Introduction

Since the election of the Justice and Development Party (Adalet ve Kalkınma Partisi – AKP) in November 2002, Turkey has emerged as a paradoxical case among the world’s rapidly growing upper-middle-income economies. It has achieved significant technological upgrading in many of its export-oriented sectors, including transportation, consumer electronics, and defense, despite an institutional environment marked by crony capitalism, executive discretion, and an increasing politicization of the judiciary. Hence, the critical question is: how can a country expand its export-oriented industries while systematically eroding the rule of law and undermining the institutions needed for good governance? This question is not merely political, in the context of this discourse, but also structural, as its primary focus will be on examining the role of judicial institutions in mediating, restricting, and reproducing this unique hybrid capitalist order in Turkey. 

This essay argues that Turkey’s pattern of technological upgrading reflects the interaction between a dual legal order and a dual economy. An extremely politicized and partisan judiciary underpins a rent-driven non-tradables sector, comprising construction, energy, and infrastructure, which is funded by public-private partnerships (PPPs). Meanwhile, islands of legality within the commercial judiciary protect contracts, property rights, and dispute settlement for export-oriented manufacturing. These “functional enclaves” sustain investor confidence and industrial learning even as the broader judiciary becomes an instrument of executive control. The analysis situates this within the Varieties of Capitalism (VoC) framework (Hall & Soskice, 2001), which has been extended by law-and-development scholarship (North, 1990; La Porta et al., 1997) and the political-settlements literature (Khan, 2010).  It then compares Turkey’s configuration with four reference cases: Korea, Sweden, Russia, Egypt, Poland, and the Western Balkans

The argument unfolds through Turkey’s legal and economic transformation since 2002, with particular attention to how courts structure growth and rent allocation. It asks two main questions: (1) through which legal and judicial mechanisms has Turkey sustained technological upgrading in export-oriented manufacturing despite pervasive crony capitalism and judicial politicization? and (2) how does this configuration compare to other hybrid capitalist models, and how sustainable is it in the medium term? Analytically, the essay combines the Varieties of Capitalism framework with law-and-development and political-settlements approaches, and employs a small comparative design (Korea, Sweden, Russia, Egypt, Poland, and the Western Balkans) to situate Turkey within a broader spectrum of hybrid regimes.

1) Theoretical Framework: Tying VoC with Law and Development

1. Varieties of Capitalism and Institutional Coordination

The Varieties of Capitalism approach distinguishes between liberal market economies (LMEs) and coordinated market economies (CMEs). LMEs rely on competitive market coordination, whereas CMEs depend on negotiated relations between firms, labor, and the state, with each configuration generating institutional complementarities that shape innovation. Nevertheless, this typology presumes coherent, rule-bound institutions, and emerging economies rarely conform to either ideal type, as they operate through hybrid coordination, blending competitive markets with politicized allocation.  Moreover, Turkey is no exception to this matter; there is an intertwining between regulatory alignments with the European Union and discretionary political control.

2. Law as the Coordinating Institution

For both cases, legal systems constitute the backbone of economic coordination, sustaining long-term investments through predictable enforcement and stable courts for CMEs, and underpinning market flexibility through contract law and transparent litigation for LMEs. Douglass, North (1990) framed law as a set of “credible commitments” that lower transaction costs.  Where courts are weak or politicized, coordination depends on informal networks, party patronage, or external discipline, hence rendering judicial institutions essential for capitalist variety.

3. Political Settlements and Rent Allocation

Khan (2010)’s political settlements theory emphasizes that institutional effectiveness depends on how rents are distributed among powerful actors. Crony capitalism does not necessarily stand in opposition to growth, as it can also be considered a stabilizing political force. This means that if the rents are channeled into the correct channels, growth can coexist with a weak rule of law. Turkey’s settlement since 2002 has relied on competitive clientelism: the executive distributes rents through construction and finance while tolerating relative autonomy in export manufacturing.  Judicial capture forms part of this equilibrium, protecting politically allocated rents while allowing a narrow domain of legal predictability.

