the lowest common denominator of the American/Caribbean contribution. But while there were important global causal factors, I also factor in the role of British developmental agency under conditions of global uneven and combined development into the explanation. For other great colonial powers such as France did not make the breakthrough into industrialization. The analysis of the American/Caribbean contribution unfolds in stages. First, I argue that slave-produced raw cotton in the Caribbean and subsequently in the United States was one vital input. I quantify the overall Caribbean contribution together with that made by imperial military spending as supplying between 38 and 51 per cent of British domestic investment. Finally, I consider the twin roles of slavery and imperial warfare in driving forward the British iron and steel industrialization.

Chapter 12 follows on from chapter 11, focussing on the ‘second great divergence’ in iron/steel production. The first comparison focuses on the key differences between Britain and China, the first of which, following Pomeranz, is that Britain had access to cheap coal and invented the steam engine that enabled the mass production of iron and steel. Second, Britain benefited significantly from the economic exploitation of its Atlantic colonies whereas China’s land-based empire yielded no economic benefits. Third, although both Britain and China were embedded in multi-state systems, nevertheless the East/Southeast Asian was largely cooperative thereby keeping China’s military spending to super-low levels. The competitive European state system, by contrast, led to frequent and highly expensive wars between imperial great power rivals. Britain’s super-high military spending, paradoxically, had major economic benefits for industrialization. Finally, the nature of Chinese warfare did not require the industrialization of her iron/steel sectors whereas Britain’s did. The second half compares Mysore in India (South Asia) with Britain, arguing that the former spent much lower amounts on warfare, that Mysore was unable to use coal, that Mysorean state intervention undermined the prospects for industrialization and that, overall, unlike Britain’s, Mysore’s developmental architecture was primed for historical capitalism.

This chapter discusses international criminal law (fighting political crimes) and transboundary police cooperation (fighting common crimes), though mechanisms such as the ICC, but also extradition and abduction

This chapter discusses whether and in what circumstances states can resort to the use of force

It is fair to say that the economy of Turkey was successfully integrated into the world economic system by the end of the 1980s. However, as we have outlined in the previous chapter, this made the economy more susceptible to the fluctuations of the international financial markets. When the global economy started to experience some serious setbacks in the 1990s, with intense financialization (see Box 3.1) and the emergence of serious competition from the South East Asian economies’ manufacturing exports, Turkey's economy faced productivity gaps, which were too big to compensate for by relying on speculative short-term capital alone. The country tried to overcome this limitation by borrowing more, which soon resulted in a fully-fledged financial crisis in February 2001. Eighteen months before this crisis hit the economy, a massive earthquake shattered the heart of Turkish industry – the provinces most affected accounted for 80 per cent of the country's industrial production, including İstanbul, which generated one-third of Turkey's gross national product (GNP). This massive earthquake intensified the fundamental volatilities of the economy in the summer of 1999. Economic losses caused by the devastating 45-second Marmara earthquake reached tens of billions of dollars at a time when the country's finances were already in deep trouble. The earthquake killed around 17,000 people and made more than a quarter of a million homeless. It destroyed or severely damaged some 60,000 buildings and vital infrastructure in an area of some 30,000 km2. The total economic damage was estimated at between $3.1 and $6.5 billion by the World Bank, or between 2.4 and 5.1 per cent of Turkey's GDP (World Bank 1999).

The Turkish crisis of 2001 was not the result of any one particular factor. The impact of several international setbacks, such as the Mexican crisis in 1994, the Asian crisis in 1997 and the Russian crisis in 1998, together with this massive earthquake in 1999 pushed the Turkish economy into recession, and as a result Turkey experienced a very serious crisis in late 2000 and early 2001. This was the most severe crisis in the country's history so far and was particularly far-reaching in terms of its consequences and its impact on output and employment.

Chapter 14 closes the book by extending the analysis of chapter 8 and focuses on the two global economies. To counter the final Marxist rebuttal of the existence of a global economy before the nineteenth century, the first section brings into focus a key property of the first global economy (FGE): specifically the global Afro-Indian cotton whip of necessity. It also differentiates this from its modern capitalist successor that is given much emphasis by Marxists. The second section challenges the prevailing assumption in IPE and IR, not to mention many other disciplines, that transnationalism within a properly global economy emerged only after 1945/1979, given the (highly problematic) belief that mercantilist internationalisation prevailed before then. I challenge this temporal binary conception by revealing a significant number of important continuities between the two global economies. I focus on eleven ‘temporal capillaries’ that weave together the two global economies. For in highlighting critical continuities so I argue that the modern global economy is less unique than globalization scholars presume and that many of its features originated within the FGE.

So-called “Arab Spring” events, which began in Tunisia in 2011 and soon afterwards spread to other MENA countries, provided a serious challenge for Turkey, not only in terms of foreign relations but also, and especially, with respect to Turkey's economic relations with the region. Before the protest movements affected the MENA countries in 2011 and 2012, Turkey's relations with the countries of the region were based on the general principles of mutual gain through economic interdependence and close neighbourly ties based on close historical and cultural links, in particular Muslim solidarity. This policy, designed by the AKP's foreign minister Ahmet Davutoğlu, formerly a professor of international relations, was presented as a soft power and mutual economic benefit-based policy, popularized as designed to produce “zero problems with neighbours”. This active policy was essentially based on Turkey's increasingly strong economic interests in the region. Turkey's total trade with Middle Eastern countries had increased from $4.4 billion in 2002 to $26 billion in 2010.1

Davutoğlu 's foreign policy and regional and international relations strategy, in particular towards Middle Eastern countries, stood in sharp contrast with that of its immediate past. This active foreign policy was a departure from the country's much more cautious foreign policy which had existed for most of the republican period – the shift was from a diplomacy that was largely passive and one-dimensional to one that was dynamic and multidimensional. The basic principles that had guided Turkey's foreign policy since the founding of the republic in 1923 were caution and pragmatism. Lessons that had been learned from the way in which the Ottoman Empire had ended after the First World War convinced the leaders of the young Turkish republic to be cautious – believing that very little was to be gained and much to lose from entering into the unfriendly and unpredictable conflicts in Turkey's immediate neighbourhood. For most of the period until the late 2000s, Turkish foreign policy was almost always cautious and merely reactionary in response to the events happening within its surrounding region, and from the end of the Second World War onwards it strictly followed the lead of the US and NATO.