=== Economic policy ===

Itzkowitz and İnalcik state Ottoman writers attributed the Empire’s troubles to the dissolution of the circle of equity, erosion of the [[sultan]]’s authority, disruption of the [[Timar|timar system]] and the demise of the [[devşirme]], "describing symptoms rather than causes".<ref>[[#Itzkowitz|Itzkowitz (1980)]],p. 94</ref><ref>[[#Inalcik|İnalcik (1994)]], pp. 22–24.</ref> They argue causes consisted of geographical and logistical limitations, population growth after the 16th century, inflation due to influx of Peruvian silver and the end of profitable conquests.<ref>[[#Itzkowitz|Itzkowitz (1980)]], pp. 93–99.</ref> Itzkowitz states, "the state could find no remedy" to these problems, and İnalcik, "As a result of these upheavals, the Ottoman Empire of the seventeenth century was no longer the vital empire it had been in the sixteenth"<ref>[[#Inalcik|İnalcik (1994)]], p. 25.</ref> – however neither show the issues remained a long-term problem. Berkes was one of the first writers in the 1960s to summarise the works on Ottoman [[socio-economic]] history.<ref>Berkes, N, 100 Soruda Turkiye Iktisat Tarihi, vol. 1: Osmanli Ekonomik Tarihinin Temelleri, vol. 2 Istanbul: Gercek Yayinevi, cited by [[#Faroqhi99|Faroqhi (1999)]], p. 189.</ref> He suggested one of the reasons for Ottoman economic decline was the inability of the [[ruling class]] to make a clear choice between war and the more conventional types of capital formation.<ref>[[#Berkes64|Berkes (1964)]] pp. 23–29</ref><ref>[[#Faroqhi99|Faroqhi (1999)]], p. 188–189.</ref> Berkes' work however focused on the confrontation of the Ottomans and the Europeans, and though important, had little detail on the commercial activities of the state.

==== War Economy ====

The Ottomans saw military expansion and [[fiscalism]] as the primary source of wealth, with [[agriculture]] seen as more important than [[manufacturing|manufacture]] and [[commerce]]. Berkes described the Ottoman economy as a "war economy" where its primary profits consisted of booty from expansion. This idea has been supported by Ottomanists Halil İnalcik and Suraiya Faroqhi. [[Western world|Western]] [[mercantilists]] gave more emphasis to manufacture and [[industry]] in the wealth-power-wealth equation, moving towards [[capitalism|capitalist]] economics comprising expanding industries and [[market economy|markets]] whereas the Ottomans continued along the trajectory of [[expansionism|territorial expansion]]<nowiki/> and agriculture. In contrast, neither the Marxian Asiatic mode of taxation, nor the feudal mode found in mediaeval Europe reflects the Ottoman mode accurately, as it falls somewhere in between the two — excess peasant production was taxed by the state as opposed to it being paid in rent to feudal lords;<ref>[[#Faroqhi99|Faroqhi (1999)]], pp. 189–191.</ref>

==== Agriculture ====

Under the late 18th century fine [[textile]]s, hand-made [[yarns]] and [[leather]]s were in high demand outside the empire. However, these declined by the early 19th century and half a century later production for export re-emerged in the form of raw silk and oriental carpets. The two industries alone employed 100,000 persons in 1914 two-thirds in carpet-making for European and American buyers. Most workers were women and girls, receiving wages that were amongst the lowest in the manufacturing sector. Much of the manufacturing shifted to the urban areas during the 18th century, in order to benefit from the lower rural costs and wages.<ref>[[#Quataert00|Quataert (2000)]], p. 133.</ref>

Guilds operating prior to the 18th century did see a decline through the 18th and 19th centuries. Guilds provided some form of security in prices, restricting production and controlling quality and provided support to members who hit hard times. However, with market forces driving down prices their importance declined, and with the Janissaries as their backers, being disbanded by [[Mahmut II]] in 1826, their fate was sealed.<ref>[[#Reeves|Reeves-Ellington]]; [[#Quataert00|Quataert (2000)]], pp. 132–137.</ref>

