Changes in Factor Markets in The Ottoman Empire, 1500-1800: F Cambridge University Press 2009

Continuity and Change 24 (1), 2009, 107136.
f Cambridge University Press 2009

doi:10.1017/S0268416009007048 Printed in the United Kingdom
Changes in factor markets

in the Ottoman Empire, 15001800
S E V K E T P A M U K *
ABSTRACT.
The most important determinant of Ottoman economic institutions and

their evolution in the early modern era needs to be sought in the Empires social
structure and political economy. Merchants and producers were never in a position to
inuence the state elites and to push for institutional changes that would favour the
growth of the private sector. As a result, many of the key institutions of the Ottoman
order, including the state ownership of land and the urban guilds, remained intact
until the nineteenth century. In contrast, institutions related to state borrowing
changed signicantly. This dierence in the political power of dierent groups
explains better than geography or resource endowments, Islam or culture the
striking divergence in the trajectory of dierent factor markets.
I. I N T R O D U C T I O N
The Ottoman Empire stood at the crossroads of intercontinental trade,

stretching from the Balkans and the Black Sea region through Anatolia,
Syria, Mesopotamia and the Gulf to Egypt and most of the North African
coast, for six centuries, up to World War I. Until recently, Ottoman
historiography had depicted an empire in decline after the sixteenth century. In contrast, a growing literature has been arguing that Ottoman
state and society had begun to adapt to changing circumstances in the
early modern era, well before the nineteenth-century reforms known as
Tanzimat or re-ordering . Beginning with a successful centralization
drive in the second half of the fteenth century, Ottoman economic institutions and policies were shaped to a large degree by the priorities and
interests of a central bureaucracy. This central bureaucracy exhibited a
* Ataturk Institute for Modern Turkish History, Bogazici University, Istanbul, and
European Institute, London School of Economics and Political Science.
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S E V K E T P A M U K
considerable degree of exibility and pragmatism while expanding the

territories under its control. It managed to contain the many challenges it
faced with the habit of negotiation, to co-opt and incorporate into the
state any social groups that rebelled against them. The Ottomans were
prepared to negotiate for the loyalty of local elites whenever the new state
was unable to impose full control. They displayed a good deal of openness
to technological innovation, such as adapting rearms on a greater scale,
more eectively and earlier than the neighbouring states, especially in the
earlier period. The Ottomans also proved to be quite adept at learning
about and borrowing institutions from others.1
While pragmatism, exibility, willingness to negotiate and ability to
adapt some of their institutions to changing circumstances were traits that
enabled the Ottomans to retain power until the modern era, their limitations need to be equally emphasized. Institutional change did not apply
equally to all areas of Ottoman economic life. Not all types of institution
were aected to the same degree by these changes. Because the central
bureaucracy was able to retain its leading position in Ottoman society and
politics, the inuence of various social groups over economic matters
not only of landowners but also merchants, manufacturers and moneychangers and more generally over the policies of the central government,
remained limited until the end of the empire. As a result, most of the
pragmatism and exibility was utilized by the central bureaucracy for
the defence of the existing order and of its own position.
In contrast, institutional changes that might have threatened the leading position of the central bureaucracy were resisted more forcefully than
others. Institutional change thus remained selective and many of the key
institutions of the Ottoman order, such as state ownership of land, the
role of urban guilds and restrictions on the accumulation of private
capital remained intact until the nineteenth century. I will also argue that
selective institutional change led to very dierent paces and patterns
of change in the three factor markets. Capital markets, especially those
related to aairs of the state showed considerable change in the early
modern era. In contrast, changes in the labour and land markets remained
limited because these institutions were ercely defended by the bureaucracy. The same argument may be stated in dierent terms : those in favour
of greater changes in these factor markets, for example landowners,
merchants and manufacturers, were not strong enough to overcome the
opposition of the bureaucracy and other political forces until the nineteenth century.
Institutional economics proposes a number of causes or determinants
of institutions. Most important amongst them are : (i) geography or resource endowments, (ii) religion or more generally culture, and (iii) social
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conict or political economy. Ottoman economic institutions, including

some nancial institutions, have of course been inuenced by geography
and resource endowments. For example, the land regime and scal institutions in Egypt were shaped to a large degree by the needs of irrigated
agriculture. In the core regions of the empire, low population density
tended to support peasant farms in the countryside. With the exception of
Egypt, however, the geography and resource endowments of the areas
covered by the Ottoman Empire were not very dierent from those of
western Europe. For this reason, geography or resource endowments were
not primary causes of the dierences in economic institutions between
them.
Religion and/or culture have long been oered as a primary cause of
the dierences in economic outcomes between the Middle East and western Europe. Max Weber, and more recently, David Landes have oered
prominent examples of this type of explanation. More recently, in a series
of recent articles Timur Kuran has pointed to Middle Eastern institutions
rooted in Islamic law (including inheritance law, commercial law and
others) as past and in some cases also continuing obstacles to economic development. While European economies developed increasingly
more sophisticated institutions and larger enterprises, those in the Islamic
world stagnated. As a result, Kuran has argued, these Middle Eastern
institutions never caused a decline in economic activity but they did turn
into handicaps by perpetuating themselves during the centuries when the
West developed the institutions of the modern economy.2 As I will argue
below, decline or stagnation is not an appropriate characterization of
the economy or the institutions of the Middle East. There were, in fact,
many changes in the economic institutions of the region. Moreover, those
economic institutions that allegedly had their basis in Islamic law actually
showed great variation as they evolved over the centuries in dierent regions across the Islamic world, from Spain to North Africa to the Near
East and South and Southeast Asia. Equally importantly, many of the
key economic institutions in the region, most notably state ownership of
land, cannot be linked in any way to Islamic law. For this reason it is
dicult to argue that the social and economic institutions of the Middle
East are deeply rooted in Islam and Islamic law.
How economic institutions are determined, and why they vary across
countries, is not suciently well understood. Nonetheless, it is clear that
because dierent social groups benet from dierent economic institutions there is generally a conict of interest over the choice of economic
institutions, which is ultimately resolved in favour of groups with the
greatest political power. The distribution of political power in society is in
turn determined by political institutions and the distribution of economic
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power. It is also recognized that, for long-term growth, economic institutions should not oer incentives only to a narrow elite but should open
up opportunities to broader sections of society. For this reason, political
economy and political institutions are considered as key determinants of
economic institutions and the direction of institutional change.3
Those contributors to the recent institutional economics literature who
adhere to a social-conict or political-economy explanation of economic
institutions argue that because dierent groups and individuals typically
benet from dierent economic institutions, there is generally a conict
over the choice of economic institutions, ultimately resolved in favour of
groups with greater political power. Economic institutions that provide
incentives to invest in land, physical and human capital or technology are
more likely to arise when political power is in the hands of a relatively
broad group who have signicant investment opportunities. The state can
be a major player in this context because it maintains the coercive power
to enforce these rules.
In a related recent study, Daron Acemoglu, Simon Johnson and James
Robinson have oered an explanation for why strong private property
rights emerged in western Europe, especially in Britain and the Netherlands, beginning in the sixteenth century. They argue that Atlantic
trade the opening of the sea routes to the New World, Africa and Asia
and the building of colonial empires contributed to the process of
western European growth between 1500 and 1850, not only through its
direct economic eects but also indirectly, by inducing fundamental institutional changes. The Atlantic trade in Britain and the Netherlands
altered their balance of political power by enriching and strengthening
commercial interests outside the royal circle, including overseas merchants, slave traders and colonial planters. Through this channel, it
contributed to the emergence of political institutions that protected merchants against royal power. In short, they argue, the Atlantic trade played
a key role in strengthening segments of the bourgeosie and the development of capitalist instittions in these countries. In contrast, where the
power of the crown was relatively unchecked, as in Spain, Portugal and
France, Acemoglu, Johnson and Robinson emphasize that trade was
largely monopolized and regulated, the crown and its allies became the
main beneciaries of the Atlantic expansion and the same induced institutional changes did not take place. Areas lacking easy access to the
Atlantic, such as Venice and Genoa, on the other hand, did not experience
any direct or indirect benets of Atlantic trade.4
This argument also suggests that the causal relationship between institutions and economic development is not necessarily one-directional, running from institutions to economic development. Economic development,
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or its absence, also inuences the institutions and their evolution. In other
words, it may be argued that just as the expansion of Atlantic trade helped
merchants shape the capitalistic institutions in northwestern Europe, the
low levels of economic transformation in the economies of the Near East
limited the economic and political power enjoyed by their merchants and
manufacturers. These low levels of economic development helped maintain a dierent pattern of institutions, one that was not equally friendly to
merchants and more generally to the private sector.
I begin below with a discussion of the economic priorities and policies
of the Ottoman government. I will then examine the factor markets in the
Ottoman Empire and their evolution during the early modern era. I will
show that many of the key economic institutions most importantly
those related to land and labour : state ownership of agricultural land and
the power of the guilds were shaped largely by economic, social and
political factors. I will also argue that the most powerful determinant of
Ottoman economic institutions and their evolution in the early modern
era needs to be looked for not in religion but in the social structure : in the
leading position of the central bureaucracy in both society and political
economy.
I I. E C O N O M I C P R I O R I T I E S A N D P O L I C I E S
Late medieval and early modern states all had to address a common range
of economic problems. The most basic of these were directly related to the
maintenance of the states themselves. The provisioning of the capital city,
of the armed forces and to a lesser extent of other urban areas, taxation,
the support and regulation of long-distance trade and the maintainence of
a steady supply of money were amongst the leading concerns of economic
policy.5
In their economic polices, states did not pursue the public interest in
some abstract sense of the term. Instead, both the goals and design of
economic policies, as well as the institutions related to their implementation, were shaped by the social structure, the relationship between state
and society, the interests of dierent social groups aligned with or represented by the state and, more generally, the social and political inuences acting on the state. To understand Ottoman economic policies or
practices, it is thus necessary to examine the nature of the Ottoman state
and its relationships with dierent social groups. Until late in the fteenth
century, there existed a considerable amount of tension in Ottoman
society between the Turkish landed aristocracy of the provinces, who were
deeply involved in the territorial conquests, and a bureaucracy at the
centre made up mostly of converted slaves (devshirme), with the balance
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of power often shifting between the two. The successful centralization

