INTRODUCTION

Istanbul has been a financial center as well as a political center throughout its history due to its geographical location. Its financial capacity enabled the city to hold the title of “biggest city in the world” for centuries, in addition to serving as a capital for the Byzantine and Ottoman empires, two long lasting empires. It is even possible to say that its capacity as a financial center was more long lasting than its identity as a political center. Today, although Istanbul is not the political center, it is the financial center of Turkey and one of the candidates for global financial center. However, when the early Republican policies are considered, it can be seen that the historical potential and geographical advantages of Istanbul were made use of adequately.

Firstly, the transition from the Ottoman Empire to the Republic meant continuity in many aspects, but when the young Republic’s choices in financial policy are considered, it is observed that their impacts on Istanbul created a dramatic rupture rather than continuity because Istanbul was the favored location of old times. It was the capital of the empire. The new establishment, by contrasts, is a national state. Moreover, Istanbul was the city where opponents posed a threat for the new political authority. Istanbul was the place where the commerce and the industry of the country were concentrated. However, the companies in Istanbul did not belong to the people close to Ankara. These companies, most of which were set up in the last quarter of the last Ottoman century, were under the control of either Unionists (supporters of the Committee of Union and Progress), who were the favorites of old times, or people who were not part of the Muslim-Turkish segment of the society. These people did not stand close enough to Ankara. This peculiar structure of ownership in the economy of Istanbul played a decisive role in the financial policy choices of the Ankara Government that felt insecure, particularly in the first years.

Secondly, when the economic development initiative was launched, nearly ¾ of the population lived in villages and were engaged in primitive agriculture. Therefore, it was not surprising that the policies were directed towards the agricultural and rural sectors. If the attempts at economic reforms that were carried out after the promulgation of the Republic were to be divided into two groups, they could be summarized as the policies towards increasing the agricultural production (mechanization in agriculture), and industry and transportation investments to develop Anatolia. The investments in sugar, textile and cement factories, and railway constructions following the foundation of the Republic were the results of these priorities. When the industrial investments of the early Republic are observed from the perspective of Istanbul, it is possible to say that the majority of them were not directed towards this metropolitan. This is due to the fact that Istanbul was a region with dense commercial and industrial activities compared to the rest of the country, although it experienced considerable setbacks due to the wars. The aim of developing Anatolia excluded Istanbul as an address for the new investments.

To sum up, the priorities of the new state were not in compliance with the expectations of Istanbul during the establishment years of the Republic. The expense of this situation for Istanbul was that it could not recover its financial power that was already damaged. The expense for Turkey was the delay in development due to underutilization of Istanbul’s financial potential. In contrast to other countries that came out of the Great War, this situation was one of the factors that explains various setbacks in the financial development of Turkey, particularly in the first half of the twentieth century.

ISTANBUL’S ECONOMIC STRUCTURE IN TRANSITION
TO THE REPUBLIC: “TRANSFER BALANCE SHEET”

Both the financial sources and human sources of the country were seriously damaged due to the wars one after another before the transition from the Ottoman period to the Republic. As is known, four factors are necessary for the production that provides economic welfare: labor force, capital, nature, and entrepreneurship. Labor force and capital from these production factors were damaged greatly due to the Libyan War, the Balkan Wars and the Great War as well as the War of Independence that spread out over ten years. The part of the population that was not lost was either left outside of the boundaries or they migrated. “The real consequence of the war for Turkey was not land loss but the loss of a productive population.”¹ Turkey managed to compensate for the loss of educated scholars, qualified craftsmen and young productive peasants over a very long time. Another production factor, nature, was also destroyed, but the destruction in nature was limited compared to the loss in population and capital factors. The only production factor available on the path to Republic was the entrepreneurial capacity of the remaining population.

Istanbul was the city where the most dramatic political and economic consequences were experienced in the transition from the Ottoman Empire to the Republic because almost half of the population in Istanbul was non-Muslim. The financial structure was under the control of the non-Muslim population. Istanbul not only lost the title of “the imperial seat” (payitaht) in transition to the national state, but it also lost a significant amount of the non-Muslim population due to the tide of nationalism. As a matter of fact, the population in Istanbul steadily declined until the end of the 1920s and was only able to reach the level of its 1907 population again in the 1950s. The non-Muslims who left naturally took their wealth and commercial potentials with them. Moreover, the Ankara government was ambiguous about compensating for the losses of Istanbul. In summary, all the observations about the unfavorable conditions in the young Republic era were just as valid, may be more, for Istanbul. It was considered as a potential rival as the political and financial focal of power of the “old times” and now became the “other” in the new era. This situation delayed and obstructed the repair of the damage of wars and political change in Istanbul.

The extent of Istanbul’s problems in the transition from Empire to Republic and the unpromising situation stemming from disparity with Ankara caused a variety of activities to be performed in order to bring these problems forward. Detailed reports were prepared in order to explain Istanbul’s problems to the government. In this regard, Istanbul is lucky to have these reports displaying its commercial and industrial configuration at the start of the Republic era.

The preparations for the first of these reports were initiated before the Truce Period ended. The aim was to prepare for the new era. The essence of the study was to determine the structure of ownership of the financial establishments dominant in Istanbul’s economy. As a result of these “financial intelligence” efforts that started in 1922 under the leadership of Ahmet Hamdi (Başar) (b. 1897-d. 1971), Turkish Commercial Almanac was prepared in two volumes.

The other study was a detailed report prepared under the chairmanship of the former Minister of Finance Cavid Bey (1875-1926) upon the request of Turkish Parliamentary Speaker Fethi Bey (Okyar) (1880-1943) right after the declaration of the Republic. An evaluation of Istanbul’s craftsmen, industry and production structures as of early 1924, as well as suggestions regarding the changes needed to improve the economy of the city, could be found in this report prepared by the “Istanbul Finance Commission (IIK)” operating under Istanbul Chamber of Commerce and Industry (Istanbul Ticaret ve Sanayi Odası [İTSO]). The IIK was composed of 13 people, including members of the chamber, scholars and bureaucrats.²

Of these two valuable studies on Istanbul’s economic structure in the early Republican era, the Turkish Commercial Almanac gives information about “the structure of ownership of Istanbul’s economy in the transition period”. The Istanbul Finance Commission Report, on the other hand, is virtually a “transfer balance sheet of Istanbul’s commerce and production structure in the Republic”.

The Share of National Merchants in Istanbul in the Foundation of the Turkish Republic According to Turkish Commerce Almanac³

While the occupation continued in Istanbul, the idea of establishing an association that would bring the Muslim-Turkish merchants together was developed. However, it was not easy to found an association under the conditions of the period. A company named “Economic Investigation, Publication and Transaction Corporation” was founded with a capital of 10.000 lira collected from 10 entrepreneurs, each donating 1.000 lira and was led by Ahmet Hamdi (Başar) in June 1922. They set out to collect intelligence to, make an inventory of the economic life of Istanbul under the cover of preparing a “commercial almanac” (yearbook). They initiated a comprehensive search in order to determine the proportion of Muslim-Turkish merchants and that of others in each sector of Istanbul’s economy .

According to the results of this research carried out among merchants in Istanbul’s market: the rate of Muslim-Turkish merchants in international trade did not exceed 4% while they constituted a mere 3% in brokering operations. They had to speak Greek, Italian and French in order to be able to work in ports. 95% of stockbrokers and brokers who worked in the Stock and Foreign Exchange Stock Market comprised people without Muslim-Turkish identity. There were not any banks under the control of the Muslim-Turkish component except two small banks (Credit National Bank⁴ and Adapazarı Islamic Commerce Bank⁵) in the finance sector.⁶ Even the correspondence was in French in the banks and other companies whose owners were not Muslim-Turkish elements.⁷ The Muslim-Turks did not possess any insurance companies. Turks could work in these companies only as attendants. Only 15% of wholesalers who worked for the domestic market were Muslim-Turks and nearly 25% of semi-wholesalers and retailers were Muslim-Turks. When the volume of work done by Muslim-Turks is considered, their significance in the sector does not even reach 10%. Therefore, significant merchants were not from the Muslim-Turkish component. Istanbul’s urban services such as water, gas, electricity, telephone, tram and tunnel, and important jobs such as railways, mines and tobacco monopoly were under the control of privileged foreign companies. Muslim-Turkish people were not employed in these companies as executives or senior officers. However, these companies maintained some Muslim-Turkish employees as a kind of bribe offered in order to get on well with the government. These were not influential offices as seen in the Ottoman Bank; sometimes these employees didn’t even go to work and only received their salaries. The highest title that Muslim-Turkish people had in the companies where they worked started from the lowest level of others. For instance, the riders in horse-drawn trams were Turkish and ticket conductors were Greek or Armenian. The drivers in trams and conductors in trains were not usually Turks, but most of the workers and attendants were Turks. Almost all of the stores, shops, restaurants and entertainment places were under the control of others outside of the Muslim-Turkish component.

Within the scope of preparation work for Turkish Commerce Almanac, 4.267 institutions were registered in Istanbul during the period prior to the promulgation of Republic. 1.202 of these institutions belonged to Muslim-Turks. This financial intelligence work was decisive in the nationalization process in the field of economy after the truce when Istanbul came under the control of Ankara. The published product of this work was the Turkish Commerce Almanac from 1924-1925 and 1926-1927.

The intelligence work that was carried out for the preparation of this yearbook displays a balance sheet on the role and significance of the Muslim-Turkish component in Istanbul’s economy. This table became the reason for the realization that a Muslim-Turkish entrepreneur group should be dominant in Istanbul’s economy. Following this realization, the National Turkish Commerce Union (Milli Türk Ticaret Birligi [MTTB]) was established. The management of ITSO was changed in order to increase the significance of the Muslim-Turkish component in Istanbul’s economy.

The results of the industry count that was carried out by the Ministry of Trade and Agriculture between 1913 and 1915, a few years before the aforementioned inventory, were not different.⁸ According to this count, only 20% of manufacturing businesses that belonged to real persons belonged to Muslim-Turks. The majority of these businesses were in Istanbul. Non-Muslims were probably more dominant in legal entities (comparatively bigger manufacturing businesses). This structure of ownership is another reason why Istanbul was considered the “other” after the national government was set up in Ankara, especially because nationalism was on the rise due to the political conjuncture of the period. This conjuncture was a financially debilitative factor in the transition period for Istanbul, which was an imperial city.

Istanbul’s Economy in 1924 According to the Istanbul Finance Commission Report

“The low level of Turkish participation in Istanbul economy” during the declaration of the Republic caused the Turkish Parliamentary Speaker Fethi Bey (Okyar), who was a member of the parliament from Istanbul, to have a report prepared to research the reasons of this situation.⁹

Istanbul has always been the crossroads of trading routes, with the country’s doors open to the outside world and to the main ports of foreign trade throughout history. Moreover, Istanbul is an important industrial production center. Istanbul’s function in the economic sphere was manufacturing, importing, and exporting. Agricultural production has never been significant enough in Istanbul except intermediation for trade.¹⁰

Istanbul’s position in financial actions can be grouped as follows:
Goods brought from abroad and distributed to the country from Istanbul,
Goods brought from different parts of the country and distributed abroad from Istanbul,
Goods brought from up-country and abroad and used as raw materials in Istanbul,
Domestic and foreign materials consumed particularly in Istanbul.

Istanbul’s economy was “seriously ill” as of 1924 as stated in the “Introduction” part of the IIK Report. If the situation stayed unchanged, there would be no need to strive for the dominance of a Turkish component since there would not be a significant economic position to be attained in Istanbul. This would be similar to a halt in a war because there were not any fighters left in the battlefield, so to speak.

The aforementioned statements that were in the IIK Report showed that Istanbul’s economic situation included not only sickness, but also hopelessness as of 1924.

Istanbul’s share in the production structure of the country was examined based on information about each of the 36 sectors. This information was collected in four sections after the findings were summarized in 18 points in the “Preface” section of the Report. The Istanbul Port and Istanbul’s share in maritime commerce and loan (banking) subjects were handled as separate topics in the following main sections. At the end of the report, it is important that Istanbul’s tourist attraction potential was evaluated and that the significance of the tourism sector in the development of Istanbul was emphasized in that period. The suggestions of the commission were at the end of the report. Among the suggestions listed in 240-point topics in total, there are some that are up-to-date despite 90 years having passed. The IIK Report included important details for understanding the situation of Istanbul in the transition period to the Republic.

Assessments regarding the role of the Turks in economic life

The reasons for the deficiency of the Turkish public in Istanbul’s financial life were examined and some statements were made. The awakening movement of the Turks began in the second Constitutional Period (1908) and developed by the policies of protectionism and promotion in the period of the Great War. Turks had not had a dominant role in Istanbul’s commercial life previously. Thus, hatred towards trade among Turks in the pre-Republic era turned gave way to a genuine interest.

The reaction against the accounts of some foreigners about “the economic incompetence of the Turk” based solely on their impressions on the surroundings of Galata and Beyoğlu after spending only a few days or weeks in Turkey can be sensed in the report. The report attempted to refute the aforementioned claims by constituting a response for the rambling opinions of foreigners. The emphasis on the role of Turks in the economic life of other countries shows how seriously those claims were taken in that period.¹¹

In the continuation of the explanations, “non-Muslim Ottoman tradesmen going under the protection of the foreigners when they had the chance” as well as capitulations and tax exemptions for foreigners, were shown among the reasons for the decline of commercial life in the Ottoman Empire. While the foreign tradesmen had consuls or ambassadors who made efforts to influence commercial life under the cover of protecting their own citizens in addition to the capitulations exemptions, there was not such force that protected the local tradesmen. Commercial life in Istanbul was completely under the control of minorities and foreigners since the local community preferred government jobs and there were not even any businesses where Turkish people could serve as apprentices according to the report.

