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T he Struc t ure of T urki s h Econo m y

T he Struc t ure of T urki s h Econo m y. Prepared by: Prof. Dr. Sedef Akgüngör Asst. Prof. Dr. Beyza Sümer Inst. Şule Gündüz. Course Objectives and Learning Outcomes.

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T he Struc t ure of T urki s h Econo m y

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  1. TheStructureofTurkishEconomy Prepared by: Prof. Dr. Sedef Akgüngör Asst. Prof. Dr. Beyza Sümer Inst. Şule Gündüz DEU, Faculty of Business Department of Economics

  2. Course Objectives and Learning Outcomes • The aim of the course is to provide necessary knowledge and information regardingTurkish economic system starting from late Ottoman period to modern Turkey. • LearningOutcomes: • Describe the major events in economic history of modern Turkey. • Identify the major actors and institutions of Turkish economy. • Recognize different macroeconomic and international economic policy approaches in the context of Turkish economic history. • Recognize developments in agricultural, industry and services sector in Turkisheconomy • Participate in classdiscussions DEU, Faculty of Business Department of Economics

  3. Assessment • Midterm: 35% • Final: 40% • Memo (class participation): 10% • Essay: 15% DEU, Faculty of Business Department of Economics

  4. Essay • It’s a briefsummary of an articlethatthestudent can choosefromthereadinglist. • It’s an individualwork. • Itmustn’t be morethan 2 pages. • No copy-paste is allowed. Itwill be hand-written. • Itwill be handed in during 28 November-26 December. No essayswill be acceptedafter 26 December. • Essays can start to be handed in afterthesecondweek of theterm. DEU, Faculty of Business Department of Economics

  5. Reading List For Essay Writing(Available from the instructor) • You can share the article with a friend if the article is more than 24 pages • Please do not choose the shortest article but the one which you might enjoy most. • Check and review the article before you choose it. • You can choose any other academic article upon the approval of your instructor. DEU, Faculty of Business Department of Economics

  6. Memo • A memoaimstogiveadditionalandsupplementaryinformationaboutthelecturedsubjects. Itwillincludecompact, preciseandilluminatinginformation. • It’s an individualwork. • Itwill be only 1 page. Therewill be 2-3 questions at theend of thememo. • Theassignedstudentwillpresent his/her memo in theclassbyusingvisualaids (photos on powerpoint). • Theassignedstudentwill ask thequestionstotheclassandwillsupervisetheconversation. • Afterdiscussion, thememoswill be handed in. • Memo time scheduleswill be preparedbythelecturerandwill be announcedtothestudents DEU, Faculty of Business Department of Economics

  7. Sample Memo Student name: Date: Course: Related with the lecture about the ‘industry, trade and services in the Ottoman’; lighting of the cities in the Ottoman first started in 1856 in Istanbul. (in 1817 in Baltimore, USA; in 1826 in Berlin; in 1829 in Paris). Gas was used for lighting then. When Dolmabahçe Palace was started to be built in 1853, a gas tank was added in the garden of the palace. In 1856 Dolmabahçe Palace was opened and was all lighted up. According to the plan, first Beyoğlu streets, then the rest of Istanbul were lighted up. In 1914 the total number of street lamps reached to 8,742; and most of the konak’s and yalı’s and government buildings were lighted up by gas. Lighting up by using electricity happened later. Foreign electric companies were trying to get concessions from the government. First a French firm made a proposal, but it was not accepted. Later English and German firms tried to enter the Ottoman market. However, construction of electric plant did not start in Istanbul but in Tarsus. (some say that the dynamo will come from Austria by Austrian Döfler’s attempt, who was working at Tarsus municipality then; some say that the sultan/emperor was afraid of a murder attempt). Tarsus got permission from the emperor for an electric plant. They built poles by the street and made connections to the houses of two notables of Tarsus. In 1902, the dynamo which spins with water force generates electricty. The houses were all in light. (CONT……) DEU, Faculty of Business Department of Economics

