Economic History of the Ottoman Empire

The Ottoman Empire's economic history spans the years 1299 to 1923. The Ottoman Empire's economy is made up of trade, agriculture, transportation, and religion. In the wealth-power-wealth equation, the Ottomans saw military expansion and careful currency use to emphasize manufacturing and industry, moving towards capitalist economics with expanding industries and markets. In contrast, the Ottomans continued on their path of territorial expansion, traditional monopolies, conservative landholding, and agriculture.

16th, 17th, and 18th Centuries

A country's economy has traditionally relied heavily on trade. It was the same in the sixteenth century. As the Ottoman Empire grew, it began to gain control of key trading routes. A significant event was the Ottoman Turks' seizure of Constantinople in 1453. With their conquest, they gained control of the Silk Road, which was utilized by European countries to trade with Asia. According to many sources, the Ottoman Empire "blocked" the Silk Road. While Europeans were able to trade through Constantinople and other Muslim countries, they were subjected to heavy tariffs. Because religion appears to have played a significant part in their societies, Ottoman-European relations were not always ideal. During this time, the Ottoman administration was primarily responsible for both land and maritime transportation quality. As a result, the quality of transportation infrastructure changed dramatically throughout time, depending on the effectiveness of the present administration. The tale of empire-wide transportation should not be viewed as one of continuous development. Indeed, in the 16th century, road infrastructure was far superior to that of the 18th century.

Land

The Ottomans inherited a caravanserai network in Anatolia from the Selçuk Turks who came before them. The empire's administration and tax collection demanded a concern for messengers and convoys' safety and (by extension) trade caravans. The caravanserai network reached the Balkans, providing a haven for merchants and their livestock. Unfortunately, the 16th and 17th-century Jelali revolts wreaked havoc on Anatolia's land transportation system. Merchants had to negotiate safe passage with the local authority of the area they were passing through because the empire could no longer guarantee their safety. Land travel in Anatolia improved only in the 18th century, thanks to concerted efforts to improve the safety of the caravanserai network and the reorganization of a corps of pass-guards.  Sea: The empire was not particularly interested in marine trade, preferring to rely on a free-market economy to generate revenue. These laissez-faire policies, however, were not always followed. The Ottoman state, for example, was directly involved in the spice trade to boost revenue during Hadim Suleyman Pasha's reign as Grand Vizier, which lasted until 1544. Such measures, however, were frequently overturned by their successors. The Aegean and Eastern Mediterranean (Primary trade: wheat), the Red Sea and Persian Gulf (major trade: spices), the Black Sea (principal trade: wheat and lumber), and the Western Mediterranean were the main areas of maritime activity. Archaeologists uncovered a large Ottoman merchant shipwreck in the Mediterranean in 2020, believed to have sunk about 1630 CE en way from Egypt to Constantinople. The ship, which was 43 meters long and weighed 1,000 tons, was hauling Chinese porcelain from the Ming dynasty, Italian painted ceramics, Indian peppercorns, coffee pots, clay tobacco pipes, and Arabian incense. The type of the cargo and the ship's size indicate that the Red Sea-Indian Ocean-Mediterranean commerce lines were active throughout the Ottoman Empire.

19th Century

New technologies revolutionized travel and communications throughout the nineteenth century. Water and land transportation was changed with the advent of the steam engine in Britain, which revolutionized trade and commerce. Because of the steamship, voyages were more predictable, times were reduced, and vast volumes of commodities could be transported for less money. For example, the Istanbul-Venice voyage, which took anything from fifteen to eighty-one days by sail ship, was cut to ten days by the steamship, according to Quataert. Sail ships would be capable of transporting 50 to 100 tonnes. Steamships, on the other hand, could now carry 1,000 tonnes. With the invention of the steamship, hitherto inaccessible routes became accessible.

Rivers that previously exclusively transported cargo in one direction may now be travelled in both directions, providing innumerable benefits to specific regions. Steamships prompted new routes such as the Suez Canal, which changed trade demography across the Near East as trade was relocated. According to Quataert's research, the volume of trade began to increase in the nineteenth century. Sailboats accounted for only 5% of ships visiting Istanbul in 1900. However, this 5% was more than any other year in the nineteenth century. Istanbul transported 4.5 million tons of cargo in 1873, increasing to ten million tons by 1900. Larger ships hastened the construction of port communities with deep harbours to accommodate them. Europeans, on the other hand, owned 0% of commercial ships in Ottoman waterways. Steamships did not help all regions because rerouting meant trade from Iran, Iraq, and Arabia no longer had to pass through Istanbul, Aleppo, or even Beirut, resulting in losses in these areas. Thus, the Ottoman world might be divided into two primary regions in terms of transportation. Wheeled transit connects European provinces, but Anatolia and the Arab world rely on non-wheeled transport.

