Economic Growth In The Ottoman Empire

Throughout the history, human beings had experienced rises and falls in terms of the quality of life standards. What is seen as peculiar to the modern times is that the economic development began to rise constantly, by changing the speed among periods and regions. This economic growth was associated with certain proximate causes such as new techniques providing productivity and efficiency in functioning of machines and also of human capital. However, some deeper causes have been recognized recently, such as social and political institutional changes. In this paper, I will discuss this latter explanation, i.e. the institutional approach to economic growth by exemplifying two historical cases from the history of Ottoman Empire in the 19th century,

According to the Decree of Muharrem, a special commission including European bondholders started to control certain revenues of the Ottoman empire, such as the salt tax, the silk tithe, and the tobacco tax. OPDA employed people whose numbers reached to 5000 in several years and one third of the state revenues became under its control. Since the payment of the debts was guaranteed by OPDA, the Porte became more credible in the international market and so the Ottoman government could continue to borrow money from Europe with even lower interest rates and also attract more FDI especially on railroads. Therefore, indebtedness functioned as one of the mechanisms that integrated the Ottomans to the global capitalist system. OPDA had a better administration than the government in terms of tax collection through using certain techniques as double-entry book keeping and not hesitating to use armed force given to them in the local areas. The strict implementation of OPDA or the Regie Company was not accepted and appreciated by the farmers for long years. One indicator for this was increasing cases of tobacco smuggling, which made the local representatives of the company continuously complain to the government and employ more and more company workers in years. Nevertheless, the OPDA could collect taxes more efficiently which meant a larger tax burden on farmers and a greater capital outflow from the Ottoman economy. As a consequence the OPDA played dual role. On the one hand, it supported economic development through new investments and efficient tax collection but appropriated the prosperity as a private company. On the other hand, it paved the way for administrative reforms and technology transfers in several sectors, which would be benefit for the Ottoman and also the Republican bureaucracy