drive of Mehmed II in second half of the fteenth century swung the
pendulum again, this time decisively. The landed aristocracy was defeated, state ownership was established over privately held lands and
power was concentrated in the hands of the central bureaucracy. After
this shift, the policies of the government in Istanbul began to reect much
more strongly the priorities of this bureaucracy. The inuence of others
social groups, not only landowners but also merchants and moneychangers, over the policies of the central government remained limited.
For the Ottomans, there existed an ideal order and balance between
social groups such as the peasantry, the guilds and the merchants. The
sultan and the central bureaucracy were placed at the top of this order.
This ideal changed over time along with changes in the economy and
society. Nonetheless, the government took care to preserve as much as
possible the prevailing order and the social balances, including the structures of employment and production. From this perspective, rapid accumulation of capital by merchants, guild members or any other group
was not considered favourably since it was felt it would lead to the rapid
disintegration of the existing order.
As a result, the governments attitude towards merchants was profoundly ambiguous. On the one hand, merchants, large and small, were
considered indispensable for the functioning of the urban economy. Yet,
at the same time, their activities occasionally led to higher prices for raw
materials, bringing pressure on the guild system and the urban economy
more generally. Thus the central administration often considered its main
task as being to control the merchants not to protect them. At the same
time, however, controlling the merchants was much more dicult
than controlling the guilds. While the guilds were xed in location, the
merchants were mobile. Needless to say, the ocial attitude towards
nanciers and moneychangers was similarly ambiguous.6 The state tolerated, and even encouraged, the activities of merchants, domestic manufacturers more or less independent of the guilds and moneychangers, as
long as they helped to reproduce the traditional order.7
Another important priority of the Ottomans was the provisioning of
urban areas, including the army, which was seen as necessary for the
stability of the social order.8 The government wanted to assure a steady
supply of goods, especially for the capital city. The bureaucracy was very
much aware of the critical role played by merchants in this respect. With
the territorial expansion of the empire and the incorporation of Syria and
Egypt during the sixteenth century, long-distance trade and the control
of the intercontinental trade routes became increasingly important and
even critical for these needs.9
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This emphasis on provisioning necessitated an important distinction

between imports and exports. Imports were encouraged because they
added to the availability of goods in the urban markets. In contrast, exports were tolerated only after the requirements of the domestic economy
had been met. As soon as the possibility of shortages emerged, however,
the government did not hesitate to prohibit the exportation of basic
necessities, especially foodstus and raw materials.
The contrasts between these policies and the practices of mercantilism
in Europe are obvious. It would be a mistake, however, to identify this
concern with the provisioning of urban areas solely with Ottomans or
Islamic states. Frequent occurrences of crop failures, famine and epidemics combined with the primitive nature of the available means of
transport, led most (if not all) medieval governments to focus on the
urban food supply and more generally on provisioning as key concerns
of economic policy. These Ottoman priorities and practices had strong
parallels in the policies of the governments in western and southern
Europe during the late Middle Ages, from the twelfth through the fteenth centuries.10 The contrasts between Ottoman and European economic policies emerged during the era of mercantilism in Europe.11 One
important reason why mercantilist ideas never took root in Ottoman
lands was that the merchants and domestic producers whose ideas and
perspectives were so inuential in the development of these ideas in
Europe did not play a signicant role in Ottoman economic thought.
Despite the general trend towards decentralization of the empire during
the seventeenth and eighteenth centuries, these groups, who were the
leading proponents and actual developers of mercantilist policies in
Europe, never became powerful enough to exert sucient pressure on the
Ottoman government to change or even modify the traditional policies.
Only in the provinces, were locally powerful groups able to exert increasing degrees of inuence over provincial administrators.
It is also signicant that the Ottoman merchants failed to develop networks and, more generally, a signicant presence in Europe during the
early modern period. From the twelfth century onwards, most European
countries had promulgated laws forbidding lengthy sojourns, permanent
settlement or engagement in commerce by foreign nationals including
Muslims. There were also other factors that contributed to this absence,
however. While the governments of European countries often encouraged, backed and supported merchants who were their subjects or
citizens, Ottoman governments did not view the protection of the merchants who were their subjects and who operated outside the boundaries
of their countries as a matter worthy of their attention. One major reason
for this was that the governments felt that the activities of the merchants
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abroad did not yield any revenues or otherwise provide a scal advantage
to the central treasury. The basic message to merchants operating abroad
was that their state was indierent to their activity and hence no backing
or protection was granted to them when they needed it.12
On the other side of this coin lay the willingness and even readiness of
the Ottoman governments, as well as the governments in the medieval
Middle East, to oer privileges legal, commercial and other to
European merchants in the form of unilateral decrees. These privileges
were granted from the twelfth century, but not because the governments
were coerced by the more powerful European states. In fact, such a power
imbalance did not really exist until the eighteenth or nineteenth century.
Through these privileges, the rulers around the eastern Mediterranean
had sought to to increase the circulation of goods, especially of luxury
goods, in their local markets and to increase state revenues from trade.
Another motive was to use the privileges as an instrument of foreign
policy to gain inuence and friendship in Europe. It is clear, however, that
the local merchants did not have much say in this process because such
privileges often put them at a disadvantage as against their European
counterparts. The privileges for the European merchants included lower
taris or even exemptions from certain kinds of duties.13 It is clear that
these put European merchants at least on equal footing with, and in many
instances at a an advantage over, the local merchants.
These privileges played an important role in the transfer of large segments of Ottoman long-distance trade, as well as coastal and longdistance shipping, to European merchants in the following centuries. As
the local merchants became weaker, it became even more dicult for them
to have any input into their governments trade policies or to change
the commercial or economic institutions in the region. With the rise of
the Atlantic trade, the merchants of northwestern European countries
increased their power substantially. They were then able not only to bring
about major institutional changes in their countries but also to induce
their governments to defend and develop their interests more forcefully in
the Middle East. Merchants of the region thus found it even more dicult
to compete against them after the sixteenth century.
With the decline in the power of the Ottoman Empire, the privileges
provided to the European merchants ceased to be unilateral grants. They
were expanded substantially in the eighteenth century and especially in the
nineteenth, under pressure from the European powers. These privileges
began to be referred to as the capitulations, as a result of the many
headings they were grouped under in the original Latin texts in the
medieval era. The Ottoman state was not allowed to revoke or reverse
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these privileges. The capitulations were only abolished after World War I
and the dissolution of the Ottoman Empire.
I I I. S E L E C T I V E I N T E R V E N T I O N I S M
Economic historians of the Ottoman Empire have long emphasized that