Railroads fundamentally changed land transportation by drastically reducing journey times, boosting population migration, and altering rural-urban relations. Railroads provided low-cost, reliable bulk-goods transportation, allowing the promise of fertile interior regions to be realized for the first time. When railroads were erected near these areas, agriculture grew quickly, and hundreds of thousands of tons of cereals were transported this way. Non-commercial travellers who began using railroads had additional benefits. There are 8 million passengers on the 1,054-mile Balkan lines and 7 million on the 1,488-mile Anatolian lines. By 1911, railroads had generated a new source of employment for almost 13,000 people. The Ottomans did not create major railroad or shipping enterprises due to low population density and finance. The majority of railroad funding came from European financiers, giving them significant financial power. With the emergence of steam, older modes of transportation did not vanish. Businesses and animals used to transport products between areas found new employment transferring goods to and from trunk lines. Over 10,000 camels were used to serve small railroads in the Aegean region alone. At one point, a thousand camels were waiting to discharge merchandise at Ankara station. In addition, the expanded territory crossed by railroads aided the development and enhanced agriculture. Land transport, like sailing vessels, aided and energized trade and commerce throughout the empire.

The Ottoman Empire had an agricultural economy with scarce labour, abundant land, and little capital. The majority of the people lived off tiny family properties, which generated roughly 40% of the empire's taxes, both directly and indirectly through customs income on exports. Economic historians have been trying to figure out how agricultural output has changed through time and between societies for a long time. The scale of productivity fluctuations is frequently at the centre of key historical discussions about whether or not there was an agricultural revolution, when and where it occurred, and how societies' living standards have differed. To explore the effects of climate, resources, technology, and institutions on productivity and determine the divergence of incomes and reversals of fortune across history, it must first establish the variations in productivity. Cultivator families made their living from a diverse range of economic activities, not just cultivating crops that included raising animals for milk and wool and farming a range of vegetables for their consumption. Some rural families made things to sell to others; for example, Balkan villagers spent months travelling to Anatolia and Syria to sell their wool cloth. At the turn of the twentieth century, the pattern established in the 18th century had not changed appreciably. That isn't to imply there haven't been any developments in the agricultural sector. Animal products, textiles, and transportation were all provided by nomads, who played a vital role in the economy. Sedentarization schemes took place in the nineteenth century, coinciding with massive influxes of refugees, and they were challenging for the state and difficult to govern. Tribes reduced their animal rearing and increased their farming as a result of this dynamic. Beginning in the 18th century, as agriculture became increasingly commercialized, more people began to cultivate more. New markets arose due to expanding urbanization, which was easily matched by the arrival of railroads.

The increased production was motivated by state legislation that required a greater amount of taxes to be paid in cash. Finally, rising demand for consumer products prompted a rise in production to meet that demand. According to Quataert, manufacturing increased due to several causes. Irrigation projects, intensive agriculture, and the incorporation of new agricultural techniques increased in usage during the 19th century, resulting in a rise in productivity. Ploughs, reapers, and other agricultural tools such as combines were found in tens of thousands over the Balkan, Anatolian, and Arab areas by 1900. However, the majority of the productivity improvements were due to enormous swaths of land being cultivated. Families began to spend more time at labour, putting barren land to good use. The use of land that had previously been used for animal pasture boosted sharecropping. Millions of refugees, aided by government policy, brought enormous swaths of tilled land into production.

The Syrian provinces' empty central Anatolian basin and steppe zone were examples of government agencies distributing smallholdings of land to refugees. Small landholdings were the standard across the empire, and this was a recurrent theme. Despite the Ottoman political decline, foreign ownership remained unique — most likely due to significant local and notable resistance and human resources difficulties. Issawi et al. claim that division of labour is impossible due to religious considerations. Inalcik, on the other hand, illustrates that labour division was historically set and subject to alteration. The state established agricultural colleges, model farms, and the teaching of a self-perpetuating bureaucracy of agrarian specialists focused on expanding agricultural exports as part of agricultural reform efforts in the late nineteenth century. The value of agricultural exports from Anatolia alone increased by 45 per cent between 1876 and 1908, while tithe proceeds increased by 79 per cent. On the other hand, cheap American grain imports harmed agricultural industries across Europe, resulting in outright economic and political crises in some areas.