4. Global Value Chains and External Discipline

Global Value Chain (GVC) theory (Gereffi et al., 2005) explains how technological upgrading can occur in countries lacking strong domestic institutions, through interaction with multinational firms and international liabilities arising from treaties, which transmit standards and technical know-how. In the Turkish case, even if the already fragile domestic institutions deteriorated rapidly, European trade law, the EU-Turkey customs union (Ankara Accords, 1963, in effect since 1995), and private arbitration imposed a substitute for the deteriorating domestic systems.

5. Conceptual Proposition

Combining these perspectives yields a new conceptual lens: hybrid capitalism with selective legality.  In such systems, the judiciary functions dually – politicized at the apex yet partially autonomous at the commercial base.  This partial autonomy sustains technological upgrading but limits the depth of innovation.

2) The Judicial Transformation of the Turkish State 

1. Ottoman Legacies and the Early Republic (1839-1946)

Structural dualism is not a new phenomenon in the evolution of Turkish institutions, as it can be traced back to the mid-19^th century, during the period of Ottoman legal and political modernization. From the Tanzimat Reforms of 1839 (which properly limited the powers of the sovereign for the first time in Turkish history), a legal duality existed between sharia courts, which applied Islamic law like how civil codes are used, while continental European-style nizamiye courts handled commercial and criminal cases. This dualism gave rise to an enduring division between religious legitimacy and administrative legality.  The late Ottoman commercial codes of 1850 and 1861, inspired by the French Code de Commerce, already reflected an attempt to secure predictability for merchants while leaving political authority unbound.

When the Republic of Turkey was founded in 1923 following the catastrophic collapse of the Ottoman Empire, reform efforts led by its founder, Mustafa Kemal Atatürk, completed the secularization of the judiciary by adapting the Swiss civil code in 1926 to Turkish realities and introducing a new commercial code that institutionalized formal equality before the law. However, the early Republican judiciary remained subordinated to an interventionist bureaucracy.  The Kemalist state viewed law as an instrument of modernization, not a means to limit power.  Courts were tools of nation-building rather than autonomous guardians of rights (Ahmad 1993).  This administrative conception of law persisted throughout the single-party era (1925-1946) and shaped the later relationship between the judiciary and economic policy, characterized as technocratic, hierarchical, and rarely independent.

2. Transition to Multiparty Democracy, The 1961 & 1982 Constitutions

The transition to multiparty politics in 1946 and the change of guard in 1950 introduced electoral competition without dismantling bureaucratic tutelage, creating an unstable political atmosphere prone to crises and the exploitation of the judiciary. However, after the 1960 military coup and the subsequent 1961 constitution, the government attempted to rebalance state power by creating the Constitutional Court – a milestone in judicial review.  Its design echoed European constitutionalism, but its mission was to protect the bureaucratic-secular order against populist politics, resulting in courts becoming guardians of the state rather than arbiters among private actors.

The 1971 military intervention, 1980 military coup, and the 1982 constitution gradually reversed most of the liberal designs of the previous constitutional order. The judiciary’s autonomy was curtailed, and the High Council of Judges and Prosecutors (Hakimler ve Savcılar Yüksek Kurulu – HSYK) was placed firmly under the executive. Nevertheless, the same period witnessed the liberalization of trade and finance under Turgut Özal, creating tension between an interventionist constitutional framework and a market-oriented economy.  The courts were expected to enforce property rights while legitimizing emergency decrees and state security laws.  This contradictory legacy – formal independence, substantive subordination – would later define the AKP era.

