Early Liberal Experimentation (1902-1929)

What is often forgotten amidst the heated discussion on the privatization of state-run public services is the existence of a laissez-faire period proceeding the emergence of the welfare state. When they were first introduced to the urban masses in the 19^th century, many public

43 services (such as water, electricity, sewage, public transportation, etc.) were provided by private companies.²⁶ The Ottoman Empire was no exception. In the Ottoman state, the nineteenth century was marked by the integration of the Empire into the capitalist world economy (Kasaba, 1988). One of the key characteristics of this period was the direct foreign investments the Empire attracted to modernize its industrial and urban infrastructure. Foreign companies were required to secure individual permits—referred to as concessions in the literature—from the Ottoman state to operate in a particular industry or work on a specific project.²⁷ The concessions, however, were highly political in nature;

this stemmed from the Empire’s vulnerable status in world capitalism, simultaneously in decline and in search for modernization (Kasaba, 1988). Consequently, the concessions obtained by the leading companies of the imperial powers were often in return for temporary financial support or military protection (Pamuk, 1987: 7). Ottoman concessions were so attractive that they stirred fierce competition among European companies (Shahvar, 2002). The charm of the Ottoman concessions were twofold: on the one hand, concessions often provided the privileged company with the monopoly status over a sector in a given city or region. On the other hand, and more importantly, the trading privileges that come with concessions were guaranteed by Ottoman capitulations, or “extra-territorial privileges enjoyed by foreigners residing in the Empire” (Ahmed, 1998: 19). Capitulations, which were initially offered as gifts to European states by the Sultan beginning in the

26 By looking the role of private governance of urban water services in early 20^th century, for example, Harris (2013: 120-121) urges us to acknowledge debates over private vs. public ownership of public services go far back to late 19^th century.

27 The sectors that foreign concession companies operated includes, but not limited to, telegram networks (Bektas, 2000; Shahvar, 2002), railway (McMeekin, 2010), electricity, mining, and port management. For foreign companies’ role in İstanbul’s transformation in late 19^th century see Dinckal (2002).

44 sixteenth century, became an economic liability and weakened the sovereignty of the Empire (Pamuk, 1987, also see Ahmad, 1998).

The Empire’s first electric generator was a small water mill in the southern city of Tarsus.

Completed in 1902, the generator had a 2 kW dynamo and could only power a limited number of streetlights (Hepbaşlı, 2005). The Ottoman’s first major power plant was Silahtaraga Power Plant built in central Istanbul in 1913 by Hungarian Graz Electric Company in partnership with Banque de Bruxelles. A year after its completion, Graz Electric Company sold the plant and the concession of providing electricity to Istanbul to a Belgian company called Sofina (Akçura, 2007). Fired by coal from Zonguldak and Northern Istanbul, the plant had an installed capacity of a little over 13 MW and singlehandedly powered the city until 1952. The plant was closed down in 1983and gentrified into a university campus in 2007.

After the First World War and following the Turkish War of Independence fought against the proxies of the Allies, excising the shame of Ottoman capitulations was of utmost priority for the victorious Ankara government.²⁸ In 1923 the capitulations were all abolished by the Treaty of Lausanne, which heralded the birth of the new Republic.

However, the young Republic continued to adhere to a relatively liberal economy until the Great Depression while, at the same time, fostering a national bourgeoisie from scratch where and when possible.²⁹ Therefore the early Republic years welcomed foreign investors

28 On the public perception of Ottoman capitulations at the turn of the century, see Ahmed, 2000.

29 The liberal economic tendency of the early Republican era is subject to heated debates amongst

economic historians. While some recite the manifesto of the first Economy Congress held in İzmir in 1923 as the proof of the early Republic’s genuine interest in liberal principles, others point to government led

45 and showed a cautious interest in cooperating with European markets (Pamuk, 2012: 180-183). The reflection of this preference was new coal-powered plants built and run by mostly German, Belgium, Italian and Hungarian capital (Hepbaşlı, 2005: 317). The first power plant in Ankara, the new capital, was a diesel generator jointly built by German MAN and AEG (Ibid). The first Turkish electricity company, Kayseri ve Civarı Türk Elektrik Inc, was founded in 1926 (Ibid).³⁰

It could be argued that late Ottoman and early Republican experience with liberalism between the mid-nineteenth century and the Great Depression might have eased the neoliberal transformation (particularly in public services) that started in the early 1980s.

Yet the early liberal experience was mostly haphazard, leaving behind few long-lasting institutions. Most importantly, both late Ottoman and early Republican approaches to the liberal economy had been highly pragmatic and geared towards reforming the weakened state structure. Local entrepreneurs neither demanded nor established collaboration with foreign capital and institutions largely remained top-down initiatives. Ottoman and Young Republican interest in liberalism was less motivated by economic principles than by increasing the central government’s reach, capacity and power (Pamuk, 2012: 158-159). In the absence of local bourgeoisie and significant treasury reserves, the governing elite showed little hesitation opening up to the world economy, with the hopes to modernize the state. This state-led, top-down, highly pragmatic style of the first acquaintance with

agriculture and banking decisions designed towards self sufficiency (Pamuk, 2012: 180-184; Finefrock, 1981). This unique state-led liberalism experiment came to an abrupt end with the Great Depression yet left lost-landing marks on the collective memory of the country’s political economy.

30 It is worthwhile to note that Kayseri ve Civarı Türk Elektrik Inc. is still an active in producing and distributing electricity in interior Anatolia and have never been nationalized and remained as one of the exceptions of the state planed era.

46 liberalism is as noteworthy as the experience itself. The reflection of this centrally supervised liberalism by 1930 in the electricity sector was 48 power plants with installed capacity equal to 74.8 MW. Each plant was a private (and mostly foreign) enterprise, completed either with the initiation or permission of the central government, first the Sublime Porte in Istanbul until the collapse of the Empire and then the new government in Ankara.