God is a Capitalist

by Roger McKinney

  Europeans had studied Arabic for centuries and many merchants learned Turkish as they wandered through the empire in search of business opportunities. But Turks, and Muslims in general, rarely ventured into Europe and few had any knowledge of European languages. While Europeans imported hundreds of products from Ottomans, the latter purchased mainly slaves from Europe.

  In the early seventeenth century, Ottoman officials knew little about the subtleties of diplomacy, for they had never needed to negotiate. Their armies almost always destroyed the enemy, after which, the Ottomans dictated the terms of surrender and the vanquished signed the document. Never recognizing heads of other governments as equals, Ottomans referred to them by lesser Ottoman titles, such as bey, or by transliterations of European titles. In a letter to Queen Elizabeth of England, the sultan wrote that he expected her to be “loyal in her vassalage and subservient,” Lewis wrote in What Went Wrong.

  Ottoman agriculture

  While Islam condones private property, the Islamic concept diverged from the Western one in important ways. In the Ottoman Empire, as in most of the Middle East today, it meant that a person has the use of property rather than the control. Ottoman farmers retained exclusive use of their land as long as they remained productive and on good terms with the state and local officials, but the state controlled the land. The government obtained the bulk of its income from taxes on agricultural production and regarded that sector of the economy as too important to be left to the control of ignorant peasants. So it regulated every aspect of rural life. Peasants could not harvest unless the military governor was present so that peasants could not hide any of the produce. The governors often did not respect the laws of the central government that attempted to protect peasants and extracted double the official taxes in order to enrich themselves.

  The law bound peasants to their land with severe penalties for leaving. But officials had difficulty enforcing the laws, especially because they had a weakness for bribes. Throughout the history of the Ottoman Empire, the central government struggled to keep peasants down on the farm. Peasants abandoned farms for many reasons: taxes became so heavy that farmers faced starvation; price controls prevented farmers from earning enough to save money against bad times at best; at worst they caused farmers to earn less than cost of production; mercenary bands raped and pillaged rural areas with impunity; finally, drought, famine, and war forced many to escape to the cities according to Inalcik.

  Sometimes peasants left one farm to farm in a different jurisdiction where the local military governor offered better conditions and lower taxes. Others fled to the cities where they tried to join guilds. Some left to take part in wars in hopes of prying open the door to a military career. As a result, population shifts in the rural areas of the empire were continuous throughout its history. Usually, military governors took over abandoned land and tried to attract sharecroppers.

  High taxes, corrupt officials, drought and marauding bands forced peasants to abandon simple things that might have made their lives easier, such as carts. Carts had been familiar in Roman and Byzantine times, but became scarce during Islamic rule and remained so until their reintroduction by Europeans. Peasants in Islamic countries saw carts as poor investments because they were hard to conceal and easy to steal, either by mercenaries, bandits or the government, and they had to pay heavy taxes on them, Lewis wrote in What Went Wrong. If possible, the plight of farmers in the Ottoman Empire was worse than Smith’s description of French farmers.

  While the sultan’s treasury bulged with tax revenues, the dawn of the seventeenth century saw the wealth of his subjects slipping behind that of Europeans. One writer has calculated the average per capita income in Europe to be around $894 in 1600, using 1990 dollars. Eastern Europe, mostly under Ottoman control, managed to get by on just $516 per head. Most of the gains to European standards of living had come from greater security for property, which led to improvements to productivity in agriculture and increases in trade according to Maddison in The World Economy.

  Seventeenth century

  Many historians picture the seventeenth century of the Ottoman Empire as one of relentless decline. Recent research shows that image to be inaccurate. Ottomans finished the century with higher standards of living than when it had begun though growth was slower than in Western Europe. Increased wealth in Europe led to greater revenue for governments and more money to spend on the military. European armies became better organized, equipped and trained. As a result, they began to defeat Ottoman armies in battle on a regular basis.

  The Ottoman government found itself in a dilemma in this century. Expansion by military conquest continued to be the reason for the existence of the Ottoman state. Had they not suffered military defeat, they would have finished the century very content. War had become very expensive and to pay for it, they desperately needed the income from taxes on newly conquered people. But those people, primarily Europeans, had become very good at defending themselves. As the century progressed, the Ottomans spent more and earned less profit with each war. In the budget for 1669-70, the state spent 62.5% of its income on war according to Inalcik’s history.

  In 1683, the Austrians spoiled the Ottoman army’s second attempt at establishing a franchise in Vienna with a military defeat that the Ottoman rulers and the people considered calamitous. Later, the Austrians, Venice, Poland and Russia formed a coalition that defeated the Ottoman army again at Carlowitz in 1698. The treaty of Carlowitz marked the first time in the history of the empire that the Ottomans signed as the defeated party.

