Economic policy and budgets in Ottoman Turkey, 1876–1909

Abstract

Budgetary deficits need not always worry a government; in fact, they can even be a positive blessing under certain circumstances.' For the Ottomans, however, chronic budget deficits did constitute an important problem throughout the nineteenth century.2 Government revenues lagged behind expenditure, and finding the means to pay the ever increasing expenditures occupied Ottoman statesmen continuously. During the 'Reform' (Tanzimat) period (1839-71/6), 'cash' in itself was seen as the remedy to the problem. The Grand Vezir Fuad Pasha once commented that the Ottoman Empire was the sick man of Europe all right, but there was a cure for his sickness: money.3 Money, the reformers did find. They borrowed it liberally from wealthy West European countries for the principal purpose of covering budget deficits, but not to improve the productive capacity of the country. Thus, they put a burden on future generations without bequeathing equivalent benefits. Having shouldered such a burden, the statesmen of Abdulhamid II's reign (1876-1909) had to operate from a disadvantaged position; Nevertheless, they benefited from the mistakes of their predecessors.4 They realized the importance of increasing the productive capacity of the country and that this necessitated the building of a modern economic infrastructure. Respectable progress was achieved in this area. The taxable capacity of the producers increased towards the end of Abdulhamid's reign, but not enough to cure the chronic budget deficit. Borrowing from Europe remained the inevitable measure of last resort. Budgetary problems plagued the next generation of Ottomans as well. The Young Turks, that is, the driving group of the Second Constitutional period (1908-18), borrowed heavily, but they also spent large sums on infrastructural projects. Farsighted as they were, however, the Young Turks too failed to raise the Ottoman lands from economic backward-