Fadıl Necmi; The Sublime Ottoman State: A History of the Ottoman Empire: Istanbul University Press
The Economy of the Early Hamidian Empire
Whilst Abdülhamid’s regime began to amass more power in the hands of the Porte, this era saw a loosening of control when it came to the finances of the empire. Here, however, there was considerably less room for maneuver, as the empire’s finances had already been shattered by the default of 1875 and the costs of the subsequent Russo-Turkish War of 1877. The war had been a victory and had gone some way toward restoring the confidence in the Ottoman government that several years of revolts and financial disasters had worn away. It appears originally Abdülhamid hoped to reform the finances of the empire on his own terms, negotiating more favorable repayment terms on existing loans or perhaps refinancing the existing debt with loans on a more favorable basis. Especially after the victory of the liberals in Britain in 1880, this appeared to be a remote prospect, and it became increasingly clear to the Porte that the only option available to them would be for some arrangement that would provide better security for European debt held within the empire.
In 1881 Abdülhamid finally acquiesced and issued the
Decree of Muharram, which announced the creation of a private company designed to provide a secure means of repayment for the foreign debt incurred by the Ottoman Empire. Several key revenues within the empire, including but not limited to the tobacco and salt monopolies, taxes on stamps and spirits, tributes from various autonomous areas of the empire, and even the indemnity which the empire had secured from Russia would go not to the Porte but would go directly to the OPDA, or Ottoman Public Debt Administration. This organization has been the subject of no small debate, not only from those opposed to Abdülhamid’s reign but from historians who have long argued over what precisely this meant for the sovereignty of the Ottoman Empire. An important distinction to note was that the OPDA was a private company, not one that was answerable to the governments of those powers from which holders of the debt came. And indeed, the effects on the empire’s economy were sometimes positive. Each of the loans contracted during Abdülhamid’s reign were done so at a lower rate of interest than had been the case from 1855-1875. Abdülhamid’s loans also tended to be more focused on economic development and public works projects than those of his predecessors which had been taken for military funding and palace-building.
However much of the criticism from both nationalists and from subsequent historians remains true. The OPDA ensured that a significant portion of the economic surplus of the empire went to more developed countries rather than being re-invested within the empire, which remained perennially short of capital. During its existence, it controlled between one-fifth to one-third of the government’s revenue, absorbing much of the growth in revenues that occurred during the Hamidian period. A recent study of the Egyptian tobacco industry shed new light on the impact of the
Régie, the company that maintained the hated tobacco monopoly for the OPDA, on the establishment of the Egyptian tobacco industry, which saw its first cigarette factories established by businessmen who fled the control of the
Régie within the Ottoman Empire itself. The existence of the OPDA also opened Abdülhamid to criticism from liberal and nationalist opponents. It remains hard to ascertain the overall impact that the OPDA had on the Ottoman economy, and whether it was truly crucial in securing what foreign investment the empire was able to attract during this period.
During this period, the wider economy seems to have done well, if not spectacularly. Many of the positive economic trends of the Tanzimat continued into the Hamidian period, and indeed the pace of change increased. The amount of land under cultivation continued to increase, caused both by population growth as well as the settling of previously nomadic peoples both within the Arab provinces of the empire as well as Eastern Anatolia. The spread of railways opened interior areas of the empire and stimulated agricultural production for the market, going some way toward creating a truly national market. It proved to be an important contributor to development in a country where much of the population remained employed as subsistence farmers. While the production of cereal crops increased considerably, this was less marked than the production of cash crops, which saw more significant expansions in the Hamidian era. From 1880 to 1918 the production of cotton increased fourfold, and that of sugar as much as fivefold. For those resources key to modern industry, growth looked even more staggering. Coal production rose thirtyfold from 1875 to 1918, as the Ereğli Coal Basin was developed, and the beginnings of a steel industry were established.
Ottoman coal miners in the Zonguldak coal mine
Despite these impressive-sounding numbers, it was in these modern areas of the economy that the backwardness of the Ottomans was most profoundly demonstrated. The thirtyfold increase in coal production in absolute numbers only meant an increase from 100,000 tons annually to 3 million, which compared poorly to a total world production in 1912 of 1.3 billion tons, and was far lower than any European Great Power except Italy [1]. Much of the railway building undertaken during the Hamidian building was built with foreign steel, foreign capital, and foreign expertise, and this only started changing toward the end of Abdülhamid’s reign. This illustrated a key deficiency in both industrial production and technical education within the empire. The level of mechanization in manufacturing remained meager, even in industries such as textiles where mechanization was relatively easy. In the age of the second industrial revolution, where crucial industries such as chemicals and electronics joined those established industries such as textiles and steel, the Ottoman economy remained woefully backward, lacking the capital to propel itself into the first industrial revolution, let alone the second. With the kind of human resources available to the Ottoman Empire, this industrial backwardness does not seem surprising. In 1912 the literacy rate of the Empire was still only 26%, far lower than that of any European power save Russia.