Medieval Times

In medieval Anatolia, no organized system for governing industry had formed. The Ahi Brotherhood, a religious institution that followed the Sufi tradition of Islam during the 13th and 14th centuries, is the closest such organization that can be discovered. The majority of the members were merchants and craftsmen who saw pride in their profession as an integral component of their Islam. The organization, however, was not professional and should not be confused with later professional guilds.

The Emergence of the Guilds

It's unclear when or how different guilds arose. However, guilds had become a well-established element of contemporary Ottoman society by 1580, according to what is known. The Surname of 1582, an account of the parade to mark Murad III's son Mehmed's circumcision, demonstrates this. The guilds were organizations that were in charge of upholding standards.

Late 18th Century Onwards

Quataert says that when studying Ottoman manufacturing, which is an important area of knowledge transfer, one must look at both large factories and small workshops. One will find that Ottoman industry was not a dying, un-adaptive, un-evolving sector but vital, creative, developing, and diverse. Over the nineteenth century, there was a change in favour of rural female work, with guild-organized urban male labour becoming less prominent. The global market for Ottoman items shrank slightly, but particular areas grew. Any decreases, however, were offset by an increase in domestic demand and consumption. Even at its peak, mechanized production was a small percentage of total output. Moreover, production mechanization was hampered by a lack of capital, as it was in other economic sections.

Nonetheless, throughout Istanbul, Ottoman Europe, and Anatolia, some manufacturers arose. Salonica, Edirne, West Anatolia, and Lebanon all had steam-powered silk-reeling plants in the 1830s. Fine fabrics, hand-knit yarns, and leathers were in high demand outside the empire in the late 18th century. However, by the early nineteenth century, they had collapsed, and export manufacturing resurfaced in the form of raw silk and oriental carpets half a century later. In 1914, the two sectors combined employed 100,000 people, with two-thirds of those employed in carpet manufacturing for European and American customers. Women and girls made up most of the labour, earning some of the lowest pay in the manufacturing industry. During the 18th century, much of the manufacturing moved to the cities to lower rural expenses and salaries. During the 18th and 19th centuries, guilds that existed before the 18th century experienced a decrease. Guilds maintained some level of price stability by restricting output and controlling quality, and providing support to members who were going through difficult times. However, as market forces drove down prices, their influence waned, and their fate was sealed when the Janissaries, who had been their patrons, were disbanded by Mahmut II in 1826. The vast majority of producers focused on the 26 million domestic consumers who often lived in neighbouring provinces. It's tough to analyze these producers because they didn't belong to any organizations that left records.

Nevertheless, manufacture saw remarkable continuities in manufacturing from 1600 to 1914; industrial cities that thrived in the 17th century were frequently still functioning in 1914. In the 18th and 19th centuries, manufacturing battled Asian and then European competition, with artisanal industries being supplanted by cheaper industrially produced imports. On the other hand, manufacturing attained unexpected output levels, with the emergence of new industries more than compensating for old ones. With the loss of handicrafts, output shifted to agricultural commodity production and other manufactured activity.

19th Century

Throughout the nineteenth century, Egypt was practically independent of the empire and had a far more advanced economy. It has a per capita income equivalent to France's and higher than Eastern Europe and Japan. Egypt had a per-capita income of $232 in 1960 dollars ($1,025 in 1990 dollars), according to economic historian Jean Barou. In 1960 dollars, France had a per-capita income of $240 ($1,060 in 1990 dollars), Eastern Europe had a per-capita income of $177 ($782 in 1990 dollars), and Japan had a per-capita income of $180 ($795 in 1990 dollars). Other sections of the Ottoman Empire, particularly Syria and southeastern Anatolia, had a highly productive industrial sector evolving in the 19th century and Egypt. Egypt initiated state-sponsored industrialization efforts in 1819, including armaments manufacturers, an iron foundry, large-scale cotton farming, cotton mills for ginning, spinning, weaving, and agricultural processing firms. Egypt had 30 cotton mills by the early 1830s, employing roughly 30,000 people. Egypt had the world's sixth most productive cotton industry in terms of spindles per capita in the early nineteenth century. Until roughly 1870, the industry was powered by technology that used conventional energy sources, including animal power, water wheels, and windmills, which were also the primary energy sources in Western Europe. While engineer Taqi Ad-Din Muhammad ibn Ma'ruf experimented with steam power in Ottoman Egypt in 1551 when he created a steam jack propelled by a crude steam turbine, steam engines were brought to Egyptian industrial manufacture under Muhammad Ali of Egypt in the early 19th century. Despite the shortage of coal reserves in Egypt, prospectors looked for them. They built boilers used in Egyptian industries such as ironworks, textile manufacturers, paper mills, and hulling mills. Until the 1830s, when Egypt got access to coal supplies in Lebanon, which had a yearly coal output of 4,000 tons, coal was imported from abroad at similar prices to what imported coal cost in France. Egypt also had superior agricultural and a well-developed Nile-based transportation system as compared to Western Europe. The required economic conditions for rapid industrialization existed in Egypt during the 1820s–1830s, according to economic historian Jean Batou, as well as for the adoption of oil as a viable energy source for its steam engines later in the 19th century. Following Muhammad Ali's death in 1849, his industrialization programs faded, and Egypt was well on its way to full integration into a European-dominated international market as a supplier of a single raw commodity, cotton, according to historian Zachary Lockman. He claims that if Egypt had succeeded in its industrialization ambitions, it would have shared the distinction of achieving autonomous capitalist development while maintaining its independence with Japan [or the United States]. Free trade, according to economic historian Paul Bairoch, contributed to the Ottoman Empire's deindustrialization.

