Imperial Ottoman

Economy · Complete overview

The Ottoman Economy: Trade, Agriculture, and Craft Production

The Ottoman economy from the timar system and Bursa silk to the 1838 Balta Liman free-trade agreement, the 1881 Public Debt Administration, and the long crisis of the seventeenth century.

In 1507 the Venetian bailo Andrea Gritti reported to the Signoria that the customs farms of Istanbul alone yielded more than 200,000 ducats a year — a sum that placed the Ottoman treasury among the three or four largest in the Christian and Islamic worlds. The economy that produced that revenue combined the wheat of Anatolia and the Balkans, the raw silk of Gilan, the cotton of the Çukurova, the coffee of the Yemen, the copper of Ergani, and the gold of West Africa, all of it taxed by a fiscal administration whose tahrir defters, or cadastral surveys, were the envy of European states. For roughly two centuries after 1453 that system worked. After about 1580 it did not. What follows is the story of how it worked, why it broke, and what was left of it when the empire ended in 1922.

Key dates

  • 1326 — First Ottoman akçe struck under Orhan; Bursa becomes the Ottoman capital.
  • 1453 — Mehmed II takes Constantinople; the Black Sea becomes an Ottoman lake.
  • 1514–17 — Ottoman–Safavid war and conquest of Mamluk Egypt; Red Sea and Persian Gulf under one rule.
  • 1566 — Death of Süleyman the Magnificent; effective akçe silver content c. 0.42 g.
  • 1695 — Introduction of the esham and the life-term malikâne tax farm.
  • 1774 — Treaty of Küçük Kaynarca; first Russian capitulation.
  • 1838 — Anglo-Ottoman free-trade agreement (Balta Liman).
  • 1840 — Itibari para (fiduciary paper money) experiment; collapses within months.
  • 1881 — Muharrem Kararnamesi; Duyun-u Umumiye (Public Debt Administration) created.

Agriculture and the timar

Agriculture supplied perhaps four-fifths of Ottoman output at the beginning of the sixteenth century, and it remained the largest sector until the empire’s end. The most distinctive Ottoman institution linking agriculture to public finance was the timar system, in which the right to collect the taxes of a village was assigned to a cavalryman in return for mounted service. At its sixteenth-century peak the system supported a sipahi cavalry that Halil İnalcık put at perhaps 80,000 to 100,000 effectives, an army raised without the cash payroll that broke European treasuries. Tahrir defters, redacted every ten to thirty years, gave the state an unusually detailed map of its rural resources, and the Kanunname-i Osmanî codified the rates: a sipahi with a standard timar kept roughly one-third of the çift resmi and other customary dues, with the remaining two-thirds passing to the central treasury.

The system was not, however, what its admirers sometimes claimed. İltizam — short-term tax auctioning to the highest bidder — crept in from the late sixteenth century, and the devastating Celali revolts of the 1590s–1610s depopulated wide stretches of Anatolia. By 1695 the state was forced to monetize the system outright. The esham reform of that year, promulgated under Mustafa II and engineered by the defterdar Sarı Süleyman Pasha, divided the state’s tax farms into transferable shares that were sold as perpetuities to investors in Istanbul and the provincial capitals. For the first time the Ottoman state had a bond market, and the sarraf houses of Galata became its underwriters. The change was irreversible.

Urban crafts and the esnaf

The Ottoman city was a manufacturing city. Bursa wove silk, Edirne broadcloth, İznik quartz-frit ceramics, Damascus steel inlay, and Cairo and Istanbul sugar confectionery, all under the discipline of the esnaf guild. The kadi (judge) and the guild kethüda (steward) fixed narh (official prices) in consultation, regulated quality, and provisioned the army and the court at fixed rates. The system, examined in detail in crafts, guilds, and manufacturing, was administratively cheap and politically stable, and the textile industries of Bursa and the carpet industry of Uşak, Ghiordes, and Kula supplied courts from France to Mughal India. The palace workshops of Ehl-i Hiref — forty-one separate oda (chambers) of weavers, illuminators, jewelers, and armourers — produced the kaftan and the Qur’an stand; their products were reserved for the sultan and his diplomatic gifts.

A word on what was not typical: Ottoman manufacturing was overwhelmingly urban and small-scale, organized in workshops of one to a few looms, and dependent on hand labour. The kind of factory production that took root in Manchester and Lyon in the 1780s never established itself in the Ottoman lands on a comparable scale; the few steam-powered enterprises of the 1840s–1860s, including the silk filatures of Bursa and the state cloth factory of Hereke, were exceptions that proved the rule. The empire industrialized too late and too little, and the result is one of the standard explanations for its peripheral position in the nineteenth-century world economy.

Long-distance trade and the routes

The Ottomans sat at the hinge of three continents. Overland, the route from Tabriz through Sivas, Tokat, and Bursa to Istanbul carried Persian raw silk westward and European cloth eastward. By sea, the Black Sea (an Ottoman lake from 1453), the Levant (organized through Aleppo, Smyrna, and Sidon), the Red Sea, and the Persian Gulf moved grain, silk, cotton, spices, and coffee across thousands of kilometres. The Ottoman trade routes and silk road article traces the network; the spice trade article takes up the Red Sea dimension after 1517. The Hajj caravan from Damascus, organized in part by the state, was both a religious obligation and a major source of customs revenue for Syria.