Also, trade required knowledge of a European language. However, our education system trained only soldiers and officers; it “did not feel the need to prepare an army for financial struggles”.¹²

Government jobs and military jobs were “first class occupations” and trade was a “second class occupation” according to the social perception in the Ottoman times. However, the income did not comply with the classes. People engaged in the first class occupations could be poor, while the second-class professionals constantly became richer. Since the people engaged in the second-class occupations were mostly non-Muslims, there were not many Turks who wanted to enter this area, and it was already difficult for Turks to enter.

However, the situation changed in the second Constitutional Period. Freedom of press and freedom of thought opened eyes and “economic propaganda”, that was previously unknown, started. Moreover, promotions, titles, ranks or medals in military and civil bureaucracy lost much of their prestige in the former regime. “Government jobs became an ordinary occupation where people received salary in return for the service like other jobs. In short, it partly lost the attraction it had in the past for the community in Istanbul.”¹³

During the Great War, the state found Ottoman non-Muslims untrustworthy and pursued policies of economic protectionism by providing significant incentives for the Muslims so that they would develop their commercial skills However, most of these incentives did not help the situation due to the lack of “economic discipline”. All of the profits were lost during or after the war due to extravagancy, dissipation or speculation.

The influence of the social atmosphere is very important in terms of reputation of the trade. The public had belittled tradesmen before, but they started to acquire a social prestige gradually. They even attained the former reputation of the government officials in the past. All the generalizations in the report actually addressed Istanbul because industry and trade were meager in the cities outside of Istanbul. Military and civilian government jobs were in Istanbul as well since it was the capital. The rest of the country was by and large a rural population that was engaged in agriculture.

The government was responsible for solving many problems, including cutting down the government bureaucracy in numbers. The government should open industry and trade schools to raise a young generation with a good command of the spirit of production and trade. It is significant that these suggestions were made in 1924.

However, there was only one Industry School in Istanbul, the population of which was 800.000 in the 1920s. The province managed this school. The report suggested that the administration of the Industry School should be directly given to the department it belonged to and its present departments should be modernized. The trade education was also far from satisfactory. Even the tradesmen preferred to have their children in foreign schools or send them to Europe since the education in Turkey could not inspire confidence. The teachers at the trade school worked as much as their colleagues in Europe and taught theory as well as they did, they still had deficiencies in practice and foreign languages.

The number of staff in the state bureaucracy had to be reduced in order to raise interest in trade. However, the government acted on the contrary by establishing new monopolies and state-owned enterprises while the bureaucracy expanded. In other words, the policy limited state intervention in economic activities in the formative period of the Republic contradicted the suggestions in the report on the revival of Istanbul’s commercial life.¹⁴

The report did not recommend the employment of youth in companies or banks either. Working in real sectors -production- was more important:

It is assumed that Turkish youth enters the economy when they are placed in companies and banks… Eyes that used to look to the felicitous state are now directed towards companies whose number does not exceed five or ten. We are not against the occupation of Turkish youth in these institutions but these are not the actions we would urge our youth towards. They should work in agricultural, industrial and commercial production.¹⁵

The declaration of Constitutional Monarchy, the rapid transformation that followed, and Istanbul’s loss of the prestige of being a capital in the reconfiguration process resulted in the cancellation of some government jobs and loss of importance of others. Due to the change of staff, many people who had important civilian or military offices and resided in Istanbul had to change jobs. There are suggestions for these people in the report as well: “They should forget about their old ranks and be satisfied with lower ranks. As a sign of respect for their past career, they are provided with salaries and ranks that they do not deserve, but this will not last long.”¹⁶

The suggestions above seem significant in terms of indicating the transformation of Istanbul’s financial life during the first years of the Republic.

Istanbul’s Production Structure

In the first days of the Republic, Istanbul was a center with indisputable significance in both industry production and trade of the country. This significance resulted from the fact that the manufacturing industry was largely established in Istanbul and because Istanbul was the crossroads and transit center in domestic and foreign trade for the products that were not manufactured in Istanbul. For instance, Istanbul does not produce carpets but the most important center in the world for carpet trade is Istanbul.

Important sectors in Istanbul’s economy during the first years of the Republic were grouped in four categories. The groups regarding the commodities subject to trade in Istanbul were as follows:

A- Items and articles: opium, tobacco, hazelnuts, intestines, leather of game, carpet, angora, wool, silk that are produced within the country and then come from outside in transit and exported from Istanbul either processed or raw.

B- Items: herbs and drugs, petrol, textiles, dry goods, hosiery glass, mirror and bottle, iron, construction materials and hardware, sugar and rice that are brought from abroad and distributed domestically in order to be consumed within the country.

C- Articles: spirit, garments, canned goods, furniture, leather craft, flour, cement, oil and butter, soap, rolling paper, silk and textiles whose raw materials are produced within the country or brought from abroad and manufactured or partly manufactured in Istanbul.

D- Articles: coal, lumber, olive oil, fish, vegetable, milk that are produced and consumed within the country or partly exported abroad.

Istanbul’s position in the production of and trading in the goods divided into four groups above is different for each group as follows:

Istanbul has the position of an agent or intermediary that adds to the value of the article and carries out certain processes for the first group. Istanbul has a special position for these items although their production is not directly related to Istanbul. These items have a positive impact on Istanbul’s profits because significant tradesmen and businesses are located in Istanbul. Europe has commercial relationships mostly with Istanbul, but also with ships that go to European ports in Istanbul.

Although war conditions damaged the financial structure, it was possible for Istanbul to remain as a permanent center for the majority of the items. It is necessary to facilitate the trade flowing from up-country to Istanbul and from Istanbul to abroad as much as possible.

Istanbul is a direct consumer and distribution center for the second group. Istanbul will always keep its significant position since such items will be consumed in densely populated cities like Istanbul, even though Anatolian port cities had a direct access to some of the items in demand in their hinterlands. The obstacles in front of commercial development had to be overcome.

Istanbul has the position of being a direct user of industrial goods for the third group of items. Istanbul, which was the most important production and commerce center of the East, both in Byzantine and Ottoman times, lost its position due to its active financial relationships with Europe. The enterprises present in Istanbul in the 1920s were but “a shadow of its old glory” and only possible thanks to the new customs protections. However, due to its potential, Istanbul was a candidate for being an even more important industrial center.

The fourth group consisted of items that were produced and largely consumed in Istanbul. They were partly exported or produced within the country and consumed in Istanbul or sent to Istanbul to be partly exported. The increase in the trade of such items was related particularly to the economic welfare of Istanbul.

Although Istanbul was the commercial and industrial center of the country during the declaration of the Republic, it did not have a healthy and satisfactory financial structure. It was experiencing the exhaustion of the war and the problems of political transformation. The things that should be done within this scope are as follows:

Primary measures to be taken to promote production in Istanbul

According to the economic conditions of Istanbul in 1924, these were emphasized as the precautions that needed to be taken in order for Istanbul to develop as a production center:

The problems of the incentives of industrial production:

The law that was introduced in order to support the local industry during the term in government of the Committee of Union and Progress stayed in effect in the Republican period. However, the nature of this law, which supported only “big manufacturing businesses”, was criticized. The condition of having mechanical power of at least five horsepower in order to benefit from the law was not considered in compliance with the aim of incentives for manufacturing. It was advocated that the manufacturing business that did not have any kind of mechanical power (engines that worked with steam or petrol) and that worked only with manhandling needed to benefit from the Law for Encouragement of the Industry.

According to article 4 of the Law for Encouragement of the Industry dating 1913, the raw materials that factories needed, but were not produced within the country should be tabulated for importation. The Finance and Economy departments were to prepare the table jointly and the Council of Minister was to approve this regulation. However, the report argued that this arrangement was void since the Council of State was actually void due to the abolition of this Ottoman institution by the Republic. It was stated that the arrangement of this table would be beneficial for the production in the country. In the lack of it, every customs administration office acted on its own and harmed merchants.

The need to set up a stock market:

Although there was a Stock Exchange Market that was active as of the mid-20^th century in Istanbul, there was not an organized spot and futures transaction market where agricultural products and raw materials were handled. There is a suggestion regarding this subject in the report: a grain and commodities stock market should be set up in Istanbul. The movements in the wholesale prices could be monitored closely through this stock market, which would regularly be in contact with European stock markets. Consumers, as well as the first and second-degree producers, would gain favor thanks to the official prices that would be formed in the stock market.

The inconveniences of standard product deficiencies would be resolved since the establishment of a stock market would enable the practice of the standard goods principle. Both spot and futures transactions should be allowed in the commodities stock market that would be opened. A commodities stock market cannot be imagined in any other way. People who would do the transactions should be members of the profession.

The need for a commodity exchange market where agricultural products and commodities could be processed in Istanbul came to the forefront on different occasions in the 1870s. The Istanbul Commodity Exchange Market started operating in Şark (Orient) Han in Galata on 21 February 1925. The stock market where futures transactions could be carried out started operating in Izmir in only 2003 and transformed into Borsa Istanbul Corporation in 2013.

The inability to channel the savings into investments was mentioned in the report. However, the establishment of neighborhood branches of the banks in order to collect deposits was not considered realistic. The employees of Ottoman Bank or Credit National Bank would be present in post offices at certain times and collect deposits. This was considered a practical method.¹⁷

Elimination of communication malfunctions:

One of the most important obstacles preventing the development of trade in Istanbul in the 1920s was the communication problem. Both domestic and foreign commerce chambers were complaining about this issue. A recipient in Istanbul would get a telegram sent from Europe in 3 days or maybe even a week. Even telegrams from Egypt sometimes came in the mail. “Under these conditions, engaging in international trade is like competing with a plane by using a camel.”¹⁸ A tradesman who wanted to send a telegram from Istanbul to America had to consult a reporter in Germany. Although Berlin sent the telegram to New York and got confirmation report within the same day, Istanbul could send a telegram message to Berlin in two days. It was emphasized in the report that the reasons of this delay should be examined, the speed of the communication should at least go back to its speed before World War I, and domestic producers and consumers would suffer if this slowness continued. It would not be possible to purchase goods from abroad at the most affordable price or to sell goods at the highest price with this communication speed. Prices are subject to change every day, every hour. Taking advantage of this was only possible through having the fastest communication facilities.

In addition to mailing services, mail distribution also had problems during the first days of the Republic. Although foreigners preferred the Ottoman Post Office because of its speed and because of the lack of other options, its mailing services still displayed malfunctions. Even the letters sent to well-known people or businesses did not arrive due to mistakes in the addresses.

Conditions of Istanbul in the Formative Period of the Republic and Suggestions

Right after the declaration of the Republic, it seemed possible to list the economically important products and services item by item for Istanbul. These items were listed in the report prepared by the Istanbul Economic Commission, formed within the body of ITSO, and dated 26 November 1924.

In total, 240 suggestions were listed at the end of the report titled “Our Suggestions”. For each product and service discussed in the report, there was at least one suggestion. These suggestions can be grouped under a few topics in terms of their qualifications.

It is possible to say that a liberal attitude that generally aimed to open the way for entrepreneurship was prevalent in the suggestions made to improve the economic structure of Istanbul. The suggestion for the abolition of customs duties or reducing the tariffs was repeated for many products. As a matter of fact, suggestions such as “downsizing 7- cadres in bureaucracy and withdrawal of the state from industrial sector” can be shown as the example of this liberal attitude. As is known, a completely opposite policy would be adopted in the following years.

Another significant subject in the suggestions is the need for improvement of the educational system. There were many suggestions about giving importance to education on various levels. There were also suggestions about opening industry and trade schools, practical art schools and evening art schools. Additionally, suggestions mentioned the need to have trainings to raise awareness among farmers in order to increase the productivity of agricultural products.

Some of these suggestions were realized in time. To give some examples of suggestions regarding financial issues, suggestions such as “194- Regulation of Stock Exchange Market Regulation with a broader perspective” or “187- Attempting to form a rea estate and credit bank in Istanbul” were realized although the center of the bank that was set up was in Ankara.¹⁹ Likewise, suggestion no. 99 “the establishment of a product stock market where futures transactions can be carried out in Istanbul” was put into operation in Izmir 81 years after the report and moved to Istanbul ten years after that.

Consequently, the report that was prepared under the chairmanship of Cavid Bey and within the body of Istanbul Chamber of Trade and Industry in early 1924 is a valuable document. It is valuable because of its descriptions regarding the financial conditions of Istanbul and suggestions regarding developing the country financially. However, the suggestions in the report did not get the acknowledgement they deserved by the Ankara Government due to the political environment of the period. There was never a retrospective analysis of the relevance of these suggestions nor was an evaluation of which of the suggestions were realized. However, it can be said that the political preferences that resulted in underutilization of Istanbul’s economic potential during the formative years delayed the economic revitalization that the country deserved. The extent to which the potential of Istanbul could be used is the referential framework to explain the differences between nominal objectives towards economic development and their realization in practice.