In contrast to China, Japan, and Spain's protectionism, the Ottoman Empire had a liberal trade policy that welcomed imports that may be traced back to the Ottoman Empire's capitulations, which began with the first commercial treaties made with France in 1536 and continued with capitulations in 1673 and 1740, which reduced import and export levies to 3%. British economists like J. R. McCulloch praised the Ottoman policies in his Dictionary of Commerce (1834). Still, British politicians like Prime Minister Benjamin Disraeli criticized them in the 1846 Corn Laws debate, citing the Ottoman Empire as "an example of the injury done by the unrestrained competition." As a result, some of the world's most prominent manufacturers have been wiped out. These factories remained in operation until 1812 when they were dismantled. That was the effect of competition in Turkey, and the consequences were exactly as catastrophic as the opposite principle's results in Spain.

Domestic trade outstripped international trade in both value and volume, despite the lack of direct measurements available to scholars. Much of Ottoman history has relied on European archives that have failed to document the empire's internal trade, causing it to be undervalued. By using certain instances, Quataert displays the extent of internal trade. In 1759, the French Ambassador estimated that total textile imports into the empire would only be enough to clothe 800,000 people out of a population of at least 20 million. In 1914, only about a quarter of agricultural produce was exported, with the rest consumed domestically. The value of Ottoman-made items sold in the Damascus province in the early 17th century was five times that of all foreign-made goods sold there. Finally, some 1890s numbers for three non-leading cities are included amid the scant internal trade data. In the 1890s, the value of their interregional trade amounted to about 5% of the overall Ottoman international export trade. Given their insignificance, cities such as Istanbul, Edirne, Salonica, Damascus, Beirut, and Aleppo are significantly greater than all three. The extent of domestic trade is put into perspective when you consider that there are dozens of medium-sized towns, hundreds of little towns, and thousands of villages. Wars and government policies have a significant impact on both domestic and international trade. Wars had a significant impact on trade, particularly when territorial losses ripped apart Ottoman economic unity, often breaking centuries-old links and patterns. The role of government policy is more contentious; however, most policy-driven barriers to Ottoman foreign and internal trade vanished or were significantly reduced. However, aside from the disruption created by war and ad hoc territorial losses, there appears to be little evidence of a large drop in internal trade.

In the nineteenth century, global trade expanded sixty-fourfold, whereas Ottoman trade increased ten to sixteenfold. Between 1750 and 1789, cotton exports more than doubled. The most significant gains came from the Balkan ports of Smyrna and Salonica. However, some reductions from Syria and Constantinople partially countered these. Cotton exports to France and England doubled during the late 17th and late 18th centuries. At the same time, semi-processed product exports to northwest Europe also increased. In the 16th century, the Ottoman market was vital to Europe, but by 1900, it was no longer so.

On the contrary, the Ottoman Empire was not decreasing; it was growing in importance, but it became less relevant. Only Constantinople had an import surplus in terms of trade imbalance. Both Lampe and McGowan contend that the empire as a whole, and the Balkans in particular, maintained an export surplus at this time. From the 18th century onwards, however, the trade balance shifted against the Ottomans. They would re-export high-value luxury goods from the Far East, primarily silks, and export many of its products. As a result, imports of high-end items began. Exports shifted to unprocessed goods in the 18th century, while commodities were imported from European colonies simultaneously. Slave labour created the majority of these goods, undermining home manufacture. However, most researchers believe that a favourable trade balance existed at the end of the 18th century. Although trade rose dramatically in the nineteenth century, exports were roughly the same as they were in the previous century. The concentration was on food and raw materials, with carpets and raw silk coming in the 1850s. Although the export basket stayed relatively consistent, the proportional importance of the items varied greatly. Foreign merchants and non-Muslim Ottomans became influential in the expanding international trade from the 18th century onwards. Their political importance expanded as their wealth grew, particularly in Syria.