It would be a mistake to judge the Ottoman economy solely on its industrial backwardness, however. Contrary to popular belief, the manufacturing sector of the Ottoman Empire did not decline, though it did not see any great growth either. Although most Ottoman subjects continued to work in the agricultural sector, the industrial sector did see some growth. Local industries such as soap production in areas of Syria or textiles in the Çukurova plain continued to thrive, and the Ottoman Empire did see the growth of some export-oriented industries. The production of Oriental carpets, a much-coveted luxury good within Europe, employed over 70,000 people by 1912. The beginnings of a textile industry could be seen in Constantinople and its adjacent regions, though its very small scale must be noted, and by 1912 had perhaps only 300,000 spindles (which compared poorly even to places such as China and India). Most industries remained oriented toward the domestic market, however, which continued to thrive, though this tended to be based on handicraft industries rather than modern industrial production.
Another myth that has dominated common conceptions of the Ottoman economy in this period is the dominance of its Christian inhabitants in industry and commerce. While much of the import and export trade was dominated by Christians, as it had been for much of the empire’s existence, more recent research has shed light on the importance of Muslims in the internal trade of the empire. This internal trade was far more significant for the empire than external trade and was increased as the government expanded the system of roads, railways, and ports that connected the country. The country’s balance of payments continued to be a great cause of concern however, as for much of Abdülhamid’s reign the value of exports was consistently lower than that of imports. Textiles were by far the costliest of the empire’s imports, but great sums were spent on even agricultural products such as sugar and grains. Although the gap was slowly reduced, by 1912 the value of exports in the empire was still around one million Lira less than the value of imports [2].
What kept the economy from further growth and industrial expansion? Government corruption and poor economic policy are less accepted as an explanation as was once the case, and instead, there appear to have been several factors mostly out of the government’s control that retarded economic growth within the empire. The lack of political stability was certainly a handicap on economic growth, particularly in the Balkans and Eastern Anatolia. Some semblance of order had been restored in the Balkans following the cycle of revolts and war that had ravaged the region in the 1870s, and Bulgaria, in particular, saw healthy economic growth, but the existence of paramilitary groups and intercommunal conflict would prevent anything beyond modest growth. In Eastern Anatolia conflict between the nomadic Kurdish population and the sedentary Christian Armenians proved to be a significant problem, and the massacres that the Christian population suffered did much to harm the region, as indeed did retaliatory attacks. The conflict has historically been a major brake on economic development, and this was certainly true of the Ottoman Empire in the first part of the Hamidian period.
Nevertheless, one must avoid too gloomy a picture of the Ottoman economy during the early Hamidian period. The budget, which had mainly been in deficit for much of the reign of his predecessor Abdülaziz, was balanced from 1879 to 1894, and indeed the government sometimes ran a small surplus [3]. The economy was growing slower than that of her European neighbors, but the Ottoman economy was beginning to pull ahead of her Middle Eastern neighbors, particularly Iran and Egypt. Looking at it in isolation, the economy of the early Hamidian Empire could be considered a success story. However, the international circumstances of the time depended on the swift growth of national resources, and this was not something that Abdülhamid’s government achieved during the first part of his reign.
[1] – By this point in OTL, Ottoman coal production was around 900,000 tons, which is pathetic by the standards of even secondary powers. But Italy of course was notably coal-poor
[2] – The exchange rate was 1.1 Ottoman Lira to 1 pound Stirling for this time
[3] – In OTL the budget deficit of the Ottoman Empire during Abdulhamid’s reign, except for the 1877-78 war and the Graeco-Turkish War of 1897, ran a moderate deficit. Since the goal of both Abdülhamid and the great powers in 1881 had been to balance the budget, it seems plausible that this could have been a viable outcome considering TTL’s differences.
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Author's notes - The situation of the economy compared to OTL can be summed up as "somewhat better, not great". To speak of the Ottoman Empire as industrializing would be a near-total falsehood, and it can be safely said that the empire is very much one that supplies raw materials to the industrialized nations. Unlike Egypt, it cannot even do that well and maintains a problematic balance of payments. However, there is cause for hope in the future here. The Ottoman Empire does have the resources necessary for industrialization in the future, and it actually still has a great deal of possible agricultural land. As in OTL however, many of the same challenges remain.