Development of economic ideas over the long-term

Classical economic thought as expressed in advisory treatises written for Sultans emphasized the need for the maintenance of the so-called Circle of Justice according to which the Sultan and his men were entitled to taxes as true holders of title to the land, which they used to pursue further conquest as well as introducing law and order in the country.

As of the seventeenth century, Ottoman scholars endeavored much to come to terms with stagnation and the long-term destabilizing effects of the sixteenth-century inflation (Kafadar, 1995). Economic thought favored fiscalism in tune with the above conception, but also traditionalism over innovation in industry, and provisionism over free trade (Gene, 1989). The last principle meant that the day-to-day provisioning of the capital of the Ottoman Empire, with its vast population wavering between 400,000 and 1,000,000, was the first concern. This implied that the import of necessities for subsistence be tolerated, if not outright encouraged, at a time when exports were seen as a potential threat to the livelihood of the domestic population. At a time when European cities still had moderate populations and states practiced mercantilism, the Ottoman Empire was practically anti-mercantilist in both economic thought and policy.

This did not, however, mean that trade was left on its own. On the contrary, it was highly and minutely regulated. As hinted above, this system could function well as long as territorial expansion remained geographically and economically feasible.

It is only with the nineteenth century, the parameters of which were designed by the paradigmatic British Industrial Revolution and the French Revolution, that the need for a more profound reshaping of Ottoman economic thought arose. As wars became more likely yet came with spiraling costs, the Ottoman statesmen were forced to modernize and maintain an army and navy by recourse to new revenues. Of critical importance were the worldwide disequilibrium effects of the Napoleonic Wars. The French expedition to Egypt demonstrated the vulnerability of the Ottoman Empire as well as exposing local populations to modernity. Muhammed Ali Pasha (1769—1848) of Egypt, an enlightened despot with industrialization ambitions, rebelled against the Sultan in 1831 and waged a decade-long war that extended well into Anatolia, the Ottoman heartland from where most of the soldiers that set off for first conquest and then the defense of the tri-continental empire originated. For this reason, Karl Marx identified it as the real seat of power (Marx, 2006: 4).

However, the Balkans, “Turkey in Europe” as it came to be known in Marx's time, had always been the true domain of the exercise of this power since the conquest of Istanbul, and was of critical economic and strategic importance for the imperial capital. The Empire survived well as long as it retained its Balkan possessions and disintegrated within a decade once it lost them with the Balkan Wars (1912—13). It is no surprise that the Ottoman Empire could survive the rebellion but not the Balkan Wars. Whereas Muhammed Ali Pasha enjoyed French support, the Ottomans, frightened by both the rebellion at home and the threat posed by Russian advances into the Black Sea in the North, turned to Britain for assistance. Britain offered support for the preservation of the integrity of the Ottoman Empire in return for the adoption of reforms conducive to free trade. With the Anglo-Ottoman Commercial Treaty of 1838, the Ottoman Empire officially entered a new economic course. Restrictions over trade would be abolished and free trade be embraced. In a nutshell, this free trade policy would encourage the export of raw materials and the import of manufactures. Manufactures would greatly originate from Britain and to a lesser extent France, to which the bulk of Ottoman raw material exports were destined. The destructive effect of this major policy shift on traditional local manufactures was imminent.

This long-term context paved the way for the development and persistence of two rival camps in Ottoman economic thought. Be that as it may, with the nineteenth century, the rules of the game had thus changed. In the realm of economic thought, a conceivable rupture with the past had occurred. Neither of the contesting parties sought continuity with their immediate predecessors. They turned instead to Europe for ammunition to wage their intellectual battles. As of then, Ottoman economic thought was subject to the influence of European ideas and policies. The rival camps of European economic thought thus inadvertently helped to develop, albeit with a delay, their extensions on the Ottoman soil.

