An Analytical View of Ottoman Public Finance in the Modern Era

Abstract

The aim of this article is to analyze the Ottoman government’s fiscal policies and performance for the period from the second half of the 18th century to the last years of the Empire. First, it should be noted that numerous Ottoman fiscal crises followed the wars, and reforms followed the fiscal crises. According to this study’s inferences, the wars were one of the basic causes of institutional change in Ottoman finance. Various other institutional constraints, such as the timar system, also caused the wars to become costly for the Ottoman Empire, leading to fiscal underperformance. Besides that, revenue policies such as confiscations, war-time taxes, and coin debasements turned into institutions that prevented stability and development in the financial sector. Another institutional constraint was that the central authority did not grant administrative-fiscal autonomy to provincial administrations until the beginning of the 20th century. Also, the central government was not able to personalize taxes because it failed to create an effective monitoring and sanctioning mechanism. Socio-economic expenditures such as education, health, public works, and transportation took a back seat to other public expenditures such as military and administrative costs for the entire era. Domestic and foreign debt payments, which occupied a significant portion of state budgets, took a toll on Ottoman public finances. The ongoing budget deficits during this period dictated the low level of financial performance by the Ottoman government. In addition, fiscal policies throughout the period led to the accumulation of the wealth by a small fraction of citizens, which distorted income distribution.