“The Law of Diminishing Returns” is one of the most fundamental and widely used laws in the field of economics. According to the rule, as the quantity of input used in production increases, the resulting quantity of output will also increase. However, at a certain point, the production level reaches a point where the additional output or utility generated by an additional unit of input tends to decrease rather than increase. At this point, the optimal production level is exceeded, and continuing production beyond this level leads to inefficient results.
Economically, we can explain some of the current economic challenges and difficulties in the world today through this law. As you may know, while oil prices were around $20 in the early 2000s, they exceeded $140 in 2008 and have now fallen below $60. The reasons for this decline could be political, economic, or social. Current indicators suggest that this decline is due to a decrease in demand. However, from another perspective, a significant production surplus compared to demand can be observed globally. In other words, the world has pushed the optimal production level, and total supply has surpassed total demand by a considerable margin. This surplus production undoubtedly leads buyers to choose different, premium, and financially viable products. The artificial abundance of money created in the early 2000s, resulting from the encouragement of domestic and international consumption, eventually led to a rise in spending that did not correspond to income. The consumption bubble, inflated by a mass that is far from the culture of saving, eventually resulted in a decline in spending categories, and consequently, a decrease in production and sudden price collapses in raw materials. The reduced demand has also affected the prices of commodities such as oil, gold, and others, ultimately leading the world towards an undefined crisis. While the United States, with the largest economic size in the world, is gradually recovering, developed economies like the European Union countries and Japan are signaling recession. Developing countries like Russia, China, and Brazil are struggling with significant challenges. It seems that in the history of economics, there has never been a period where the concept of the economy has been used so much as a tool or argument in global political disputes and discussions. When viewed from the right perspective, it can be understood that countries are diverging economically and politically, the world is polarizing, and echoes of the Cold War era are being heard. In this political arena, countries are ready for any kind of cooperation or conflict according to their interests. Countries like Turkey, which are newly involved in the game in this context, play a critical role. When evaluated in this context, the visit of Russian Federation President Vladimir Putin to our country makes it easier to understand the sudden reaction of the West to this cooperation and the agreements made. It will probably be beneficial for the West and the whole world to reconcile with Russia on the issue of Ukraine, which he sees as a strategic and vital matter. After all, the world we live in is troubled and tense enough. Now, acting with reason in all national and international political issues has become not just a choice but a necessity. In light of all these developments, the essential factor we should not overlook is that the balances are changing, and the world will not be the same as before.
In the last decade, the world has met with a massive production center like China. The wind that wiped away many small-scale manufacturers at the SME level in many countries with the removal of quotas was one of the biggest surprises of the last decade. However, in the past years, the process has reached a point where China has discovered its domestic market and has begun to engage with consumption. In this economically developing and growing country, people are now earning money and starting to spend it on high-value-added products in their own countries. At this stage, when you add India with its population of nearly 1.5 billion and its gross domestic product of around 10 trillion dollars, and the economically growing and developing South Korea to the equation, you can see that the world’s trade and economic trajectory is changing. It is truly important for our country to create a real perception management in which we determine our major factors and to determine where we want to be in this new equation. Because time is shouting to us that being fast, being powerful, and most importantly, reading the world correctly are the keys to the new era.
While wishing for the goodness of all these developments and results, I would like to emphasize the importance of effective reforms in our country’s production, employment, and marketing policies. As I conclude my words, I wish for a strong Turkey free from internal and external problems in this new year, turning its vision and perspective towards the future, and becoming the shining star of the region. I greet you with my deepest respects.
Giyasettin Eyyüpkoca
