"Economy and economic policy" in Encyclopaedia of the Ottoman Empire

Encyclopedia of the OTTOMAN empire

Gábor ÁgostonGeorgetown University, Washington, D.C.

Bruce MastersWesleyan University, Connecticut

i-xxxviii_Ottoman_fm.indd i 11/4/08 2:29:59 PM

Encyclopedia of the Ottoman Empire

Copyright © 2009 by Gábor Ágoston and Bruce Masters

All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any infor-

mation storage or retrieval systems, without permission in writing from the publisher. For information contact:

Facts On File, Inc.An imprint of Infobase Publishing

132 West 31st StreetNew York NY 10001

Library of Congress Cataloging-in-Publication Data

Ágoston, Gábor.Encyclopedia of the Ottoman Empire / Gábor Ágoston and Bruce Masters.

p. cm.Includes bibliographical references and index.

ISBN-13: 978-0-8160-6259-1ISBN-10: 0-8160-6259-5

1. Turkey—History—Ottoman Empire, 1288–1918—Encyclopedias. 2. Turkey—Civilization—Encyclopedias. I. Masters, Bruce Alan, 1950– I. Title.

DR486.A375 2008956'.01503—dc22 2008020716

Facts On File books are available at special discounts when purchased in bulk quantities for businesses, associations, institutions, or sales promotions. Please call our Special Sales

Department in New York at (212) 967-8800 or (800) 322-8755.

You can find Facts On File on the World Wide Web at http://www.factsonfile.com

Text design by Joan M. Toro, Erik LindstromMaps by Sholto Ainslie

Printed in the United States of America

VB Hermitage 10 9 8 7 6 5 4 3 2 1

This book is printed on acid-free paper and contains 30 percent postconsumer recycled content.

the Russo-Ottoman War (1877–78); the war with Greece (1897); the Armenian question (1878–1915), the question of Macedonia (1880s–1912); the War with Italy (1911); the Balkan Wars (1912–13); and finally World War I (1914–18). A glance at this list reveals that the Eastern Question has been stretched to its limits in an attempt to explain the entire history of the relations between Europe and the Ottoman Empire. Contemporary historians gen-erally avoid the term, considering the “Eastern Question” to be a Eurocentric reduction of the Ottoman Empire and its peoples to passive recipients of the power politics of the Great Powers.

Kahraman ŞakulFurther reading: Virginia Aksan, Ottoman Wars 1700-

1870: An Empire Besieged (Longman, 2007); M. S. Ander-son, The Eastern Question, 1774–1923 (New York: St. Martin’s, 1966); M. S. Anderson, ed., The Great Powers and the Near East, 1774–1923 (New York: St. Martin’s, 1970); Selim Derin-gil, The Well-Protected Domains: Ideology and the Legitima-tion of Power in the Ottoman Empire, 1876–1909 (London: I.B. Tauris, 1998); Caroline Finkel, Osman’s Dream: The Story of the Ottoman Empire, 1300–1923 (London: John Murray, 2005); Donald Quataert, The Ottoman Empire, 1700–1922 (Cambridge: Cambridge University Press, 2000); F. A. K. Yasamee, Ottoman Diplomacy: Abdulhamid II and the Great Powers, 1878–1888 (Istanbul: Isis, 1997).

economy and economic policy Ottoman economic history can be divided into two main periods: the first, or classical, period from the beginning of the empire in the 14th to the end of the 18th century, which witnessed little change with regard to the basic institutions, values, objectives, and tenets; and the second period, character-ized by modernization and reform, from the second half of the 19th century.

PRINCIPLES OF OTTOMAN ECONOMIC POLICYOttoman economics in the classical period was centered on the concept of need and was motivated by three main principles, provisionism, fiscalism, and traditionalism. Provisionism was the policy of maintaining a steady sup-ply of goods and services, which had to be cheap, plentiful, and of good quality. Fiscalism was the policy of maximiz-ing treasury income. Traditionalism was the tendency to preserve existing conditions and to look to past models when changes occurred. These three policies created the referential framework of the Ottoman economic system.