==== Manufacturing ====

Over the 19th century, a shift occurred to rural female labor with [[guild]] organized urban-based male labor less important. The global markets for Ottoman goods fell somewhat with certain sectors expanding. However, any changes were compensated by an increase in domestic consumption and demand.<ref>[[#Quataert00|Quataert (2000)]], p. 132.</ref> Mechanized production even at its peak remained an insignificant portion of total output. The lack of capital, as in other areas of the economy, deterred the mechanization of production. Nonetheless, a number of factories did emerge in Istanbul, Ottoman Europe and Anatolia. In the 1830s steam powered silk reeling factories emerged in [[Salonica]], [[Edirne]], West Anatolia and [[Lebanon]].<ref>[[#Quataert00|Quataert (2000)]], pp. 132–137; [[#Frangakis|Frangakis-Syrett (1994)]], p. 116.</ref>

Manufacturing through the period 1600-1914 witnessed remarkable continuities in the loci of manufacturing; industrial centers flourishing in the 17th century were often still active in 1914.<ref>[[#Inalcik|İnalcik (1994)]], p. 5.</ref> Manufacturing initially struggled against Asian and then European competition in the 18th and 19th centuries whereby handicraft industries were displaced by cheaper industrially produced imports. Quataert’s study of the Istanbul port workers and their struggle over two decades against the European companies with indirect support from the state highlights the difference between colonial administrators elsewhere and the Ottoman government. However, manufacturing achieved surprising output levels, with the decline of some industries being more than compensated by the rise of new industries.<ref>[[#Quataert00|Quataert (2000)]], p. 110.</ref> Decline of handicrafts production saw a shift of output move to agricultural commodity production and other manufacturing output.<ref>For instance, silk reel production from the Levant emerged in the nineteenth century, as did the production of raw silks and carpets; [[#Pamuk87|Pamuk (1987)]], p. 8.</ref>

=== Trade ===

Domestic trade vastly exceeded international trade in both value and volume though researchers have little in direct measurements.<ref name=autogenerated1>[[#Quataert00|Quataert (2000)]], pp. 126–127.</ref> Much of Ottoman history has been based on European archives that did not document the empire’s internal trade, resulting in it being underestimated.<ref>[[#Faroqhi99|Faroqhi (1999)]], p. 142.</ref>

Quataert illustrates the size of internal trade by considering some examples. The French Ambassador in 1759 commented that total textile imports into the empire would clothe a maximum of 800,000 of a population of at least 20 million. In 1914 less than a quarter of agricultural produce was being exported the rest being consumed internally.<ref>[[#Quataert00|Quataert (2000)]], p. 126; [[#Pamuk84|Pamuk (1984)]], p. 109.</ref> The early 17th century saw trade in Ottoman-made goods in the Damascus province exceeded five times the value of all foreign-made goods sold there. Finally, amongst the sparse internal trade data are some 1890s statistics for three non-leading cities. Their sum value of their interregional trade in the 1890s equaled around 5% of total Ottoman international export trade at the time. Given their minor status, cities like Istanbul, Edirne, Salonica, Damascus, Beirut or Aleppo being far greater than all three, this is impressively high. These major trade centres, dozens of medium-sized towns, hundreds of small towns and thousands of villages remains uncounted – it puts into perspective the size of domestic trade.<ref name=autogenerated1 />

Two factors that had major impact on both internal and international trade were [[war]]s and government policies. Wars had major impact on commerce especially where there were territorial losses that would rip apart Ottoman economic unity, often destroying relationships and patterns that had endured centuries. The role of government policy is more hotly debated – however most policy-promoted barriers to Ottoman international and internal commerce disappeared or were reduced sharply.<ref>[[#Quataert00|Quataert (2000)]], pp. 124–125.</ref> However, there appears little to indicate a significant decline in internal trade other than disruption caused by war and ad-hoc territorial losses.