  8. Siemens&halskegottheroyalty (concession) of buildingelectricplant in Selanik and İzmir in 1905. Thefollowingcitiesusedelectrictyforlighting - Halep and Bursa in 1906?, Şam in 1907, Necef in 1908 (Ali’stomb), Üsküp in 1909. In 1907 in Istanbul Boğaziçi upto Sarıyer, Tophane, Beyoğlu andmostparts of Istanbulwithpalaces, hotels, köşkswerelightedupbyelectricity. In1910, thegovernmentgaveroyaltyto an Hungarianfirm (Ganz) fortheconstruction of electricplant. Thisfirmthenformed Osmanlı Anonim Şirketi with a Belgianfirm. Ottoman’sfirsttermicpowerplant (electricplant) wasbuilt in Silahtarağa. Lightingbyelectricity (electrification) startedafter 1914 in İstanbul (in the USA Wisconsin in 1882, in London in 1891). Electrictystartedto be used in lighting, fortramway, and in otherfields. Silahtarağaelectricplantgeneratedelectricityfrom 1914 upto 1983 for 69 years. NowadaysSilahtarağabuilding is used as an art andmuseum site (Santral İstanbul). Questions: 1) WhywastheOttomanlateforusinggasforlightingup? 2) WhywastheOttomanlateforusingelectricty in Istanbul? Whatreasonsdidthe sultan haveforrejectingtheuse of electricity in thehouses, hotels, etc. 3) How didthisdelayaffecttheOttomaneconomy? DEU, Faculty of Business Department of Economics

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  10. *The content of a memo can be a phenomenon, a process, or an event supported by reliable documents. • *Before you write a memo, search the topic and find relevant and multiple information about it. • *These topics can be taken for any period (Ottoman time, 1920s, 1970s, or 2000s)of Turkey. • *Please see the memo sample. • *You must use your creativity to write a memo. DEU, Faculty of Business Department of Economics

  11. Memo List • Youshouldchooseonetopicfromthelist. • Thedatesandlistwill be posted on theinstructor’sdoor. • Pleaseput your name on thelistforthetopicandthedate of memopresentation • This is an individualwork. • Morethanonestudent can choosethesametopic DEU, Faculty of Business Department of Economics

  12. Agriculture (output, food, ruraldevelopment, husbandry, forestry, beeandsilkworm, fishery) • Industry (sectoralanalysis {construction, manufacturing, metal, defense, chemical, glassindustries, etc}, productivity, use of hightechnology, firms) • Services sector (health, education, tourism, businessservices, etc) • Mining (coal, petroleum, boron, marble, gold, etc) • Logisticsandtransportation (airlines, logistics) • Growth, development, knıowledgesociety • Investment, FDI, portfolioinvestment • Foreigntrade (exports-imports) • Integrations (EU, transatlanticrelations, othereconomicblocmembership) • Energy • Crisis (bankingandbankerscrisis, financialcrisis) • Dollarization • Privatization • Urbanization • Migration, immigration • Coupd’etatsandeconomicperformance • Etatism • VillageInstitutes • Governmentprocurements, incentivesandaids • Constitutions (economicarticles) DEU, Faculty of Business Department of Economics

  13. Weekly course schedule Week of September 26, 2016: • Introduction to the course and Brief Overview of Turkish Economy Week of October 3, 2016: • Brief Historical Background: Economic Structure During the Ottoman Era Reading: Kepenek, pp. 1-7 Week of October 10, 2016 • Brief Historical Background: Economic Structure During the Ottoman Era (Cont) In the Reading List: S. Pamuk (2004). Change and the Longetivity of the Ottoman Empire 1500 1800. Journal of Interdisciplinary History 35(2): 225-247 Week of October 17, 2016 • Early Years of The Turkish Republic: 1920s Reading: Kepenek, pp. 7-13 Week of October 24, 2016 • Etatist Era and Industrialisation: 1930s and 1940s Reading: Kepenek, pp.13-20 DEU, Faculty of Business Department of Economics

