Finances of the Ottomans

The Tanzimat initiated a system of standardized taxation. In previous times local rulers and tax collectors had been guilty of enriching themselves at the expense of locals. This new system meant that taxes were more evened out and equal across the board. There was an abolition of the capitation tax on non−Muslims, with a regular method of establishing and collecting taxes in 1856. However this caused an uproar because non-Muslims were now having to pay more taxes under the new system than they had before. The system of taxation also applied to military conscription and training, a system that now was regulated, and involved less pressure on the locals.
One other change that occurred in the finances of the Ottomans during the Tanzimat was the reorganization of the finance system according to the French model. As the empire looked more and more towards the West in its remodeling, the circulation of money and financial institutions were made to imitate the French. This resulted in changes such as the introduction of the first Ottoman paper banknotes in 1840 and the launching of the first Stock Exchange in Istanbul was established in 1866.

Economic Blunders of the Tanzimat

As much as the Ottomans were reforming the education and government systems, there was very little being done in terms of fiscal and economic reform. That is to say that the empire’s intentions with methods such as bank notes and the stock exchange were not in coherence with its spending or monetary policies.
According to Roger Owen "Limited financial resources, the lack of competent administrators, the growing technological gap between Europe and the rest of the world, and the constraints imposed by Turkey's social structure and weakened international position all combined to set strict limits on the types of economic politics pursued" (Owen, p. 116). This resulted in over-stretching of the Ottoman monetary supplies and debt accumulation.
This was not aided by the fact that in its reformation, the Ottiman Empire was having to make a great many capitulations to foreign powers. On one hand France and England used their diplomatic influence in Constantinople to accommodate imperialist expansion at the expense of economic reform within Ottoman realms.

Some examples of the capitulations that the Ottomans made which had a financial impact on the empire are:

a) The 1838 Anglo-Turkish commercial convention in which the empire needed British support in fighting Egypt, one of the conditions was the spread of European imports in Ottoman markets.

b) In the 1850s and 1860s, the British and French established investment banks designed to channel domestic savings into overseas loans and projects. These banks were the cornerstone of Ottoman borrowing activities and resulted in the indebtedness of the empire. This history of debt would be kicked off by the 3 million British pounds borrowed to pay war expenses in 1854 and followed by the many payments needed to service these loans.
Other failures of the Tanzimat’s financial reforms were the lack of a government apparatus that would carry out these reforms. An example would be that though the tax collection system was reformed, there was a lack trained personnel that would collect and handles taxation matters within the empire. This continued until after 1859 when the Mekteb-i Mülkiye school to train bureaucrats was established.
The efforts for economic development during the Tanzimat were not so much a failure as it was the fact that they were overwhelmed by external factors. The Tanzimat period occurred at about the same time as the industrial revolution in Europe. This meant that there was a boom in building roads, ports, and other economic infrastructure that facilitated the transport of goods. This trade however remained profitable only to foreign traders and investors as opposed to merchants from the empire and this was due to a poorly developed tariff system.
It is reputed that Ottoman exports increased nearly 500 percent between 1840 and the 1870s. However these exports were less than 10 percent of total production in the empire. There largely constituted of raw agricultural materials sent to England and France.Moreover, local Ottoman industries faced an increase in competition from foreign companies such that some collapsed while others became appendages of foreign business and not part of Ottoman production. Those that faced a boom were Ottomans in the port ares were ships docked but even then, theirs were profits gained from connection with foreigners trading on Ottoman soil and not from local industry. It is no wonder that Ottoman finances during the Tanzimat continued to worsen until the empire eventually declared bankruptcy in 1875.


Work Cited
1. Davison, Roderic H. Reform in the Ottoman Empire,1856 - 1876. Princeton, NJ: Princeton University Press 1963.
2. Lewis, Bernard. The Emergence of Modern Turkey, 3d edition. New York: Oxford University Press, 2002.
3. Owen, Roger. The Middle East in the World Economy,1800 - 1914. New York: Methuen, 1981.
4. Pamuk, Şevket. The Ottoman Empire and European Capitalism,1820 - 1913: Trade, Investment, and Production. Cambridge, U.K., and New York: Cambridge University Press, 1987.
5. Shaw, Stanford J., and Shaw, Ezel Kural. History of the Ottoman Empire and Modern Turkey, Vol. 2: Reform, Revolution, and Republic: The Rise of Modern Turkey, 1808-1975. Cambridge, U.K., and New York: Cambridge University Press, 1977.