An Analytical View of Ottoman Public Finance in the Modern Era
Modern Dönem Osmanlı Maliyesine Analitik Bir Bakış
The aim of this article is to analyze the Ottoman Empire’s fiscal policies and performance in the context of institutional change experienced during the modern era. In this study, which covers the period from the second half of the 18th century to the beginning of the 20th century, it should be noted that numerous Ottoman fiscal crises followed the wars, and reforms followed the fiscal crises. The wars at the end of the 17th century and in the third quarter of the 18th century both dragged the economy into crisis. To overcome this, the government established financial policies and institutions such as “malikâne,” “esham,” and “multiple treasury system”. The wars were one of the basic causes of institutional change in Ottoman finance. Various other institutional constraints, such as the timar system, also caused the wars to become costly for the Ottoman Empire. The Ottoman administration, which was not able to match Europe’s weapons technology and military system in the 17th and 18th centuries, then questioned its own systems and administrative-financial structures. Besides that, revenue policies such as confiscations, war-time taxes, and coin debasements turned into institutions that prevented stability and development in the financial sector. However, during the same period, European states moved away from such financial policies, increased their central revenues, and prepared to enter the Age of Industry. Another institutional constraint was that the central authority did not grant autonomy to provincial administrations until 1913. Because of this institutional constraint, provincial and central finance were articulated. As a result, mutual bi-directional deterioration occurred during the financial crisis periods: problems in provincial finance that constituted the infrastructure of central finance were directly reflected in the central administration. Also, provinces were unable to meet the fiscal requests of the central administration. Within this vicious cycle, the central administration was unable to provide financial assistance to the provinces and failed to fulfill public services. In other words, the central administration forced the provinces to be dependent on it in an administrative and financial sense. But due to their inability to establish an efficient fiscal organization in the provinces, the central administration in turn remained dependent on provincial fiscal agents and administrations in terms of revenueexpenditure implementations.
Along with legal regulations and reforms, organizations and institutions such as the central army, central bureaucracy, centralized financial system, modern banking, paper money, and foreign borrowing were established. However, despite all administrative and fiscal reforms, the desired institutional change was not achieved. Because the Ottoman state did not have a central bureaucratic structure like European states, it could not experience success with its tax policies. The central government was not able to personalize taxes because it failed to create an effective monitoring and sanctioning mechanism. During the 19th century, the tax burden fell on the shoulders of the agriculturists. Large wealth holders, domestic and foreign merchants, and other non-agricultural sectors did not fulfill their tax obligations, placing the Ottoman Empire at the bottom of the European states in terms of per capita tax revenue. Socio-economic expenditures such as education, health, public works, and transportation took a back seat to other public expenditures such as military and administrative costs for the entire era. Domestic and foreign debt payments, which occupied a significant portion of state budgets, took a toll on Ottoman public finances. The ongoing budget deficits during this period dictated the low level of financial performance by the Ottoman government. In addition, fiscal policies throughout the period led to the accumulation of wealth by a small fraction of citizens, which distorted income distribution. During the last years of the Empire, the central and local administrations could not find a way to recover financially due to the Balkan Wars (1912–1913), World War I (1914–1918), and the Independence War (1919– 1922). As a result, the administrators of the Republican period inherited a worn out public finance system.
