structural:scholar_edition, stylistic:tone
Great Depression, 1929–1931

The young republic, like the rest of the world, found itself in a deep economic crisis during the Great Depression. Atatürk reacted to conditions of this period by moving toward integrated economic policies and establishing a central bank to control exchange rates. However, Turkey could not finance essential imports; its currency was shunned, and zealous revenue officials seized the meagre possessions of peasants who could not pay their taxes.

In 1929, Atatürk signed a treaty that resulted in the restructuring of Turkey's debt with the Ottoman Public Debt Administration. At the time, Atatürk not only had to deal with the payment of the Ottoman public debt but also the turbulent economic issues of the Great Depression. For example, until the early 1930s, Turkish private business could not acquire exchange credits. It was impossible to integrate the Turkish economy without a solution to these problems.

In 1931, the Central Bank of the Republic of Turkey was established. The bank's primary purpose was to control the exchange rate and Ottoman Bank 's role during its initial years as a central bank was phased out. Later specialized banks such as the Sümerbank (1932) and the Etibank (1935) were founded.

From the political economy perspective, Atatürk faced the problem of political upheaval. The establishment of a new party with a different economic perspective was necessary; he asked Ali Fethi Okyar to meet this end. The Liberal Republican Party (August 1930) was founded with a liberal program and proposed that state monopolies should be ended, foreign capital should be attracted, and state investment should be curtailed. Nevertheless, Atatürk maintained the view that "it is impossible to attract foreign capital for essential development," and state capitalism became the dominant agenda during the depression era. In 1931, Atatürk proclaimed: "In the economic area...the programme of the party is statism." However, the effect of free republicans was felt strongly and state intervention became more moderate and more akin to a form of state capitalism. One of Atatürk's radical left-wing supporters, Yakup Kadri Karaosmanoğlu from the Kadro (The Cadre) movement, claimed that Atatürk found a third way between capitalism and socialism.