Economics and Capitalism in the Ottoman Empire

Deniz Kilinçoğlu

• Publisher: Taylor & Francis
• Year: 2015
• eBook ISBN: 9781317524946
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Is it possible to generate "capitalist spirit" in a society, where cultural, economic and political conditions did not unfold into an industrial revolution, and consequently into an advanced industrial-capitalist formation? This is exactly what some prominent public intellectuals in the late Ottoman Empire tried to achieve as a developmental strategy; long before Max Weber defined the notion of capitalist spirit as the main motive behind the development of capitalism.

This book demonstrates how and why Ottoman reformists adapted (English and French) economic theory to the Ottoman institutional setting and popularized it to cultivate bourgeois values in the public sphere as a developmental strategy. It also reveals the imminent results of these efforts by presenting examples of how bourgeois values permeated into all spheres of socio-cultural life, from family life to literature, in the late Ottoman Empire.

The text examines how the interplay between Western European economic theories and the traditional Muslim economic cultural setting paved the way for a new synthesis of a Muslim-capitalist value system; shedding light on the emergence of capitalism—as a cultural and an economic system—and the social transformation it created in a non-Western, and more specifically, in the Muslim Middle Eastern institutional setting. This book will be of great interest to scholars of modern Middle Eastern history, economic history, and the history of economic thought.

1
Ottoman society, economy, and economics in the nineteenth century

Enemies were strong, fortune was weak,
Treasury was empty, debt was plenty.
In this situation he found the state,
Is it really necessary to explain what is obvious?
…
Numerous schools were established,
Government debts were regulated.
Thanks to his majestic efforts,
Order and security emerged.¹

(Münif Pasha, 1882)

When Abdülhamid II ascended to the Ottoman throne in 1876, the empire was in great fiscal and economic (in addition to political) difficulties amidst global financial and economic crises during the Long Depression (1873–96). Although Münif Pasha’s eulogy above exaggerates the improvement in the economic and fiscal conditions of the empire during his reign (1876–1909), economic development was placed at the focus of the modernization efforts of his governments. Economics was considered an indispensable instrument of state administration, and became an important topic in popular education. Accordingly, late Ottoman economic thinking produced its most important works in (especially the first two decades of) the Hamidian era.

Intellectual tools for coping with economic and fiscal problems had not been totally absent in the earlier decades, however. On the contrary, publications on economics and economic education in schools had begun in the first half of the century, as the Ottoman elite realized that the nineteenth century was an economy-centered age. Ottoman statesmen as well as intellectuals had begun to study and discuss this new instrument of government through various (rather unsystematic) publications in periodicals as well as in the form of books. Many of these publications and discussions in the popular periodicals provided an intellectual, as well as a linguistic, basis for discussions on economic development in the Hamidian and subsequent periods.

As the Ottomans began to study economics, the failure of state-led industrialization efforts in the first half of the century also taught important (albeit bitter) lessons to the Ottoman elite about how capitalism works, influenced their approach to the question of economic development—in the context of the broader issue of modernization. The realization of the socio-economic institutional factors behind this failure (from the popular work ethic to the legal framework) changed their approach also to the discipline of economics as a guide to economic development.

This chapter provides a historical overview of the economic and intellectual factors that shaped the primary concerns and discussions in Ottoman economic thinking in the final decades of the empire. The first section is a concise reassessment of pre-modern Ottoman economic institutions and economic thought in its global historical context. The second section deals with the economic and social change as a result of the challenge of capitalist modernity and the integration of the Ottoman Empire to this new global world order. Finally, the last section provides an overview of the evolution of Ottoman economic literature until the Hamidian era, and the emergence of main fault lines in Ottoman economic thought—which were to shape economic thought and policies in the last decades of the empire and the early decades of the Turkish Republic.

Ottoman economy and economic mind before the birth of economics

Historians of economic thought usually consider the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (1776) the birth of modern economics as an independent field of social inquiry. Diane Wood, in her Medieval Economic Thought, notes that her title is actually a misnomer, since it did not exist.² This, of course, does not imply that economic ideas did not exist before the modern era. Yet in the pre-modern world, economic matters were examined within the boundaries of theology and philosophy, and not as distinct phenomena with their own governing rules.

This is the theoretical side of the story. On the practical level, however, agents in the marketplace acted according to implicit everyday rules of economic life, which might conflict with ideals and principles determined by theology. Such conflicts at times produced severe restrictions on business practices—as in the case of the ban on usury in both Christian and Muslim traditions. Market agents, however, devised alternative ways to overcome legal and religious limitations and to expand and protect their space of maneuver. In the context of medieval Islamic economy, for example, merchants had recourse to hiyal whenever theological rulings created an obstacle for certain economic transactions.³ Hiyal were the use of legal devices and the legal literature to circumvent Islamic prohibitions on certain economic activities (e.g., riba or usuary). The use of such practices was so widespread that there were lawyers who specialized in hiyal.⁴ At the market level, therefore, practical economic knowledge ruled, at times defying the restrictions of theory.