3. The Troubles of the 1990s: Legal Fragmentation and the EU in the Picture

The 1990s were characterized by judicial fragmentation, coalition instability, and the deepening of rent-seeking.  The judiciary often acted as an autonomous veto player, annulling privatizations and administrative reforms, which in turn fostered executive resentment.  At the same time, the European Union’s Customs Union (1996) and the Helsinki accession process (1999) brought unprecedented external pressure for judicial reform.  The National Program for the Adoption of the Acquis (2001) mandated codification of competition, procurement, and investment laws, aligning them with EU standards.  Thus, by the time of the 2001 financial collapse, the institutional map of Turkey already contained the elements of duality: an EU-anchored commercial and administrative law framework coexisting with politicized high courts and rent-laden economic governance.

4. The 2001 Crisis and Early Reforms from AKP

The 2001 financial crisis shattered the old patronage system and prompted an intervention by the International Monetary Fund (IMF) and the EU in the form of a stabilization package. Judicial reform was embedded in these efforts through the implementation of EU harmonization laws between 2002 and 2005, which expanded due-process rights, restructured the Court of Cassation, and created specialized commercial courts. Following the AKP’s rise to power in 2002, the average length of commercial cases decreased, and the judiciary implemented digital case-tracking systems.  The National Judiciary Informatics System (UYAP), launched in 2004, modernized record-keeping and facilitated e-justice, showcasing significant improvements in the efficiency of the justice system.

However, this liberal phase was short-lived.  Once EU accession stagnated after 2006, the AKP redirected its focus on legal reform toward political consolidation.  Judicial independence was redefined as freedom from “military-bureaucratic tutelage,” rather than from executive control.  This paved the way for the 2010 constitutional referendum, which expanded government control over the HSYK.

5. Further Politicization and Construction-Driven Economy

From 2010 onward, the government transformed legal institutions into instruments of patronage.  The 2010 and 2014 HSYK reforms, as well as the post-2016 purges (resulting in the dismissal of over 4,000 judges), effectively dismantled internal checks and balances.  This capture coincided with the ascent of the construction-PPP complex as the regime’s main growth driver.  Courts rarely challenge land-zoning decrees or expropriations tied to mega-projects, such as the Istanbul New Airport or the Third Bridge.  Administrative judges who resisted were reassigned.  Consequently, the judiciary’s economic function shifted from ensuring rule-based competition to legitimizing the transfer of rents.

6. Continuities and Ruptures

Historically, the Turkish judiciary has oscillated between bureaucratic guardianship and executive subordination, but rarely genuine autonomy.  Each constitutional moment – from 1924 to 1982 to 2017 – redefined judicial independence to serve prevailing power coalitions.  The AKP’s transformation of the courts, therefore, represents less a rupture than an evolution of a long-standing pattern: law as an instrument of statecraft.  What distinguishes the post-2002 era is the combination of this tradition with global market integration.  The coexistence of EU-inspired commercial legality and politicized constitutionalism created today’s hybrid system – one capable of sustaining economic upgrading while undermining its own institutional foundations.

3) Islands of Legality: Judicial Subsystems and Technological Upgrading

1. Commercial Courts and Contract Enforcement

Despite pervasive politicization, the Turkish commercial judiciary is relatively well-positioned compared to many other OECD member states, particularly in the Istanbul Provincial Courts of Justice, which handle the majority of cases in the country, with comparable efficiency to the OECD average. This relative predictability enables manufacturing and export-focused firms – especially in electronics and transportation – to maintain supplier relations and foreign partnerships. Empirical studies show that firms perceiving contract enforcement as reliable invest more in R&D.

2. Arbitration, International Law, and Foreign Investment

Turkey’s participation in the New York Convention (1991) and bilateral investment treaties ensures that many high-value contracts are governed by international arbitration (ICC, ICSID).  This external legal infrastructure compensates for domestic weaknesses.  In the automotive sector, joint ventures such as Ford Otosan and Tofaş rely on arbitration clauses, which allow for technology transfer without political risk.  Hence, external legal pluralism acts as a substitute for judicial independence.

3. Legal Dualism and Sectoral Outcomes

In non-tradables, where PPP and zoning decisions prevail, judicial capture facilitates the extraction of political rents.  In tradables, partial legality sustains upgrading.  The coexistence of these regimes reflects Turkey’s dual economy, characterized by a rent-absorbing domestic sector and an export-disciplined sector.  Legal institutions thus reproduce economic dualism rather than resolve it.