  14. Week of October 31, 2016 • EconomicGrowthandperiodafter WW2: 1950 Reading: Kepenek, pp.20-30 Week of November 7, 2016 • Beginning of PlannedEconomy: 1960s Reading: Kepenek, pp. 31-48 Week of November 14, 2016 andWeek of November 21, 2016 Midtermweek Week of November 28, 2016 • Modernization: 1970s Reading: Kepenek, 31-48 Week of December 5, 2016 • EconomicGrowthBased on Open Economy: 1980s Reading: Kepenek, 51-72 DEU, Faculty of Business Department of Economics

  15. Week of December 12, 2016 • Growth, inflation, economiccrises: 1990s Inthereadinglist: FatihÖzatay, (2000). The 1994 currency crisis in Turkey. The Journal of Policy Reform. 3(4): 327-352 Week of December 19, 2016 • MilleniumYears: 2000s Inthereadinglist: YılmazAkyüz and KorkutBoratav, (2003). The Making of the Turkish Financial Crisis. World Development. 31(9): 1549–1566 Week of December 26, 2016 • MilleniumYears: 2000s Inthereadinglist: Erinç Yeldan, (2006). Neoliberal Global Remedies: FromSpeculative-LedGrowthto IMF-LedCrisis in Turkey. Review of RadicalPoliticalEconomics. 38(2): 193-213 Week of January 2, 2017 • Overview of theTerm DEU, Faculty of Business Department of Economics

  16. Structure of an Economy • Thesum ofallthedifferenteconomicactivities within the boundariesofanarea(city,regionor country)constitutesthestructureofan economy. DEU, Faculty of Business Department of Economics

  17. Whatis themeaningof economic structure? • Economic structure is a term that describes the changing balance of output, trade, incomes and employment drawn from different economic sectors • primary (farming, fishing, mining etc) to secondary (manufacturing and construction industries) to tertiary and quaternary sectors (tourism, banking, software industries) • Changes in economic structure are a natural feature of economic life. • They bring challenges in terms of reallocating factors of production. DEU, Faculty of Business Department of Economics

  18. Structure.. • Sectors • Agriculture • Industry • Services • Mining • Gross NationalProduct • GrossDomesticProduct • Economic growth • Economic development DEU, Faculty of Business Department of Economics

  19. GDP Growth, 2015:  4.2% (World Bank) • GDP Growth, 2016 forecast:  3.5% (World Bank)  • Total GDP, 2014:  $799.5 billion (World Bank) • Total GDP, 2015 estimate:  $861 billion (IMF) • Unemployment, 2015: 10.2% (TUSIAD) • Unemployment, 2016 forecast:  10.6% (TUSIAD) • Inflation, 2015: 8.8% (TUSIAD) • Inflation, 2016 forecast:  9.1% (TUSIAD) • Current Account Balance, 2015 (% of GDP): -4.4% (TUSIAD) • Current Account Balance, 2016 forecast (% of GDP):  -4.9% (TUSIAD) • Trade Deficit, 2014:  $84.5 billion (TUIK) • Trade Deficit, 2015:  $63.27 billion (TUIK) • Government Gross Debt, 2015 (% of GDP):  34.5% (TUSIAD) • Government Gross Debt, 2016 forecast (% of GDP):  34.2% (TUSIAD) • Turkey Exports to US, 2014:  $7.4 billion (US Census Bureau) • Turkey’s FDI in the US: $3.3 billion http://www.tusiad.us/economic-indicators/ DEU, Faculty of Business Department of Economics

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  21. DEU, Faculty of Business Department of Economics http://www.focus-economics.com/countries/turkey

  22. BriefTimelineofKeyPoliticalEvents • 1923: Republic of Turkey • 1928: Secular state • 1924-1930s: Economic and Social Reforms • 1940: Neutral for most of the WW2 • 1950: Republic’s first open elections • 1952: Member of NATO • 1960: Military coup; New Constitution • 1963: Association agreement with the European Union DEU, Faculty of Business Department of Economics

