Politics of Institutional Change, Network Formation and the Dynamics of Government-Business Relations in Two Turkish Cities

In recent years, many countries have witnessed a state rescaling process through the reconfiguration of power relations between the central and local governments. This paper examines the emergence of local governments as a new element in government-business relations, which remains an under-researched subject in the government-business relations literature. It aims to show how tenders of local governments in Turkey contribute the emergence and development of a new group of politically privileged business people who have developed networks with the ruling Justice and Development Party, and business associations and charity organizations with Islamic outlook at the local level.

In the political economy and economic sociology literature, networks are mostly evaluated as social interaction between individuals. Moreover, they focus on economic benefits derived from preferential treatment “thanks to” networks. However, this paper argues that networks at the local level could only be sustained and mobilized thorough heavy political intervention in the tender processes through legislative and administrative changes. In this context, “ gradual and incremental institutional changes” have become instrumental for expanding the scope of political discretion, which has led to obscure the standardization efforts of tender procedures under the firm support of international organizations such as the IMF, the World Bank and the WTO. After these legislative changes, institutions have become instrumental in fostering networks for capital accumulation process in favor of some business groups affiliated with the ruling party while excluding others. Therefore, rather than focusing on the social interaction between individuals, the paper discusses the institutional interventions that shape and contribute to the formation of networks. Especially in the way they affect publlic tender procedures, these relations  have become important in the formation and the stability of Islamic networks of which the government is a component.This paper also shows the limits to network-based process of capital accumulation. It argues that after a point, networks turn into an important obstacle to further economic benefits. For business people who rely on close relations with the political power, the current system of public tenders is not conducive to improving technological capacity and becoming more competitive. 

This paper draws on the extensive analyses of legislative and administrative changes, tender statistics, media reports, and the results of field research in two important Turkish cities, namely Istanbul and Konya. Although there are similar trends that shape the network formation, outcomes of these processes could not be evaluated as monolithic. Comparing a global city (Istanbul) with a middle-sized city (Konya) aims to attain to a better understanding of the impact of “scale” on the dynamics of network formation process in different context.

Overall, this paper investigates the interface between the politics of institutional change and the formation of networks in shaping the capital accumulation process at the local level.