The first principle was that of provisionism. Because the early Ottoman economic atmosphere was character-ized by low productivity and because it was difficult to increase productivity while transportation costs were high, the Ottomans built an extensive network of produc-tion and exchange facilities in the fields of agriculture,

artisanship, and trade. Family-run farms of between 60 and 150 acres were thought to be the most productive landholding pattern in agriculture, and the state, as the owner of the land, protected these units so that holdings would not be broken into smaller units through inheri-tance. While the state would allow the transfer of land between individuals to prevent potential setbacks in pro-duction, it restricted peasants from abandoning villages and leaving land untilled.

The basic economic, fiscal, and administrative unit in the empire at this time was the kaza, or judicial dis-trict, overseen by a kadı or judge with extensive powers. The kaza usually consisted of a town with a population of 3,000–20,000 and a number of villages varying from 20 to 200 with a total area of 200–1200 square miles. Small-scale artisanship was the norm in the kaza as was the small-scale landholding pattern in the village, and it was the responsibility of these small farmers to market their own agricultural produce in the town. Marketing of produce and goods out of the kaza was prohibited unless the demand within the town was already satisfied. Excess goods were offered first to the army and the palace, then to the city of Istanbul, followed by other regions. Export was an option only after domestic demands were satisfied.

Export was not an objective of provisionist Ottoman economic policy, which aimed at satisfying domestic demand. The state regularly intervened in export, forc-ing quotas and special customs taxes on export goods. Imports, by contrast, were fostered. This economic approach differs considerably from the export-oriented mercantilist policies pursued in Europe at that time. For this reason, Ottoman capitulations, or trade privileges offered to foreigners who sold goods within the empire, were not restricted until the end of the classical period.

Although provisionist policy always took priority in this period, another economic policy followed dur-ing this era was fiscalism, which may be defined as the policy of maximizing treasury income and trying to pre-vent its level from falling. Like increases in production capacity, increases in treasury income were difficult and slow to achieve, especially when transportation costs were so high and gold and silver stocks were very lim-ited. The reliance on provisionism was considered indis-pensable for social welfare, but this policy actually made any attempt to grow the economy both risky and costly, creating a situation in which any growth in revenues was difficult to achieve, which is evidenced by the budgets or treasury balance sheets from the 1550s to the 1780s.

Also falling within this period, though not arising until provisionism and fiscalism had come into matu-rity by the mid-16th century, was the economic policy of traditionalism. This may be summarized as the tendency to preserve existing conditions, to look to past models instead of searching for a new equilibrium when changes

192 economy and economic policy

001-611_Ottoman_tx.indd 192 11/4/08 3:17:09 PM

occurred, and to maintain some institutions for the sake of traditionalism even when they had lost their func-tional value.

These three policies created the referential frame-work of the Ottoman economic system. Any difference in policies stemmed from the combination of the three principles in varying degrees. For instance, whenever provisionism prevailed, export was restricted and import was fostered; when fiscalism was favored, the opposite policy was followed.

STATE CONTROL OF PRODUCTIONClassical Ottoman economic policy coincided with the state’s attempt to control all factors of production—including land, labor, and capital—with long-term con-sequences on the Ottoman economic and commercial structure. Of all factors of production, land was the most important. Agricultural land accounted for the largest portion of land use and, for the most part, was owned and controlled by the state. The landholding pattern prevalent in most of the Asian and European provinces was called miri (state-owned); it allocated small units of land for cultivation by families. Under this system, peas-ants paid taxes on the land they cultivated and consumed its produce as they saw fit, but they could not convert the land into a religious endowment (waqf) or grant it to another party. If the land was left untilled for three years in a row without excuse, the plot would be given to another farmer. Furthermore, if a farmer moved to another area and abandoned his plot, he could be brought back by force in a decade unless he was registered in the land survey of the village he moved to or paid a specified penalty (çift bozan resmi). Family farms passed from gen-eration to generation intact without inheritance taxes.

Given the inherent protections of this system for both the state and the peasantry, this ownership structure played a crucial role in the rapid expansion of Ottoman rule in the 14th century. Based on cadastral surveys of the 15th and 16th centuries, it seems that this structure enabled increases in both production and population.