  23. 1980: Military coup • 1980: Trade liberalization, outward looking growth strategy – Washington Consensus: World Bank; IMF led policies • 1982: New constitution • 1987: Full membership application to the EU • 1995: Customs Union agreement with the EU • 2001: Major economic crisis • 2004: EU negotiotions begin • 2002, 2007, 2011, : Justice and Development Party wins the highest seats in the Parliement. • 2014: First Presidential election • 2016: Coup attempt DEU, Faculty of Business Department of Economics

  24. Economic Growth DEU, Faculty of Business Department of Economics

  25. OECD Economic Outlook, 2016 • Growth has been stable, but source of growth must be balanced • Growth is mainly driven by domestic consumption • Net foreign investment detoriated • To achieve sustainable growth, domestic saving must be inreased DEU, Faculty of Business Department of Economics

  26. ● Growth has been robust despite adverse circumstances but must be rebalanced ● Removing structural bottlenecks would boost productivity ● Deeper participation in global value chains could help rebalance growth DEU, Faculty of Business Department of Economics

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  30. TheOttomanEra Socialstructure in theEmpire: thegoverners (military) andthegovernees (reaya) Anothercategorywasreligious: Muslimsandnon-Muslims. anothorbigsocialgroup: freepeopleandslaves. People whoresided in theOttomanEmpirecouldnt be collected as slaves . Theywereused as laborforceesp. İn Istanbuland Bursa, on thefarmsand/or in theweavingtextilefactories. Slaverywasabolished in theOttomanEmpire in 1847. Turks; minorities (Jews, Armenians, Greeks (rum’s); foreigners Administration: absolutemonarchy, rulesmadeby divan-ı humayun (prime minister, council of ministers, armychiefs, religiouschief) accordingtothe şeriat. TherewerevariousnamesfortheOttomanEmpire: Devlet-i Aliye-yiOsmaniyye (Yüce Osmanlı Devleti- SupremeOttomanState) Devlet-i Aliye (Yüce Devlet- SupremeState) Devlet-i Ebed Müddet (Ebedi Devlet- everlasting/eternalState) Memalik-i Mahruse (Korunmuş Memleket- Protectedandimproved Country) DEU, Faculty of Business Department of Economics

  31. It was a strong empire of 470-year. Pre-founding period: 1299-1453 Rising period: 1453-1579 Growth period: 1579-1683 Stagnation period: 1683-1827 Decline period: 1827- 1908 Dissolution period: 1908-1923 DEU, Faculty of Business Department of Economics

  32. Tımar system in theOttoman Tımar systemconstitutesthe political, economic, militaristic,and administrative structure based on Agriculture. In the Ottoman Empire, production was mainly based on agriculture. Besides cultivating the land, other agricultural activities such as cattle breeding, forestry,etcwere also important. The land was the fundamental factor of production. The Ottoman land system is a mixture of preceding civilizations of the region. Elements of the Timar system can be seen to have their origins in thePre-Islamic antiquity (ancient Middle Eastern Empires, Rome, Byzantium, and Pre-Islamic Iran, andSeljuki’s) DEU, Faculty of Business Department of Economics

  33. The Great Seljuk Empire ( 1040-1157) During the Grand Selcukis, iqta (later called “dirlik”) was the grant of land which constituted the main economic and administrative system. there are similarities but also considerable differencesbetween the ıqta and fief systems. Iqtas were not subject to inheritance. The subjects (farmers) attached to the iqta were technically free men. Seljukiyan-i Rum (Anatolian Seljuk State) (1077-1307) stateownedland was divided into 3 groups: 1) dirlik, 2) waqf, 3) mülk. - Dirlikswere donated by the Sultan to the Turkmen beys and commanders. In return they had to raise soldiers for the state’s army. - Waqflands were reserved for the expenses of institutions such as hostels (han), hospitals, education centers, etc. - Mulklands are donated to the officials who have shown high performance in state service. DEU, Faculty of Business Department of Economics