Of the two rival camps, advocates of free trade doctrine and the classical theory behind it appeared first. According to them, the Ottoman Empire had vast resources, the inventory of which attested to a favorable inscription into the international division of labor as an exporter of primary materials. Exports would generate wealth and help afford imports of manufactures thereby giving a new shape to Ottoman economy and society. This position was advocated by resident foreigners with a vested interest in commerce such as Alexander Blacque and David Urquhart, minorities as well as certain Ottoman statesmen with intellectual credentials. The primary instruments of spreading these optimistic Smithian ideas were newspapers, pamphlets, and occasionally books as in the case of David Urquhart’s Turkey and its Resources (1833), that attracted much criticism from Marx (2006, 25). The classical approach penetrated via French linguistic and educational intermediation as was the case with Serandi Arsizen, the author of an early introductory manuscript and a student of Pellegrino Rossi in France (Ozgur and Gene, 2014).

In opposition, there emerged a group that was excited with the devastating effects on domestic manufactures of imports and the growing disparity between the Ottoman Empire and the West who turned increasingly to protectionism as a way of self-defense. These included Ottoman dilettanti, statesmen, and ambassadors. Among the first to call attention to the unfavorable consequences of the Anglo-Ottoman Commercial Treaty were Ahmed Fethi Pasha, Sadιk Rifat Pasha, Kostaki Bey, Ahmed Cevdet Pasa, Namik Kemal, and Ziya Pasha. This opposition was not only protectionist but also understandably productionist at a time when the prospects of free-trade blinded many an eye.

Whereas the classical paradigm looked more consistent and squarely rounded-off with its universal credentials, its alternative in-the-making was piecemeal, ad hoc, and at best reminiscent of mercantilism and cameralism, even though the channels of dissemination of ideas, in case there were any, remained obscure.

The successor to Ohannes Pasha was Cavit Bey (1875—1926) and the line of succession worked through Mekteb-i Mulkiye, a school designed to raise statesmen — elevated in 1877 to the status of a school of higher learning — which provided the first hospitable environment for the institutionalization of political economy as a discipline in the Ottoman Empire. Cavit Bey’s work updated and replaced the text of Ohannes Pasha. It served for instruction during a critical period when economics gained popularity and recognition. Cavit Bey was a consistent and sound economist who was not only an academic but also an actual policymaker in his capacity as the influential Minister of Finance for most of the period after the Young Turk Revolution of 1908. Having already gone bankrupt as officially recognized by the infamous Decree of Muharrem (1881), the Ottoman economy was subject to important constraints, such as that imposed by the very existence and authority of the Public Debt Administration that left no room for policy improvization, at least until the outbreak of the First World War. Against this

backdrop, Cavit Bey set the tone for the last decade of Ottoman policymaking as a committed liberal. The ideas of classical liberalism would hence continue to dominate the scene, and Bey was aloof to neoclassical economics.

It was as of the 1870s that the rival approach to that of classical orthodoxy gained a new impetus when Ottomans like Mehmet Serif Effendi and Hayreddin Pasha introduced the name of Colbert as a source of inspiration. Mercantilism had thus finally come to the Ottoman Empire with a vengeance. But this deja vu mercantilism could not suffice, something more was needed. It is no coincidence that the oppositional ideas developed fast into a Historical School alia turca. For example, Ottoman patriot Namιk Kemal (1840—88), a victim of the Hamidian despotism (1878—1908), rejected the classical approach while developing a neo-mercantilist alternative by making use of mercantilism as it was (mis)represented in the texts of the classical school, physiocracy and Malthus. The inferences he drew were reminiscent of those of the German Historical School. Here we are faced with a case of theoretical independent (re)discovery.

Ahmed Midhat Effendi (1844—1912) was a popular and prolific writer of the Hamidian era. Just like his predecessors, he turned to Colbert for inspiration in his Ekonomi Politik that deserves at least as much attention for its simple and straightforward title that heralds a new era. More importantly, he delved into the investigation of Ottoman character relative to the conception of homo-economicus. In his view, Ottomans behaved differently because of cultural reasons. Even so, he insisted that a new approach to economic affairs could be cultivated. In this way he brought to the foreground the issues of rationality and character-traits of economic agents. This is how the question of individualism arrived on the Ottoman scene. The fact that Midhat Effendi concentrated on individual behavior may have had to do with the repressive character of the Hamidian regime. He advocated hard work, entrepreneurial gist, and frugality in his didactic literary works and in many ways anticipated, albeit in a crude form, the Protestant-ethic thesis of Max Weber. This was yet another instance of simultaneous independent discovery.