interventionism was a permanent feature of Ottoman economic policies.14
It is true that the Ottoman government did not hesitate to intervene in
local and long-distance trade to regulate markets and ensure the availability of goods for the military, the palace and, more generally, the urban
economy. In comparison to both Islamic law and the general practice in
medieval Islamic states, the early Ottomans were denitely more interventionist in their approach. In economic and scal aairs as well as in
many administrative practices they often issued their own state laws
(kanun) even if those came into conict with the shariat (Islamic law). The
practices they employed such as the enforcement of regulations (hisba)
in urban markets and price ceilings (narh) had their origins in early
Islamic tradition but the Ottomans relied on them more frequently. In
addition, in the provisioning of the army and the urban economy, deliveries at xed prices were required from merchants for some of the more
important goods.15
Nonetheless, it is necessary to distinguish priorities and intentions from
actual implementation. Whether the governments succeeded in bringing
about the desired outcomes through their interventions depended on their
capabilities. Yet there existed serious limitations on the administrative
resources, organization and capacity of all early modern states. They did
not have the capacity to intervene in markets comprehensively and eectively. Attempting to intervene in the economy did not necessarily mean
succeeding in bringing about the desired outcomes. The mixed success of
government actions inevitably led the Ottoman authorities to recognize
the limitations of their power. As a result, Ottoman governments moved
away from a position of comprehensive interventionism as it was practised during the reign of Mehmed II (1444 and 14511481) towards more
selective interventionism in later periods.
Unfortunately, this evolution towards a more selective nature of
government interventionism after the fteenth and sixteenth centuries has
not been adequately recognized. The laws issued by Mehmed II and his
immediate successors continue to be referred to as examples of government interventionism in the economy. This inability of many historians
to make a more realistic assessment about interventionism is primarily
the result of a state-centred perspective. In addition, there are a number
of practical reasons why archival evidence has misled historians to
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exaggerate both the frequency and the extent of state interventions in the
economy. One basic source of error has been the unrepresentative nature
of the available material. Each government intervention was typically recorded by a document in the form of an order to the local judge (kadi) or
some other authority. In contrast, there are no records for the countless
numbers of occasions when the government let the markets function on
their own. Faced with this one-sided evidence, many historians have
concluded that state intervention and regulation was a permanent xture
of most markets at most locations across the empire.
The case of the ocial price-ceiling (narh) lists provides an excellent
example in this respect. After collecting a few of these from the court
archives, most historians have assumed that narh was a permanent xture
of urban economic life. In fact, my recent searches through all of the more
than a thousand registers of three of Istanbuls courts, those of the Old
City, Galata and Uskudar from the fteenth through the mid-nineteenth
centuries, have indicated that narh lists were not regularly prepared. They
were issued primarily during extraordinary periods of instability and distress in the commodity and or money markets, when prices, especially
food prices, tended to show sharp uctuations or upward movements.
Wars, crop failures, other diculties in provisioning the city and monetary instabilities such as debasements or reforms of the coinage were examples of these extraordinary periods. In the absence of such problems,
however, there were long intervals sometimes lasting for decades when
the local administrators did not issue narh lists.16
Another bias is related to the fact that a large part of the available documents provide evidence of state intervention directly related to
the economy of the capital city.17 This evidence has led many historians
to assume that the same pattern applied to the rest of the empire. In
fact, Istanbul was unique in terms of both its size and its political
importance. With its population approaching half a million, it was the
largest city in Europe and West Asia during the sixteenth century. As was
the case with monster cities elsewhere, government economic policy often
revolved around it. In contrast, the central government was much less
concerned about the provisioning of other urban centres. The state organization was not as strong there and the local authorities, who were
appointed by the centre, were more willing to cooperate with the locally
powerful groups : the guild hierarchy, merchants, tax collectors and
moneychangers.18
Examples of Ottoman monetary practice only conrms the Ottoman
tendency to rely on markets and local practices in most economic matters.
Until the sixteenth century, the Ottoman territories in Anatolia and the
Balkans had a unied monetary system based on the gold sultani and the
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silver akc e. At the bottom of the hierarchy were copper coins with nominal values used for small transactions. As the Ottoman state territorially
expanded to become a fully edged empire in the sixteenth century, however, this simple system could not continue. The newly conquered territories, each of which was subject to dierent economic forces and very
dierent patterns of trade, already had well-established currency systems
of their own. The Ottomans pursued a two-tiered approach to money
and currency in these areas. The sultani became the only Ottoman gold
coin across the empire in the sixteenth century, for both symbolic and
economic reasons. With a single gold coin as the ultimate symbol of
sovereignty, the Ottomans thus unied the empire from the Balkans to
Egypt and the Maghrib. In another example of pragmatism, the standards
of the sultani, its weight and neness, were kept identical to those of the
Venetian ducat, which had become the accepted standard of payment in
long-distance trade across the Mediterranean and beyond.
For the silver coinage used in daily transactions, and to some extent in
long-distance trade, the central government chose to continue with the
existing monetary units in the newly conquered territories, with or without modications. The most important reason for this preference was a
wish to avoid economic disruption and possible popular unrest. Also, it
was not clear whether the central government had the scal, administrative and economic resources to unify the silver coinage of the empire.
As a result, while the silver coinage that was minted in the new territories
from Mesopotamia to Egypt and Tunis began to bear the name of the
sultan, their designs and standards as well as the names of the currencies
adhered to the pre-Ottoman forms and usages. Earlier styles and types of
copper coinage were also continued.
In all regions of the empire the silver currency remained the basic unit
of account and the leading means of payment in local transactions. The
exchange rates of the Ottoman and foreign gold coins, expressed in terms
of the local silver unit, were determined by the markets, subject to changes
in the specie content of the silver currency, uctuations in the goldsilver
ratio and a host of other factors. The state encouraged the circulation of
all types of foreign coinage in order to maximize the means of payment in
local markets. Moreover, the government did not adhere to a legally xed
rate of exchange between the gold and silver coins or to a xed goldsilver
ratio around which the face value or the standards of both types of coin
would be determined. Similarly, the exchange rates of the various coins
were also determined by the local markets. The basic virtue of this system
was its exibility : as long as the markets determined the exchange rates of
various coins, and if the ocial rates at which the government accepted
these coins followed the markets closely, none of these coins was likely to
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be over- or undervalued. For this reason, they were less likely to disappear
from circulation.19
In short, a more realistic assessment of the nature of Ottoman state
interventionism in the economy is long overdue. When the biases of
archival evidence and the limitations on the power and capabilities of the
state are taken into account, Ottoman policy towards trade and markets is
best characterized not as permanent and comprehensive interventionism,
but as selective interventionism. In its later periods, intervention was used
primarily for the provisioning of selected goods for the capital city and the
army, and during extraordinary periods when shortages reached crisis
conditions.
I V. L A N D A S A C O M M O D I T Y ?
Until the end of the sixteenth century, the rise of the Ottoman Empire was
closely associated with territorial expansion. Military success, in turn,
depended closely on the land-tenure regime, which supported a large,
cavalry-based army. The Ottoman bureaucracy always took care to
undertake detailed censuses of the new territories in order to assess their
scal potential. Even after territorial expansion slowed down in the second half of the sixteenth century, agriculture continued to provide the
economic livelihood for close to 90 per cent of the population as well as
key scal support for the Ottoman state. The durability of the empire and
its achievements as well as its limitations during the next three centuries
cannot be understood without paying attention to its agrarian institutions.
Ottoman land market institutions were shaped most importantly by
economic and political factors and experienced limited changes in the
early modern era. During the early stages of Ottoman territorial expansion, lands taken over from the neighbouring states in the Balkans began
to be registered as state lands. In contrast, private property in land continued in areas taken from the Islamic principalities in Anatolia. With the
centralization drive in the second half of the fteenth century, however,
state ownership of agricultural lands was established as the basic form in
the core regions of the empire, in the Balkans, Anatolia and Syria. It has
been estimated that as much as three-quarters or more of the agricultural
lands in these core regions were under state ownership during the rst half
of the sixteenth century.20 The state did not relinquish its ownership of
these lands until the second half of the nineteenth century.
Hereditary usufruct of these lands was given to peasant households,
which typically cultivated them with a pair of oxen and family labour. The
peasant family farm thus emerged as the basic economic and scal unit in
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the countryside.21 Peasant families could not sell the land or their usufruct
rights. The collection of taxes from these peasant cultivators and the
conversion of these revenues into a large provincial army was made
possible by the timar system. Under this system, sipahis (state employees
often chosen for their wartime valour) lived in the rural areas, collected
taxes, mostly in-kind, from the agricultural producers and spent the
revenues locally on the training and equipment of a predetermined number of soldiers as well as on their own maintenance. The Ottoman central
administration did not attempt to impose the timar regime in all of the
conquered territories, however. In many of the more distant areas, such
as Eastern Anatolia, Iraq, Egypt, Yemen, Wallachia, Moldavia and the
Maghrib, the Ottomans were eager to collect taxes but altered the existing
land regimes either to a limited extent or not at all. The most important
reason for this preference was the wish to avoid economic disruption
and possible popular unrest. It was also not clear whether the central
government had the scal, administrative and economic resources to
establish a new regime in these areas.
The central government thus handled the task of establishing the landtenure-cum-scal regime for the expanding empire with a large degree of
pragmatism. This approach was in fact quite similar to Ottoman practices
in other areas. As a result, there emerged inside the empire zones that were
under varying degrees of administrative control. At the core were the
areas most closely administered by the capital, with institutions most
closely resembling those in the Istanbul region. With increasing distance
from the capital, the institutions and administrative practices reected the
power balances between the capital and the local structures and forces.
For example, the land regime and the scal practices in Ottoman Egypt
remained closely linked to the demands of irrigated agriculture along the
Nile valley. In the more distant frontier regions, the Ottomans retained
many of the local institutions and did not attempt to impose the institutions of the core regions.22
Despite the decline in the power of the central government and the
rise of urban notables in the provinces in the seventeenth century, and
especially in the eighteenth, the latter could not establish private property
on land. De facto large holdings emerged in the Balkans and Syria but they
were less common in Anatolia where higher land/labour ratios favoured
peasant households and small holdings. The state refused to recognize
private ownership in agricultural land during this period, with the exception of orchards and vineyards in urban areas. Local courts, which had
jurisdiction over matters of property, rarely approved sales of agricultural
land. Records from these Islamic courts provide details of some cases of
land sales during the early modern era but these are small in number.
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Formal sales of urban lands and real estate and of orchards and vineyards
occurred more often. It was also rare for courts to evict peasants from the
lands they held for defaulting on loan payments or for similar reasons.
Even in the Balkans and in Syria, land did not emerge as a major form
of investment for the wealthy. Investment in land ranked behind tax
collection and trade as the leading forms of economic activity for the
provincial notables. Usufruct in most state lands thus remained in the
hands of peasant households. When the central government began to
reassert itself in the provinces with a successful centralization drive in
the second quarter of the nineteenth century, it was able to replace many
of the leading notables with new individuals or families as provincial
tax farmers. As the power of the long-standing notable families declined,
their control over agricultural lands weakened and the state (miri) status
of the latter was rearmed. Peasant family enterprises cultivating lands
under state ownership thus continued into the second half of the nineteenth century as the basic form of Ottoman agriculture. All of this means
that agricultural lands, with the exception of vineyards and orchards,
were rarely bought and sold in the open market. Urban real estate did
change hands quite easily, however, as is evidenced by the large volume of
documents available from the records of Islamic courts. The state began
to recognize private property on the agricultural lands only after the Land
Code of 1858.23
State power was not the only obstacle in the way of private property
in land, however. Commercialization of agriculture, including the exporting of agricultural commodities, remained limited until the nineteenth
century. In addition, in a landscape dominated by small peasant holdings, it was not easy to nd wage labour. Large farms or estates using
year-round labour thus remained few in number. The exceptions were
mostly in the Balkans where expansion of long distance trade and greater
population density provided greater support for larger estates oriented
towards commercial agriculture. In Egypt, on the other hand, institutions
of landownership and taxation as well as the techniques and organization of cultivation depended closely on the irrigation of fertile land.
Large holdings and sales of agricultural land were more frequent
there.24
Another important category of land was the vakif or pious foundation.
Islamic law allowed individuals who had private property (including land)
under private ownership to convert some or all of these assets to vakif
status and to direct their future income for a predetermined purpose. At
the time of the endowment, private ownership terminated. A board of
trustees was then appointed to rent out or otherwise manage the property
designated as vakif and to direct the revenues towards the designated
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purpose. Control of the board of trustees over these lands usually