4. Human Capital and Judicial Capacity

Turkey’s judiciary employs approximately 22,000 judges and prosecutors; however, training and case management remain uneven.  The Justice Academy, restructured in 2014, emphasizes administrative loyalty over jurisprudential skill.  However, new programs in commercial and intellectual-property law – often developed with EU funding – sustain a small cadre of technically competent judges.  These judges form the institutional backbone of the “islands of legality” that underpin industrial competitiveness.

4) Comparative Analysis: Different Paths of Development

This chapter extends the comparison of Turkey to six reference cases – South Korea, Sweden, Russia, Egypt, Poland, and the Western Balkans (with particular reference to Serbia) – to examine how differences in judicial organization shape technological upgrading and economic coordination.  The selection encompasses prominent capitalist families, including those influenced by East Asian developmentalism, European coordination, resource-state authoritarianism, postcolonial clientelism, and post-communist hybridization.

1. South Korea: Bureaucratic Legalism and Developmental Discipline

South Korea’s industrialization combined a powerful developmental state with a judiciary that, though not fully independent, ensured credible enforcement of commercial law. From the 1960s onwards, courts consistently upheld state-directed export targets and property rights within the chaebol system. This technocratic ethos, rooted in Confucian bureaucratic meritocracy, facilitated long-term policy consistency.

After the switch to a fully democratic regime, courts began to gain autonomy. However, they retained a bureaucratic orientation, allowing for the continuity of industrial policy, which had its roots in the tumultuous years of military rule, without extreme politicization. The key difference with Turkey is not judicial independence per se, but bureaucratic cohesion: even under authoritarian rule, Korea’s legal institutions maintained procedural predictability. Turkey, by contrast, exhibits legal pluralism and selective application, with efficient enclaves coexisting alongside executive manipulation. Both cases demonstrate that developmental success can emerge under partial legality, provided that legal bureaucracies are internally coherent and strategically coordinated with economic agencies.

2. Sweden: Judicial Neutrality and Embedded Innovation

Sweden is one of the best examples of a “Coordinated Market Economy”, as it enables institutionalized, non-market, relationized interactions between different actors to achieve growth and development. The Swedish judiciary is also heavily compartmentalized among autonomous agencies, administrative courts, and “judicial neutrality” is a constitutional norm since the 1809 constitution. Disputes over industrial relations and innovation are typically resolved through arbitration and corporatist negotiation rather than executive discretion.  The tripartite consensus between unions, employers, and the state functions because courts are trusted to enforce agreements impartially.

Turkey’s system, by contrast, relies on personalized enforcement.  While Swedish capitalism evolved around the rule of law as a social norm, Turkish capitalism relies on selective legal guarantees tied to political loyalty, underscoring how social trust and judicial credibility together generate institutional complementarities that are conducive to innovation.

3. Russia: Authoritarian Legalism and the Resource Curse

Russia, which underwent a similar case of democratic backsliding to that of Turkey, to more extreme levels, also illustrates a different path. Its style of authoritarian modernization, which began in the 1990s following the fall of the Soviet Union, adopted a continental European-style hierarchical judicial system. However, from the 2000s onwards, the system became heavily centralized around Vladimir Putin, who has effectively ruled the country since 2000, resulting in broad executive control over judicial appointments and the allocation of cases. The Arbitrazh (commercial) courts retain some professionalism. However, cases involving politics and resources are tightly managed, resulting in a form of dual legalism, similar to Turkey’s, but with weaker external discipline.  Resource rents shield the state from dependence on export manufacturing, reducing pressure for credible legal institutions.

In Turkey, the absence of significant natural-resource rents created more substantial incentives to maintain pockets of legality for export-oriented manufacturing.  Thus, Turkey and Russia share the logic of authoritarian coordination; however, Turkey’s integration into European trade networks and the lack of natural resources introduce external constraints absent in Russia.