Coinage, prices, and the price revolution

The Ottoman monetary system is treated at length in Ottoman coinage and currency, but a few points are worth making here. The silver akçe, struck in good silver under Mehmed II at c. 0.68 g fine, was the unit of account for the entire empire, while the gold sultani (struck from 1478) was the international currency of the eastern Mediterranean. From the 1580s onward, the influx of American silver and the rising cost of Ottoman warfare combined to produce the debasement that Şevket Pamuk has made the centrepiece of his monetary history. The akçe lost more than ninety per cent of its silver content between Mehmed II and 1687, when it stood at c. 0.05 g; a working economy that could not agree on a stable unit of account was, in effect, paying for Ottoman overstretch in inflation. The seventeenth century, in Pamuk’s argument, was a price-revolution crisis as much as a fiscal one, and the inflation that hit Istanbul hit the janissary’s pay, the vakıf endowment, and the Anatolian peasant in the same akçe-denominated ledger. I find this persuasive for the akçe’s debasement; the parallel story for the gold sultani and the kuruş is more complicated, and the kuruş’s collapse has its own chronology (see the coinage article).

“In the reign of the late Sultan Süleyman, a kile of wheat in Istanbul fetched 4 akçes; under Murad III, 18; under Mustafa I, 60. The cause is the clipping and alloying of the silver, and the cause of that is the wars.” — Katip Çelebi, Düstûrü’l-Amel li-Islâhi’l-Halel (c. 1653), summarising the complaints of Istanbul’s provisioning officers.

The 1838 Balta Liman agreement and the Public Debt Administration

Two legal documents are the bookends of Ottoman economic decline. The first is the Anglo-Ottoman convention signed at Balta Liman on 16 August 1838, by which Mustafa Reşid Pasha and Lord Palmerston abolished the Ottoman state monopoly on most goods and fixed a uniform external customs duty of 5 per cent ad valorem, with a 12 per cent transitional reduction on some categories. Issawi called it a British imperial heist; Owen a rational Ottoman response to a fiscal crisis; Pamuk, more recently, a missed opportunity to reform the tariff regime in a way that might have protected Ottoman infant industry. The exchange was reciprocal on paper — Britain abandoned its Navigation Acts in favour of Ottoman goods — but in practice the deal removed the last protective barrier around Ottoman manufacturing, and the flood of cheap British cotton cloth that followed destroyed the urban textile sector within a generation.

The second document is the Muharrem Kararnamesi of 20 December 1881. The Ottoman state, bankrupted by the Russo-Turkish war of 1877–78, handed the administration of several state revenues — the tribute of Bulgaria, the salt monopoly, the tobacco regie, the stamp duties, and a number of other indirect taxes — to a Duyun-u Umumiye (Public Debt Administration) governed by a council of European bondholders and administered, in Istanbul, by a Galata banker (the British Diranian and the French descendants of the Helbig and Zarifi houses taking turns). It is the textbook case of what Robinson and Gallagher called “informal empire” in their 1953 essay of that name, and the Ottoman case, with the Galata bankers as the hinge between the Sublime Porte and the City of London, fits the type almost too neatly.

Between 1838 and 1881 sits the short, instructive failure of the itibari para of 1840. Under Abdülmecid I, and on the advice of the British and French embassies, the government issued fiduciary paper money — the kaime-i nakdiye-i itibariye — backed not by silver in the treasury but by the state’s promise to honour it at face value. The notes lost more than half their value within a year, were withdrawn at heavy loss, and were never reissued. The episode is a small but pointed lesson: the Ottoman state of the 1840s could not borrow in its own currency at a rate that did not invite default.

Thematic threads

Five threads tie the silo together. (1) The fiscal-military nexus. The timar, the akçe, the sipahi, and the devshirme janissary were parts of a single machine, and the seventeenth-century crisis of that machine is the most important single fact of Ottoman economic history. (2) The grain-to-credit pivot. The 1580s price revolution, the Celali revolts, the 1695 esham, the 1695 malikâne, and the eighteenth-century rise of the çiftlik all describe the same shift: from an agrarian order of reciprocal obligation to a cash-and-credit order of tax farming, and ultimately to an export economy of raw materials. (3) The integration bookends. The 1838 Balta Liman agreement and the 1881 Duyun-u Umumiye are the two legal moments at which Ottoman sovereignty over its own economy effectively ended. (4) The monetary story. The akçe-to-kuruş transition, the gold-sultani-to-mecidiye transition, and the lira reform of 1881 are three chapters of one continuous story about a state that could not stabilize its unit of account. (5) What historians disagree about. Population estimates vary by a factor of two between Cook, Karpat, and Pamuk; the timar-to-iltizam transition is dated differently by Fleischer, Barkey, and Khoury; the Great Divergence is debated by Pamuk, Parthasarathi, and Pomeranz; the 1838 Balta Liman is read in three different ways by Issawi, Owen, and Pamuk. The figures used in this silo are mid-range, not consensus.

Sources and further reading

  • Halil İnalcık, The Ottoman Empire: The Classical Age 1300–1600 (Orion, 1973; reprint 2000).
  • Suraiya Faroqhi, The Ottoman Empire: A Short History (Markus Wiener, 2009).
  • Şevket Pamuk, A Monetary History of the Ottoman Empire (Cambridge University Press, 2000).
  • Donald Quataert, The Ottoman Empire, 1700–1922 (Cambridge University Press, 2005).
  • Halil İnalcık and Donald Quataert (eds.), An Economic and Social History of the Ottoman Empire, 1300–1914 (Cambridge University Press, 1994).
  • Christine Woodhead (ed.), The Ottoman World (Routledge, 2011).
  • Maurits H. van den Boogert, The Capitulations and the Ottoman Legal System (Brill, 2005).
  • Roger Owen, The Middle East in the World Economy, 1800–1914 (I.B. Tauris, 1993).
  • Charles Issawi, An Economic History of the Middle East and North Africa (Columbia University Press, 1982).