weakened over time and the tenants began to enjoy greater autonomy and
to pay less in rent. Despite occasional state expropriation, substantial
amounts of agricultural land as well as urban real estate remained under
vakif status throughout the Ottoman centuries, but both vakif lands and
legally recognized private property in land made up only a fraction of the
land under state ownership until the nineteenth century.
V. G U I L D S A N D L A B O U R M A R K E T S
The importance of agriculture in the Ottoman labour force ranged between 80 to 90 per cent during the early modern era. Most of this labour
force was self-employed in the family enterprises that were by far the
most frequently observed form in agriculture. Even the large holdings in
the Balkans were most often leased out to sharecropping families that
used unpaid family labour. In other words, farms using year-round wage
labour or servile labour were exceptional in the Ottoman Empire. In the
earlier literature, there have been arguments about the emergence of
a second serfdom in the Balkans during the seventeenth and eighteenth
centuries but these arguments have been abandoned in recent decades.25
Seasonal wage labour can be observed in certain crops such as cotton.
Putting-out activities in the countryside and rural industry using wage
labour also remained limited except in parts of the Balkans such as
Thessalia, Macedonia and Bulgaria.
In the urban economy, labourers in trade and manufacturing remained
mostly under the umbrella of the guilds until the second half of the
nineteenth century. Even though religious themes Muslim and nonMuslim played an important role in guilds, the evolution of the
Ottoman guilds was shaped primarily by economic and political factors.
The guilds tried to regulate the labour markets by employing a wide range
of restrictions including wage rates. They often sought the support of local
or central government to enforce guild rules, secure raw materials at
low prices and obtain tax exemptions. The government, in turn, needed
and relied on the guilds for the provisioning of the urban areas and the
military. The guilds also oered the government an instrument for the
supervision of the urban population. Nonetheless, there existed a considerable amount of tension between the government and guild membership, both Muslim and non-Muslim. While the guilds tried to preserve
their independence, they were viewed with suspicion for the heterodox
religious beliefs of their membership.26 The guilds were generally more
free of government supervision and intervention in the provinces. An
important development in the eighteenth century was the increasing
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overlap between guild membership and the janissaries, the permanent