  The military defeats in the late seventeenth century caused Ottoman subjects from the Sultan to the peasants to question what had happened to the great empire. At first, their rulers dismissed their defeats as nothing more than better military strategy or superior weapons. They sought the remedy in imported weapons and advisers, most of who came from Europe. The state had to look for increased revenues to finance these improvements, since they could not conquer new territories, so they increased the tax burden on farmers, merchants and craftsmen. At the same time, the state fixed the prices of goods at artificially low levels in order to reduce military expenses. Then, the state paid for those goods with debased currency much as the Romans had done.

  Outside of concern over the military defeats, life in the Ottoman Empire continued as it had for centuries. The government allowed merchants to accumulate wealth to a point, but even mid-level members of the political class were wealthier than the wealthiest merchants according to Inalcik. A long rebellion in Anatolia caused the normal tide of peasant flight to swell to a flood, which reduced tax revenue from farming. The government continued to collect taxes through tax-farming, the ancient Roman technique of selling to the highest bidder the right to collect taxes. The tax farmers were allowed to use any effective method to collect taxes and they usually collected far more than the official levy. As a result, farmers, merchants and craftsmen found it difficult to save money that they could invest in equipment to enhance their productivity. Still, had they managed to save, it is doubtful they would have invested in machinery that would attract the attention of the politically powerful, thieves or tax collectors.

  By the end of the century, Muslim clerics, or mullahs, began to object to the trade concessions granted to European merchants during the century because such concessions implied a long-term peace with the infidels. The mullahs admitted that temporary truces with infidels could be permitted, but under the principle of jihad, permanent peace could not be considered.

  Eighteenth century

  The trends begun in the previous century gained momentum in the eighteenth. European advances in weapons, military discipline, logistics and maneuvers outclassed the Ottomans who were bound up in tradition. The aura of invincibility that once surrounded Ottoman armies faded as they suffered more defeats than victories in the last half of the century.

  Improved fiscal management and heavier taxes enabled the government to accumulate significant reserves in the first
half-century. But these evaporated with the defeats of the last fifty years. The state continued to collect taxes through tax farming, but even Europeans were shocked by the disparity between what the tax farmers collected and what the government received. In one instance, it was reported that the state received only four million British pounds out of twenty million collected according to Inalcik.

  In international trade the Empire pursued free trade policies while Europeans increasingly protected home industries by restricting imports. Occasionally, the Ottoman government would step in to prevent the export of grain or silk when it was in short supply, but it never bothered with imports, which were considered luxuries. Europeans continued to seek capitulations, or lower duties on exports to the Ottoman Empire, and they usually got them. But Ottomans remained indifferent to the rising wall of tariffs imposed on their products in Europe.

  Some economists and historians have attributed this lack of concern for international trade to naiveté on the part of the Ottoman’s. Instead, it may have been due to the small size of the export market, which was dwarfed by the domestic one. In 1759, France’s entire export of textiles to the Ottomans would clothe a mere 800,000 people Inalcik reported. At the end of the eighteenth century, Ottoman exports stood at about the same level of a hundred years earlier in absolute terms, but the empire’s share of world trade had declined. As the century passed, Ottomans increasingly exported raw materials and imported manufactured ones. Like the Spanish, they manufactured very few things and those were consumed by the home market. They did not manufacture for export.

  In the previous century, the Ottomans had looked to military improvements in order to regain their supremacy. Now they focused on the factories of Europe and decided that they were the secret of Europe’s military successes. So the Ottoman government began to experiment with building factories for itself. Private industry could not build the factories because price controls made it impossible for the owners to raise the capital to build them, since investors knew they could never earn enough profit to repay their investment.

  With the government still focused on warfare, the new factories produced goods for the military, such as uniforms. The government owned and operated the factories, so the managers cared less about efficiency or quality than for high volumes of production. The same problem would later plague the U.S.S.R. During wartime, the state paid below-market prices to the factories for their goods, which hurt the more efficient factories the most and encouraged inefficiency in the remaining factories. Quality became so poor that soldiers often sold clothing provided by the state and dressed themselves in imported clothes Inalcik said.

  To cut costs, the Ottomans decided to populate new, government-owned factories with slaves made up of Christian children from the center of the empire. One Armenian chronicler, reported in Inalcik, described the youth “jobs” program in this way:

  By Royal decree, many [thousands of] Armenian children [from eight to fifteen years of age] from Sebastia [Sivas] and from other towns in Anatolia were assembled in Erzerum and taken to Constantinople for forced labor at the iplikhane [spinning mill], the Sultan’s shipyard, to manufacture sails for ships and at [the foundry] forging hot iron. They were given bread and clothing, but no salary. And this order is renewed year after year and they collect hundreds of Armenian children from every town, depriving them of their parents and their homeland, and during this thirty-day march [journey] in bare feet and rags, [they] take them to Constantinople. Several die of cold and want on the way and later through the tyranny of their masters, while others convert to Islam, hoping thus to obtain their freedom. None of the Armenian leaders dared protest to the government against this diabolic evil.