Although this structure began to shift in the 17th century with the emergence of large farms, most of these new farms were located in previously vacant lands out-side settled areas. Considering the spread of big farms both an economic and a cultural threat, the peasantry and the state reacted against this shift and prevented the big farms from expanding into the villages. Small landholders continued to constitute the basic unit of agricultural pro-duction, and statistics indicate that land distribution in Anatolia and Rumelia preserved its egalitarian character until the end of the empire in the early 20th century.

Ottoman control of labor during this period was sec-ondary, important only for the state’s control of the land; Ottoman subjects were not serfs or semi-slaves tied to the

land. There was no law forcing the peasant to till the land but rather an obligation from which he could escape by paying a fine equivalent to 7–10 times his usual tax. This practice was valid not only for peasants but also for some urban industrial workers whose labor was indispensable to the state, and for workers in the mines owned by the state

State control of labor was also common in the case of several urban artisan groups, which were organized in accordance with the sharia, or religious law, and imperial decrees. All the members of each guild had to complete an apprenticeship, a means of building human capital in specialized fields. The guilds tended toward monopoly, each group coming to dominate a particular area of production, especially in Istanbul and other big cities. By the 17th century, the state began to issue guilds monopoly licenses (known as gediks or patents) stipulat-ing that certain products or services could only be offered by members of specified guilds. This practice spread throughout the 18th century, enabling state control of the urban sector of artisans. Control of labor helped limit the mobility of labor in the pre-industrial age when insuf-ficient production was chronic; it also enabled the gov-ernment to protect both the structure and the volume of production, and promoted specialization, as evidenced by production successes in such fields as metal goods, jewelry, dyeing, and leather manufacturing.

While controlling both land and labor, the state also worked to control both financial and physical capi-tal, with significant consequences. The policy of pro-visionism motivated the state to limit the rate of profit on consumer goods, setting a maximum of 5 to 15 per-cent profit for tradesmen and merchants from the 16th to the mid-19th centuries. The actual rate of profit was decided based on the kind of economic activity. In retail and wholesale trading the norm was 5 to 10 percent. The prices of the goods and services sold in the mar-ket, as well as the wages paid by guilds, were determined through the cooperation of the relevant guild with the kadı, the inspector of the marketplace (muhtesib). For example, in 1726, retail merchants selling Egyptian flax in Istanbul as raw material with minor processing were allowed a profit of 6.5 percent. Trades that required more complicated production—such as ceramics or nails—yielded profits as high as 20 percent.

Even when the state did not fix the prices, the com-plexities of the Ottoman guild system had a strong ten-dency to reduce profits, because each step in production was dominated by a particular guild. Any attempt by one group to increase its own profit would decrease that of others and thus artisans and tradesmen kept each other in check. When this system of internal balances failed to stabilize profit margins, the guilds would seek interven-tion and the state would impose a fixed average profit of

economy and economic policy 193

001-611_Ottoman_tx.indd 193 11/4/08 3:17:09 PM

10 percent. Under the circumstances, it was very difficult for any group or individual to accumulate capital. State intervention led to the lack of capital in commerce and artisanship. Small-scale craftsmen could meet produc-tion costs, yet certain fields required substantial invest-ment that only the state could undertake either directly or through pious foundations. These areas included the con-struction of covered bazaars; caravansaries; dyeing, print-ing, and finishing/polishing installations; oil, candle, and soap manufacturing; and tanneries. In these plants the state could charge rent equal to between 5 and 8 percent of the invested capital. In this manner, the state ensured necessary production by controlling physical capital, at the same time limiting the market in contraband goods.

The opportunity to accumulate capital was limited by the fact that interest rates on credit were higher than the 10 percent average permissible profit. Moreover, interest, a crucial factor for the formation and the out-let of capital, was only permitted in particular areas of the Ottoman economy and was required to comply with sharia, or Islamic law. An interest rate of approximately 20–25 percent was allowed to provide capital for the tax-farming sector in the 17th and 18th centuries. Money-changers, in their turn, were allowed to accept deposits at an interest rate of 15 percent in order to form the nec-essary capital for the tax-farming sector. The other two sectors in which free interest was applicable were opera-tions concerning cash inheritance belonging to orphans and cash waqfs or endowments. While the upper limit for interest rates was between 12 and 29 percent with an average of 20 percent, the prevailing interest rates tended to be higher, limiting the flow of capital to those sectors working with a profit rate of approximately 10 percent. With such high interest rates, the main outlet for capital in the empire was tax farming.