army soldiers. Growing numbers of janissaries or traditional soldiers
amongst guild membership in both the capital and the provinces increased
the ability of the guilds to resist government pressure and intervention.
After the abolition of the janissaries in 1826 and the establishment of a
new permanent army, however, the ability of the guilds to resist government encroachment was sharply reduced.
The guilds did not attempt to place restrictions on new entries in the
early period. These restrictions emerged and tensions between guild
members and non-members began to rise in the seventeenth century,
however. The right to own an enterprise that was part of an urban guild
began to be bought and sold in the eighteenth century. The emergence of
such a market may be taken as a sign that the value of these enterprises
was rising. The emergence of a market in such licences (gedik) can also
be interpreted as a sign of the increasing power of the guilds and their
ability to enforce restrictions on entry. The guild also attempted to prevent the activities of non-members and to stop merchants whenever they
tried to organize alternative forms of production in the rural areas or just
outside the limits of urban centres. The outcome of these eorts was
mixed, however. In the Balkans, many labourers and enterprises operated
outside the guilds from the sixteenth century, despite the opposition of
the guilds and their eorts to seek local and central government action
against the newcomers. Entry of non-member labourers and owners
was much more dicult in the capital city as the government played a
more active role there. In the Arab provinces, tensions between members and non-members began to increase in the eighteenth century as
small but growing volumes of trade and manufacturing activities began
to take place outside the control of the guilds. In general, however,
recent immigrants to urban areas did not nd it easy to nd employment in the guilds after the sixteenth century. Agricultural activities in
and around the urban areas oered recent migrants easier access to
employment opportunities. Wage labour in manufacturing outside the
guild system began to expand only towards the end of the nineteenth
century after the guilds were subjected to a large degree of competition
from imported European manufactures.27 It would be safe to estimate
that the proportion of those who received most or even a signicant
part of their income as wages or salaries remained below 10 per cent of
the labour force in the early modern era. The available evidence does
not point to a clear direction or trend in this share during these three
centuries. The numbers of female wage earners were even smaller. They
also began to increase with the growing commercialization of the nineteenth century.
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Markets for slaves existed until the second half of the nineteenth century but most of the limited numbers of slaves were employed as domestic
labour. Slave labour was virtually non-existent in agriculture, trade and
manufacturing. A prominent exception was silk manufacturing in Bursa,
where labour shortages led to the use of slaves during the fteenth century
and the early part of the sixteenth.
V I. T H E E V O L U T I O N O F C A P I T A L M A R K E T S
Capital markets institutions include rules for the credit markets, rules for
the transferability and maturity of nancial claims and rules concerning
the liability of debtors, shareholders and nancial intermediaries. This
section examines dierent aspects of capital markets in the Ottoman
Empire and their evolution during the early modern era. The emphasis
will be on pragmatism and selective change. I will argue that capital
market institutions in the Ottoman Empire, especially those pertaining to
public nance, changed to a greater extent than land and labour market
institutions.
(i) Islam and interest
It has often been assumed that the prohibition of interest in Islam
prevented the development of credit or, at best, that it imposed rigid
obstacles in its way. Similarly, the apparent absence of deposit banking
and lending by banks has led many observers to conclude that nancial
institutions and instruments were, by and large, absent in Islamic societies. It is true that a religiously inspired prohibition against usurious
transactions was a powerful feature shared around the Mediterranean
during the Middle Ages, by both the Islamic world and the Christian
West.28 While the practice of riba, the Arabic term for usury and interest,
is sharply denounced in a number of passages in the Quran and in all
subsequent Islamic religious writings, already in the medieval era Islamic
law had provided several means by which the anti-usury prohibition could
be circumvented, just as the same prohibitions were circumvented in
Europe in the late medieval period. Various legal ctions, based primarily
on the model of the double-sale , were, if not enthusiastically endorsed
by jurists, at least not declared invalid. Thus, there did not exist an insurmountable barrier against the use of interest-bearing loans for commercial credit.
Neither the Islamic prohibitions against interest and usury nor the
absence of formal banking institutions prevented the expansion of credit
in Ottoman society. Utilizing the Islamic court records, the late Ronald
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Jennings has shown that dense networks of lenders and borrowers ourished in and around the Anatolian cities of Kayseri, Karaman, Amasya
and Trabzon during the sixteenth century. Over the twenty-year period
his study covered, he found literally thousands of court cases involving
debts. Many members of families and many women are registered in these
records as borrowing and lending to other members of the family as well
as to outsiders. These records leave no doubt that the use of credit was
widespread among all segments of urban and even rural society. Most
lending and borrowing was on a small scale and interest was regularly
charged on credit, in accordance with both Islamic and Ottoman law, with
the consent and approval of the court and the ulema (religious scholars).
In their dealings with the court the participants felt no need to conceal
interest or resort to tricks in order to clear legal hurdles. Annual rates of
interest ranged from 10 to 20 per cent.29
The supply of capital was fairly abundant and hence was not the
monopoly of any small group of moneylenders. The moneylenders came
as much from among the Muslim as the Christian and Jewish inhabitants
of these towns. There was little indication until the end of the seventeenth
century in either Anatolia or in Aleppo that non-Muslims had gained
control over the credit markets. A commercial or mercantile mentality
and the prot motive thus permeated all segments of the urban societies in
these areas, not just the people of the bazaars but the rural landholders,
the Ottoman military class and the ulema as well.30
One important instrument in the nance of long-distance trade was
the suftaja, a bill of exchange or letter of credit. Their basic purpose was
to expedite long-distance payments or transfer of funds. In Europe, the
bill of exchange entailed the initial payment of one type of currency
in return for the payment of another type of currency at a dierent
location. In the Geniza documents of medieval Egypt the suftajas consistently appear as involving the repayment of exactly the same type of
money to the issuing banker. They were as good as money ; the bearer
could fully expect to redeem his suftaja for cash immediately upon
arrival at his destination. The prompt payment was further assured by
the government through the imposition of sti penalties for any delays.
Suftajas were used used widely inside the Ottoman empire between
Anatolia, the Aegean islands, the Crimea, Syria, Egypt and also with
Iran. Ottoman court documents from fteenth- and sixteenth-century
Bursa, a major centre of long-distance trade, point to the high frequency
of the use of suftajas. The local judges (kadis) were actively involved in
the enforcement of the suftajas in their various forms.31 Another type of
letter of credit was the hawala, which was an assignation of a fund from
a distant source of revenue by a written order. It was used in both state
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and private transactions to avoid the dangers and delays in the transportation of cash.32
One important provider of loans in Istanbul, the Balkans and the
Anatolian urban centres were the cash vakifs (as described above in
relation to land), pious foundations established under Islamic law with
the explicit purpose of lending their cash assets and using the interest
income to full their goals. These endowments began to be approved by
the Ottoman courts in the early part of the fteenth century and had
become popular all over Anatolia and the Balkan provinces by the end of
the sixteenth.
Not surprisingly, a lively debate developed during the sixteenth century within the Ottoman ulema regarding whether the cash vakif should
be considered illegitimate. The cash vakifs were opposed by those who
believed that only goods with permanent value such as real estate should
constitute the assets of a pious foundation and that the cash vakifs contravened the Islamic prohibition of interest. The majority of the ulema,
however, remained eminently pragmatic and the view that anything
useful for the community is useful for Islam ultimately prevailed. During
the heated debate, Ebusuud Efendi, the prominent, state-appointed religious leader (seyhulislam) of the period, defended the practice from a
purely practical point of view, arguing that the abolition of interesttaking would lead to the collapse of many pious foundations, a situation
that would harm the Muslim community.33 Ottoman institutions of
credit and nance retained their Islamic lineage and remained mostly
uninuenced by developments in Europe until the end of the seventeenth
century.34
Despite this pragmatism, however, the cash vakifs faced serious shortcomings. The interest they charged was xed by the original founders and
could not respond to later changes in market conditions. More importantly, their capital was limited primarily to the original endowment and
whatever additional amount could be accumulated by ploughing back the
prots and other marginal means. Since the original capital was essentially composed of the savings of a single individual, no matter how
wealthy they were such funds were bound to remain small and the potential for growth remained limited over the long term. Moreover, the
Ottoman cash vakifs never lent to entrepreneurs ; they provided consumption credit. An interesting development that became more pronounced during the eighteenth century was the increasing allocation of
funds to the trustees of these endowments. The trustees then used the
borrowed funds to lend at higher rates of interest to large-scale moneylenders (sarraf ) at Istanbul who pooled these funds to nance larger
ventures, most importantly long-distance trade and tax farming.35
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(ii) Business partnerships

Even though there did not exist an insurmountable barrier against the use
of interest-bearing loans for commercial credit, this alternative was not
pursued in the medieval Islamic world. Instead, numerous other commercial techniques were developed that played the same role as interestbearing loans and thus made the use of loans unnecessary. These included
a variety of forms of business partnership, such as mudaraba or commenda,
credit arrangements, transfers of debt and letters of credit, all of which
were sanctioned by religious theory. Long-distance trade was thus
nanced not by simple credit relations involving interest but by a variety
of Islamic business partnerships, the specics of which depended on the
nature of the risks and the resources provided by the dierent partners.
Ottoman merchants had widely used the varieties of Islamic business
partnerships practiced in the Islamic world since the medieval era.36 The
most frequently used method in the nancing of long-distance trade and
certain other types of business ventures was the mudaraba partnership of
medieval Islam, in which an investor entrusted his capital or merchandise
to an agent who was to trade with it and then return the principal. The
prots were then shared between the principal investor and the agent
according to some predetermined scheme. Any loss of the capital resulting
from the exigencies of travel or the business venture itself was borne
exclusively by the principal investor. The liability of the agent was limited
to his time and eorts.37 To a lesser extent the Ottomans also used the
mufawada partnership of the Hane school of Islam, in which the partners
were considered equals in terms of capital, eort, returns and liabilities. In
the related musharaka (or inan) arrangement, the partners were free to
invest dierent amounts and agreed to share the returns and liabilities
at unequal but pre-arranged rates.
Evidence from Islamic court records on commercial disputes and their
resolution until the middle of the nineteenth century indicate that in
Anatolia and Istanbul, at least, the Ottoman jurists were well informed
about the teachings of medieval Muslim jurists and, in general, they
adhered closely to the classical Islamic principles in disputes arising from
these partnerships. There were some innovations over the centuries ; for
example, some interesting combinations of mudaraba and puttingout activities were developed. On the whole, however, the evidence from
hundreds of business partnerships indicates that classical Islamic partnership forms not only survived but were applied, with minor exceptions,
true to their original forms until the nineteenth century. Cizakca suggests
that the continued dominance of small-scale rms or partnerships was
probably the most important reason for the limited changes in this area.38
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Ottoman business partnerships as well as the cash vakifs thus remained