ISTANBUL’S ECONOMY FROM THE EARLY REPUBLICAN ERA
TO THE SECOND WORLD WAR (1923-1945)

Various classifications based on different criteria exist in the periodization of Turkish economic history. When considered from the perspective of Istanbul, the period from the formative period to World War II can be grouped under one title because Istanbul went through a difficult process in the first half of the 20^th century, both during world wars and the years in between.

As is known, after Mustafa Kemal Pasha left Istanbul on a ferry on 16 May 1919 to go to Samsun, he did not come to Istanbul for over 8 years, not until 1 July 1927. Practical impossibilities due to the Independence War are most likely why he did not go to the city during the first years of this 8-year period. However, after the declaration of the Republic, President Mustafa Kemal did not go to Istanbul for nearly 4 years –quite a long time that defies any explanation based on impossibility. Even when he was passing through the Bosphorus on his Mudanya-Trabzon trip on 12 September 1924, he did not stop in Istanbul, which was interpreted as a punishment for Istanbul. When the economic policy preferences of the establishment period of the Republic are analyzed, there are some other examples that support this interpretation. ²⁰

1 July 1927 was the date when President Mustafa Kemal returned to Istanbul after years. It was also the date when the first issue of 500 TL (Turkish lira) and 1000 TL banknotes went out in circulation. It cannot be a coincidence that there were no verbal or visual references to Istanbul on these banknotes.²¹ The significance of Istanbul in the economy of the country and its political, historical and geographical qualifications cannot be ignored. However, there were not any signs from Istanbul on the first issued banknotes, although some geographical engravings recurred a few times.

Likewise, it is difficult to explain the doomed faith of all the companies founded during the last years of the Ottoman Empire by people who were close to the Union and Progress Party in addition to Credit National Ottoman and other “national companies”²² with commercial failure.²³ It is not possible to think that the political atmosphere of the period did not affect the economic opportunities of the city.

The point where the financial development can roughly be observed the best is the population growth. The relationship between economic development and population can be seen as the chicken and egg relationship. One can have an opinion about the change in the economic situation looking at the population figures of a place. According to Turkey’s first general census that took place in 1927, the population of Istanbul was 699.769 and the population of Ankara was 74.000. While the population of Istanbul went up to 739.171 in the 1935 census, the town population of Ankara went up to 123.000. In other words, while the population of Ankara increased by 66%, the population of Istanbul went up by only 5%. While Istanbul was ten times bigger during the establishment of the Republic, this rate decreased by half within 15 years.

Istanbul was one of the two cities with a population of over 100.000 according to the 1927 general census.²⁴ The majority of the country’s population still lived in villages or cities like villages. Istanbul was still the biggest city of the country but it also experienced the biggest demographic and economic loss in the Republican era. The fact that the 1907 level of population could only be attained in the 1950s and that its population decreased until 1927 is suggestive about the low economic prospects of the city in that period.

Istanbul was of secondary importance during the development and industrialization attempts in the early Republic. The majority of 11 big industrial enterprises planned in the early times were outside of Istanbul. The only exception to this situation was Paşabahçe Glass Factory. Also, Bakırköy Textiles Factory was expanded.²⁵ One explanation for making investments elsewhere in that period can be the goal of all-out development of the country. However, in terms of productive managing principles, ready access to the raw material, work force and market are important factors. In this regard, it seems impossible not to claim that Istanbul had relative –if not absolute- advantage in any given industrial investment project at the time.²⁶ While Istanbul was ignored, choices such as setting up a sugar factory in Erzurum where there was no sugar beet production, was justified by “spreading the development to the country”. For a product with a cumbersome raw material, production in a faraway location had a high activity cost for the economy of the country.

While most of the privileged companies extant from the Ottoman capitulatory regime were still present in the 1920s, the Republic gave new privileges to companies with foreign capital. Istanbul-Seydiköy Gas and Electricity Company (1924, Belgian capital), Izmir Telephone Company (1925, Sweden), Izmir Electricity and Tram Company (1926, Belgium), Zingal Forestry Company (1927, Belgium), Southern Anatolia Manganese Mining Company (1927, Germany), Kireçlik Chromium Mining Company (1927, France), Adana Electricity Company (1928, Germany), Ankara Electricity and Gas Company (1928, England), Fethiye Silvery Lead Mining Company (1928, France), Ford Company (1929, USA) and Coal Mining Company (1929, France) were among the privileged foreign companies set up in the new era.²⁷

Some foreign companies founded factories in Turkey without getting any privileges in the same period. Two cement factories were founded by the French capital and Belgian capital respectively during the first years of the Republic. An English company opened a big cotton gin factory in Adana in 1925. Nestle’s chocolate factory in Istanbul, HMV and Columbia’s record companies, pharmaceutical factories of some foreign chemical companies, and the silk weaving company of a Japanese group in Bursa were the important companies. To sum up, “Contrary to what has been written and said with inadequate research and assumptions, Turkey of the 1920s witnessed an important foreign capital flow to Turkey” as Tezel expressed.²⁸

Most of the nationalized public works were in Istanbul while no priority was given to Istanbul in state investments in the early Republic period. Examples of this include Kadıköy Water Company, which was purchased by the government on 17 June 1937, Istanbul Electricity Company, which was purchased on 23 May 1938, Istanbul Tram Company, which was purchased on 28 January 1939, and Tunnel Company, which was purchased on 30 January 1939.

As a choice of economic policy, one may consider reasonable to nationalize public works that act as natural monopolies. However, in a period when the financial problems were at their highest level, state surveillance of the operations and profitability through intervening with these private companies’ service and pricing policies was also a possibility. Instead, the state spent the limited resources on the expropriation of the private businesses: “an important portion of foreign debt of the Republican era resulted from nationalization policy rather than inheriting the debts of the Ottoman Public Debts Administration.”²⁹ In the present, a cool-headed argument would be that keeping these companies in line through public regulations could be a significant policy alternative for reaching the targeted goal because nationalization resulted in economic etatism without producing the expected results. Taxes and foreign debt were used to change the ownership of the available capital rather than in making new investments and increasing the national income.

Expropriations that sped up in the second half of the 1930s continued in the following years as well. Haliç Ferries Company was transferred to the Ministry of Transport on 15 April 1941. The same ministry seized Auspicious Company (Şirket-i Hayriye: the Bosphorus Ferries Company) on 4 July 1944. On the other hand, the ferries belonging to two private companies were seized due to the extraordinary Wealth Tax debt on 4 February 1944.

Istanbul had the highest Property Tax accrual and collection. Thus, the extraordinary Wealth Tax had a cost for Istanbul’s economy. However, it also contributed to the weakening of Istanbul’s “otherness” by moving assets from non-Muslims to Muslims. This was because the loans offered by the banks for the properties put up for urgent sale due to tax debt were distributed rather selectively.³⁰

Turkey’s first private sector plane factory, founded by Nuri Demirağ (1886-1957) in Beşiktaş in 1936, and his Aviation School founded in Yeşilköy, did not fare better. This factory, owned by a national entrepreneur,, produced “A-class airliners” and operated pretty successfully, receiving orders from various countries and delivering some of them. Ankara nevertheless adopted a different viewpoint on economic matters and had the Turkish Aviation Association cancel its plane orders from the company. In line with the prevalent political atmosphere it was. prevented from exporting its planes and finally expropriated and closed down, The damage done to the industrialization infrastructure of the country was not limited to the respective entrepreneur or the city of Istanbul.³¹ When examining the reasons why Turkey missed out on the twentieth century in the industrialization process, one should take account of the attempt to set up a plane factory. The experiences Nuri Demirağ had as, the wealthiest businessman of his time in his endeavor to set up a plane factory conveys in a nutshell the setbacks in the history of Turkish industrialization. He endured various obstructions from the state rather than enjoying official support. In addition, he was faced with court cases. Nuri Demirağ is not the only example for this situation. Vecihi Hürkuş had similar experiences in the same period as well.

Vecihi Hürkuş (1896-1969) built the first Turkish civilian plane VECIHI XIV in a lumber shop he rent in Kadıköy, He performed his first flight in front of a big crowd and press group in Kadıköy-Fikirtepe on 27 September 1930. After this flight, he flew to Yeşilköy and then to Ankara with VECIHI XIV. He applied to the Ministry of Economy for an airworthiness certificate and he got the response “A certificate could not be given as there was nobody to evaluate the technical qualifications of the plane on 14 October 1930.”³² Thereupon, Hürkuş got permission to dismantle his plane and send it to Czechoslovakia on a wagon he rented from a railway in order to get a certificate. Official documents, like statics report, regarding the plane were translated into Czech language in advance and the plane was put together again. After the controls of materials and technical controls were completed, the flight control was performed. Hürkuş received the flight permission from Czechoslovakian officials with a ceremony on 23 April 1931 and was honored with a banner saying, “Long live the Turkish aviation”. He left Czechoslovakia on 25 April 1931 and arrived in Turkey on 5 May 1931; however, VECIHI XIV was prohibited from flying with a telegram order on 3 November 1931. He also manufactured the plane called “Nuri Bey” (Vecihi K-XVI) through financing from Nuri Demirağ. Vecihi Hürkuş set up Hürkuş Airlines, which was the first civilian airline company, in 1954. However, this company does not exist today and its history is not even known adequately.³³

The Istanbul-Ankara conflict in the early Republic, which is one of the vacant subjects of Turkish economic history, has not been examined in terms of its economic consequences yet.³⁴ However, the traces of this conflict could be seen in many economic policy preferences in the 1920s and 1930s because according to Ankara, people who had the financial power in Istanbul were either people considered as political rivals or minorities who were difficult to accommodate by the nation-state mentality. Thus, economy policies of the early years of the Republic can be defined as “the attempts to develop without using Istanbul’s potential” in a sense. For instance, several congresses and conferences gathered in Ankara in the early Republican period. The convenience of convening the “Fishing Congress” in Ankara is disputable. Obviously, Istanbul comparably had physical advantages over Ankara in that period. The preference of Ankara had no meaningful reason other than a show of strength in a period when its transportation and accommodation facilities were backward;, availability of such facilities was a prerequisite for the participation of relevant parties to any meeting. It seems possible to classify the conferences that convened in Istanbul in early periods under two groups. The first one comprised international meetings, with the participation of foreign countries as well.³⁵ Istanbul was preferred for a few other conferences that gathered with the aims of encouraging the use of domestic goods or savings.

For instance, the message “Youth! Use domestic goods!” was given in the conference that convened in Istanbul on 4 April 1929. The headquarters of the Türkiye İş Bank is in Ankara, but the “Savings Day” announcement was made by the Türkiye İş Bank at the Istanbul branch on 17 December 1929. Organization of the “Savings Day” by the Istanbul branch instead of running a countrywide campaign through the head office in Ankara must have carried a message.

Izmir Economic Congress and Istanbul

When the events of the period are analyzed, it is possible to say that the choice of Izmir as the venue of the 1923 Economic Congress aimed to check Istanbul’s financial supremacy as well as economic groups in Istanbul.

It was decided that the “Foreign Trade Congress” would be organized in Istanbul in December of 1922 by National Turkish Trade Association. This would occur a few months before the Economic Congress that convened in Izmir between 17 February-4 March 1923. The subject of this planned congress was “filling the financial gap that emerged in Istanbul with Turkish tradesmen and searching for ways to build relationships with European and American trade environments.” The congress was postponed until 15 January 1923 since the preparations were not complete by December. The Minister of Finance at the time, Mahmut Esad Bey (Bozkurt) (1892-1943), requested from the National Turkish Trade Association that organized the congress in Istanbul to postpone the congress and to participate in the Turkish Economic Congress to be convened in Izmir in February. Efforts to organize a congress in Izmir sped up after this.³⁶ This suggest that the Izmir Economic Congress was an attempt to “steal the spotlight” from Istanbul.

It was anticipated that 8 people from each district would participate in the Izmir Economic Congress (one tradesman, one industrialist, one craftsman, one laborer, one company, one bank representative and three farmer representatives). The majority of professional representatives, associations and institutions were in Istanbul. For example, professional groups such as Istanbul Craftsmen Guilds, Istanbul Porters’ Community, All Tailors Community, Istanbul University (Darülfünun) Law School, Istanbul School of Trade, Farmers Association, Alumni of Galatasaray, and Hungary Turkish Graduates Community came from Istanbul. The most crowded group, apart from the farmers, was composed of people who came from Istanbul. The National Turkish Trade Association that could not gather the congress in Istanbul because of Ankara’s intervention wanted to exert their authority in Izmir. However, they faced many challenges including delegate quotas and transportation to Izmir. It was not easy for Istanbul delegates to leave to participate in the congress and to arrive in Izmir.³⁷

The preference for Izmir for the 1923 Economic Congress of Turkey while the efforts were still continuing to convene a congress in Istanbul, give hints about the Ankara-Istanbul economic tug-of-war because the idea and preparations of organizing a congress in Istanbul started earlier. Although the Congress convened under the supervision of the Ankara government, it was also an opportunity for the tradesmen of Istanbul and their representative, National Turkish Trade Association, to be heard. The Izmir Economic Congress was the venue where the first signs of tension between Istanbul trade groups and the Ankara Government were displayed. This was because Istanbul delegates not only participated in the Izmir Economic Congress with a crowded group, but also became individuals who directed the congress from start to end due to their grasp of the subject.