On the other hand, Muslim merchants controlled internal trade and trade between the interior and coastal cities. With the advent of protectionism in Europe and producers looking for new markets, foreign trade, a tiny element of the Ottoman economy, became slightly more important towards the nineteenth century. It grew during the study era, especially in the nineteenth century. The balance of payments was relatively stable throughout, with no significant long-term deficits or surpluses.

Taxation, primarily from the rural people, was used to fund Ottoman bureaucratic and military expenditures. Pamuk observes significant differences in monetary policy and practice across the empire. Although monetary regulation existed, enforcement was sometimes lax, and little effort was made to monitor merchants, moneychangers, and financiers' operations. Between the end of the 15th and the end of the 17th centuries, about 500 percent price rises during the "price revolution" of the 16th century, when inflation took off. However, inflation did not persist, and it did not resurface in the 18th century. Military-related spending increased in the 18th century, while both bureaucracy and military spending increased in the 19th century. McNeill describes Ottoman stagnation as a result of centre-periphery interactions, with a lightly taxed centre and cost-burdened periphery provinces. Though this study may apply to some provinces, such as Hungary, current research has discovered that most of the funding came from provinces around the centre. The central state's role developed and diversified as the empire modernized following European powers. It had hitherto been content with earning tax revenues and waging wars. It began to address education, health, and public works, which religious leaders previously organized in the villages - this can be said to be required in a quickly changing world and necessary Ottoman response. Around 2,000 government servants were employed at the end of the 18th century, but by 1908, that number had risen to 35,000. Ottoman military technology and practices were increasingly adopted by the Ottoman military, which grew from 120,000 soldiers in 1837 to over 120,000 in the 1880s. Other advancements, such as the telegraph, railroads, and photography, were rapidly being used against old mediators becoming increasingly marginalized. The Ottoman Empire was the only empire that had never taken on foreign debt and enjoyed a healthy financial situation until 1850. As the state's financial demands grew in the nineteenth century, it realized it couldn't meet them through taxation or domestic borrowing, so it resorted to huge debasement and subsequently created paper money. It investigated European debt, which had excess cash available for international investment, but decided against it because of the risks connected with European control. However, the Crimean War, which lasted from 1853 to 1856, necessitated such debt. The Ottoman Empire suffered through a crucial period from 1854 and 1881. This period includes sporadic attempts by western powers to impose some authority, beginning with the first foreign loan in 1854. A second, more severe period began in 1863, resulting in a snowball effect of accumulating debts. In 1875, the Ottoman government acknowledged its inability to repay its external debt, totalling 242 million Turkish pounds, with more than half of all budgetary expenditures going toward its service. A drop in tax collections hastened the decline into bankruptcy due to poor harvests and excessive spending, exacerbated by the expenditures of suppressing revolutions in the Balkans. The Public Debt Administration was established after agreements with European countries, and certain incomes were given. The Ottomans were subjected to foreign financial control due to this agreement, and they were unable to break free, partly because of constant borrowing. The Ottoman administration was still reliant on European bankers in 1914, with a debt of 139.1 million Turkish pounds. The Ottomans had yet to build a financial system comparable to that of London and Paris. The government has recognized the necessity for a dependable bank since the beginning of the 18th century. Like the Bank of Constantinople, the Galata bankers lacked the capital and expertise to undertake such huge projects. Ottoman borrowings followed the Heckscher-Ohlin theorem as a result. Between 1854 and 1876, there were two different phases of borrowing. The first and most significant caused defaults in 1875. Borrowings were typically 4 to 5% of the bond's nominal value; however, new issues were sold at prices well below these values after commissions, resulting in a much higher effective borrowing rate – coupled with a deteriorating financial situation, the borrowing rate rarely fell below 10% after 1860. The European engagement began with establishing the Public Debt Administration. A reasonably tranquil period allowed the budget to be balanced with lower levels of external borrowing due to the absence of wartime expenditures. In the late 1800s, the semi-autonomous Egyptian region incurred massive debts, prompting international military involvement. With the debt administration providing security, more European capital poured into the empire, investing in railroad, port, and public utility projects, strengthening foreign capital control over the Ottoman economy. The debt burden grew, devouring a significant portion of Ottoman tax income; by the early 1910s, deficits had resumed, along with military spending, and another default may have occurred if the First World War had not broken out.