relatively small, of short duration and involving limited capital. Under
these conditions it is not surprising that European business organizations
began to dominate Ottoman overseas as well as domestic trade. The
continued dominance of small-scale rms or partnerships has been cited
as the most important reason for the limited changes in institutions of
private nance. In other words, it has been argued that demand for further changes in these institutions was not suciently strong. This line of
reasoning suggests that the causal relationship between institutions
and economic development is not one-directional : just as economic institutions inuence the degree and direction of economic development,
economic development or its absence also inuences the institutions and
their evolution.
There is another reason for the limited nature of institutional changes in
this area. The private sector, the merchants and producers were never in a
position to inuence the Ottoman state elites and to push for institutional
changes that would favour the growth of the private sector during these
centuries. In other words, because the central bureaucracy was able to
retain its leading position in Ottoman society and politics, the inuence
of various social groups not only of landowners but also of merchants,
manufacturers and moneychangers over economic matters, and more
generally over the policies of the central government, remained limited
until the end of the empire.
(iii) Institutions of state borrowing
The evolution of Ottoman scal institutions during the seventeenth
and eighteenth centuries provides a good example of the ability of the
Ottoman state to contain the challenges it faced with pragmatism, exibility and the habit of negotiation to co-opt and if necessary to incorporate into a broad alliance any social groups that challenged its
authority.
While loans to kings, princes and governments were part of the regular
business of European banking houses in the late medieval and early
modern periods, in the Islamic world advances of cash to the rulers and
the public treasury were handled dierently. In the face of the prohibition
on interest, they took the form of tax farming arrangements in which
individuals possessing liquid capital assets advanced cash to the government in return for the right to farm the taxes of a given region or scal
unit for a xed period. Tax farming thus dominated the Islamic world
from the Mediterranean to the Indian Ocean, from the earliest days and
through the early modern period.
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From the very beginning the Ottomans relied on tax farming for the
collection of urban taxes. Until late in the sixteenth century, however, the
agricultural taxes which constituted the largest part of the tax revenues
were collected locally and mostly in kind by cavalrymen within the timar
system. Until the second half of the sixteenth century, the state nances
were relatively strong, thanks to the revenues obtained through the rapid
territorial expansion of the empire, and the state did not feel the need to
increase the revenues collected at the centre. There are examples of shortterm borrowing by the state during the sixteenth century. These services
earned the nanciers, mostly Jews and Greeks, the inside track on some of
the most lucrative tax farming contracts.39
With the changes in military technology during the sixteenth century and the need to maintain larger, permanent armies at the centre,
however, pressures increased to collect a larger part of the rural surplus
at the centre. As a result, the timar system began to be abandoned in
favour of tax farming and the tax units were auctioned o at Istanbul.40
This shift aimed to increase the cash receipts at the centre, but the decline
of the state power vis-a`-vis the provinces reduced the expected benets.
Bureaucrats in the capital and provincial groups began to share taxfarming revenues with the central government during the seventeenth
century.
A further deterioration of state nances during the seventeenth century
increased the pressures on the central government to take greater advantage of the tax-farming system for the purposes of domestic borrowing.
Especially during periods of war, when the scal pressures were greatest,
the central government thus began to increase the length of the tax
farming contracts from onethree years to threeve years and even
longer. It also demanded an increasingly higher fraction of the auction
price of the contract in advance. Tax farming was thus converted into a
form of domestic borrowing with the actual tax revenues being used as
collateral by the central government.
Further steps were taken in the same direction with the introduction in
1695 of the malikane system, in which the revenue source began to be
farmed out on a lifetime basis in return for a large initial payment to be
followed by annual payments.41 One rationale often oered for this
system was that by extending the term of the contract, the state hoped that
the tax contractor would take better care of the tax source, most importantly the peasant producers, and try to achieve long-term increases in
production. In fact, the malikane allowed the state to use tax revenues as
collateral and to borrow on a longer-term basis. In comparison to the
straightforward tax farming system, it represented an important shift
towards longer-term borrowing by the state.
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With the extension of their term and the introduction of larger advance
payments, the long-term nancing of these contracts assumed an even
greater importance. The private nanciers then began to play an increasingly important role in the tax-collection process. Behind the individual often a Muslim who joined the bidding in the tax-farming
auctions, there often existed a partnership that included nanciers as well
as agents who intended to organize the tax-collection process itself, often
by dividing the large initial contract into smaller pieces and nding subcontractors. Non-Muslims were prohibited from holding most malikane
contracts but Greeks, Armenians and Jews were very much part of this
elite as nanciers, brokers and accountants. These arrangements were
mostly in the form of Islamic business partnerships involving both
Muslims and non-Muslims.42 Over the course of the eighteenth century,
some 1,000 to 2,000 Istanbul-based individuals, together with some 5,000
to 10,000 individuals in the provinces as well as innumerable contractors,
agents, nanciers, accountants and managers, controlled an important
share of the states revenues. This grand coalition of Istanbul-based elites
and the rising elites in the provinces constituted a semi-privatized but
interdependent component of the regime.43 Many provincials were able to
acquire, and pass from one generation to the next, small and mediumsized malikane shares in villages as long as they remained in favour with
local administrators or their Istanbul sponsors. For both the wellconnected individuals in the capital city and those in the provinces, getting
a piece of government tax revenues became an activity more lucrative than
investing in agriculture, trade or manufacturing.
It is signicant that these changes in the tax-collection and revenuesharing system did not alter the legal basis of landownership until the
nineteenth century. Despite the rise of provincial elites, most agricultural
lands remained miri (state) land with the peasant households holding the
usufruct while the sipahis gave way to tax farmers who were then replaced
by malikane owners. State ownership of land combined with usufruct by
the peasant household, a key institution of the classical Ottoman order,
thus remained intact until the modern era.
In the longer term, however, the malikane system did not full the
expectations of the central government. It actually led to a decline in
state revenues because of the inability of the state to regain control of the
revenue sources after the death of the individuals who had purchased
them.44 The central government thus began to experiment with other
methods fo tax collection and domestic borrowing from the 1770s onwards. Rising military expenditures and increasing scal pressures during
wartime were once again responsible for the institutional changes. After
the end of the war of 17681774, which had dramatically exposed the
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military as well as nancial weaknesses of the Ottoman system, the

nancial bureaucracy started a new and related system of long-term
domestic borrowing called esham. In this system, the annual net revenues
of a tax source were specied in nominal terms. This amount was divided
into a large number of shares which were then sold to the public for the
lifetime of the buyers. The annual revenues of the source continued to be
collected by the tax farmers. The esham generally sold for six to seven
times the annual net payments, which remained xed.45 As the linkage
between the annual government payments to esham holders and the
underlying revenues of the tax base weakened, the esham increasingly resembled the life-term annuity that was quite popular in many European
countries of the period.
One motivation for the new system was to broaden the base of state
borrowing and reach beyond the limited numbers of large nanciers who
tended to dominate the malikane auctions towards a larger pool of small
and medium-sized lenders. However, the inability of the state to control
or limit the sales of the esham between individuals and the diculties in
preventing the heirs of the deceased from continuing to receive payments
seriously limited the scal benets of this system. During the next halfcentury, the state vacillated between abolishing the esham during periods
of scal stability and expanding it when scal pressures mounted and
additional funds had to be secured, with little regard for their long-term
cost.46
In the early part of the nineteenth century, the centre, supported by the
new technologies, was able to reassert its power over the provinces. After
the central government began to undermine the power of the provincial
notables in the 1820s and 1830s, many of the malikane contracts were
pulled back to the centre and their revenues began to be collected once
again by tax farmers. The malikane or the life-term tax farming system
was phased out in the 1840s as part of a larger package of administrative
and economic reforms. With the same package of centralizing reforms the
central government also attempted to eliminate short-term tax farmers.
This last step failed, however, due to the administrative limitations of
the central government. Short-term tax farming continued until World
War I. Nonetheless, the centralization of the nineteenth century helped
raise the central governments share of the tax revenues, from about 23
per cent of the underlying economy (GDP) in the late eighteenth century
to 1012 per cent on the eve of World War I.47
The long-term evolution of Ottoman institutions of state borrowing
illustrates the states ability and willingness to reorganize as a way of
adapting to changing circumstances, albeit slowly and often with considerable time lags. The rise and the evolution of the tax farming,
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malikane and esham systems demonstrate the willingness of the central