4. Egypt: Clientelist Judiciary and the Absence of Discipline

Egypt, after achieving de facto independence from the Ottoman Empire under Mehmet Ali Pasha in the 19th century, initially adopted a corporatist approach to development, similar to the one Turkey adopted after the establishment of the Republican regime in 1923. However, it was heavily drawn into clientelist politics post-1952, following the fall of the Egyptian monarchy. There was limited counter-weight over executive abuse through Majlis al-Dawla (The Council of the State), but the rulings rarely constrained rent distribution. Under Hosni Mubarak, judges negotiated limited autonomy in exchange for acquiescence in state patronage (Henry & Springborg,  2010).  The courts thus legitimized clientelism while protecting the property rights of the elite.

Turkey’s pattern differs mainly in its exposure to external discipline, with better political stability and more consistent governance.  Whereas Egypt’s closed economy insulated its judiciary from global accountability, Turkey’s export orientation forced partial modernization.  Both systems, however, demonstrate how clientelist legal orders can coexist with regime stability but stifle innovation.

5. Poland: Rule-of-Law Regression and More EU Control

Poland can also serve as a good comparative case with Turkey, especially in terms of judicial backsliding, but with more European constraints due to its membership in the European Union. After joining the EU in 2004, Poland initially experienced rapid growth, supported by credible institutions and a strong administrative court system.  However, since 2015, the Law and Justice (PiS) government has pursued the politicization of the judiciary through reforms of the National Council of the Judiciary and the Constitutional Tribunal.  These measures paralleled Turkey’s HSYK restructuring, subordinating judicial appointments to the executive.

The EU’s response – Article 7 proceedings and the conditionality mechanism – illustrated the power and limits of external constraints, as Poland remained within the EU’s legal order, subjecting its courts to oversight by the European Court of Justice (ECJ).  This supranational anchor prevents the complete erosion of legality, unlike Turkey, which operates outside the EU judicial enforcement framework.  Nevertheless, both cases reveal how populist executives exploit nationalist rhetoric to justify “judicial reform” while retaining formal constitutionalism.  The outcome is selective compliance: legal institutions remain functional for economic coordination but lose autonomy in politically sensitive cases.

6. Serbia (and the Western Balkans at-large): EU-Dependent Hybridization

Serbia and other Western Balkan states (Bosnia and Herzegovina, North Macedonia, Albania) occupy a middle ground between Turkey’s hybrid capitalism and Poland’s constrained backsliding.  Since the early 2000s, judicial reform has been a core component of EU accession conditionality, but, as in Turkey, reforms have often been procedural rather than substantive, focusing on laws and councils rather than entrenched judicial culture. An example can be seen in Serbia, where its High Judicial Council nominally guarantees independence but remains politically influenced.  Commercial courts perform adequately, while high judiciary appointments are negotiated among political elites.

Economically, Serbia’s pattern mirrors that of Turkey in miniature as export-oriented manufacturing (especially automotive and electronics assembly for German firms) depends on predictable contract enforcement, while domestic sectors remain clientelist. Similar to the Turkish case, EU integration creates external mimicry – institutions that resemble European ones but operate informally, much like Turkey once benefited from a similar mimicry during its more serious attempts at EU membership, from the late 1980s until 2011. The Western Balkans’ experience demonstrates the fragility of such hybrid legality without full membership or rule-of-law conditionality.

This parallel also highlights the regional diffusion of hybrid governance.  Turkish construction conglomerates and defense firms operate extensively in the Western Balkans, often negotiating directly with political leaders.  Their activities reflect a shared institutional grammar, characterized by discretionary enforcement of contracts, selective arbitration, and blurred lines between public procurement and private enterprise.  The interaction of Turkish and Balkan hybrid capitalisms thus generates a transnational network of selective legality, anchored neither entirely in EU law nor in autarkic sovereignty.