PURPOSE AND CONSEQUENCES OF STATE CONTROL

During the classical period, the state usually did not actively engage in industry even when it owned the means of production. Except for goods and services con-sumed by the residents of the palace, the government left production to the market. Even in the military, the state ran only the arsenal (see Tersane-i Amire), the gun foundry, and the gunpowder works. In other fields it only invested in the physical plant and passed manage-ment over to artisans and craftsmen, sometimes provid-ing them with working capital.

State control changed depending on the industry. For instance, while the state legally possessed the land, it treated vineyards and vegetable gardens as private prop-erty. While the export of cotton was prohibited in the 16th and 17th centuries, this prohibition was lifted in the 18th century and its export was subjected to a new tar-

iff, increasing both the volume of cotton exported and the customs revenue. This increase is all the more significant since domestic woven and printed cotton manufacture also expanded enormously. However, in accordance with the principle of provisionism, this growth in industrial crops did not take place at the expense of cereal cultiva-tion. Likewise, dues from the export of silk began to yield more revenue in the 17th and 18th centuries. However, high domestic demand for silk increased prices, reducing foreign demand. Thus silk was mainly consumed domes-tically. After the domestic demand was satisfied, silk could be exported in small quantities. By the beginning of the 19th century, the increase in foreign demand increased silk prices to the detriment of domestic producers. The Ottoman authorities, in response, prohibited the export of silk. The export of any good was prohibited when it caused an increase in the price in the domestic market. During the classical period, the state always favored the domestic economy, and this policy played an important part in the vitality of the Ottoman economy for centuries.

As a rule, the Ottomans favored redistribution over accumulation and promoted general prosperity rather than progressivism or economic growth. Through its policies, the state aimed to prevent production from concentrating in private hands and sought to distribute these means of production equally among its subjects, an approach also used by Ottoman religious foundations, or waqfs, controlled by the state. The state kept earnings and savings low to prevent the accumulation of capital. By fostering this system it was thought that both the econ-omy and the government would enjoy greater stability.

The economic policy of the state, however, was not always wholly consistent. The official Ottoman purchase regime (miri mübayaa), for instance, driven more by fis-calism than provisionism, worked to limit the costs of the state at the expense of its subjects. This policy imposed a tax-like levy to facilitate the provision of goods and services for the state at a price usually lower than the market prices (and sometimes even below production costs). During times of peace, this purchase regime had little affect on the people, but in times of war and dur-ing economic crises, larger-scale craftsmen and trades-men would be vulnerable to the ever-increasing demands of the state. During the era of defensive wars from the mid-18th century to the 1830s, these groups were made especially vulnerable as the official purchase regime was applied frequently, damaging high-production work-shops. As ongoing wars decreased revenues, the state increased its demand for goods and services at reduced prices, creating a situation in which those workshops that showed the most growth were hardest hit by the demands of the government. This situation, in turn, effectively favored small producers and reinforced the egalitarian tendencies of the Ottoman economy.

194 economy and economic policy

001-611_Ottoman_tx.indd 194 11/4/08 3:17:09 PM

In keeping with the overall principle of egalitari-anism, the state also undertook an unusual means of helping to fund its defensive wars during the period 1770–1812. This was the policy of confiscating the pri-vate inheritance money of those considered rich. Know-ing that it had no legal right to pursue such a policy, the state presented these confiscations as compulsory loans, replaced confiscated funds with treasury bonds, and promised repayment in peacetime. Having already made it difficult for individuals to accumulate capital, this pol-icy further hindered such accumulation by transferring the little available private capital into the war effort.

CHANGING THE CLASSICAL STRUCTUREThe process of investment liquidation that began with the period of defensive wars ultimately lasted 70 years, until 1839, the beginning of the Tanzimat or Ottoman reform era. This coincided with the Industrial Revolu-tion, which actually necessitated the fostering of capital accumulation. The preceding period of capital liquida-tion left the empire ill-prepared to meet the economic requirements of this new age, but radical economic changes were made nevertheless in an effort to rise to the demands of this new phase.