Conflicts between economic theory and practice was not a result of theorists’ isolation from and ignorance of economic practice. On the contrary, many prominent medieval Muslim jurists and theologians who wrote on economic issues, such as Ibn Taymiyyah (1263–1328) and al-Maqrizi (1364–1442), served as muhtasibs.⁵ Muhtasib was an official local administrator who was in charge with the orderly functioning of the market in both moral-religious and economic standards. He controlled weights and measures, prices, quality standards, and even the overall cleanliness of the market place. Muhtasib assumed a supervisory role and was in close contact with local religious authorities in his responsibilities. Pre-modern Islamic economic thought, therefore, was considerably buttressed by the theorists’ practical experience and concrete observations in the market place, as well as their meticulous studies on the scripture.⁶

Having mentioned pre-modern Islamic economic theories and practices, it should be noted that we are still far from having an adequate understanding of the dynamics of pre-modern Islamic economic thinking in its various geographical and institutional variations.⁷ Mainstream historiography of economic thought is still largely Eurocentric, and non-Western traditions of economic analyses continue to remain in the margins of the scholarship on the global historical evolution and transmission of economic ideas. In a similar vein, our knowledge of pre-modern Ottoman economic thought is still very limited.⁸ Based on limited research, however, we know that the political administration of the Ottoman Empire in the “classical age” (c.1300–1600) was usually business-friendly and economy-conscious:⁹

Following a very old tradition of Middle Eastern states, the Ottoman government must have believed that merchants and artisans were indispensable in creating a new metropolis. It used every means to attract and settle them in the new capitals. By granting tax exemptions and immunities the imperial government encouraged them to come and settle or in a summary fashion forcibly exiled them to the capital.¹⁰

Moreover, through the waqf (pious foundation) system, the state ensured the establishment and maintenance of economic institutions that served local and trans-regional markets, such as bedestans, caravanserais, and bazaars.¹¹ The waqf system did not only provide (market-related or otherwise) public services, they were also active economic agents in various capacities. Besides, they served to provide hiyal opportunities for capital accumulation and circulation in the Ottoman economy. The Ottoman State exploited the Islamic law to make sure that it was the sole owner of all property (in the name of God). The central state used the practice of confiscation to stop alternative dynasties appear through capital accumulation. The state could—and did—confiscate family fortunes, especially following the death of the head of the family who acquired his wealth during official service.¹² Although all property could belong to the state, the state, according to the Islamic law, had no right to touch waqf assets under normal conditions. This opened a major window of opportunity for capital accumulation and bequeathing accumulated wealth to subsequent generations. Founding waqfs, therefore, became an indispensable way for the local and central elites to bypass political and bureaucratic restrictions on capital accumulation, and keep it over generations through the control of the board of trustees by family members. Another exceptional and controversial role that waqfs played was in the case of the “cash waqfs.” These institutions lent money on interest, on the principle of using the resulting profit in charity. The controversial aspect of this operation was that usury was strictly prohibited by the Islamic law. Where ordinary Muslims could not (in theory) even think about it, these Islamic-law based institutions were operating on the verges of defying this very prohibition.¹³ Waqfs, therefore, played an important role in the everyday working of the economy, thanks to their central role in capital accumulation and circulation in the empire, well into the nineteenth century.

Since the state treasury depended upon taxes, including those on trade, the primary economic concern of the state was to protect and expand commercial activity within the empire. A careful reading of Ottoman historical and political treatises from the sixteenth century, for example, shows that the Ottoman elites were fully aware of internal and external economic challenges, although they did not conceptualize their ideas in modern economic terms.¹⁴ Moreover, the bureaucratic and military classes were not aloof from commercial life, as the classic theoretical division (i.e., the erkân-ı erbaʿa—religious, commercial, military, and agricultural classes) of Ottoman society might deceptively imply. From the early days of Islam, the Muslim political elite—including the prophet himself—had been involved in commerce in various degrees, and the members of the Ottoman military class were no exception.

Rüstem Pasha (1500–61), the well-known grand vizier of Süleyman the Magnificent, for example, was a rich man thanks to his many business transactions in addition to rent revenue.¹⁵ An outstanding example from the seventeenth-century was a later grand vizier (1653–54) Derviş Mehmed Pasha (d. 1655). Before assuming this highest position, he served as the governor of many provinces, including Damascus, Aleppo, Diyarbaki...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Note on translation, transliteration, and dates
• List of abbreviations
• Introduction: “an unending dialogue between the present and the past”
• 1 Ottoman society, economy, and economics in the nineteenth century
• 2 Ottomanization of economics
• 3 The economic idea of society and social change for development
• 4 Imperialism, nationalism, and economic development
• 5 Changing hearts and minds: economic thought in late Ottoman fiction
• Conclusion
• Bibliography
• Index