=== Finance ===

Ottoman [[bureaucracy|bureaucratic]] and military expenditure was raised by taxation, generally from the agrarian population.<ref>[[#Quataert00|Quataert (2000)]], p. 71.</ref> Pamuk notes considerable variation in monetary policy and practice in different parts of the empire. Although there was monetary regulation, enforcement was often lax and little effort was made to control the activities of merchants, moneychangers, and financiers. Under Islamic law usury was prohibited, Pamuk quotes a number of stratagems that were used, notably double-sale agreements:<ref>[[#Wilson|Wilson (2003)]], p. 384;</ref> During the "price revolution" of the 16th century, when inflation took off, there were price increases of around 500% from the end of the 15th century to the close of the 17th.<ref>Pamuk argues the Turkish economic historian Omer Barkan is incorrect in attributing price rises to imported inflation rather the cause being the velocity of circulation of money drove prices up, as well as increasing commercialization with the growing use of money as a medium of exchange; [[#Pamuk01|Pamuk (2001)]], pp. 73–85; [[#Wilson|Wilson (2003)]], p. 384.</ref> However, the problem of inflation did not remain and the 18th century did not witness the problem again.

Though this analysis may apply to some provinces, like Hungary, recent scholarship has found that most of the financing was through provinces closer to the centre.<ref>Finkel, C, The Administration of Warfare: The Ottoman Military Campaigns in Hungary 1593-1606, Vol I, Vienna, VWGO, 1988, p. 308, cited by [[#Faroqhi99|Faroqhi (1999)]], p. 180.</ref> As the empire modernized itself in line with European powers, the role of the central state grew and diversified. In the past, it had contented itself with raising tax revenues and war making. It increasingly began to address education, health and public works, activities that used to be organised by religious leaders in the communities – this can be argued as being necessary in a rapidly changing world and was a necessary Ottoman response. At the end of the 18th century, there were around 2,000 civil officials ballooning to 35,000 in 1908.<ref>[[#Quataert00|Quataert (2000)]], p. 62.</ref> The Ottoman military increasingly adopted western military technologies and methods, increasing army personnel from 120,000 in 1837 to over 120,000 in the 1880s.<ref name="Quataert 2000 p. 63">[[#Quataert00|Quataert (2000)]], p. 63.</ref> Other innovations were increasingly being adopted, including the telegraph, railroads and photography, and utilised against old mediators who were increasingly marginalised. These were diverse groups such as the Janissaries, guilds, tribes, religious authorities and provincial notables.<ref name="Quataert 2000 p. 63"/>

Up to 1850, the Ottoman Empire was the only empire to have never contracted foreign debt and its financial situation was generally sound.<ref>[[#Quataert00|Quataert (2000)]], p. 341; [[#Pamuk84|Pamuk (1984)]], p. 110.</ref> As the 19th century increased the state’s financial needs, it knew it could not raise the revenues from taxation or domestic borrowings, so resorted to massive debasement and then issued paper money.<ref>[[#Clay01|Clay (2001)]], p. 204; [[#Pamuk01|Pamuk (2001)]]</ref> It had considered European debt, which had surplus funds available for overseas investment, but avoided it aware of the associated dangers of European control.<ref>[[#Clay01|Clay (2001)]], p. 71;</ref><ref name="Raccagni 1980 p. 343">[[#Raccagni|Raccagni (1980)]], p. 343;</ref> However, the Crimean war of 1853-1856 resulted in the necessity of such debt. Between 1854 and 1881, the Ottoman Empire went through a critical phase of the history. Beginning with the first foreign loan in 1854, this process involved sporadic attempts by western powers to impose some control. From 1863 a second and more intense phase began leading to a snowballing effect of accumulated debts. In 1875, with external debt at 242 million Turkish pounds, over half the budgetary expenditures going toward its service, the Ottoman government facing a number of economic crises declared its inability to make repayments. The fall in tax revenues due to bad harvests and increased expenditure made worse by the costs of suppressing the uprisings in the Balkans hastened the slide into bankruptcy. After negotiations with the European powers, the Public Debt Administration was set up, to which certain revenues were assigned. This arrangement subjected the Ottomans to foreign financial control from which they failed to free themselves, in part because of continued borrowing. In 1914, the Ottoman debt stood at 139.1 million Turkish pounds, and the government was still dependent on European financiers