Because the civil sectors, the traditional providers of consumer goods, could not adequately meet increased demands at this point, the government undertook the production of goods and services by establishing state-run firms, although it did not push further its ever-expand-ing control of the capital. In addition to heavy invest-ments for arms and ammunition production required by the new army, the state undertook the production of sailcloth, woolen fabrics, leather, garments, shoes, fez-zes, paper, and other goods by setting up factories. It also entered into trade to finance the new army and these investments. The state monopolies that had started with a few goods at the beginning of the 19th century flour-ished with the inclusion of various new trade items, such as opium, wool, silk, olive oil, soap, and charcoal. In addition, the state assumed control of all trade in some regions, including Salonika and Antalya. These policies were without precedent in the classical system.

With the introduction of these policies, conventional Ottoman economic policy fell apart. Traditionalism was abandoned at the very beginning of the period of transi-tion. Nevertheless, provisionism and fiscalism continued to prevail as motivating economic factors, and the means of the state began to play an active role in the economic life of the empire. The period of transition lasted until the beginning of the Tanzimat era and was replaced by a new trend of transformation in which the state aban-doned both the principles of provisionism and fiscal-ism and its control over the mechanisms of production. Except for state control over the land, this process of eco-

nomic transformation was completed within 25–30 years. Thus the classical paradigm effectively came to an end as a result of a long and contradictory period of transforma-tion covering most of a century. From the mid-19th cen-tury on, the foundations of a modern economy were laid, but true economic growth began only with the demise of the empire.

Mehmet GençSee also banks and banking; caravan; caravan-

sary; charity; debt and the Public Debt Adminis-tration; ihtisab and muhtesib; markets; merchants; merchant communities.

Further reading: Fikret Adanır, “Tradition and Rural Change in Southeastern Europe During Ottoman Rule,” in The Origins of Backwardness in Eastern Europe: Econom-ics and Politics from the Middle Ages until the Early Twenti-eth Century, edited by Daniel Chirot (Berkeley: University of California Press, 1989), 131–177; Gábor Ágoston, Guns for the Sultan: Military Power and the Weapons Industry in the Ottoman Empire (Cambridge: Cambridge University Press, 2005); Engin Deniz Akarlı, “Gedik: A Bundle of Rights and Obligations for Istanbul Artisans and Traders, 1750–1840,” in Law, Anthropology and the Constitution of the Social, edited by Alain Pottage and Martha Mundy (Cambridge: Cambridge University Press, 2004), 166–201; Giancarlo Casale, “The Ottoman Administration of the Spice Trade in the Sixteenth Century Red Sea and Persian Gulf.” Journal of the Economic and Social History of the Orient 49, part 2 (2006): 170–198; Eunjeong Yi, Guild Dynamics in Seventeenth Century İstanbul: Fluidity and Leverage (Leiden: Brill, 2004); Haim Gerber, Economy and Society in an Ottoman City: Bursa, 1600–1700 (Jerusalem: Hebrew University, 1988); Halil İnalcik and Don-ald Quataert, eds., An Economic and Social History of the Ottoman Empire, 1300–1914 (Cambridge: Cambridge Uni-versity Press, 1994); Charles Issawi, The Economic History of Turkey, 1800–1914 (Chicago: University of Chicago Press, 1980 ); Bruce McGowan, Economic Life in Ottoman Europe: Taxation, Trade, and the Struggle for Land, 1600–1800 (Cam-bridge: Cambridge University Press, 1981); Bruce Masters, The Origins of Western Economic Dominance in the Middle East: Mercantilism and the Islamic Economy in Aleppo, 1600–1750 (New York: New York University Press, 1988); Linda Schatkowski Schilcher, Families in Politics: Damascene Fac-tions and Estates of the 18th and 19th Centuries (Wiesbaden: F. Steiner, 1985); Benjamin Braude, “International Competi-tion and Domestic Cloth in the Ottoman Empire, 1500–1650, a Study in Undervelopment.” Review 2 (1979): 437–54.

Ecumenical Patriarch of Constantinople See Greek Orthodox Church; millet.

Edirne (Gk.: Adrianople; Lat.: Hadrianopolis) The city of Edirne is at the junction of the Tundzha and

Edirne 195

001-611_Ottoman_tx.indd 195 11/4/08 3:17:10 PM