7. Comparison: Mapping the Spectrum

Table: Comparison of Selected Cases – Ranking from Developmental Outcomes
Country	Legal-Institutional Type	Coordination Mechanism	External Anchor	Developmental Outcome
Sweden	Judicial Neutrality	Corporatist Coordination	European Union + Domestic Social Trust	Continuous innovation
South Korea	Bureaucratic Legalism	Developmental State	U.S. Security + Export Discipline	High-tech upgrading
Poland	Populist Backsliding	EU-dependent Coordination	EU Institutions (Especially the ECJ) + Foreign Investment	Slowing innovationStability
Turkey	Selective Legality	Competitive Clientelism	Weakening EU Anchor through the Customs Union and other pan-European institutions + Export Discipline	Medium-tech upgradingIncreasing fragility
Serbia+Western Balkans	Hybrid Mimicry	Patronage + external mimicry	Conditional EU Accession + Foreign Investment	Partial upgradingPersistent informality
Russia	Authoritarian Legalism	Resource Rents	Minimal to None	Low diversification
Egypt	Clientelist Judiciary	Crony Capitalism	Minimal to None	Stagnation

Examining these diverse cases from across Europe and the rest of the world, we observe a continuum of hybrid capitalist models rather than distinct realities. On one end, Sweden and Korea are highly coherent: legality and coordination reinforce each other. On the other hand, Egypt and Russia are characterized by low coherence, characterized by rentierism without external discipline. Between these lies a cluster – comprising Turkey, Poland, and the Western Balkans – where partial legality, external dependence, and politicized courts coexist. They upgrade industrially through global value chains, but their legal fragility threatens sustainability once external incentives cease to exist. The expanded comparison reveals a broader point: judicial capture is not unique to Turkey, but rather part of a global wave of competitive authoritarian legalism. Executives increasingly instrumentalize courts not by dismantling them but by repurposing their autonomy to legitimize policy. In Turkey and Poland, judicial reform is framed as a means to democratize the system against “elitist judges.” In Serbia and Russia, it is framed as a means to restore sovereignty. In Egypt, it is framed as a means to achieve stability. The legal rhetoric differs, but the functional outcome remains the same: law becomes a selective mechanism for regime consolidation and economic management.

Comparing Turkey to these six other cases shows that the relationship between courts and capitalism is neither linear nor deterministic. Legal systems can both serve as engines for development and pose obstacles to it. What differentiates sustainable innovation from fragile upgrading is not the existence of courts but their integration into credible, rule-bound coordination mechanisms.

Turkey’s judiciary today is more like Poland and Serbia than Korea or Sweden: it is embedded in an externally influenced, domestically politicized order. Its success in manufacturing is real but contingent on the persistence of selective legality and access to external markets. Without institutional convergence towards impartial adjudication, Turkey will join the broader regional trend of permanent hybridization – neither a rule of law state nor an outright autocracy but a structurally ambiguous capitalism that hovers between both worlds.

5) Implications and Limits of Turkey’s Hybrid Legal-Economic Model

1. Resilience Through Legal Fragmentation

The Turkish model, as outlined in previous chapters, has successfully driven technological development and export discipline despite democratic backsliding, demonstrating remarkable resilience, enabled by the endurance of legal predictability in micro domains. This fragmented rule of law provides just enough certainty for investors while preserving political control.  Nevertheless, it erodes long-term confidence due to structural fragility, particularly through policy volatility, currency crises, and selective enforcement.

2. Judicial Capture and Innovation Constraints

Innovation, despite being heavily dependent on capital (human and financial), knowledge, and technical abilities, is not solely reliant on these drivers. The security of intellectual property protection and impartial adjudication is equally important, as their strength enables the economic rationalization of innovation, guarantees enforcement and predictability,  and creates a self-reinforcing innovation ecosystem. Turkey’s patent enforcement, on the other hand, remains weak; firms rely on informal arrangements, and the judiciary’s lack of autonomy deters risk-taking.  Empirical data show that R&D intensity plateaued after 2016 (OECD 2023).  The erosion of judicial credibility thus directly constrains technological deepening.