  34. Timar System Timar is both the name of the land system and the name of a type of land. Timar system was also called dirlik system. It is a temporary land grant to the timarlisipahis (cavalrymen), other members of the military class (janissaries), and other officials. Timar was given to the public officers for agricultural production, to raise soliders and to collect taxes. The usary right of land was given to the peasants. They could use the land and in return give taxes to the timar holders. It was developed and used starting by the 14th century in the Ottoman State. Some of the revenues of the timar were left to the statesmen and high rank soldiers as salary. Timars were mostly seen in the regions of southern Tuna, Bosnia, Teselya, Mora, Trakya, West and Central Anatolia. Timars were rarely seen in the East and Southeast regions. In Halep and Damascus timars were even more rarely present. There were no timarsin Irak, Arabia, Egypt and North African countries. DEU, Faculty of Business Department of Economics

  35. In the timar system, the bare proprietorship of land belonged to the state; tax collecting right was given to the timariots; usuaryright of land was given to the peasants. If the land was not cultivated for three years consecutively, then it was given to someone else. If the land was used according to its rules then the usuary right could have passed from the father to the son. Timar system acted as a production system, military system and administrative and publicfinance (tax collecting)system. In this way, the state was able to control the main economic activities such as production and distribution. By this system, powerful army was provided without any costs; the peace and security of each relevant regions were maintained; sustainability in agricultural production was ensured; the country developed; the nomads were motivated to settle; taxes (government revenues) were collected properly. The Ottoman state also desired to centralize the sultan’s authority by removing the feudal system and aristocratic elements from dominating the empire. DEU, Faculty of Business Department of Economics

  36. The land in the Ottoman Empire basically belonged to the state and it is called stateowned land (arazi-i emiriye, arazi-i memleket, miriarazi). The Empire hold the idea that the cultivated land should never be subject to private property. Privately owned land (mülkiarazi) was very limited. In this way, by holding the proprietorship of the majority of the land, powerful classes/groups, except the Ottoman family, were kept away the power system. According to the Land Law (arazikanunnamesi)of 1274, the land in the Ottoman State was grouped in five: 1) Mülkarazi: privately owned land 2) Miriarazi: stateowned land 3) Vakıfarazi: a type of land which is left or given to the institutions by the individuals 4) Metrukarazi: a type of land which is abandoned 5) Mevatarazi : a type of land which is not cultivated/ not owned/idle DEU, Faculty of Business Department of Economics

  37. Stateowned land (miriarazi) was divided into seven groups: timar(dirlik); waqf; Ocaklık; Yurtluk; Mukataa; Paşmaklık; Malikane. As the Empire weakened, people claimed private proprietorship on the stateowned lands. In 1841 and in 1847, by two regulations, proprietorship certificate (tapu) was given to the individuals who held the land. In 1841, timar holders were forced to retire. They were allowed to benefit from their timars until they died but not after that. In 1849 and 1858, change of hand of stateowned land due to debts was accepted. In 1856, Reform Act (IslahatFermanı) promised the foreigners to buy land. In 1857, Land Law amended the rules and methods about the proprietorship, acquisition, and transfer of land. This lawabolished timar and zemaat. DEU, Faculty of Business Department of Economics

  38. Timars (type of land) could be small, when they would be granted by governors, or large, which then required a certificate from the Sultan, but generally the fief (piece of land) had an annual value of less than 20 000 akçes (an Ottoman silver coin). A timar holder was called timariot. The duties of the timariots were: to provide peace and security of the region, to supervise the cultivated land, to collect taxes, to raise sipahis in return of some of the taxes he received, to lead the soldiers that he raised during the wartime. If the revenues produced from the timar were between 20 000 and 100 000 akçes, then it was called zeamet. Zeametland was donated to middle grade statesmen, kadıs, provincial treasury officials, alaybeys, divan katips. They had to raise cebelüs in return And if they were above 100 000 akçes, it was called has. Has land was distributed to sultans, şehzades, vezirs, members of divan, beylerbeyis and sancakbeyis (administrative high officials).They did not reside on the land that was given to them. The taxes from this type of land were collected by tax collectors who got a share from the taxes and who had to raise cebelü (like sipahi) in return. DEU, Faculty of Business Department of Economics

