POLITICAL ECONOMY of DEVELOPMENT BANKING AFTER WORLD WAR II: ANALYSIS of the INDUSTRIAL DEVELOPMENT BANK of TURKEY DURING THE 1950-1953 PERIOD

INTRODUCTION

Banks have been the tools of transferring funds from where they are abundant to where they are necessitated (Akgüç, 1993: 31). This mechanism is vitally important since transfer of the usable funds to investors in the real sector in a short and direct way, and with minimum cost, becomes possible if the banking sector worked well (ġahinkaya, 2008: 622). Hence, financial sector had to foster parallel development with real sector of the economy for economic development and growth (ibid). The funds, which might be collected as the saving of individuals or as transfers from domestic and foreign governments or institutions, might be lent for short, medium and long term depending on the purpose. As a specialized example, development banks have directed their funds for the sake of developmental purposes that necessitate long-term lending. First examples of development banks existing in Europe in the nineteenth century evolved from commercial banks at the time. The custom of long-term lending in the industrialized countries was progressed by infrastructural investments but it was after the Industrial Revolution when new lending institutions began to flourish. Indeed, the strong link between industrialization and development was discovered in this era since industry being the most productive area of production was regarded as the most reliable route to a more rapid increase in welfare. Like Kiely (1998: 3) has defined industrialization as ―a particular way of organizing production and assumes there is a constant process of technical and social change which continually increases society's capacity to produce a wide range of goods‖. Although industrialization is a broad concept since it includes the impact of this way of production on society, it is not as broad as development. Kiely pointed out that ―the development theory in the 1950s and 1960s often implicitly defined development as an increase in Gross National Product, and assumed that the increase in wealth associated with industrialization would trickle down to the bulk of the population‖ (ibid). Nevertheless, the current definitions of development are much broader than those earlier definitions, including indicators as distribution of income, life expectancy, and levels of educational attainment1. Obviously, development is determined according to the level of distribution of the fruits of the increase in wealth through industrialization and the change this increase creates on peoples' lives. In short, although it does not embrace all aspects of it, industrialization is generally seen as a prerequisite for development. Above all; promoting industrialization has been vital for the development of underdeveloped countries download