5 - The importance of credit

Summary

Introduction

In this chapter we shall investigate the organization of credit in various sectors of the economy. Since the structuration of the economy proceeded mostly through the activities of merchant and interest-bearing capital, it becomes important to analyse the network of credit as it reflected the processes of articulation and structuration. Credit, or money created by financial institutions, is one form of the universal equivalent which gains additional importance under capitalism. Thus, its relative status in the economy will depend both on the use of other forms of money and on the functioning of financial institutions. For this reason we shall first discuss money supply in the economy, and then the organisation of banks.

The discussion on banks gains further importance because this sector enjoyed lucrative rates of profit, and was the most rapidly growing sector within the economy. For this reason it became an attractive field of activity for native capital; and it was in banking that Turkish capital gained the largest ground from foreign capital. This transfer was actively supported by the government, partly in response to complaints from merchants and industrialists about credit shortage. But the analyses of the institutional background of credit in banks will also provide us with a total perspective on the articulation and relative status of the three sectors of activity we have so far discussed. Banking capital acts as the accountant and manager of social capital, allocating funds to where they earn the highest rates of return. Thus, the discussion on banking and credit should provide us with an understanding of the total rationality of the peripheral economy.