3. The EU Dimension and External Anchoring

The European Union once catalyzed judicial reform. However, those efforts were rendered ineffective and only acted as a facade to enable AKP’s takeover of the judiciary and state bureaucracy. Thus, with a stronger AKP and much more powerful Erdoğan, accession prospects faded, and the EU influence was rendered irrelevant on the reform side of the scope. However, EU trade law and private arbitration still embed Turkey within a transnational legal order, and a possible re-engagement with European legal standards – especially under the Green Deal and digital market regimes – could restore a measure of predictability.

4. The Future of Legal Dualism in Turkey

Turkey’s hybrid model may persist as long as industrial enclaves remain profitable and political rents are sustainable.  However, the contradiction between selective legality and innovation-driven growth is widening, as credible courts are essential for long-term investment in high-technology sectors (such as AI, semiconductors, and green manufacturing), which will remain limited without them.  The consolidation of presidential power after 2018 further reduces the judiciary’s reform capacity.  Sustaining technological upgrading will thus depend on re-professionalizing the courts and restoring legal certainty.

6) Further Critical Reflections: The Sustainability of Turkey’s Hybrid Legal–Economic Model

1. Structural Tensions in Hybrid Models

Turkey’s model of selective legality and dual economic structure is proven to be resilient in the short term; however, it could face growing contradictions in maintaining the equilibrium between political control, rent extraction, and market openness. This is heavily dependent on the executive’s ability to maintain fiscal and social stability while keeping export sectors functional, and this equilibrium is eroding. Turkey is slowly losing ground in terms of the returns provided by its existing model, a case similar to that stated by Rodrik (2007), who notes that growth built on partial institutional reform tends to plateau once the “easy gains of integration” are exhausted. As a result, manufacturing exports are stagnating in sophistication, productivity growth has slowed, and macroeconomic volatility has increased.

The erosion of judicial credibility exacerbates these structural tensions, as investors face an increasingly inconsistent and unstable judiciary. The system is heavily dependent on the rule of law; it systematically erodes to maintain confidence; thus, the model’s sustainability hinges on a perpetual paradox.

2. The Middle-Income and Middle-Institution Trap

Turkey’s trajectory may also be pushing the country towards a condition known as the “middle institution trap”, where a country’s institutions are sufficient to support innovation but are insufficient for advanced innovation and further economic development. As Khan (2010) and Buğra & Savaşkan (2014) note, the coexistence of competitive enclaves and rentier politics can generate steady but shallow upgrading. However, once wages rise, comparative advantages shift, and technological transition demands stronger legal frameworks for intellectual property, competition policy, and dispute resolution. In Turkey, the capture of courts constrains precisely these capacities. The long-term implication is that Turkey risks becoming a permanent sub-tier supplier within global value chains, rather than moving toward autonomous innovation. R&D intensity remains around 1.4% of GDP, and the institutional environment discourages venture capital and advanced research partnerships. This institutional glass ceiling will likely remain in place unless judicial and bureaucratic reforms restore predictability.

3. External Dependence and European Vulnerabilities

The question of sustainability also extends to Turkey’s relations within the European system, both as one of the EU’s most important trading partners and as an integral part of the European supply chain. Both sides benefit from these dependencies, but this state of affairs also imports legal asymmetry. European firms operating in Turkey rely on contractual enforcement through arbitration and EU trade law, but the absence of domestic judicial independence exposes them to political leverage. As Brussels pursues strategic autonomy, Turkey’s weak rule of law could become a liability for EU industrial policy.

Moreover, the EU’s diminished leverage, following the de facto freeze of the accession talks, means that conditionality mechanisms have weakened, resulting in a widening divergence. To address this issue, new frameworks are needed, particularly sector-specific and more targeted “rule of law” compacts. If not, European investors may diversify away from Turkey toward North Africa or Eastern Europe, further undermining the sustainability of the Turkish growth model.