  Even without large, privately-owned factories, the Ottomans held their own against the onslaught of European manufactured products until about 1770 when severe restrictions on imports began in Europe. Meanwhile, the state supported the concentration of craft production under the control of associations and discouraged production outside of traditional areas.

  During this century, the famous Janissary corps deteriorated into a Mafia-like organization. The Janissaries began as an army made up of children torn from the homes of Christian families in the Ottoman territories of Eastern Europe. Every year, beginning in 1326, the Ottoman government had required each Christian village to surrender one-fifth of the males between the ages of fourteen and twenty to the state. (A separate levy of children aged six to ten paralleled this one and lasted two centuries longer, but these served in the sultan’s palace.) If parents resisted, they were beaten or killed. Ottoman soldiers raised these young men in harsh conditions, forced them to convert to Islam and trained them as fierce warriors. Then the state unleashed them against their former countrymen. The Janissaries were the shock troops for the bulk of the conquest of Eastern Europe in early centuries according to Bat Ye’or in The Decline of Eastern Christianity.

  By the eighteenth century, the military importance of the Janissaries had declined to the point that they had become an unpaid militia. However, they still formed part of the elite military class and held enormous political power. They dominated villages as tax-farmers and moneylenders and practiced extortion. The forty thousand Janissaries in Istanbul forced the trade associations to employ them as “consultants.” In Cairo, they controlled the guilds and extorted protection money, also.

  In the seventeenth and eighteenth centuries, many European governments had reduced taxes and increased the protection of private property. The Ottoman system on the other hand offered little protection for towns, nor could the citizens expect the protection of private property that would encourage investment and experimentation. Instead, the Ottomans implemented more of the policies that stifled progress.

  Merchants were tolerated during this century, but not admired. The state taxed them lightly, but they remained vulnerable to extortion and bandits on the road. They invested little in their enterprises because of the volatility of the markets, threat of confiscation and rampant crime. As a result, capital goods in which they had already invested tended to wear out. By the end of the century, the demands of financing wars caused the state to abandon any pretense of respect for private property and confiscate the property of merchants.

  The population of the Ottoman Empire grew, but not as fast as that of Europe. Anatolia’s population remained about the same, but Syria’s and Egypt’s declined because of war, fiscal rapacity and crime. Taxes became so heavy for farmers that in Egypt they surrendered two-thirds of their produce to tax-farmers. Farmers got some relief at the end of the century when the state finally freed grain prices, not because of enlightened policy, but because war and disaster had reduced the supply to dangerous levels and threatened the Empire with famine.

  Rural residents continued to flee the harsh conditions to neighboring countries and cities and this migration made Ottoman territories more urban than Europe. It is curious that this fact has escaped the many historians who credit the rise of cities in Europe for that continent’s economic development. If correct, why did not the larger, richer cities of the Ottoman Empire do the same for it?

  During this century, while Protestants in Europe were casting aside the yoke of tyranny and freeing their economies, Ottomans were strengthening the cast iron lock that the state held on its people and economy. The Sultan punished efficient producers by paying prices for their goods that were below the costs of making them; tax farming increased the already heavy burden; and the government protected guild monopolies on craft production and the job market. By the end of the century, the state became so desperate for funds that it required wealthy merchants to pay to equip troops and send them to the front as well as to make loans to the government. Finally, from 1770 to 1810, the state simply confiscated the inheritance of private individuals who were considered rich, wrote Donald Quataert in Manufacturing in the Ottoman Empire and Turkey: 1500-1950.

  Nineteenth century

  For the aging Ottoman Empire, the nineteenth c
entury proved crucial, its last opportunity to restore its former glory and its equality with Christian Europe, if not its former dominance. But the industrial revolution in England was gathering a head of steam and would soon roll over the traditional system to which the Ottomans clung.

  Until 1826, sultans had made little progress toward reforming the empire. The pervasive Ottoman bureaucracy continued to regulate every aspect of the economy, emphasizing monopolies in production and restrictions on exports to ensure cheap and plentiful domestic supplies. Many among the leadership of the Empire recognized the need for change, but the obstacles appeared insurmountable. Three principles guided the Empire during this century: 1) Provisionism, which meant keeping a plentiful supply of goods for the government at low prices; 2) Tradition, which emphasized looking to the past for answers to current problems; and 3) Fiscalism, or keeping the tax revenue flowing at all costs, according to Quataert.

  The most significant reform of the century took place in 1826 when Sultan Mahmud II broke the power of the Janissaries, who had successfully blocked all previous military and economic improvements. With the Janissaries out of the way, the Sultan was free to proceed with plans for centralizing state power and westernization. He encouraged people to attend western theater productions, listen to western music and adopt western styles of dress. He passed legislation giving non-Muslims equality with Muslims, although the law was generally ignored for religious reasons. A few of the elite called for equality of women and democracy.