government to come to terms with the limits of its political and administrative power by entering into a broad alliance with elites and nanciers in
the capital city as well as those in the provinces. The central bureaucracy
was forced to share the tax revenues with provincial groups and nanciers
during the seventeenth and eighteenth centuries. With the centralization
of the nineteenth century, however, the power and share in the tax revenues of these partners steadily declined while the ratio of tax revenues
reaching the central government to GDP rose above 10 per cent for the
rst time in Ottoman history.
The trajectory of the institutions provides important clues for understanding the longevity of the empire as well as the key position of the
central bureaucracy until the end. It also suggests that the Ottomans were
willing to borrow or adapt European nancial institutions before the
nineteenth century. Despite recent research on the evolution of Ottoman
forms, the causal connections between the evolution of the Ottoman
institutions of public nance as outlined here and the evolution of the
French institutions of public nance during the seventeenth century and
especially in the eighteenth have not yet been investigated. The parallels
between the two are quite striking, however. It appears that increasing
economic and nancial integration with Europe after the sixteenth century brought about more rapid changes in the institutions of public
nance than in those of private nance.48
(iv) Linkages with western European capital markets?
Recent research suggests that western European capital markets experienced a substantial degree of integration during the early modern era.
Most international capital ows during this period took the form of
lending to private and public borrowers in other countries, not direct
investment. These international ows were facilitated by the political and
institutional changes taking place in western European countries. As a
result of institutional changes and greater integration of capital markets,
there occurred from the late medieval era to the eighteenth century substantial decreases in and a large degree of convergence of the interest rates
paid by the western European governments. Nominal rates of interest
declined from a range of 1020 per cent per annum in the fourteenth
century to 510 per cent in the seventeenth and to less than 5 per cent in
the eighteenth century.49
The Ottoman Empire remained outside the European capital markets
network until the second half of the nineteenth century, however. While
the Ottoman government did not consider external borrowing until late
131
in the eighteenth century, it is not clear how much interest there would
have been in western European capital markets in lending to the Ottoman
government. In part because it remained outside the western European
capital markets network, interest rates in the Ottoman Empire remained
signicantly higher than those prevailing in western Europe during the
seventeenth and eighteenth centuries. Since the Ottoman government
used the tax-collection process for most of its borrowing, as discussed
above, it is not easy to identify the rate of interest paid by the state.
Nonetheless, one may calculate the implicit rate of interest on the basis of
some of the esham auctions in the second half of the eighteenth century.
These calculations suggest that, until the middle of the nineteenth century,
the interest rates at which the state could borrow remained in the 1215
per cent range and rose to 1520 per cent and even higher during periods
of distress such as wars or monetary instability.50 It appears that the
Ottoman governments inability or unwillingness to commit credibly to
repayment put limits to the amounts they could borrow in the domestic
markets. While the successful European pattern of public borrowing
during wartime was followed by budget surpluses and paying back in
peacetime, the Ottomans resorted to debasements whenever borrowing
could not meet the states nancial needs.
V I I. C O N C L U S I O N
Institutional economics proposes a number of causes or determinants

of institutions. Most important amongst them have been geography or
resource endowments, religion or culture and social structure or political
economy. There is no doubt that Ottoman institutions have been inuenced by geography and resource endowments, as the examples above
have suggested. With the exception of Egypt, however, the geography or
resource endowments of the areas covered by the Ottoman Empire were
not very dierent from those of other countries with a temperate climate.
For this reason, geography or resource endowments should not be considered as primary determinants of Ottoman economic institutions. I have
also shown that Ottoman capital markets institutions have been inuenced, to some extent, by Islam. I have emphasized, however, the exibility of these institutions and the willingness of both the society and the
state to circumvent Islamic rules in many cases. I have then argued that
the most powerful determinants of Ottoman economic institutions and
their evolution in the early modern era need to be searched for not in
Islam but in the social structure and political economy.
Because the state elites were able to retain the leading position in
Ottoman society and politics, institutional change did not apply equally
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to all areas of economic life. Merchants and producers were never in a

position to inuence the state elites and to push for the institutional
changes that would favour the growth of the private sector. As a result,
the extent of changes in Ottoman factor markets during the early modern
era varied considerably. Many of the key institutions of the Ottoman
order, including the state ownership of land and the role of the urban
guilds, remained intact until the nineteenth century. In contrast, the institutions related to state borrowing changed signicantly This dierence
in the political power and the capacity to inuence economic institutions
of dierent groups explains better than geography or resource endowments, Islam or culture the striking divergence in the trajectory of the
institutions of public nance on the one hand and of private nance and
land and labour markets, on the other.
ACKNOWLEDGEMENTS
The author would like to thank Tine de Moor, Bas van Bavel and Jan Luiten van Zanden for
organizing the Utrecht conference on factor markets, as well as the participants in the conference, and also the anonymous referees of this journal for useful comments on an earlier
draft.
ENDNOTES
1 For a recent argument, see S

