Overview: Turkey's quest for stable growth
Turkey began taking serious steps to liberalize and strengthen its economy a full 20 years ago. Before this reform program was instituted, tariff barriers were high, state ownership prevailed in key sectors, and competition was strangled by regulation. Today Turkey has plenty of modern, high-performing companies that hold their own against international competition. Many foreign companies, attracted by a relatively cheap but well-educated and skilled workforce, proximity to important markets, and the absence of major regulatory barriers, have also performed well there. So great has the country's economic progress been that it now has its sights set on becoming a member of the European Union. If Turkey succeeds in its ambition—and the EU is set to decide at the end of next year whether to begin entry negotiations—it is, based on current demographic projections, destined to be the bloc's largest member1 and the only one with a predominantly Muslim population.
One barrier to EU accession may be Turkey's failure to achieve stable economic growth. During the 1980s, GDP grew strongly, at an average rate of 5.2 percent a year, thanks principally to the new wave of liberalization and increased competition. However, in...