The first indications of a serious crisis appeared in December 2007 and January 2008. On 15 January, news of a sharp drop in the profits of the Citigroup bank led to a sharp fall on the New York Stock Exchange. On 21 January, a spectacular fall in share prices occurred in all major world markets, followed by a series of collapses. Several American and European banks declared massive losses in their 2007 end of year results.

Later months of the year witnessed the bankruptcy of Lehman Brothers, a 158-year-old investment bank, the takeover of the stockbroking firm and investment bank Merrill Lynch, and the move by Goldman Sachs and Morgan Stanley to seek banking status in order to receive protection from bankruptcy. During the same weeks, the remaining four investment banks on Wall Street all went under in one way or another. To stop further collapse and to ward off total economic catastrophe, the US government made its most dramatic interventions in financial markets since the 1930s. Only the infusion of hundreds of billions of dollars into the US banking system, coinciding with equally colossal interventions in Europe, staved off an entire crash of the world’s financial markets.

The collapse of financial markets was soon being matched by the decline of the real economy. The world appeared to be heading for a period of inevitable economic stagnation or recession (a period of negative economic growth). Advanced economies experienced their sharpest contraction of the postwar period. Although emerging and developing economies were more resilient than in previous global downturns, they also suffered setbacks. In China growth slowed to 9.6 per cent, down from 14.2 per cent, and in India it fell to 3 per cent, down from 7.6 per cent (World Bank 2019b). It is not often that the world is faced with financial and economic turmoil so severe that the IMF calls it “the largest financial crisis in the US since the Great Depression”.

Among the experts there was a consensus that the immediate cause of the crisis lay in the US sub-prime mortgage lending market. Since the start of the 1990s, a large number of people, previously considered to be bad credit risks, were offered mortgages.

Chapter 8 advances further my claim concerning the existence of the first global economy (FGE) by revealing its ‘historical capitalist’ nature. This responds to the fundamentalist-Marxist position which asserts that a global economy could not have existed before the nineteenth century because capitalist social relations of production were not universal and that the world rested largely on an agrarian foundation and only weak trans-continental trading linkages. I draw on a range of eclectic Marxists and Braudel in outlining the contours of ‘historical capitalism’, which comprises a hybrid set of social relations—part-modern capitalist/part-agrarian—together with rational institutions and global trade. I then advance a detailed analysis of how the principal global trading commodities were produced within the global historical capitalist mode of production. Here the analysis of Caribbean slave production provides the litmus test for my claim that historical rather than purely modern capitalism existed before about 1850, simultaneously revealing that the dividing line between the two modes of production can be wafer thin. I then reveal the rational commercial and financial institutions of historical capitalism, in the absence of which global trade could not have existed before concluding with a brief summary of global trade during the FGE.

Chapter 2 is the first of five chapters that highlights the interconnections between Western and non-Western agency in the making of the first global economy (FGE), which existed between roughly 1500 and 1850. This chapter re-introduces China as an agent of the FGE, adopting a via media between the Sinocentrism of key parts of the California School on the one hand and Eurocentrism/Eurofetishism on the other (i.e., China's role in the FGE was more important than Eurocentrism allows for but was less pronounced than Sinocentrism presumes). Overall, it reveals how China was open to global trade and was an important (though not the key) driver of it. It critiques all of the standard Eurocentric claims concerning China's isolation from foreign trade, revealing as myths: the realisation of the state's official bans on foreign trade (section 1); the dominance of the Europeans in Chinese trade and the dominance of China over Britain (section 2); the Chinese tribute system (section 3); the Canton System (section 4); and China's heavily protectionist trade regime (section 5). The chapter closes with a detailed analysis as to why Qing China moved to freer trade after 1684 while Britain moved in the opposite direction to extreme protectionism.

At the start of 2020, according to all available data, more than ten years after the collapse of the Lehman Brothers sparked the greatest financial crisis and economic downturn since the Great Depression, none of the underlying contradictions of the world economy have been resolved. The false claim that governments have broken the back of the recession was running out of steam. Global imbalances and deep-rooted tensions have deepened even further. In a survey by the US National Association for Business Economics, published in August 2019, 72 per cent of economists predicted that a recession would occur before the end of 2021 (National Association for Business Economics 2019). In the second half of 2019, fears over the health of the global economy had deepened with the publication of international data. Global manufacturing output was actually falling, as measured by economists from JP Morgan, and

The Purchasing Managers’ indices for the service industries in the US, UK and Germany, published in October 2019, all turned out to be worse than economists had expected (Financial Times, 5/6 October 2019, 4). The UK economy saw no growth in the final three months of 2019; the Office for National Statistics (ONS) said that manufacturing had contracted for the third quarter in a row and the service sector had slowed. In particular, the car industry had seen a particularly weak quarter. The services sector – which accounts for more than three-quarters of the UK economy – grew by just 0.1 per cent in the final quarter of 2019, and the construction sector grew by 0.5 per cent.

