Osman Şenkul
The 1929 Depression, which originated in the United States and profoundly shook the entire world, even triggering the Second World War that claimed millions of lives, erupted as a result of various factors coming together and had profound effects worldwide.
In the United States during the 1920s, share prices rose rapidly, and many investors poured large amounts of money into shares for speculative purposes. However, share prices had exceeded their true value, creating a bubble. The stock market crash that began on October 24, 1929, led to many people losing large amounts of money and banks facing the risk of bankruptcy. During the same period, both individual consumer debt and corporate debt increased rapidly. This excessive borrowing, combined with the onset of the crisis, led to many companies going bankrupt and put banks at risk of collapse. The inability to repay debts and the bankruptcies deepened the economic hardship. The Great Depression also caused major problems in the agricultural sector. Agricultural incomes declined, and businesses in the agricultural sector found themselves in a difficult position. This further amplified the impact of the general economic crisis.
When looking at the Turkish economy today, although we cannot speak of the same consequences, one of the significant outcomes of the 1929 Depression was the corporate bankruptcies of companies and individuals. Approximately 96 years after the Great Depression, although not to the same extent in Turkey, the current downturn has begun to highlight mass bankruptcies of individuals and companies in a similar manner.
According to Dun & Bradstreet’s 2024 Global Insolvency Report, the number of companies going bankrupt in Turkey rose by 23 per cent compared to 2023, reaching 465. Furthermore, the number of composition cases granted a provisional moratorium between January and July increased by 105 per cent compared to the same period last year, reaching 1,617. Final moratorium decisions rose by 209 per cent to 961, while rejected composition requests increased by 113 per cent to 710.
According to assessments of many economists, a sharp increase in company bankruptcies and applications for composition is being observed in 2025. With 96 companies going bankrupt in the first six months alone, this points to the economic fragility deepening in the business world. Economists and experts emphasise that if this process is not managed correctly, it will create a ‘domino effect’ and reignite discussions about zombie companies. In short, the dramatic increase in bankruptcies and composition applications in just the first six to seven months of 2025 points to an increasingly challenging picture. In particular, the sharp rise in composition requests and rejected applications seriously threatens the sustainability of economic stress.
This decline is not only the result of bankruptcies but also the closure of businesses. An increase in business closures has been observed in Turkey; according to this, approximately 49,097 small businesses closed for economic reasons in the first five months of 2025; some sold their machinery to foreign buyers at low prices.
Another reflection of this crisis, which is frequently highlighted in news reports published in various media outlets, is the significant increase in the number of international companies that have ceased operations or effectively suspended their activities in Turkey.
Among these, Merlin Entertainments (United Kingdom), Madame Tussauds Istanbul, SEA LIFE Aquarium and Legoland Discovery Centre Istanbul have permanently closed. The reasons given were ‘declining profitability and weak commercial performance.’ Furthermore, Daio Paper / Goo.N (Japan) announced its withdrawal from the Turkish market on 30 June 2025. US-based Morgan Stanley Securities Inc. was removed from the Istanbul Stock Exchange membership by a board of directors decision dated 12 March 2025; its brokerage licence in Turkey was relinquished. In a statement issued by the Communications Directorate on 19 March 2025 regarding Morgan Stanley’s withdrawal, it was stated that “Morgan Stanley had previously applied to relinquish its existing operating licences. This application was favourably received by the Capital Markets Board, resulting in the revocation of the institution’s Limited Authorised Brokerage Firm Certificate and its expulsion from Borsa Istanbul membership by the decision of the Borsa Istanbul Board of Directors dated 12 March 2025.”
The severe developments in the economy were also reflected in the number of concordats. In the first five months of the year, 2,235 companies declared concordats. Of these, 967 were granted a temporary stay of proceedings, 690 were granted a definitive stay of proceedings, 462 applications were rejected, 77 companies went bankrupt, and 39 companies received confirmation decisions.
In the first six months of the year, the number of companies granted a temporary stay increased by 108 per cent to 1,259, compared to 605 in the same period last year. During this period, final moratorium decisions rose by 236 per cent to 822. Bankruptcy decisions in these concordats also rose by 101 per cent to 553.
The 2025 calendar, which is rapidly overtaking 2024, reveals that companies in sectors such as construction, manufacturing and retail are in a state of deep economic fragility. Dramatic increases in provisional and final moratorium decisions are noteworthy; this situation indicates that companies are intensively striving to overcome their payment difficulties with long-term solutions. The twofold increase in bankruptcy decisions is a clear indication that economic difficulties are directly affecting the business world.
In short, in 2025, Turkey experienced record increases in concordato and bankruptcy applications, particularly in the first half of the year, quickly surpassing the records set in 2024. This trend clearly shows how challenging the economic environment is for companies. Consequently, an economy in which a large number of companies are forced to close is seen as an ‘alarming’ development by both academic and market commentators.
When economists look at these results from a macroeconomic policy perspective;
– They say that, particularly during periods of high interest rates, companies’ borrowing costs rise excessively, which in turn suppresses investment and production.