Fostered by a set of multiple independent discoveries, yet handicapped by its relative ignorance of the then contemporary European scholarship, the critical alternative approach was further elaborated during the last quarter of the nineteenth century. This alternative was theoretically squared off and thus evolved out of a naive alla turca historismus with the works of Akyigitzade Musa Bey (1865—1923) who taught at the prestigious Military Academy in Istanbul. He advocated temporary protection for nascent industries in a way reminiscent of Friedrich List (1789—1846) within a “national economy” perspective (Cavdar, 1992, 131). Musa Bey was originally from Kazan, a thriving city of the Russian Empire populated by the Tatars, who were in many ways linked with the Ottoman culture and acted as a bridge to the more backward Russian Muslims of Central Asia, thereby spreading the urge for an enlightenment via education as advocated by Ismail Gaspιralι (known also as Gasprinskii, 1851—1914), the equivalent of Midhat Effendi as the “Teacher of the Nation” (Baldauf, 2001, 87). The economic development then under way in Kazan attracted much attention, including that of Max Weber, who felt compelled to qualify his position concerning the relationship between a religion and economic action: “Industrialization was not impeded by Islam as the religion of individuals — the Tartars in the Russian Caucasus are often very ‘modern’ entrepreneurs —, but by the religiously determined structure of the Islamic states, their officialdom and their jurisprudence” (Weber, vol.II, 1978, 1095). It must have been in Russia that Musa Bey came to know List and Historismus (Berkes, 1972, 52-3).

Hence German influence over Ottoman Turkish economic thought worked, at least in part, by way of Russian mediation. In this respect, there was also Alexander Israel Helphand (1867—1924), a Russian Jew brought up in Odessa, who had obtained a doctorate degree in economics and finance in Basel (1891) before seeking refuge in the Ottoman Empire as of 1910. He published extensively under the pen-name of Parvus from 1912 to 1914 and exerted an influence on the Young Turks. Parvus insisted that indigenous economic development should start off with the peasantry (Sencer, 1977, 22, 22n) — a thesis disclosing his affinities with the Russian debates — whereas Yusuf Akyura (1876—1935), again originally from Kazan, the prom­inent precursor of Turkish nationalism, proclaimed that the foundation of a modern state ought to be the national bourgeoisie nurtured by a modern national economy; a policy objective embraced soon by the Young Turks and the nascent Turkish nationalists (Berkes, 1978: 461—2) such as Tekin Alp (the Jewish convert Moiz Kohen, 1883-1961) and Ziya Gokalp (1876-1924), who helped popularize Musa Bey's economic ideas and policy preferences.

Gokalp, posthumously named as the father of Turkish sociology, was in fact of critical importance in transmitting the economic thought of the late Ottoman Empire to the leading cadres and the first generation of the Turkish Republic. If industrialization became a major concern in the Republican era, it was because of Gokalp, who endorsed it wholeheartedly. Otherwise, the last decade of the Empire had witnessed how the debate between the primacy of agriculture and industry had remained unresolved. To the very end, there remained those like Ethem Nejat (1883-1921) who believed that investment in agriculture and commerce via education (human capital) and infrastructure would be more fitting to trigger sustained economic development in the Ottoman Empire. Gokalp identified in industry a transformative social force, much in the spirit of List. It should be noted that the alternative approach was thus rounded off only when Listian political economy was consciously integrated to the naive and sui generis Ottoman historical approach. The circumstances of a war economy as dictated by the outbreak of the First World War in which the Ottoman Empire was allied with Germany, only helped the fortunes of this ultimate synthesis and its rising popularity among the Ottoman-Turkish intelligentsia (Toprak, 1982). This was all happening at a time when these debates found outlets in the first academic journals and associations of economists, while economics education found increasing room in the traditional university of Istanbul then known as Darulfunun.