The president of the Izmir Economic Congress was Kazım (Karabekir) Pasha but the congress clerk was National Turkish Trade Association delegate Ahmet Hamdi (Başar) who represented Istanbul tradesmen. Although the congress president stated that “The Economic Pact was more important than the National Pact” during his speech about the Economy Pact, there were not many items related to economy in the Economic Pact. The demands of Istanbul delegates were not added to the Economic Pact either. Although the suggestions of Istanbul delegates were reasonable, “identification with Istanbul” was enough for them to be rejected. Istanbul tradesmen who were not content with the results of the congress requested the congress to be repeated the following year. However, no other congresses convened for this matter until Industry Congress in Ankara in 1930, where Istanbul was not represented adequately.

Ankara’s viewpoint in that period was averse to whatever initiative to be taken by Istanbul in any event. The Finance Deputy Mahmut Esat Bey (Bozkurt) did not welcome Istanbul delegates. Although there were people who had active duties in the Independence War among his addressees, serious accusations such as “people, who betrayed the national government and cause, nesting in Istanbul” were expressed. There was an indiscriminate policy of alienation towards Istanbul. Ankara did not consent to Istanbul’s leadership in the struggle of nationalizing the economy. One of the things to be done was to weaken Istanbul.³⁸ This viewpoint of Ankara became the decisive factor in the changes in Istanbul’s economic structure in the early Republican era. The priority of the economic struggle was to increase the economic assets of the country as a whole by making use of the limited resources at hand in the most proper form. However, this priority turned into an attempt to transfer Istanbul’s economic power to Ankara in those years. Whatever done in economy, Istanbul had to be excluded.

Almost all sources that mention the Izmir Economic Congress emphasized, “main principles of the economy of the state to be founded was determined”.³⁹ There is no sign of an intention to ignore Istanbul’s potential or hostility against foreign capital in this statement. As a matter of fact, both the significance of Istanbul and the presence of foreign capital existed in the companies founded until the 1930s.

The lack of the power and interest of the private sector was emphasized as the reason why policies of economic etatism were practiced in the 1930s. However, this view does not completely reflect the situation in the 1920s. According to Ökçün’s study, 201 corporations were founded in Turkey between 1920 and 1930.⁴⁰ 119 (nearly 60%) of these companies were founded in Istanbul. There were foreigners among founders, shareholders, or executive board members in 57 of the companies founded in Istanbul (28%). In terms of corporation capital, these rates are higher.

There were foreigners among founder, shareholder, and executive board members of 3 corporations out of 31 Turkish corporations that were founded to operate in the banking field of Turkey in the same period. The paid-in capital of the 3 banks with foreign partners was 1.230.000 TL and they were all founded in Istanbul.

Only three of 28 banks that were founded as corporations by domestic capital within the same 10-year period were in Istanbul. ⁴¹ When the capital is considered, nearly 428.000 TL (less than 2%) out of the 22.000.000 TL paid-in capital of domestic banks belonged to the banks in Istanbul.⁴² This situation was not parallel with Istanbul’s historical importance in the economy. However, it is informative about the financial developments in the formative years of the Republic. The same situation is valid for insurance companies founded in the same period. Six out of eight insurance companies with foreign shareholders founded until the 1930s in the Republican period were founded in Istanbul. The headquarters of two companies with completely domestic capital were in Ankara.

Some of the companies that were expropriated as of the 1930s in line with economic etatism were the companies who had been established by the permission of the Republic. This makes the explanation “the investments had to be made by the state out of necessity since the private sector did not have enough entrepreneurial power” inconsistent. It also weakened the claim, “the economic structure based on privileges granted by Ottoman capitulations and inherited by the Republic was nationalized.” Some past and present investments made by the private sector were expropriated in this period by the state despite its meager funds available. It carried out expropriations by going into debt or cancelling the treasury’s due expenses. The former owners of the companies that were expropriated took a part of the paid expropriation price abroad. The explanation that carries validity in light of the evidence is the transfer of Istanbul’s economic power.

Imperial Center vs. Nation-State Center

The effects of moving the capital to Ankara should be considered in terms of Ankara’s attitude towards Istanbul, embodied in the expressions of the Minister of Economy, Mahmut Esat Bey. The government officers and soldiers present in the city had a share in the economic vitality of Istanbul, which had been the center of the Eastern Roman Empire and then the Ottoman Empire for centuries. Istanbul’s loss of the position of a capital city was a major blow for Istanbul’s economy by itself. Although the business in Istanbul was against the change of the capital, it could not object to this decision overtly.⁴³ Ankara’s status as the capital meant that Istanbul lost the advantages resulting from being “the capital of the empire”. In this case, Istanbul could only develop as the economic center of Turkey. However, the political will of center is not encouraging.

Despite the official discourse that the War of Independence was carried out against the Western imperialism, foreign capital existed in Turkey until the 1930s. While foreign-capitalized Turkish companies continuing from the Ottoman Empire were operating and the new ones were being founded in Istanbul in this period, state-capitalized and domestic-capitalized Turkish corporations were being founded in Ankara.⁴⁴ The preference of the political authority is obvious in such an atmosphere. The attempts to found Ankara-based new domestic companies and create a national bourgeoisie gained significance along with Turkification of the foreign companies, which was what Muslim-Turkish tradesmen in Istanbul preferred. Istanbul tradesmen also complained that the Istanbul Chamber of Commerce and Industry (ITSO) was not really the “Turkish Chamber of Commerce”. However, people who were assigned to the management of ITSO during its “turkification” process must not have been considered acceptable by Ankara, because efforts to create alternatives in Ankara continued after management of ITSO was Turkified.⁴⁵ However, Ankara had inadequate financial and commercial potential. The headquarters of nearly all public banks and financial businesses founded after the principle of etatism was adopted were in Ankara. This situation meant weakening of Istanbul as an economic center, which had already lost its position as a political center. One of the striking features of the economic progress in Turkey between 1923-1950 was the formation of the industrial bourgeoisie by people from the state bureaucracy.⁴⁶

Although financial feasibility required preference of another city for a long time, the presence of centers of public companies in the capital was adopted in Ankara. The productivity loss caused by the fact that headquarters of public banks were in the political center instead of the financial center became a subject of discussion again in the period launched by the 24-January Decisions (1980). However, public banks deeply experienced the problems of difference between the area of activity and center of management during the twentieh century. Some banks moved their headquarters to Istanbul and some of them were closed down before they moved their headquarters.

For instance, while the activities of primary banks, including Ottoman Bank, which had the status of central bank until 1930, were in Istanbul, the management center of Central Bank (Merkez Bankası) and other deposit and investment banks founded by the state in the Republic period was in Ankara. The first bank to be moved to Ankara was Ziraat (Agriculture) Bank. During the occupation of Izmir in 1919, Greeks formed a separate Ziraat Bank Administration Center and bound the branches and boxes in the region to this center. The Ankara Government bound the branches and chests in the places under their dominance to Ziraat Bank Ankara Branch after the Grand National Assembly opened in 1920. Finally, the center of Republic of Turkey Ziraat Bank, which was turned into a corporation through the Budget Law in 1924, was in Ankara.

During the liquidation process of Ottoman National Credit Bank, which was established and operated in Istanbul following the Izmir assassination, it was transferred to the Turkiye İş (Business) Bank, which was smaller in all aspects but was founded in Ankara in 1924. This situation was an extension of the same attitude as well because the place of establishment explains the ownership structure of the banks. All of these events were political preferences that had a weakening effect on Istanbul’s financial power.

Tablo 1- The distribution of Corporations that were founded in Istanbul between 1920-1930

Source: Ökçün, 1920-1930 Yılları Arasında Kurulan Türk Anonim Şirketlerinde Yabancı Sermaye. [Foreign Capital in Turkish Corporations Founded between 1920-1930].

The 1920s, following World War I, were similar to the easy loan period of the 2000s in terms of global conjuncture. The time before the 1929 Depression is defined as “The Roaring 20s”.⁴⁷ Turkey was not able to make use of the opportunities of this financial conjuncture.⁴⁸ Due to the discussions of modus operanti, attempts at consolidation of power, and bombastic policies of alienation, the country missed the opportunities for the economic development in this exceptional period. While financing from Western countries was easy and cheap, the young Republic could not adequately make use of the chance to obtain this financing through the private sector and to catch international trade opportunities. This was because the finance and trade circles settled in Istanbul that could have been operational in financing during those years were either struggling to survive or to leave the country.⁴⁹ The fact that Turkey could not benefit from this rising trend in the world during the 1920s did not prevent it from being subject to the negative effects of the 1929 depression on foreign trade balances. As a matter of fact, one of the social groups that was affected in the most negative way by the economic depression was undoubtedly the category of tradesmen.⁵⁰

Had it not been for the unfeasible economic model –followed for the sake of sidelining Istanbul-, it would not be unfair to argue that the country would have been more prosperous in the twentieth century. As a matter of fact, this conjuncture had a role in building up the economy of Germany in a short time although it was defeated in World War I and its economy was damaged by the hyperinflation in 1923-1924. Germany recovered within 5 years and started to export capital to Turkey, in addition to various other goods. This recurred after World War II as well. Countries such as Germany and Italy, who were defeated in the war and whose infrastructure was completely destroyed, recovered in only 10-15 years. They started giving loans to Turkey, made no progress despite staying out of the war.

Some writers define the first years of the Republic as “lost years” due to the confusion in economic models to follow. Another reason why the years between 1923-1930 were lost years was the ambiguity regarding Istanbul’s position. That said, “the postwar years between 1923-1926 was the busiest time of establishing joint-stock companies in Turkey.”⁵¹ It was stated in the 1923 Izmir Economic Congress that socialism was not a choice.⁵² However, the representative of liberalism was Istanbul. Finally, the state took the path of etatism. The centers of public banks and state economic enterprises were in Ankara after the promulgation of Republic. The obvious result of not making use of Istanbul’s commercial and strategic potential was a waste of limited sources, a loss of activity, and failure to reach the potential growth rate. The private sector, considered as the “other”, was not given a chance for revival. The state even took foreign loan to transfer the economic enterprises of the private sector to itself. The public enterprises that lost money were financed from the budget for years.

The philosophy of the etatism policy in the 1930s is described as “making investments that the private sector can not undertake”. The alienation of people whose capital and experience would enable them to invest was ignored in this explanation of the failure of individuals to make investments. In the case of Istanbul this point justifiable makes sense. In other words, the definition of etatism in the 1930s was based on the policy of exclusion of Istanbul by all means. An analysis has yet to be made into the correlation between sense of insecurity inherited from the early years of the Republic and malfunctions in the promotion of industry in our country.⁵³

The 1929 Depression and Istanbul’s Economy

During the years of 1927 and 1928 before the great depression, agricultural production seriously declined due to the drought. The decline of agricultural production on one hand and bigger drops in the price of crops than industrial goods on the other hand, had a destructive effect on the payment balance of Turkey. The Turkish economy was mainly based on agricultural production and agricultural product export. Under the conditions created by the 1929 depression, Turkey shifted to the practice of protectionist and statist economic policies that would exist until the end of World War II.

Although the governments were careful with their budget balance in this period, foreign trade and foreign exchange controls came to the fore due to the deterioration of the balance of payments depending on the changing international terms of trade, unfavorable to Turkey. Later, interventions and surveillance increased in domestic trade and markets. The Ottoman “Stock Exchange” was taken over through a regulation enacted in 1922. The stock market transactions were rearranged through the Securities and Foreign Exchange Markets Law in 1922 and a regulation following it. The stock market, whose equities and conversion transactions declined in the economic crisis environment, became a place where foreign exchange transactions gained more significance. It was moved to Ankara in 1938 with the title of “Foreign Exchange, Securities and Bonds Market”⁵⁴ and returned to Istanbul in 1941. Its foreign exchange transactions continued until the end of 1958.

The national financial policy that continued from the Party of Union and Progress and during the first years of the Republic evolved into the policy of economic etatism after the 1929 depression. The state undertook investments in industry and started operating as the producer directly. The objective of these policies was to establish a national industry by the state investment since incentives in the 1920s (for instance, the Law for Encouragement of the Industry) failed to create.

“The First Five-Year Industry Plan” that went into effect in 1934 can be shown as the primary step of statist industrialization in Turkey. However, there were other regulations and practices directed towards economic etatism before this plan as well. If one of the objectives of all these policies was to develop Turkey economically, the other one was to realize development elsewhere different from Istanbul without utilizing Istanbul’s potential. For instance, there were many attempts to set up several industrial enterprises by the government during the first years of the Republic. However, receivers of nearly all of these enterprises were planned to be other places and not Istanbul. The reason for this was economic improvement in Anatolia. However, Istanbul has already been affected by the adverse impacts of the 1929 depression seriously enough because of the fact that it was relatively more open to market conditions compared to the rest of Turkey.

The 1929 depression had impacts on not only the economy but also the political life in Turkey. Those who argued that the wrong economic policies of the Republican People’s Party (CHF) accounted for the problems the country experienced during the crisis gathered around the Free Republican Party (SCF) on 12 August 1930. SCF got more support than expected, particularly in Istanbul and Izmir. This caused it to be shut down within a few months. Actually, this public attention was an indication of dissatisfaction with the economic policies that were practiced. The Progressive Republican Party (TCF) also had a similar experience in the past. The Progressive Republican Party, which was founded on 17 November 1924 and had great prestige in Istanbul and Izmir, was shut down within 7 months. TCF founders were accused of “hostility against the Republic, support for the sultanate and caliphate, English partisanship, riot provocation and treason” in The Speech; however, the founders and the leaders of this party were those members of the inner circle apart from Mustafa Kemal and İsmet İnönü who led the Independence War. Their comparatively liberal attitude to economic matters was the distinct common trait of these individuals. This situation caused them to be labeled as “the defenders of Istanbul” and subject to the aforementioned accusations.

