That began to crack in 1980. A severe balance of payment crisis forced Turkey to devalue the lira. And this time around, under pressure from international lenders, the government embarked on the gradual deregulation of trade, investment, and finance. But the bad fiscal habits that had been treated so discreetly by Turkey's Cold War patrons proved hard to unlearn: Budget deficits persisted and the economy ran on unsustainable inflows of capital. Inflation went untamed, averaging 50 percent during the 1980s and 80 percent in the 1990s.
Finally in 2001, the government committed to a more prudent fiscal stance and to end dependence on foreign loans. The central bank was granted greater autonomy, and the bank's new charter made price stability the first priority, barring it from making direct loans to the government to finance budget deficits.
While it remained legal to hold financial assets in foreign currencies, the "dollarization" of the Turkish economy swung into reverse as confidence in the stability of the lira grew. Households and corporations now hold roughly 30 percent of their liquid assets in dollars, compared to 60 percent at the turn of the century.
Much has thus changed since the early 1980s -- but too much hasn't. Corruption in places high and low remains a serious problem: Turkey ranks 61st on Transparency International's Corruption Perceptions Index -- better than in the emerging-markets of Asia and Latin America, but far behind Europe and North America. A legacy of arbitrary authority and discretionary law enforcement has permitted a large, corrupt bureaucracy to thrive, petty bribery is still customary.
Until very recently, moreover, whenever political stability was threatened by clashes between the right and the left, or secularists and religious Muslims, the military stepped in. A rapid return to civilian rule did occur after each of the three post-war coups. But the threat of intervention defined the limits of Turkish democracy.
The Islamic government of Prime Minister Recep Tayyip Erdogan, elected in 2003, has promised to tighten civilian oversight of the security forces; to this end, a civilian-controlled Supreme Military Council was established in 2011. But the Council of Ministers (a sort of "super cabinet" in the Turkish government) has yet to adopt measures assuring that the military would remain in its barracks until summoned by elected administrations.
The initial steps towards opening the economy in the 1980s created opportunities for business start-ups -- specifically, Islamic businesses -- challenging the secular/nationalist "old boy" network. These businesses flourished, increasing the voice of religious Muslims in national politics. By no coincidence, newly-empowered interest groups formed networks that challenged the center-right coalition -- and the secular-republican synthesis that had allowed a Turkish nation to emerge from the ruins of the Ottoman Empire.
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