Uncertainty - Turkey and the Varieties of Capitalism

Despite being included in original statement by Hall and Soskice the case of Turkey in the framework of Varieties of Capitalism approach has been left hanging in an ambiguous position. This ambiguous position has not changed despite several reinterpretations and modifications of the original Varieties of Capitalism statement. A closer look at the case shows that in the current era Turkey is neither a liberal (too much state), nor coordinated (not enough inter-firm coordination), nor state-led (does not aim to be), nor dependent (too strong domestic bourgeoisie) market economy. Part of the Varieties of Capitalism approach is based on the notion that it understands institutions in terms of the functions they perform and sees institutions as entities that create, and increase certainty. According to the Varieties of Capitalism literature the state is providing a stable institutional context and is thereby reducing uncertainty for firms. However in the case of Turkey a difficulty in situating it in the Varieties of Capitalism framework is the peculiar institutional context. In Turkey firms face the problem of erratic state behavior in a stable institutional context. The state may enact, for instance, retroactive legislation as it did in the Banking sector. It might also create highly particularistic rules that favor or weaken even a single firm as it did in the automotive sector. Hence the institutional context in Turkey is marked by uncertainty. To the degree that the state acts in such a manner the Varieties of Capitalism approach has difficulties in explaining such a case. In order to make sense of cases such as Turkey, the conceptualization of institutions in the Varieties of Capitalism approach, which is grounded in rational choice institutionalism and thus sees institutions as beneficial, has to be modified.