To sum up, the main differences in the financial policies’ attempts to found opposition parties within the first ten years of the Republic can be defined as the effort to defend Istanbul’s position against the attempts to make Ankara dominant in every aspect. The defense of rational choices; thus, pro-Istanbul policies, against the choices of the dominant power, provided the first opposition parties with extensive support outside of Ankara and this situation caused them to be perceived as a threat to the regime.

Detailed debates regarding economic etatism and economic liberalism were carried out within the body of Kadro and Kooperatif journals in the 1930s. However, even though some names that were identified with Istanbul defended financial statism, they were not respected or heard by Ankara.

Ahmet Hamdi (Başar) who made efforts to Turkify Istanbul’s economy during the Truce Period, and make the Ankara government dominant in Istanbul, complained about this situation in his memoir. He took part in Mustafa Kemal’s 3-month country-wide trip as a consultant, but was not able to convey his opinions as an “Istanbul representative” adequately. His request to attend the commission that would be established in Ankara in 1932 in order to evaluate the economic situation of Turkey as the manager of the Istanbul Port Company was not accepted. In the response letter by Recep Bey (Peker), the general secretary of CHF, to Ahmet Hamdi’s letter that he wrote to Mustafa Kemal on 23 March 1932, he was requested to “convey his ideas for Mustafa Kemal to Recep Bey”. These examples are significant to show how dismissive the Ankara Government was towards Istanbul’s tradesmen.

It is difficult to argue that Istanbul, which was not favored by the political authority, had welfare in this period. Economic isolation probably declined after the self-confidence caused by the increase of state control in the economy and the rapprochement provided by Mustafa Kemal’s return to Istanbul. However, the 1929 depression and World War II, which started before the country recovered from the depression, resulted in new problems on top of the previously unsolved economic problems. Istanbul’s position did not change significantly until the years when the war ended.

The 1930 Industry Congress, Etatism and Istanbul

The principle of national economy that the Committee of Union and Progress tried to implement after 1908 became confusing when some practices of the Republic were considered. Some decisions were made regarding economic preferences in the 1923 Turkey Economy Congress in Izmir; however, the practice in the following years was far from achieving the desired results. Ideal results would have increased the financial welfare, but didn’t because “it was not possible to find even a word regarding industry or industrialization processes in the programs of the 14 governments that were set up between 1920 and 1930.”⁵⁵ The Great Depression caused the review of financial policies. “The 1930 Industry Congress was the result of the need to confront this problem.”⁵⁶ There was no hesitation regarding the fact that industrialization was the way to follow in order to reach the level of contemporary civilization. However, there was not a consensus about how this industrialization would take place. The 1929 depression suddenly revealed the weakness of the economy in the 1920s. The first precautions were foreign currency controls, use of domestic goods, and incentive of savings.⁵⁷

“The National Economy and Saving Association” was established in Ankara on 12 December 1929. The speaker, some ministers, and general directors of two state banks were among the founders of this association, which had a semi-official qualification. The association started working on preparations of an industry congress in the following months of its foundation. The Industry Congress convened in Ankara on 22-30 April 1930. The National Industry and Samples Exhibition was opened along with the Congress. The Congress convened with the slogan “Our objective is that Turkey’s industry should be new and advanced like the Turkish State.” The reason to convene under the leadership of the Industry Congress was stated as “trying to increase the amount of domestic goods, raise their quality to the level of similar foreign products in terms of endurance, elegance, and excellence and decrease the prices.”⁵⁸

The most appropriate path to follow was to contact businessmen for the realization of this objective. However, according to the congress regulation, “It is neither practical nor beneficial to contact all of the businessmen in Turkey. The easiest way is to gather the representatives of various industrial groups, determine the needs collectively, and prepare the necessary principles for the realization of these objectives together.”⁵⁹ Congress was organized, in a sense, to organize an industrial inventory of the period and learn what could be done. However, competent industry people were pessimistic. Industrial circles did not welcome the attempt by Congress. Businessmen who were contacted said, “How can we expect anything from this congress when we had no positive results from other congresses organized so far? … Our needs, troubles and wishes are evident. We are tired of repeating the same things. What is the use of repeating them once again?”

Reports were requested from some settlement areas about problems of the industry in those areas and solution suggestions. “Reports from 14 cities where the industry was comparatively developed” were discussed in the congress in that period. Reports were in the form of a list of wishes from Bursa, Eskişehir, Edremit, Ayvalık, Uşak, Isparta, Elazığ, Kastamonu, Denizli, Balıkesir, Ankara, Gaziantep, Kütahya and the Izmir Industry Union. According to Şahinkaya, “The 1930 Industry Congress is Turkey’s Industry Congress in a sense.” However, Istanbul was not represented among “14 cities where industry was comparatively developed.”

The primary determination of the General Commission Report prepared at the end of the Congressional session was “the presence of the case of capital extravagance in our country.” The reasons for the capital extravagance are listed as follows in the report:

1. Failure in choosing the facility locations,
2. Tightness of working capital,
3. Inadequacy of technical devices,
4. Inaccuracy of profitability calculations,
5. Defects in the management,
6. Lack of technical specialization.

According to the commission, these reasons constitute an entirety. If one of them is lacking, “it will delay the pace of our economic development.” The commission gathered their suggestions for making up for the shortage areas under two topics: (i) An industry program for at least ten years should be determined, (ii) An Industrial Facility Scrutiny and Supervision Center should be set up. The Industry Program of 1934 can be considered as the acceptance of the first suggestion, while State Industry Office can be regarded as the acceptance of the second suggestion. However, “negligence of Istanbul’s potential” was not discussed among “the reasons of capital waste” above. There were “associates” in the congress, but there were not any representatives of Istanbul’s industry. The industry businessmen who were pessimistic about the success of the congress proved right in the following years.

Istanbul was affected deeply by World War II.⁶⁰ The ration card practice for many food products, such as flour and oil, started in Istanbul. Suburban towns and villages that were able to produce for subsistence were either not subject to such ration card practices or were only slightly affected.⁶¹ “The bath durations in Turkish baths were limited to one hour” on the grounds that ladies’ bath pleasures caused water waste in Istanbul.⁶² Although Istanbulites were considered to be more prosperous due to the economic development difference, it was inevitable for Istanbul to feel the subsistence problems in the economic crisis and war times due to the very crowded city. Such limitations were not practiced as intensely as they were in Istanbul in terms of subsistence matters.⁶³

The widest practice area of etatism was foreign trade and foreign exchange transactions since the economic structure could not produce the foreign exchange needed for the foreign trade. While it was necessary to strengthen the businesses in Istanbul as the place where the activities that could produce the foreign currency could happen, foreign exchange limitations weren’t opted for until 1980.

The conjuncture was not favoring liberal policies in the 1930s. The customs taxes did not increase until 1929 due to the Lausanne Treaty. Foreign exchange controls gained importance in foreign trade due to the pressure from the great depression after 1929. The course of events in the world was the same in this period. Thus, it was inevitable that the 1930s would be a problematic period when Istanbul experienced a comparative power loss due to international conjuncture, even without Ankara’s negative attitude towards Istanbul. The attitude towards Istanbul intensified such problems for Istanbul. Practices such as the Wealth Tax also damaged Istanbul’s trade capacity. The process experienced in that period was not simply a shift in ownership structure for Istanbul; it was also a loss of experience and prestige. Political reflections that went down in history as the “6-7 September Events” in the following years, had similar results for Istanbul’s economy.

Economic etatism policies required the establishment of special-purpose state banks in accordance with the policies. The common feature of Sümerbank (1933), Belediyeler Bank (1933), Etibank (1935), Denizbank (1937), Halk Bank and Public Boxes (1938) that were set up in this period was having their headquarters in Ankara.

ISTANBUL’S ECONOMY AFTER WORLD WAR II (1946-1980)

Since the conditions of World War II created an environment that did not allow the economic etatism policies followed by the Republic governments of the 1920s to be changed, they can be evaluated in a periodical continuity. However, there was a chance to bring forward new economic policies in the new term after the war. A new structure called mixed economy doctrine replaced the economic etatism of the previous period. The mixed economy, which can also be described as softening economic etatism, continued in a structure where mercantilism was dominant in foreign trade, industry, and state control in markets. Even though interim periodization was performed through the impact of the State Planning Organization (DPT), this period, which could be extended to the 1980s, was identified with import substituting industrialization policies. When priorities for saving the day such as war or economic crisis fell off the agenda, planned industrialization attempts gained importance. However, the method chosen for the financing of the industrialization was not the capital market; it was indirect financing through investment and development banks. These developments were the precursors of a period when Istanbul started displaying its commercial potential.

Istanbul Association of Traders

Istanbul Association of Traders (ITD), which was founded in 1947 after World War II, became the common ground where Istanbul businessmen tried to be heard during the first years of the Democratic Party. In this sense, ITD is similar to the National Turkish Commerce Union (MTTB), which was also founded by a group of Istanbul traders in 1922. There were 25 years between the foundations of these two unions; also, some of the founders and members were the same and their member profile was very similar, as both were founded by “national Istanbul traders.” The basic point that differentiated them was that the issues they were struggling against were different. MTTB was the attempt of the Muslim-Turkish trade circle to turkify Istanbul’s market after the Independence War and were not happy with the economic dominance of the non-Muslim component. ITD, on the other hand, was founded to defend the rights of the Istanbul trade circle who operated in an already Turkish market, but excluded Istanbul and was dissatisfied with the economic etatism policies that increased, particularly during World War II. The factor that encouraged them to act against financial policies that they were not happy about was the changing conjuncture.

The pioneers of both formations were the same, and media organs of both of the institutions had the same name. Both MTTB and ITD published a periodical called Economy Journal of Turkey.⁶⁴ ITD was criticized by some for being a rival to ITSO. It was emphasized that ITD was an independent trade organization while ITSO was an official institution in the responses given to this criticism in Economy Journal of Turkey. Although it was stated that they operated in solidarity, ITSO was criticized for operating “under the government’s command.”⁶⁵ The implication was inadequacy of ITSO in defending the rights of Istanbul traders as an official institution under Ankara’s control.

1948 Economic Congress of Turkey and Istanbul

The Economic Congress of Turkey convened in Istanbul in 1948 with the efforts of business circles in Istanbul that mostly comprised tradesmen. ITD was a pioneer in the organization of the congress. The establishment of an organization committee formed by ITSO, Regional Industry Union, Turkey Economists Association and ITD representatives was done in order to organize a congress where economic problems would be handled and solutions would be offered. This committee was agreed upon in the meeting of ITD’s board of management on 29 June 1948. The organization committee approved the congress regulation in a meeting on 3 August 1948.

1,300 people, including representatives of various chambers, unions, stock markets, associations, cooperatives, banks, insurance companies, universities and newspapers were invited to the congress that started in Taksim Municipality Hall on 22 November 1948 and lasted six days. General assembly meetings convened in the morning and commission meetings started in the afternoon during the congress where 1,100 people participated. At the end of the congress, the reports prepared by the commissions were approved. While some of the reports were accepted with an almost unanimous majority, some reports of the commissions witnessed fierce debates. It was decided that the next congress would convene in Izmir in 1950.

What made the 1948 Turkey Economic Congress an important event in Turkey’s recent history were the views on etatism that were brought forward in the congress. The definition and traits of etatism in the changing conjuncture after World War II took on new forms. It was stated in the congress that the state should defend the financial freedoms of individuals. Using the private enterprise as the base, the state having the guidance role in the economy and ensuring the social justice were the points emphasized.

The state should not undertake the role of a manager in the economy and restrain itself to simply carrying out the public service. It should make its presence felt through research, organization and supervision in the formation of economic policies. It was argued that the state should be removed from agricultural and industrial production. The state should not be in the position of both a rival and the supervisor-regulator in a free market environment. However, the state can operate in areas such as railways, ports, radio and energy services, which have the nature of a monopoly and exceed the power of private enterprises. The state’s legislation regarding incentives, supervision and regulations should build up trust in the private sector and should gain a qualification that would provide free enterprises.

The 1948 Turkey Economic Congress organized in Istanbul is significant in terms of showing that the economic etatism which was prevalent in Turkey in the 1930s would not exist in its old form after World War II ended. This congress, which was organized by institutions based in Istanbul, was Istanbul’s criticism against Ankara’s economic policies for a quarter century and its demands from the new period.

The loss of strength for Istanbul’s economy that started during the wars in the last years of the Ottoman Empire could not be compensated during the early Republic period. Istanbul did not have a significant growth rate in terms of population and economy during the first years of the Republic. Ankara grew noticeably during those years. The population decrease continued in Istanbul during the first years of the Republic. If the tax payments are one of the indications of economic dynamism, Istanbul was not the most dynamic city of the country during those years. Bursa had the taxation record of Turkey in 1958.

Import Substituting Industrialization and Istanbul (1950-1980)

The cost of productivity loss of etatist policies in economy became a focal point of attention after World War II. Close relationships with the United States of America changed the direction of economic policies as well. Emphasis on the strength of private enterprise and industrialization increased in the planned-economy period. However, industrialization applied in this period only consisted of production by the private sector towards the domestic market. The objective in this was to decrease dependence on import. The products imported until the 1950s were produced in the country domestically in the 1960s and 1970s. The aim was to get over the foreign currency bottlenecks that resulted from excessive import. However, the development of production as an assembly industry made the need for raw material, or semi-manufactured material, continue even though the final product was produced in the country.