Turkey, with gross domestic product (GDP) of $754,412 billion, GDP per capita income of $9,042, a population of 83.9 million and an average annual growth rate of 5 per cent for the past 17 years, is a significant middle-range power, currently the nineteenth largest economy in the world, and a central regional player in the global system (World Bank 2019; Turkstat 2020). The first decade of the twenty-first century highlighted Turkey's rise as an emerging star in an unstable region that ran from the Balkans to the Middle East. Never colonized and straddling the continents of Europe and Asia, Turkey's strategically important location and dynamic young population have meant that it has a major influence in its neighbourhood and beyond. Turkey's location is important for its economic success and political prominence in the Middle East. Serving as a bridge between the European Union and the Middle East and wider Islamic world, Turkey is a major centre for commerce, finance and industry. It is a country that spans traditional North–South and East–West cultural divides, maintains a geographic focus on Africa and has increasingly central attention on post-Soviet states in the Caucasus and Central Asia. Turkey is not rich in fossil-based energy resources other than some high-sulphur and low-calorie coal, but it has significant levels of industry and a sizeable economy and is the only country in the region ranked among the top 20 economies of the world (World Bank 2009).

Many of Turkey's cities have been industrializing at a rapid rate and now participate in the global economy because of Turkey's location and young population, which both promote business and trade. Turkey has experienced one of the fastest rates of urbanization of any country in the world. Four of the world's ten fastest-growing cities are in Turkey.

Despite serious adverse shocks since the 2008 global financial crisis and the tragic civil war in neighbouring Syria, Turkey has shown strong indications that its status as an emerging market economy will continue for the next ten years and beyond. Turkey is categorized as an “upper-middle-income” country by the World Bank because its per capita income is between $3,976 and $12,275 (Serajuddin & Hamadeh 2020).

The global political economy

During the period when the Turkish economy was being fully integrated into the world economy, the global system was experiencing one of its historic structural transformations when deep-seated movements and shifts of positions were affecting every single economy in the world. This is what soon came to be known as the global shift: a shift in the hegemonic structures of the world economy – a shift away from North America and Western Europe to the emerging economies of the Global South in Asia, Africa and South America. Drawing on comparative analyses, historians and political economists identify patterns and causes of hegemonic power decline, such as decreasing economic and technological resources relative to those of rising powers (Kennedy 1987; Grygiel 2006; Kupchan 2011). These studies inform contemporary theoretical debates on power transition from the powers in the Global North to the powers in the Global South, mainly based on the analyses of the economic rise of China, the growing assertiveness of Russia or the dynamism of India.

The definition of the global shift used in this book is based on Andre Gunder Frank's 1998 thesis in Re-ORIENT: Global Political Economy in the Asian Age, which offers broad analytical tools that have proven their value in anticipating what is now increasingly acknowledged as a primary shift in the global system towards China and India as dominant emerging powers in the world.

I shall first consider whether, and if so how and with what consequences, the global system in this period has been going through a major shift. I shall then look at the role and position of Turkey, as a medium-sized emerging economy, within this period of global shift.

Chapter 7 is the first of two chapters that consider the globality and structural properties of the first global economy (FGE). It challenges the two most comprehensive critiques of the existence of the FGE the neoclassical economic and the transformationalist—(i.e., O'Rourke and Williamson/Held, McGrew, Goldblatt and Perraton respectively). Revealing their Eurocentrism is important because I redeploy their exact threshold criteria within a non-Eurocentric framework in order to prove the existence of the FGE. In particular, I dismantle their imputed Eurocentric temporal binaries in which the pre and post 1828 periods are presented as opposites. That is, transcontinental trade in the pre 1828 era is (re)presented as more controlled/regulated, monopolistic, noncompetitive, luxury-based and non-global than it was so that the post-1828 or post-1945 era can be (re)presented as more laissez-faire, ‘free trading’, competitive and hyper-global than it has been. And I also challenge their ahistorical temporal binary conception wherein the pre-1828 era is (re)presented as more state-regulated and militarily violent than it was while the post-1828 period is (re)presented as more laissez-faire and peaceful than it has been. In the process, their binaries airbrush out of the picture significant continuities between the first and second global economies.

Since 2002 two parallel processes affected Turkey's position in the world economy. First, the global shift (a massive and complex shift in global economic power from the developed West and North to the underdeveloped East and South) has been changing the parameters of the worldwide conditions of trade, finance and growth; and second, there has been a neoliberal transformation of Turkey's economy that is centred on fast export-oriented industrialization and financial restructuring. In a real sense, the neoliberal transformation of the Turkish economy within the context of the global shift is the story of Turkey's massive transformation, for better or for worse.

In parallel to this economic transformation, the coming to power of a new political party, the AKP, at the beginning of this period represents the development of an alternative segment of Turkish polity with the historic potential of co-opting Islamist elements into Turkey's ruling body. The main question which this book has tried to answer is to what extent Turkey's economic transformation in this period was the result of this new political orientation or, in other words, was this economic process the consequence of the AKP's Islamist political vision?

During this period of nearly 20 years, Turkey provides an excellent example of how global developments, changing positions of power and rankings, as summarized by the term global shift, have influenced a middle-sized regional power and have created the conditions, both economically and politically, that were needed for it to change from being a backward, underdeveloped, static and dependent economy to being an important regional power and an influencer on the world stage, with a GDP that multiplied almost three times in less than 20 years. Although the country's economy has experienced some serious setbacks, one after the 2008 global crisis and another one triggered by political tensions with the US in August 2018, it was still described in positive terms by the European Commission in 2019: “Turkey is endowed with a strategic geographic position, a strong and entrepreneurial business sector, a large domestic market and a growing young population” (European Commission 2019: 11).