evket Pamuk, Institutional change and the longevity
of the Ottoman Empire, 15001800, Journal of Interdisciplinary History 35 (2004),
22547.
2 Timur Kuran, The Islamic commercial crisis: institutional roots of economic underdevelopment in the Middle East, The Journal of Economic History 63 (2003), 41749,
and Why the Middle East is economically underdeveloped: historical mechanisms of
institutional stagnation, Journal of Economic Perspectives 18 (2004), 7190.
3 See Douglass C. North, Institutions, institutional change and economic performance
(Cambridge University Press, 1990), and, more recently, Daron Acemoglu, Simon
Johnson and James Robinson, Institutions as the fundamental cause of long-run
growth, in Philippe Aghion and Steve Durlauf eds., Handbook of economic growth
(Amsterdam and London, 2005), 385471; also Elhenan Helpman, The mystery of
economic growth (Cambridge MA, 2004), and Dani Rodrik, Arvind Subramanian and
Francesco Trebbi, Institutions rule: the primacy of institutions over geography and
integration in economic development , The Journal of Economic Growth 9, 2 (2004),
13166.
4 Daron Acemoglu, Simon Johnson and James Robinson, The rise of Europe: Atlantic
trade, institutional change and economic growth, American Economic Review 95
(2005), 54679.
5 One should add the qualication that for most societies in the late medieval and early
modern periods, it is dicult to talk about an economic sphere separate from
the political, administrative and scal; see Edward Miller, France and England, in
M. M. Postan, E. E. Rich and E. Miller eds., The economic policies of governments,
The Cambridge economic history of Europe, vol. 3 (Cambridge, 1963), 28291.
133
6 Huri I_ slamoglu and Caglar Keyder, Agenda for Ottoman history, Review, a Journal of
the Fernand Braudel Center 1 (1977), 3155.
7 Carlo Cipolla has argued that there was virtual identity between the merchants and the
state in the trading towns of medieval Italy: More than once the action of the guild of
merchants seemed to imply the armation, letat cest moi (Carlo M. Cipolla,
Currency depreciation in medieval Europe, Economic History Review 15 (1963), 397).
Ottoman merchants during the early modern era could not possibly make a similar
claim. Instead, as Udovitch has concluded for the merchants of eleventh-century Egypt,
Ottoman merchants could at best proclaim letat nest pas contre moi (A. L. Udovitch,
Merchants and amirs: government and trade in eleventh century Egypt, Asian and
African Studies 22 (1988), 5372).
8 Mehmet Genc, Osmanl iktisadi dunya gorusunun ilkeleri, I_stanbul Universitesi
Edebiyat Fakultesi Sosyoloji Dergisi 3, 1 (1989), 17585; Halil Inalcik, The Ottoman
state: economy and society, 13001600, in H. Inalcik and D. Quataert eds., An economic and social history of the Ottoman Empire, 13001914 (Cambridge, 1994), 4454.
9 Inalcik, The Ottoman state: economy and society, 4852 and 179379; see also
Palmira Brummett, Ottoman seapower and Levantine diplomacy in the age of discovery
(Albany, 1994), 13174.
10 See Miller, France and England, 290340, and C. M. Cipolla, The economic policies
of governments: the Italian and Iberian peninsulas, in Postan, Rich and Miller eds.,
The Cambridge economic history of Europe, vol. 3, 397429.
11 The Ottomans were not unaware of mercantilist thought and practice. Earlyeighteenth-century historian Naima, for example, defended mercantilist ideas and
practices and argued that if the Islamic population purchased local products instead of
imports, coinage would stay in Ottoman lands; see Naima, Tarih-i Naima, ed. Zuhuri
Dansman (Istanbul, 1968), vol. 4, 18267, and vol. 6, 25205.
12 Gad Gilbar, The Muslim big merchants-entrepreneurs of the Middle East, 1860
1914, Die Welt des Islams 43, 1 (2003), 136.
13 J. Wansbrough and H. Inalcik, Imtiyazat, Encyclopedia of Islam (2nd edn, 1973).
14 See Genc, Osmanl iktisadi dunya gorusu .
15 Sabri F. Ulgener, I_ slam Hukuk ve Ahlak Kaynaklarnda I_ ktisat Siyaseti Meseleleri,
Ebulula Mardine Armagan, Kenan Matbaas (Istanbul, 1944), 115189; Mubahat
S. Kutukoglu, Osmanllarda Narh Muessesesi ve 1640 Tarihli Narh Defteri (Istanbul,
1983), 338. For the texts of late-fteenth and early-sixteenth-century laws regulating
the markets in large Ottoman cities, see Omer Lut Barkan, Baz buyuk sehirlerde esya
ve yiyecek yatlarnn tesbit ve teftisi hususlarn tanzim eden kanunlar, Tarih
Vesikalar 1, 5 (1942), 32640; 2, 7 (1943), 1540; and 2, 9 (1943), 16877.
16 Narh lists were issued most frequently during the periods 15851640 and 17851840,
times of monetary and price instability; see S
evket Pamuk, Prices in the Ottoman
Empire, 14691914, International Journal of Middle East Studies 36 (2004), 45168.
Otherwise there were long stretches, often decades, when no narh lists were issued in the
city of Istanbul.
17 Istanbul was a giant, consuming city dependant on its vast hinterland. The classic work
on the economy of the capital city and the nature of state intervention in that economy
remains Robert Mantran, Istanbul dans la seconde moitie du XVIIe sie`cle (Paris, 1962),
chapitre II, 23386; see also Inalcik, The Ottoman state: economy and society,
17987.
18 See, for example, Halil Inalcik, Bursa and the commerce of the Levant, Journal of the
Economic and Social History of the Levant 3 (1960), 13147, B. Masters, The origins of
western economic dominance in the Middle East : mercantilism and the Islamic economy in
134
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
15001800
Aleppo, 16001750 (New York, 1988), and Daniel Goman, Izmir and the Levantine
world, 15501650 (Seattle, 1990).
S
. Pamuk, A monetary history of the Ottoman Empire (Cambridge, 2000), 6676,
88111.
Omer Lut Barkan, H. 933934 (M. 15271528) mali yilina ait bir butce ornegi,
Istanbul Universitesi Iktisat Fakultesi Mecmuasi 14 (19531954), 251329.
Inalcik, The Ottoman state: economy and society, 10379.
For Ottoman pragmatism and exibility in the administration of the frontier provinces,
see Gabor Agoston, A exible empire: authority and its limits on the Ottoman frontiers, International Journal of Turkish Studies 9 (2003), 1531.
Caglar Keyder and Faruk Tabak eds., Landholding and commercial agriculture in the
Middle East (Albany, 1991).
Stanford J. Shaw, The nancial and administrative development of Ottoman Egypt,
15171798 (Princeton, 1962); Kenneth Cuno, The pashas peasants: land, society and
economy in lower Egypt, 17401858 (Cambridge, 1992).
Compare Troian Stoianovich, Land tenure and related sectors of the Balkan economy,
16001800, The Journal of Economic History 13 (1953), 398411, with Keyder and
Tabak eds., Landholding and commercial agriculture.
Suraiya Faroqhi, Towns and townsmen of Ottoman Anatolia: trade, crafts and food
production in an urban setting, 15201650 (Cambridge, 1984).
Suraiya Faroqhi, The eldglass and the magnifying lens: studies of Ottoman crafts and
craftsmen, Journal of European Economic History 20 (1991), 2957; Onur Yildirim,
The transformation of the craft guilds in Istanbul during the seventeenth and eighteenth centuries, 16501826, Revue des Etudes Sud-est Europeennes 38 (19992000),
91109.
For a recent discussion of the classical Islamic views on interest, see N. A. Saleh,
Unlawful gain and legitimate prot in Islamic law : riba, gharar and Islamic banking
(Cambridge, 1988), 932.
R. C. Jennings, Loans and credit in early 17th century Ottoman judicial records,
Journal of the Economic and Social History of the Orient 16 (1973), 168216.
Masters, The origins of western economic dominance, 14685, and A. Cohen, Economic
life in Ottoman Jerusalem (Cambridge, 1989).
A. L. Udovitch, Partnership and prot (Princeton, 1970), 2689; Eliyahu Ashtor,
Banking instruments between the Muslim East and the Christian West, Journal of
European Economic History 1 (1972), 55462, and H. Sahillioglu, Bursa kad sicillerinde ic ve ds odemeler arac olarak Kitabul-Kad ve Sufteceler, in O. Okyar and
H. U. Nalbandoglu eds., Turkiye iktisat tarihi semineri (Ankara, 1975), 10344.
Inalcik emphasizes the use of hawala in state transactions; see H. Inalcik, Hawale,
Encyclopedia of Islam (2nd edn).
J. E. Mandaville, Usurious piety: the cash waqf controversy in the Ottoman Empire,
International Journal of Middle East Studies 10 (1979), 289308.
See M. Cizakca, A comparative evolution of business partnerships: the Islamic world and
Europe with specic reference to the Ottoman archives (Leiden, 1996).
Cizakca, A comparative evolution, 1314.
Udovitch, Partnership and prot, 170217, and Cizakca, A comparative evolution,
6676.
In essence, this was identical to the commenda of Europe. For discussions of the Islamic
origins of European commenda, see A. L. Udovitch, At the origins of the Western
commenda: Islam, Israel, Byzantium, Speculum 37 (1962), 198207, and E. Ashtor,
Banking instruments between the Muslim east and the Christian west, Journal of
135
38
39
40
41
42
43
44
45
46
47
48
49
50
European Economic History 1 (1972), 55373, and Cizakca, A comparative evolution,

1032.
Cizakca, A comparative evolution, 6585 and 12631; see also M. Cizakca, Financing
silk trade in the Ottoman Empire: 16th18th centuries, in S. Cavaciocchi ed., La seta in
Europa secc. XIIIXX (Prato, 1993), 71123.
Inalcik, The Ottoman state: economy and society, 21214.
Linda T. Darling, Revenue-raising and legitimacy, tax collection and nance administration in the Ottoman Empire, 15601660 (Leiden, 1996); H. I_ nalck, Military and
scal transformation in the Ottoman Empire, 16001700, Archivum Ottomanicum 6
(1980), 283337.
M. Genc, A study of the feasibility of using eighteenth century Ottoman nancial
records as an indicator of economic activity, in Huri I_ slamoglu-I_ nan ed., The Ottoman
Empire and the world economy (Cambridge, 1987), 34573.
Cizakca, A comparative evolution.
Ariel Salzman, An ancien regime revisited: privatization and political economy in
the eighteenth-century Ottoman Empire, Politics and Society 21 (1993), 393423.
Genc, A study of the feasibility.
Yavuz Cezar, Osmanl maliyesinde bunalm ve degisim donemi: XVIII. yy.dan tanzimata
mali tarih (Istanbul, 1986), 813; see also M. Genc, Esham, I_slam Ansiklopedisi 11
(1995), 37680.
Cezar, Osmanl maliyesinde bunalm, 12834, 198200.
My estimates are based on central government budget documents and estimates of
per capita income in the Ottoman Empire; for the latter, see S
. Pamuk, Estimating
economic growth in the Middle East since 1820, The Journal of Economic History 66
(2006), 80928.
G. Parker, The emergence of modern nance in Europe, 15001730, in C. M. Cipolla
ed., The Fontana economic history of Europe, vol. 2 (London, 1974), 56082. For the
case of France, the country most likely to have inuenced the changes in Ottoman
institutions of public nance during the eighteenth century, see Eugene N. White,
France and the failure to modernize macroeconomic institutions, in Michael D. Bordo
and Roberto Cortes-Conde eds., Transferring wealth and power from the old to the
new world: monetary and scal institutions in the 17th through the 19th Centuries
(Cambridge, 2001), 5999.
S. R. Epstein, Freedom and growth: the rise of states and markets in Europe, 13001750
(London and New York, 2000), 1629.
My calculations as presented in Pamuk, A monetary history of the Ottoman Empire,
1912.
136
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Continuity and Change 24 (1), 2009, 107136.

f Cambridge University Press 2009

Changes in factor markets

The most important determinant of Ottoman economic institutions and

The Ottoman Empire stood at the crossroads of intercontinental trade,

considerable degree of exibility and pragmatism while expanding the

conict or political economy. Ottoman economic institutions, including

of power often shifting between the two. The successful centralization

This emphasis on provisioning necessitated an important distinction

Economic historians of the Ottoman Empire have long emphasized that

purpose. Control of the board of trustees over these lands usually

overlap between guild membership and the janissaries, the permanent

(ii) Business partnerships

Ottoman business partnerships as well as the cash vakifs thus remained

military as well as nancial weaknesses of the Ottoman system, the

malikane and esham systems demonstrate the willingness of the central

Institutional economics proposes a number of causes or determinants

to all areas of economic life. Merchants and producers were never in a

1 For a recent argument, see S

European Economic History 1 (1972), 55373, and Cizakca, A comparative evolution,

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