Several events can be listed as reasons for the fast growth in Istanbul after the 1950s. The first event among these was the concentration of the production factors of the assembly industry, supported as required by the import substituting industrialization policy in Istanbul. This policy was comparatively supreme in terms of these factors. The factories that became dense around Istanbul in this period resulted in the increase of migration to the city and slum areas and ran parallel to the increase in employment opportunities. The inclination of the unemployed work force in the suburban areas towards the city with the mechanization in agriculture supported this process. While the urban population growth was 20.1% between 1940 and 1950, it rocketed to 80.2% in the 1950-1960 period.⁶⁶ Migration to bigger cities brought the concept of slums and a boom in construction with it. The construction sector grew by 23% annually between 1951 and 1953. The first half of the 1950s was prosperous years for Turkey. Real estate income had been growing fast in Ankara since the 1920s and spread to other cities, such as Istanbul and Izmir, in the 1950s. The other factor was the opening of the Bosphorus Bridge in 1973. The Asian side developed particularly as a housing center with the convenience of transportation between two sides of Istanbul. Fatih Sultan Mehmet Bridge started operating in 1988, which sped up this process even more. While only 18% of the total population lived in cities in 1950, this ratio went up to 44% in 1980.

The real estate market was affected adversely by the situation during previous years when the population and economic livelihood were limited.⁶⁷ Ankara was the only growing city in the country in the 1930s.⁶⁸ Istanbul started receiving migrations in 1945 and particularly after the 1950s. The economic development was parallel to the regression in the status of “the other”, and brought with it the dwelling production that increased with the “shanty” concept. The first shanties started in the Zeytinburnu area after the industrial areas were declared. The second slum area was the Rami, Topçular area.⁶⁹ The Minister of Public Works and Housing of the period stated that “the number of shanties in big cities was over 700.000” in a speech he gave on 26 January 1975. The estimate that “the number of shanty houses would go up to 400.000 in Istanbul in 1980” by the president of the Istanbul Chamber of Architects in his speech on 15 February 1962 became invalid after a short time. According to the statement of the Minister of Public Works and Housing on 5 May 1965, there were even “individuals who had 27 shanty houses.”⁷⁰

Apartment buildings increased in this period as well as shanty houses that were made common by workers who came from suburbs to work in industry businesses. However, the spread of apartment buildings was limited because the judicial system did not allow condominiums. When the Condominium Law that was accepted on 23 June 1965 came into effect in early 1966, it changed the urban appearance of the city. Owning flats in apartment buildings became more appealing as a solution of property problems. The apartment buildings, which quickly increased in number parallel to the demand, played an important role in the growth of the city. The construction of commercial structures and passages, considered as the pioneers of today’s shopping malls, started in the 1970s as well.

The compensation for the traumatic impact of political events on the economic structure of the city took a long time. Such events included the liquidation of Unionists in 1926, Wealth Tax in 1942, 6-7 September Incidents in 1955, and Cyprus incidents in 1964. However, the homogenous social structure that came into being after these incidents helped with a faster recovery in the following years.

The Banks Founded (1944-1960)

Real estate constructions and bank establishments do not display a homogenous distribution over time. The 15 years following World War II was a period when the number of the banks founded in Turkey was the highest.⁷¹ The increase in foreign loans and export opportunities made the foundation of banks through both private and state capital possible. If it is necessary to group the banks founded during those years depending on their structure of ownership and foundation locations, it is observed that banks with private capital were generally in Istanbul except local banks. The first bank in this period to be founded with completely private capital was Yapi ve Kredi Bank (1944). It was followed by Garanti (1946), Akbank (1948), Istanbul Bank (1953), Demirbank (1953), Pamukbank (1955), ŞEKERBANK (1956), and TÖBANK (1958). There were short-lived banks among the banks founded during this period such as Türkiye Kredi Bank (1948), TUTUMBANK (1948), MUHABANK (1949), DOĞUBANK (1952), RAYBANK (1956), Esnaf Kredi Bank (1957), TÜMSUBANK (1957).⁷² Niğde Bank (1948), İşçi Kredi Bank (1954), and Maden Kredi Bank (1957) were some of the local banks.

Turkey Industrial Development Bank (1950) was the first development bank to be founded in that period and represented the preferred development model.⁷³ Denizcilik Bankası (Turkish Maritime Bank [1952]), ŞEKERBANK (1953), Türkiye Vakıflar Bank (1954) and Türkiye Öğretmenler Bank (1958) were founded in the same period as state-owned or semi-state institutions. Also Halk Bank founded the Halk Sandığı in Izmir (1957). Turkish Banks Association was set up in this period as well (1958). However, 1958 devaluation⁷⁴ caused serious damage in the country, particularly in banking sector. Some of the newly founded banks were liquidated before they were able to grow.

Table 2- Distribution of foreign capitalized companies into cities (August 2013)

Source: The Republic of Turkey Ministry of Finance International Direct Investment Data Bulletin, October 2013.

After the expansion and increase in number in the banking sector in the 1950s, some small banks were merged or liquidated in the 1960s. Group banking developed in the 1970s. Likewise, Capital Market Law did not pass until 1981, although there were efforts regarding the establishment of a capital market in Turkey in the 1960s. Financing through investment banking was chosen over capital market in this period.

LIBERAL TRANSFORMATION IN ECONOMIC POLICIES AND ISTANBUL (1980- )

The-24-January-1980 Decisions and Istanbul

Although Istanbul was partly restored of honor as a foreign trade and production center in the import substituting industrialization period, it would not be wrong to say that Istanbul’s indisputable economic rise occurred after 1980. The 24-January-1980 Decisions that indicated a radical direction change in terms of economic system preferences brought along developments that would raise Istanbul’s significance. The import substituting industrialization policies between 1950 and 1980 increased the production capacity of Istanbul where the assembly industry was concentrated. However, the lack of financing also existed in Istanbul due to the need for this industry to have a competitive structure due to the 24-January-1980 Decisions. The increase in openness to the outside in the economy after 1980 caused Istanbul’s economy to grow rapidly. Istanbul’s title as the economic and financial center was strengthened in this period because most foreign trade was carried out in Istanbul. The position Istanbul acquired in the recovery process after the economic crisis at the beginning of the new millennium would be reminiscent of the imperial capital city period.

Table 3- Istanbul’s share in international direct investments (1954-2013/August)

Source: The Republic of Turkey Ministry of Finance International Direct Investment Data Bulletin, October 2013.

The finance sector in this period was concentrated in Istanbul. After the Capital Market Law was enacted in 1981, the Istanbul Stock Exchange Market started operating again in 1986. New banks, intermediary firms, and other financial institutions were established in Istanbul and some banks whose headquarters were in Ankara started considering moving to Istanbul. Moving the headquarters of institutions related to the economy, such as TCMB (Republic of Turkey Central Bank), SPK (Capital Market Board), and BDDK (Banking Regulation and Supervision Agency) to Istanbul was brought to the agenda in the 2000s. Finally, the Istanbul International Finance Center (IFM) vision that was put into effect in 2009 can be identified as the peak of the economic system choice made during the 24-January-1980 Decisions.

The objective of “a market economy open to the outside” was the essence of the 24-January-1980 Decisions, and it meant raising the economic significance of Istanbul. While the ratio of foreign trade to gross national product in Turkey was 15% in 1980, this ratio doubled in 1997 and reached 37%. The nature of export also changed in this period. While the share of industrial products in export was less than 30% before 1980, it almost reached 80% in the mid-1990s. While the number of companies with foreign capital founded in Turkey increased, Istanbul’s share never dropped below 50%. 60% of foreign capitalized companies are still located in Istanbul.⁷⁵

Even though etatism policies in the economy were abandoned, the state dominance in big industry businesses continued until the 1990s when privatization started to get results. The share of industry production of state companies, particularly the raw material provision, was around 40% until the 1970s. While state institutions were at the top until the 1980s in the “500 Big Industry Businesses of Turkey” list made by the Istanbul Chamber of Commerce (ITSO), Arçelik was among the “biggest 10 companies” list in 1987 for the first time as a private company. All of the ten big industry businesses of the country were state companies until 1987. According to the 2013 data of the same list, the only state company among the first ten companies is Electricity Generation Corporation (EÜAŞ). Six out of the ten biggest industry businesses and half of the biggest 50 industry companies are in Istanbul. 198 of the biggest 500 industry businesses of Turkey are members of ISO (International Organization for Standardization). In other words, Istanbul represents almost 40% of the industry of the country in terms of the number of companies. When their balance sizes and export capacities are compared, these rates are even higher.

Table 4 - Biggest Industry Businesses of Turkey (2011-2012 listing)

Source: İSO

Real Estate Income and Istanbul

Although the concepts of ‘shanty house’ and ‘reconstruction amnesty’ emerged in Turkey during the late 1940s, the transformation of unlicensed – and even extra-legally owned- shanty houses into apartment buildings was made possible with reconstruction amnesty laws accepted after 1980, which became the new trend. The generosity of municipalities in defining higher FARs (floor area ratio) in zoning codes encouraged this trend. In addition, liberal attitudes of authorities responsible for inspecting the compliance of structuring with reconstruction regulations had a large influence in creating today’s appearance of the city center.

The rapid growth in the real estate market took on a new form in the 1990s. When the convenient dwelling locations were exhausted in the city center, it caused the emergence of bigger housing estates firstly, and then the concept of “satellite towns”. Göztepe Soyak Housing Estate and Ataköy, which were both constructed in Istanbul in the 1990s, were the first collective housing estate examples. Bahçeşehir and Ataşehir projects initiated by the General Directorate of Housing Estate and State Partnership and Emlak Bank are the two successful examples of this model in Istanbul. In time, the city centers included the satellite towns and real estate financing opportunities increased. This process reached the level of pushing the reconstruction boundaries of cities to the geographical border of neighboring cities in the 2000s. Housing estates with different scales and social opportunities started filling the periphery of the city.

To sum up, the import substituting industrialization strategy started opening up new fields of work and business in Istanbul after the 1950s. The workers who came from suburbs to the city with a growing population increased the number of shanty houses. Reconstruction regulations and the Condominium Law facilitated the construction of apartment buildings after the 1960s. Reconstruction amnesties enabled the transformation of shanties to apartment buildings in the 1980s. Lack of quality housing in the city center created the concept of satellite towns in the 1990s, and increasing demand and financing facilities led to the “second tulip era” (Tulip Era: era of reforms part of which was reconstruction projects in Istanbul, 1718-1730) in the real estate sector in the 2000s. The only thing that did not change in this period was the increasing significance of real estate income in Istanbul that had started in Ankara in the early Republic period and the famous saying, “Istanbul is paved with gold” (Istanbul is full of opportunities).

CAPITAL MARKETS AND ISTANBUL (1923-1985)

The Securities Market, which stayed closed during World War I, was taken over by the Republic era with its present structure through a regulation change in 1922. However, due to both the constraints of its circulating devices and the debilitated financial power of the investor group in the transition period, it is not possible to refer to a stock exchange market where bills stating partnership and creditor status were circulating actively in the early Republic period. Transactions were mostly limited to foreign currency transactions of foreign trade origin. The stock exchange building was moved from Galata to Eminönü Dördüncü Vakıf Han on 1 April 1926 as a component of nationalization efforts of the economy. This occurred because Galata was where minorities and foreigners were grouped together, while Eminönü was a location for Muslim tradesmen.

The name of the stock exchange market was changed to Stock Exchange, Foreign Exchange, and Securities Market by law (law number: 1441) in 1929. However, the economic depression of 1929 did not allow the new stock exchange market to develop during its early years.

The stock market was moved to Ankara in 1938 for 3 years with the name Foreign Exchange and Securities Market, but it returned to Istanbul in 1941.

The foreign exchange transaction authority of the stock exchange where foreign currency transactions and equity share and conversion transactions were performed was revoked in 1959.

Governments’ “savings bonds” exports in the 1960s, multi partnered “workers’ companies” enterprises set up with the efforts of Turkish workers who worked in Europe, and the sale of equity shares of some corporations to the public or their conversion exports partly created mobility in the capital market. However, permanent and effective development could not be ensured until the 1980s since necessary legislative regulations were not carried out. The location of stock market transactions in this period was around Eminönü 4. Vakıf Han.

It is possible to consider the 24-January-1980 Decisions as a milestone in the development process of economic markets in Turkey in terms of a change in mentality. It can also be considered as the confirmation of restoration of Istanbul’s leadership in economy, which had suffered from economic policies from the early Republic period and on. While the banker crisis that happened right after this liberalization damaged the savings, it was also added to the archives of economic experience, filed as the torment of transition period.

The Capital Market Law drafts that were prepared between 1964 and 1970 became a dead letter at the Turkish Grand National Assembly (TGNA) twice. Finally, in 1981, the Capital Market Law No: 2499 was enacted. This law was the text that set the basic framework for the Turkish capital markets in the following 30 years. A radical change in the Capital Market Law was made with law no: 6362 in late 2012.

The official opening of the Istanbul Stock Exchange was on 26 December 1985 and the transactions started on 3 January 1986. The Istanbul Stock Exchange period started in Cağaloğlu, moved to Karaköy for a short while and finally continued in İstinye starting from 1995; it lasted until 4 April 2013.

