Economic History of Turkey (1923-1929)


Economic History of Turkey (1923-1929)

General Economic Situation in Foundation Years

When the economy is analyzed after the war, the country has followed the protective policy combined with statist economy just because they did not have the improved industry to compete with other countries. The government fundamentally has pursued the industrialization policy through private enterprise. However, in the country which has a majority of the population works in agriculture the improvements in the industry can only be achieved by investing on agriculture. Therefore, developmental decisions which encourage farmers has been taken in Izmir Economic Congress.

Just after the foundation of Turkey, the publishing of the new economic system has been made in Izmir Economic Congress (1923) which includes 1135 commissioners who are representatives of industrialists, merchants, farmers and workers. In this congress, all economic problems of the time period have been discussed and also there is an exclusive feature about Izmır Economic Congress because the economic classes which do not have authority before have been included in the congress. The new economic policy which is completely compatible with the national economy policy has been created in that congress. The new economic policy is more liberal than before and includes statements about open market in addition to supportive decisions to the foreign capital with a steady protective policy. In line with this purpose, some decisions that have been made in Izmır Economic Congress;

Domestic production should be encouraged while the country avoids from luxury import
Branches of industry which have its’ raw materials inside the country should be founded
Manual labour and small businesses immediately should be replaced by factory – assembled system
Attempts that have been made by the private enter prises hould be supported by the goverment
2 national banks which will provide support and credit to private enter prise should be founded
The construction of the railways should be started soon
Tithe should be removed
Insurance should be made to the workers
The cultivation and the trade of the tobacco should be free



In this time period, the most important improvement which has been made in agriculture was the removing of tithe which provides %30 of the government’s income (1925). With this, the government aimed to ease the taxes that are belong to the farmers. However, to compensate the loss of income the government levied taxes on lands and in contrast to the decisions that have been made in the congress the monopolies were founded inside the country. After that, in 1924, the first national bank of the time period Is Bank was founded.

The time period 1923 – 1929 was the period which the agricultural production has increased rapidly.  With the lead of the Celal Bayar who is the first general manager of the bank, Is Bank has started to service with 2 branches and 37 staffs of the bank.


In that time period, the infrastructure for industrialization was not enough. The government tried to improve the domestic industry through some incentives. Industry and Mines Bank was founded to support private industry investments. (1925). With the foundation of the bank, the government aimed to provide short term and long term loans to the private industry businesses and helping them in the matters of financial, economic and technical problems.

Other implementation which is about industrial fund of the time period was The Industrial Promotion Law. (1927) This law was generously providing enormous exemptions, privileges and incentives to the industrial investments and businesses( Korkut  Boratav,Türkiye İktisat Tarihi, 2015,p.48. ).


In the earlies of the time period the transportation services were important for the progress. Especially, the construction of the railways was principal for the government. In 1924, the law of Nationalisation of Anatolia Railways was published. Railways were nationalized and new links were constructed. Seaway had also become important topic for the government during that time and in 1926 Cabotage Law was published.

In 6th of October 1926, one aircraft factory was founded in Kayseri and flights between Istanbul and Berlin has started at 1929. In that time period banking activities has also increased and except Is Bank 29 other banks were founded.

Even though all these steps that have taken by the government, desired growth in industry could not achieved. The fundamental reasons of this was lack of infrastructure, fund, entrepreneur and craft within the country.


During the foundation of  The Republic of Turkey, insufficient infrastructure that has been taken by Ottoman Empire and the lack of trading ability that comes from Ottomans forced goverment to set grain and raw materials as a primary export products. The tariffs  that were set by Ottoman Empire in 1916 has not changed until 1929 and these conditions were blocking the movements / improvments of the country during that time. The idea that the development can only be achieved by the improvement in the industry was accepted by alland after that industralization has become the keypoint of development for the country.

From the proclamation of there public until 1929, trade balance had a deficit continiously. The main reasons of this were; the destruction of production units in the World War I, insufficiency of raw materials and the problems that took place in the importation of the raw materials. In addition to this, custom to lerances which has been taken place as a consequences of thetreatises that were made between 1907 – 1924 to the foreigners had also bad effects on trade balance of the country. And finally, Great Depression has affected the country as well.

The Effects of Great Depression on Turkey (1929)

Caused problems in international terms of trade, losses in real income and set foreign tradede ficits maximum level during 1931 – 1933.

Speculative numbers caused decrease in products’ prices and purchasing power in world’s market.

The businesses that import products got into more debt in a short termand interestrates of debts that were financed during crisis time incread and it caused crisis to become a reality.

Turkish lira which decreased in value when compared to sterlin devaluated during that time.

The decrease in the prices of agricultural products had a bad effect on the people who were working in rural area.

Briefly, free market economy was commonly accepted and the country verged to west during that period. Eventhough in the first place foreign trade could not be protected for some reason safter 1929 the goverment has achieved to protect it. Generally, statism was accepted by the majority during that time.


Akyildiz, HuseyinandEroglu, Omer (2004), ‘EconomicPolicies in TurkishRepublicPeriod’, University of Suleyman Demirel I.I.B.F. Magazine, 9(1),47.

Boratav, Korkut (2015), EconomicHistory of Turkey, Ankara: ImgeBookstore Publications

Durmuş, Savas ve Aydemir, Kemal (2016), ‘TurkishEconomyduringAtaturkperiod(1923-1938)’, University of Kafkas I.I.B.F. Magazine,7(12),158-162.

Eroğlu, Nadir (2007), ‘EconomicPoliciesduringAtaturkperiod(1923-1938)’, University of Marmara I.I.B.F. Magazine, 23 (2),66-67.

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