<ref>[[#Clay94|Clay (1994)]], p. 589;</ref>

<ref>[[#Pamuk87|Pamuk (1987)]], p. 57.</ref>

Why had the Ottomans not developed their own financial system in line with London and Paris? It was not for the want of trying. Since the beginning of the 18th century, the government was aware of the need for a reliable bank. The Galata bankers, mostly [[Greeks]] or [[Armenians]], as well as the Bank of Constantinople did not have the capital or competence for such large undertakings.<ref name="Raccagni 1980 p. 343"/><ref>[[#Clay94|Clay (1994)]], pp. 589–590.</ref> Borrowing spanned two distinct periods, 1854-1876. The first is the most important resulted in defaults in 1875. Borrowings were normally at 4% to 5% of the nominal value of the bond, new issues however being sold at prices well below these values netted of commissions involved in the issue, resulting in a much higher effective borrowing rate – coupled with a deteriorating financial situation, the borrowing rate rarely went below 10% after 1860.<ref>[[#Pamuk87|Pamuk (1987)]], p. 59.</ref>

European involvement began with the creation of the Public Debt Administration, after which a relatively peaceful period meant no wartime expenditures and the budget could be balanced with lower levels of external borrowing. The semi-autonomous Egyptian province also ran up huge debts in the late 19th century resulting in foreign military intervention. With security from the Debt Administration further European capital entered the empire in railroad, port and public utility projects, increasing foreign capital control of the Ottoman economy.<ref>[[#Pamuk87|Pamuk (1987)]], p. 130–131.</ref>

European economic history concentrated on trade around the Mediterranean, the Americas, India and South East Asia, ignoring the empire in between that was the centre of the known world throughout this period.<ref>Lewis, B, "Some Reflections on the Decline of the Ottoman Empire", Studia Islamica, No. 9, 1958, pp. 111-27; "The Ottoman Empire stood at the crossroads of intercontinental trade... from the early sixteenth century up to World War I. At its peak in the seventeenth and eighteenth centuries, its population exceeded 30 million. One might have expected that the economic institutions that sustained this large, multiethnic entity for so long would be of interest to economic historians. Unfortunately, mainstream economic historians have long neglected the land regime, manufactures, economic policies, and the daily existence of ordinary men and women. As a result, the longevity of the Ottoman Empire remains an anomaly and even a mystery for many." – [[#Özmucur|Özmucur & Pamuk (2005)]], p. 295.</ref>

The complexity and multi-faceted nature of the Ottoman economy does not lend itself to the analyses that have been provided to date. Faroqhi cites earlier scholars (Gibbs and Bowen) who realised with the commencement of archival studies, details as well as major generalisations would need to be modified or even totally discarded.<ref>[[#Faroqhi99|Faroqhi (1999)]], p. 177.</ref> She cites errors present in secondary literature passed over by generations, Some errors may be just amusing, such as the story that the heads of the Ottoman religious-cum-legal hierarchy, the seyhulislams, if executed, were ground to death in a gigantic mortar and pestle... Others are more serious and have much hampered research, such as the inclination to explain anything and everything by Ottoman decline.<ref>[[#Faroqhi99|Faroqhi (1999)]], p. 29.</ref> Jonathan Grant questioned an inexorable decline thesis by considering military technology, showing the Ottomans could reproduce the latest military technology (however it is disputed whether the help of foreign expertise was necessary or not from the 15th century onwards Kenneth Chase (2003)) maintaining this relative position through two technology diffusions until the 19th century. They failed to keep pace with technology from the industrial revolution becoming dependant on imported weapons.<ref>Grant, J, 1990, pp.179-202; cited also by Alam, 2002, op cit, p. 11; Alam, M S, op cit, pp. 64-8</ref> İslamoğlu-İnan in her work on the peasants of Corum and Sivas takes an alternative view arguing an increase in population increased economic growth, cultivating more market-oriented crops as their numbers increased, rather than stunting it.<ref>[[#Faroqhi99|Faroqhi (1999)]], pp. 104–106.</ref> McCloskey argued that an increase in population should increase the volume of transactions and economic activity and lead to a decline in prices.<ref>[[#Pamuk01|Pamuk (2001)]], pp. 71–72.</ref> (Comparatively, historians argue one of the factors of Britain’s industrial revolution was a population increase growing from 7.5 million to 18 million in the late 18th century.)<ref>[[#Brown|Brown (2000)]], pp. 116–117.</ref> Pamuk however highlights Morineau’s recent research with specie flows into Europe continuing to increase during the 17th century even after prices declined, casting doubts on the causality of inflation by bullion inflows.<ref>[[#Pamuk87|Pamuk (1987)]], p. 1; [[#Pamuk01|Pamuk (2001)]]</ref>