The Capital Market Law that was amended in accordance with the vision of making Istanbul a global finance center prepared the legal infrastructure of institutional transformation of the Istanbul Stock Exchange. The name of the Istanbul Stock Exchange was changed to Borsa Istanbul Corporation on 5 April 2013 with the participation of the Istanbul Gold Market and the Derivatives Exchange (TurkDex) that operated in İzmir.

The “Istanbul International Finance Center Strategy and Action Plan” decision was published in the Official Gazette on 2 October 2009 and put into effect. Accordingly, an area of nearly 2.700.000.000 m² in Istanbul’s Ataşehir region would be turned into an international finance center. The objective of the project was to build a bigger finance center than the finance centers in New York, London and Dubai and turn Istanbul into a finance center that was approved worldwide.

CONCLUSION

Istanbul has been an important commercial and political center due to its geographical location throughout its history. Istanbul experienced a political and economic transformation in the first half of the twentieth century. The decrease in its population and increase in its homogeneity, as well as the loss of the status of capital city meant the loss of economic power for Istanbul. When some of the demographic groups that created Istanbul left the city in the first half of the twentieth century, it caused the city to lose its economic liveliness. This poses a stark contrast with increasing the economic vitality of the city through the policy of forced settlement in Istanbul after the conquest (For instance, the population transferred from Aksaray, a group of Armenians that came from Van and Bitlis and Jewish people who migrated from Spain and Portugal at the end of the fifteenth century).

The conviction that Istanbul was the opponent of Ankara, besides its non-Muslim appearance in the early Republican period, resulted in an inability to benefit from its economic potential. After a staggering period that required a generation to change, Istanbul regained its economic significance. Today, Istanbul’s economic significance constitutes almost half of the economy of the country by itself and is indisputable. Istanbul, which was the imperial capital city in the early twentieth century, is a candidate to be one of the financial centers of the global economy in the twenty-first century. ITO, where nearly 1.000.000 businesses are registered, is the biggest chamber of commerce today. This magnitude, which results from its centrality, is at a level where it requires activity-increasing precautions to be brought forward.

The economic structure Istanbul reached in the 2000s is the mirror image of economic policies of the second quarter of the twentieth century. The growth in Istanbul after the 1950s and particularly the 2000s is like letting go of a stretched bow. However, when the concentration in Istanbul was added to an uncontrollably growing population and infrastructure in the 1950s, it reached a level that caused fears of chaos as well as advantages.

It is an indisputable fact that the country experienced serious problems and deprivations during the establishment years of the Republic. After the time that passed and generations that changed, a nonpartisan statement would be that some of this distress was likely to result from the failure to adequately benefit from some skilled individuals who were considered as political rivals. Negligence of Istanbul’s potential in a conjuncture where the empires were destroyed and national states were emerging is not surprising. The cosmopolitan structure of the imperial capital city was not in accordance with the national state policies.

The efforts of the Committee of Union and Progress to Turkify the economy through a national economy policy started over from scratch since the actors of this national economy policy were considered “non-national” after the Republic. Many companies founded by national elements in Istanbul within the scope of the Law for Encouragement of the Industry that was introduced in 1913 were subject to liquidation or property transfer after the Republic. People who were supported by the national economy policy of Unionists had troubles in the following term due to this support and none of the national companies of the previous term lasted long. It is unimaginable for regime changes not to have impacts on the economic structure, all the more so when even a new government in a democracy may bring either fortune or misfortune to some businessmen. Istanbul’s economy was on the losing side in the transition from the empire to the nation state.

The preference of the chief social stratum (Muslim Turks) as military or public service rather than trade is considered to be the reason why the Ottoman Empire lagged behind. In other words, while political power was gained through economic power in the West, acquiring economic power through political power was criticized in Ottoman Empire. This understanding did not change after the Republic. New elites and favorites emerged. In this period Istanbul was not the city where the privileged groups of the new period were located. It was a city losing power since minorities and foreigners, who were given the occupation of commerce in the former era, left the city.

Istanbul was the “other” for the Ankara government during the foundation years. This attitude suppressed Istanbul’s economic power in following years. However, the pressure declined in the 1950s and turned into interest in liberal economic policies that were brought to the agenda in the 1980s. Istanbul gained great significance in the economy after 2000.

The organization of the center of all state banks and companies that was founded in the early Republic era in Ankara was far from economic rationality. The transfer of institutions such as the Istanbul Stock Exchange, the Foreign Exchange and Securities Market, and the School of Government (Mülkiye) to Ankara can be shown as examples of Istanbul’s position as the “other” in this period. Each move meant a loss for Istanbul’s economy. In the 2000s, on the other hand, the move of financial state institutions, especially the state banks, such as TCMB, SPK, and BDDK to Istanbul was brought forward. This time, problems, as well as the benefits, of excessive aggregation were discussed.

The economic conflict between Ankara and Istanbul was not anachronistic. Claims were discovered decades later. Cavid Bey, in his IIK Report that he wrote in 1924, and Kazım Karabekir and Fethi Okyar in their endeavors to run an opposition party, tried to stress the same points as well. The correlation between the short span of life of the opposition parties and the support they drew from Istanbul has not been analyzed adequately so far.

In conclusion, the way the Republic has evolved in 90 years is undoubtedly a success story. An economy was created from scratch. However, the current situation of Istanbul is an even bigger success story since the city strengthened its leadership in a competition that it started one step behind. One of the developments of the Republic’s economic history of 90 years is the change in the negative attitude towards Istanbul during the early years.

This text has not been written to underrate the development efforts for the country against all odds. The Ankara government has certainly had big achievements. There is no doubt that they did the best they could with what was left after ignoring and wasting a part of the remaining resources and destroying other parts in an already ruined society.

FOOTNOTES

1 İlber Ortaylı and İsmail Küçükkaya, Cumhuriyet’in İlk Yüzyılı (1923-2023), Istanbul: Timaş Yayınları, 2012, p. 306.

2 Ticaret ve Sanayi Odasında Müteşekkil İstanbul İktisat Komisyonu Tarafından Tanzim Edilen Rapor, 29 Kânunusâni 1340-1926 Teşrînisâni 1340-1924, İstanbul: Zelliç Biraderler Matbaası, 1341. For the transcription of the report also see. Ticaret ve Sanayi Odasında Müteşekkil İstanbul İktisat Komisyonu Raporu, tr. Aynur Karayılmazlar, Ekrem Karayılmazlar, İstanbul: İstanbul Ticaret Odası, 2006.

3 Murat Koraltürk (prepared) Ahmet Hamdi Başar’ın Hatıraları, Meşrutiyet, Cumhuriyet ve Tek Parti Dönemi: Gazi Bana Çok Kızmış, II vol., İstanbul: Bilgi Üniversitesi Yayınları, 2007, c. 1, s. 10-15 has been greatly benefited from under this topic.

4 This bank, which was established by the Party of Union and Progress in 1917 and was aimed to substitute for the Ottoman Bank was transferred to Turkey İş Bank Corporation in 1926 during the Izmir assassination process.

5 It was later called Turkish Commerce Bank. Its current title is “Turkish Commerce Bank Corporation in Dissolution”. Although the establishment location was Adapazarı, its activity area was the hinterland of Istanbul, which may be why it was included in the report.

6 Actually this number is higher. Eight banks were set up in Istanbul by Turks (also 7 banks by foreigners and 2 banks by minorities) between 1909 and 1923. Fourteen banks were founded in Anatolia by Turks. However, they were not long lasting and could not provide the expected financial benefits because the banks did not have adequate capital and their foundation dates coincided with the World War (See A. Gündüz Ökçün, “1909-1930 Yılları Arasında Anonim Şirket Olarak Kurulan Bankalar”, Türkiye İktisat Tarihi Semineri: Metinler/Tartışmalar, 8-10 Haziran 1973, ed. Osman Okyar and H. Ünal Nalbantoğlu, Ankara: Mars Matbaası, 1975, s. 409-475).

7 During the rule of the Party of Union and Progress, particularly during the nationalization attempts that increased after the start of the World War, the languages used in companies were subject to discussions and regulations. Due to the defeat in the war, the occupation and truce that followed changed the structure in transition to Republic.

8 See. A. Gündüz Ökçün, Osmanlı Sanayii 1913-1915 Yılları Sanayi İstatistikleri, İstanbul: Öztürk Matbaası, 1984.

9 For the preparation process and a detailed evaluation of the report, see, İlhan Tekeli and Selim İlkin, “1923 Yılında İstanbul’un İktisadî Durumu ve İstanbul Ticaret ve Sanayi Odası İktisat Komisyonu Raporu”, Tarih Boyunca İstanbul Semineri, Bildiriler, ed. Mübahat S. Kütükoğlu, İstanbul: İstanbul Üniversitesi Edebiyat Fakültesi Tarih Araştırma Merkezi, 1989, pp. 261-316.

10 An indication of this is that a commodity exchange market had not been set up in Istanbul in the Ottoman period. The first commodity exchange where the agricultural products were processed was set up in Izmir and the second one was in Adana. The Istanbul Commodity Exchange Market was set up in Istanbul in 1925.

11 İstanbul İktisat Komisyonu Raporu, pp. 9-10.

12 İstanbul İktisat Komisyonu Raporu, p. 11.

13 İstanbul İktisat Komisyonu Raporu, p. 12.

14 In a period when financial statism was not declared by Ankara Government as a policy and “liberal attitude was assumed to continue in economy until 1929 great depression”, these criticisms in a report prepared in Istanbul in 1924 are remarkable.

15 İstanbul İktisat Komisyonu Raporu, p. 15.

16 İstanbul İktisat Komisyonu Raporu, p. 16.

17 The suggested method can be likened to the method that is practiced today in order to collect gold by some banks.

18 İstanbul İktisat Komisyonu Raporu, p. 19.

19 “The bank that was established in Ankara with a capital of 20.000.000 TL in 1926, with the name of Emlak ve Eytam Bank, had a capital of 110.000.000 TL. In 1946 and its name was changed to Türkiye Emlak Kredi Bank Co. Inc.. The bank merged with Anadolu Bankası in 1988 and its name was changed to Türkiye Emlak Bank Corporation. The bank that took over Denizcilik Bank in 1992 was transferred to the Türkiye Cumhuriyeti Ziraat Bank Corporation in 2001 and went into liquidation process. The present name is Türkiye Emlak Bank Corporation in Liquidation (http://www.tasfiyeemlak.com).

20 Thus, the first visit was after the purges following the 1926 assassination attempt at Izmir. He wrote a part of The Speech in Istanbul when he visited the city for the first time after years, all of which can be considered as details open to interpretation The claim that the writing of the Speech at a later date outside of Istanbul would have affected his style is also open to speculation.

21 The engravings on the first issued banknotes that were put in circulation in 1927 and stayed in circulation until 1949 are as follows: 1 TL Front: Farmer and the First Assembly Building, Back: Ministry of Finance building at Ulus. 5 TL Front: Grey Wolf and Ankara Castle, the First Assembly Building, Back: Ankara and Taşköprü. 10 TL Front: Grey Wolf and Ankara Castle, Back: Ankara Bridge and Castle. 50 TL: Front Mustafa Kemal, Back: Afyonkarahisar. 100 TL Front: Mustafa Kemal, Back: Ankara and Taşköprü. 500 TL: Front: Sivas Çifteminare, Mustafa Kemal, Back: Sivas General View. 1.000 TL Front: Mustafa Kemal, Back: A railroad through the valley. The first sign of Istanbul on Republic of Turkey Central Bank banknotes was the engraving of Rumelihisari on the back of second issued first scheme 500 TL notes that were put into circulation on 15 June 1939. The Atatürk portrait and watermark on the front side of the second scheme issue of the same scrap that was put into circulation on 18 November 1940 was changed to İsmet İnönü’s portrait and watermark. The Rumelihisari engraving stayed the same on the back side.

22 National economic policy and national companies also see Zafer Toprak, Türkiye’de Millî İktisat: 1908-1918, İstanbul: Doğan Kitap, 2012.

23 For the activity statuses of the companies set up during the last period of the Ottoman Empire as of 1930, also see Hamit Tahsin and Remzi Saka, Sermaye Hareketi, İstanbul: Amedî Matbaası, 1930.

24 The other city with a population of over 100.000 according to the Turkey 1927 general census was Izmir (See. Oktay Yenal, Cumhuriyet’in İktisat Tarihi, İstanbul: İş Bankası Kültür Yayınları, 2010, s. 12).

25 One of the factories that was set up in the early Republic period in Istanbul was the Mecidiyeköy Liquor Factory founded in 1931. However, this factory is not considered one of the “first 11 big factories”.

26 As a matter of fact, “mistakes in choosing of the construction site” was considered one of the biggest problems of industrialization in the Industry Congress in Ankara in 1930. The same criticism was made in the 1947 Industry Congress. According to the official history, there is nothing wrong in the overall picture of state factories. However, in practice there were serious tensions between the statesmen about the selection of sites of the factories founded in 1934-1937. (See. Şafak Altun, Atatürk, İnönü ve Bayar’ın İktisat Kavgası, İstanbul: Hayal Et Kitap, 2008, pp. 139-140).