4. Geopolitical Dimension and Strategic Ambiguity

In the geopolitical arena, this dual-legal order affords Turkey some flexibility, albeit at significant reputational costs. The politicization of courts undercuts Ankara’s credibility in investment protection treaties and defense-industrial cooperation. For NATO partners, co-production and technology transfer depend on trust in contract enforcement and export controls. The same applies to Gulf and Asian investors, who are increasingly perceiving Turkey’s legal risk as high, despite attractive market opportunities. In this sense, legal dualism translates into strategic ambiguity, as Turkey oscillates between Western institutional commitments and domestic autarkic impulses. While this ambiguity grants short-term bargaining power, it undermines long-term institutional convergence with both Western and Eastern partners.

5. Environmental, Social, and Governance (ESG) Risks

Finally, sustainability must be assessed in both normative and economic terms. The global shift toward ESG standards places the rule of law and judicial transparency at the center of investment decisions, and Turkey’s selective application of the law exposes firms and foreign partners to reputational and compliance risks. Without judicial reform, access to EU carbon-border adjustment mechanisms and green finance will be limited, hence extending the damage caused by the erosion of legal accountability into fiscal consequences.

6. Beyond Resilience: Prospects for Reconstitution

Despite the apparent showcase of Turkey’s extraordinary resilience, this situation does not equate to sustainability. In the medium term, continuing innovation and growth require institutional reconstitution, particularly a restoration of judicial impartiality and regulatory credibility.  A re-professionalized judiciary could serve as the institutional hinge between political stability and economic innovation; however, in its absence, Turkey’s hybrid capitalism risks devolving into authoritarian stagnation, characterized by short-term adaptation but lacking the capacity for long-term transformation.

For its partners, especially within the EU and NATO, engagement strategies will need to move beyond transactional pragmatism. Supporting judicial capacity-building, commercial law harmonization, and the rule of law in environmental matters could help anchor Turkey within a cooperative legal order. Without such coordination, both sides will remain trapped in a relationship of mutual vulnerability – interdependent but institutionally divergent.

Conclusion

Turkey’s recent history demonstrates that technological upgrading can coexist with judicial politicization; however, it also highlights the structural limitations of relying on a fragmented legal order to support a modern, innovation-oriented economy. The dual legal regime that has emerged – with politicized high courts alongside more professional commercial and administrative chambers – has allowed export-oriented sectors to function with a degree of predictability, while enabling the executive to use the judiciary as a tool for consolidating political authority and managing rents in non-tradable sectors. This arrangement extends long-standing historical patterns in which Turkish courts have often provided technical stability without exercising genuine autonomy in politically sensitive domains.

The comparative evidence supports this conclusion. Turkey now resembles hybrid systems, such as those found in Poland and Serbia, more than the coherent institutional orders of Sweden or South Korea. These cases demonstrate that while selective legality can sustain medium-tech competitiveness, especially in economies embedded in global value chains, it rarely generates the institutional confidence necessary for advanced innovation, robust intellectual property regimes, or long-term investment planning. Judicial backsliding, even when partial, imposes cumulative constraints on the credibility of economic commitments, and Turkey is no exception.

For this reason, the sustainability of Turkey’s hybrid model is increasingly in question. Its resilience in the face of political and economic shocks reflects the strength of insulated industrial enclaves rather than the coherence of the broader institutional framework. As external anchors weaken and judicial credibility erodes, the country risks slipping into a stable but stagnant equilibrium – one where technological upgrading continues in narrow segments but cannot evolve into higher-value, innovation-driven growth.

Ultimately, Turkey’s experience reveals a broader lesson: growth can occur under selective legality, but it cannot mature without the institutional reliability of impartial courts. The long-term trajectory of the Turkish economy will therefore depend less on continued integration into global markets than on whether the judiciary can be restored as a credible and predictable partner in economic coordination.

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