– Furthermore, in countries where inflation is persistent, policymakers taking unpredictable steps make it difficult for the business world to plan.
– High interest rate – low credit access policies suppress consumer demand, causing companies’ sales to decline.
Nouriel Roubini, the Istanbul-born economist known as the ‘crisis prophet,’ attributes such frequent company closures to bottlenecks in the banking system and credit channels.
In addition, Keynesian economists such as Paul Krugman emphasise that small and medium-sized enterprises cannot withstand shocks, with bankruptcies concentrated more in this segment, and link company closures in developing countries dependent on external financing, such as Turkey, to increases in foreign exchange costs and exchange rate shocks.
Dani Rodrik, a professor of international political economy at Harvard University’s John F. Kennedy School, who was also born in Istanbul, attributes such developments to deeper ‘competitiveness and production structure problems’ that ‘cannot be explained by monetary policy alone.’ Rodrik points out that the successive closures of companies may be based on ‘monopolisation,’ alongside legal uncertainties and unpredictable regulations, as large players remain standing while many companies close.
Roubini, Rodrik and many other economists generally view such a scenario as ‘a period when the economy is sounding the alarm, signalling a need for policy change, and posing serious risks to employment and growth.’ They interpret company closures not merely as a ‘temporary crisis effect’ but as an indication that the economy is failing to undergo structural transformation.
Furthermore, Keynesian economists such as Paul Krugman and Joseph Stiglitz, in their assessments of such developments that increase bankruptcies, emphasise the lack of demand caused by unemployment or a deterioration in the general income distribution. According to these economists, they also explain corporate bankruptcies by the decline in consumer spending and the government’s failure to provide sufficient incentives, and as a solution, they propose:
– Increasing public spending,
– Lowering interest rates to facilitate access to credit,
– Supporting demand through social welfare spending.
According to economists, the closure of a large number of companies is an indication that ‘the state is not sufficiently involved in the economy.’
In contrast, neoliberal free market economists such as Milton Friedman and Friedrich Hayek may view company bankruptcies and closures as a ‘natural selection process of the market.’ According to them, some businesses are inefficient, and their bankruptcy and withdrawal from the market allow resources to be transferred to more efficient companies. However, they also criticise the state for accelerating the process through high taxes, excessive regulation or misguided monetary policies. Therefore, for economists holding this view, closures are often the result of ‘state intervention and misguided incentives’ or a natural by-product of the market finding its own equilibrium.
On the other hand, Marxist economists such as David Harvey and Samir Amin view company closures as part of capitalism’s crisis cycles. According to them, the problem lies not only in interest rates, demand or state policies, but in the system’s own internal contradictions. The fact that large companies survive crises while small ones disappear accelerates the centralisation of capital.
As a solution, they propose a more egalitarian production model and the empowerment of the working class, stating that ‘company closures are the inevitable result of the capitalist system’s structure, which constantly eliminates the working class and small producers.’
Economists such as Ha-Joon Chang, a South Korean institutional economist specialising in development economics, also explain company closures by global competitive pressures and misguided industrial policies. According to these economists, companies are vulnerable to crises, particularly in developing countries, because production diversity is not ensured and there is no investment in technology.
As a solution, these economists advocate strengthening industrial policies, particularly supporting export sectors, and developing long-term development strategies.
Based on the approaches of economists from different schools of thought, we can summarise the recent developments in Turkey that have triggered bankruptcies and increased unemployment as follows:
– High interest rate policies and tight monetary policy in Turkey have reduced domestic demand.
– Consumer loans have become more expensive, households have cut back on spending, and companies’ sales have fallen.
– The state’s failure to provide sufficient financial support and incentives has accelerated closures.
– Tax burdens, sudden regulatory changes, and credit restrictions in Turkey have reduced companies’ competitiveness.
– Companies that should have survived based on ‘market dynamics’ have been stifled by misguided policies.
– The large number of closures in Turkey is actually accelerating the centralisation of capital: small producers are being liquidated while large holdings and chains remain standing.
– The currency crisis, energy costs and high interest rates have hit small companies hard; large capital, on the other hand, is protected by political connections.
– Company closures in Turkey stem from the contradictions of the capitalist system; this process further weakens workers and small producers.
– Turkey’s industrial policy is weak, and production is largely dependent on imports.
– As energy and raw material costs are linked to foreign exchange, companies become vulnerable during crises.
– Companies are unable to compete globally because advanced technology and value-added production have not developed.
Looking back to 1929, what is most striking is that it is not particularly difficult to predict how and why the severe crisis created by the world economy, which was largely confined to its own region in its attempts at internationalisation, manifested itself in local collapses such as ours in today’s highly globalised economy, and what the possible consequences might be. The ‘natural consequences’ in such situations are the large masses impoverished by rapidly rising unemployment, as we have experienced severely in Turkey. While the great depression that emerged approximately 96 years ago dealt heavy blows to almost all aspects of the system, the harsh consequences of the current crisis will primarily affect the large army of unemployed people in Turkey, who are becoming increasingly impoverished.