27 Yahya Sezai Tezel, Cumhuriyet Döneminin İktisadî Tarihi (1923-1950), Ankara: Yurt Yayınları, 1986, pp. 169-170.

28 Tezel, Cumhuriyet Döneminin İktisadî Tarihi, pp. 168-170.

29 Güneri Akalın, Atatürk Dönemi Maliye Politikaları, Ankara: Maliye Bakanlığı Yayınları, 2008, p. 113.

30 For the reputation of non-Muslim and converted partners of Textiles Santral Corporation which was the first big textile factory of Turkey, before bank and jurisdiction during Property Tax process see Leon N. Taranto Tur’Arslan, Varlık Vergisi Faciasının Neticelerinden: Taranto-Bezmen Davası, İstanbul: Tan Matbaası, 1951.

31 Fort his subject which has not been analyzed in a way it deserved see Necmettin Deliorman, Nuri Demirağ Hayatı ve Mücadeleleri, İstanbul: Nu. D. Matbaası, 1957; Fatih Mehmet Dervişoğlu, Nuri Demirağ: Türkiye’nin Havacılık Efsanesi, İstanbul Ötüken Neşriyat, 2007; Ziya Şakir, Nuri Demirağ Kimdir, İstanbul: Akıl Fikir Yayınları, 2011; Mehmet Bahattin Adıgüzel, Hayallerini Uçuran Adam Nuri Demirağ, İstanbul: İstanbul Ticaret Odasi Yayınları, 2013.

32 Vecihi Hürkuş was lucky that the state made do with not granting the flight certificate for his plane VECIHI XIV in 1930. In 1925, he had manufactured “VECIHI K-VI” with limited sources and when he asked for a certificate not only got the answer, “there was no expert available who could give a certificate” but also a punishment for “flight without permission” because he had a trial flight on 28 January 1925.

33 Vecihi Hürkuş, Havalarda 1915-1925, İstanbul: Kanaat Kitabevi, 1942; Vecihi Hürkuş, Bir Teyyarecinin Anıları: Yaşantı, İstanbul: Yapı Kredi Yayınları, 2000; Mehmet Gürbüz Gürer, Vecihi Hürkuş: Göklerin Korkusuz Adamı, İstanbul, 2001; Mehmet Bahattin Adıgüzel, Türk Havacılığında İz Bırakanlar, Ankara: Türk Hava Kurumu Kültür Yayınları, 2001.

34 For an article which discusses Istanbul-Ankara tension in Early Republic period from an architectural point of view, see Uğur Tanyeli, “Erken Cumhuriyet İstanbulu Bir Mimari Direnme Odağı mı?”, İstanbul Araştırmaları Yıllığı, 2012, no. 1, pp. 205-218. For a popular book with a political perspective, see Seyfi Öngider (ed.), İki Şehrin Hikayesi: Ankara-İstanbul Çatışması, İstanbul: Aykırı Yayıncılık, 2003.

35 For example, the Balkan Student Conference gathered in Istanbul on 8 July 1929. However, Ankara was mostly preferred for national congresses in the 1920s and 1930s. (See. Cumhuriyet Ansiklopedisi, İstanbul: Yapı Kredi Yayınları, 2002, v. 1-2.

36 Koraltürk, Ahmet Hamdi Başar’ın Hatıraları, c. 1, s. 16; Tekeli and İlkin, “1923 Yılında İstanbul’un İktisadî Durumu”, p. 262.

37 For the problems and impressions of Istanbul delegates who travelled from Istanbul to Bandirma on Gulnihal boat on 10 February 1923 to take part in Izmir Economic Congress see A. Gündüz Ökçün, Türkiye İktisat Kongresi 1923 - İzmir, Ankara: SPK Yayınları, 1997, pp. 169-173.

38 Ahmet Hamdi Başar, “İktisadî Savaş Başlıyor”, Barış Dünyası, 1967, no. 56, pp. 57-58.

39 Ökçün, Türkiye İktisat Kongresi, p. 13.

40 This number must be close to reality even though the number may be short. However it should be kept in mind that only corporations are in question not all kinds of companies.

41 These are the banks founded in istanbul between 1920-1930. Domestic capital: İstanbul Esnaf Bankası TAŞ (foundation: 14 June 1925, paid-in capital: 118.820 TL), Türkiye İmar Bankası TAŞ (foundation: 22 Mart 1928, paid-in capital: 286.100 TL) and Üsküdar Bankası TAŞ (foundation: 11 Ekim 1929, paid-in capital: 22.975 TL). Total paid-in capital of domestic 28 banks founded in this period was 22.040.327 TL.

42 A. Gündüz Ökçün, 1920-1930 Yılları Arasında Kurulan Türk Anonim Şirketlerinde Yabancı Sermaye, Ankara: Sevinç Matbaası,1971, pp. 99-101.

43 As is known, the last “Unionist congress” took place in Cavid Bey’s house in Nişantaşı on 12-13 April 1923. When Mustafa Kemal, who met with Kara Kemal beforehand, wanted Unionists to determine the attitude they would adopt in the elections, the congress decided on a program with 9 articles –not to be confused with “Nine Principles.” One of the articles of the program was, “Istanbul should be the capital city”. The results of the meeting were communicated soon. Only two days later, on 15 April 1923, it was prohibited with an amendment in Treason Law t”o do politics not conforming to the Nine-Principles program”. It meant there would be no possibility of suggesting Istanbul as capital.

44 For domestic and foreign capitalized corporations founded in Turkey in this period see Ökçün, Türk Anonim Şirketlerinde Yabancı Sermaye.

45 As an indication of the idea that İTSO’s Turkifying policy and people who had a role in this process were not adopted by Ankara, we can see the absence of this subject and the names of people who were actively involved in the Turkifying process in the book published in honor of ITSO’s 50. year anniversary (See Hakkı Nezihi, 50 Yıllık Oda Hayatı 1882-1932, İstanbul: İstanbul Ticaret ve Sanayi Odası, 1932). This situation was a subject of reproach later for Ahmet Hamdi Başar who had the leader role in nationalization of ITSO (“İstanbul Ticaret Odası Nasıl Millîleşti?”, Barış Dünyası, 1967, no. 57, pp. 58-59).

46 Tezel, Cumhuriyet Döneminin İktisadi Tarihi, p. 396. findings in terms of ratios are striking: “Nearly 40% of the owners of businesses founded between 1921-1950 and had at least 50 employees in 1968 started their career in the state. Although this ratio was only 13% for the businesses frounded between 1921 and 1930, it was 78% for businesses founded between 1931-1940 when industrialization policies based on state capitalism were practiced and 31% of businesses founded between 1941-1950.

47 Due to the wars and crises before and after this period, some call it “temporary stability and development” period. However, it was not qualitatively different from the quick rise in production in the World after war in terms of proliferation of optimism and speculation regarding future (See. Oya Silier, “1920’lerde Türkiye’de Millî Bankacılığın Genel Görünümü”, Türkiye İktisat Tarihi Semineri: Metinler/Tartışmalar, 8-10 Haziran 1973, ed. Osman Okyar and H. Ünal Nalbantoğlu, Ankara: Mars Matbaası, 1975, p. 485-535).

48 See. İlhan Tekeli, Selim İlkin, 1929 Dünya Buhranında Türkiye’nin İktisadî Politika Arayışları, İstanbul: Bilge Kültür Sanat Yayıncılık, 2009.

49 There were some Istanbulites such as Cavid Bey (1875-1926) and Kara Kemal (d. 1926) who could have taken active roles in economic development in this period had they managed to survive execution and murder, respectively.

50 Alev Gözcü, 1929 Dünya Ekonomik Buhranı ve Türkiye, İstanbul: Libra Kitapçılık ve Yayıncılık, 2013, p. 426.

51 Tekeli and İlkin, 1929 Dünya Buhranında Türkiye, p. 41.

52 The ambassadors of two countries were in Izmir Economic Congress: Soviet Ambassador Aralof and Azerbaijan Ambassador Abilof. There was nobody from European countries. See. Ökçün, Türkiye İktisat Kongresi, p. 175).

53 The period when Istanbul was alienated, as it was not considered “national” enough, was the period when even the performance of “national music” types was prohibited in conservatories. State Opera and Ballet was established in Ankara in the same period.

54 The short-term Ankara “trip” of Istanbul Stock Market can be shown as an indication of viewpoint. The transfer of Political Science School of the Civil Service to Ankara was one of the preferences of the period.

55 Orhan Kurmuş, “Cumhuriyet’in İlk Yıllarında Sanayi’nin Korunması Sorunuve Ticaret Sermayesi’nin Tavrı”, Sanayi Kongresi 1976, Ankara: Türkiye Makina Mühendisleri Odası, 1977, p. 15.

56 Serdar Şahinkaya, Gazi Mustafa Kemal ve Cumhuriyet Ekonomisinin İnşaası, Ankara 2007, pp. 149-183. Kemal Tahir was the first writer to assess the year 1930 as a period of settling the account after a ten-year practice of Republic policies. He handled differences and conflicts in financial attitudes specific to opponent party attempt in his Yol Ayrımı (İstanbul: Sander Yayınları, 1971).

57 The Prime Minister İsmet İnönü mentioned the importance of the use of domestic goods and saving in his speech in the assembly on 12 December 1929 for the first time. The celebration of 12-18 December as the Domestic Goods Week started in 1946.

58 The name of the association was changed to Turkey Association of Economy and Savings on 12 June 1939. The name of the institution that merged with Turkish Economy Society on 18 January 1955, which was founded in Istanbul in 1931 and moved to Ankara in 1939 was Turkish Association of Economy. This institution transferred its assets to Turkish Economy Association Foundation through Foundation Voucher on 12 December 1973. The foundation provides funding for the activities of the institution. See. www.tek.org.tr Domestic goods week is identified with this society and is based on its establishment date. This society also organized an Agriculture Congress in 1931.

59 Şahinkaya, Gazi Mustafa Kemal, s. 166.

60 The “Hadjiagha” pastiche mocking rich person appeared under the conditions of war and he was not from Istanbul. However, Istanbul benefited from this phenomenon as the place where they spent their money.

61 The subsistence problems due to Istanbul’s size and its inability to produce for its subsistence were not specific to war times only. As Ortaylı expressed, “There were no towns in Anatolia with a population of 10.000 that did not have more than one school. There are neighborhoods in Istanbul with a population of 10.000 that do not have schools even in the 2000s.” (Ortaylı and Küçükkaya, Cumhuriyet’in İlk Yüzyılı, p. 270).

62 İstanbul Belediyesi Kararı, 10 Nisan 1958, Cumhuriyet Ansiklopedisi, v. 2.

63 Economic problems apart from the wars were experienced deeply in Istanbul. For instance, fuel started to be distributed with a ration card in Istanbul on 19 June 1979.

64 The first Turkey Economy Journal was published by MTTB between 1921-1926 and the second one was published by ITD between 1948-1956.

65 Koraltürk, Ahmet Hamdi Başar’ın Hatıraları, v. 1, p. 44.

66 Ümit Özcan, İmar Mevzuatının ve Kentsel Toprak Mülkiyetinin İrdelenmesi, Ankara: yerel YönetimlerAraştırma ve Eğitim Merkezi, 2000, pp. 45-46.

67 For instance, while the field where Yesilkoy Ataturk Airport was located was used as the area for Nuri Demirag’s flying school, it was nationalized for “1.5” kuruş per square meter (15 tl per acre) in 1944.

68 Özcan, İmar Mevzuatının ve Kentsel Toprak Mülkiyetinin İrdelenmesi, p. 33.

69 The number of shanty houses in Ankara was higher than the number in Istanbul in 1950 when the trend of shanty houses gained momentum in Istanbul. The Minister of Internal Affairs of the period said “There were 40.000 shanty houses in Istanbul, 45.000 in Ankara and 4.500 in Izmir” in his speech on 15 January 1958.

70 For the complete explanation and figures, see Cumhuriyet Ansiklopedisi.

71 Other periods when the establishment of banks intensified were the 1980s when foreign bank enterprises increased after 24 January decisions and the 1990s when private bank licenses were distributed easily. However, the number of banks founded within these two decades is lower than the period mentioned.

72 TÜMSUBANK (Turkey Teachers, Officers and Army Officers Bank) merged with MUHABANK (Turkey Old Veterans Bank) in 1959 and it was named Turkey Integrated Savings and Loan Bank Corporation. It was liquidated under the supervision of T. Emlak Kredi Bank in 1961.

73 The first development bank attempt was Turkey Industry and Mines Bank founded in 1925. The government transferred the management of the facilities that it had to this bank. The bank had 13 industrial businesses under its control in 1928. However, the bank that was not given adequate capital support turned out to be short-lived, took on the name Industry Loan Bank in 1932 and was transferred to Sumerbank when it was founded in 1932. (See. A. Gündüz Ökçün, “1909-1930 Arasında Anonim Şirket Olarak Kurulan Bankalar”, Türkiye İktisat Tarihi Semineri: Metinler/Tartışmalar, 8-10 Haziran 1973, ed. Osman Okyar and H. Ünal Nalbantoğlu, Ankara: Mars Matbaası, 1975, pp. 409-475).

74 The exchange rate of the USA dollar was raised by 221% to 9 TL from 2.8 TL with the biggest devaluation of the Republic era on 4August 1958. An exchange rate arrangement that ended the abundant and easy import period that was symbolized by the 1956-1957 model American cars also paved the way for the planned development and import substituting policies in the following years.

75 See. İstanbul Kalkınma Ajansı, İstanbul Bölgesi’nde Yatırım ve Yatırımın Önündeki Engeller, Rapor, Temmuz 2012; İstanbul Ticaret Odası, İstanbul’da Yabancı Sermaye Göstergeleri 2012 Yıllık, İstatistik Şubesi, 2013.