  39. Miningsector Coal, chromium, borax, lead, copper, silver, saltpeter (potassium nitrate-güherçile), iron, manganese,zinc Mines especially needed at wartimes for outfit of soldiers and for issuingcoins State licencesformine extraction (1890-1911): 102 to Turks, 101 to foreigners, 67 to minorities. Capital accumulationin miningsector. Foreignersgained power in this sector. Percentage of mining (1902-1911): Turks 43-20; minorities 7-5; foreigners 50-75. Of the foreigners-French 80 percent; British 14; German 6. French invested in lead, coal, zinc, manganese. British in chromium and borax; German in chromium and hard coal. All the mines exported were used as inputs by the western Europe countries in the industry. DEU, Faculty of Business Department of Economics

  40. Laws and regulations about mining in the Ottoman 1858 Law of Land (AraziKanunnamesi) If/when mineswerefound in stateowned land (miri): belonged to the state in abandoned land and idle land(arazi-i metrukevearazi-i mevad): 1/5th to the state, 4/5th to the one who found the mine in Vaqfland: belonged to the vaqf in Private land: belonged to the owner of land but if paid aşr and/or haraç tax and if the mine found can be melted like silver, mercury, etc then 1/5th to the state. If not melted (eg coal, emerald, ruby) then all belonged to the land owner. 1861 Regulation for Mines (maadinnizamnamesi) : privileges weregiven to operate the mines for a period of 10 years and the 1/4th of the total revenues to be paid to the state. 1861 law was amended by new regulations in 1869, 1887 and 1896 to fill the legal gaps. These regulations dealt with the classification of mines, mining concessions, taxes, the responsibilities of the concessionaries, concession terms. In addition, the regulationsincluded important issues such as the health and safety of the workers. 1869 Regulation: the operation period was raised to 99 years. 1906 Law- mines were grouped and privileges /royalties given according to the groups. DEU, Faculty of Business Department of Economics

  41. Industry, trade, andservices Administration and management of the industrywas done byguilds(lonca). Guild is asystem, an organization for production and trade activities. Artisans who produced,and merchants who traded the goodswerethesamepeople. Guilds seen in Europe also.It is an economic and social system. Ahi Brotherhood: a religious organisation that followed the Sufi tradition of Islam during the 13th and 14th centuries. Most of the members were merchants and craftsmen with adherence to Islam. However, the organization was not a professional organization and should not be confused with the professional guilds that emerge later. By 1580,guilds had become a well established aspect of contemporary Ottoman society. This is evidenced by the Surname of 1582. The guilds were organizations that were responsible for the maintenance of standards. Guilds declined in the 18th and 19th centuries. Guilds provided some form of security in prices, restricting production and controlling quality and provided support to members who hit hard times. However, with market forces driving down prices their importance declined, and with the Janissaries as their backers, being disbanded in 1826, their power ceased and in 1913, the system was totally removed. DEU, Faculty of Business Department of Economics

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  43. Usually small-sized firms goods produced for close marketsand at localneeds, mostly consumer goods. In the rural area, tools (smallmachines)wereproducedforagriculture- weaving looms; milling tools. In the urban area, toolsfortextile (weaving), food, metal housewares, construction were produced. Restricted market with capitulations and loyalties given to foreigners Railwaysandmaritimeweretotallycontrolledbytheforeigners. Since 1826, Ottoman state had banned the export of domestic subsistence goods by the foreigners. 1838 Turkish-British Trade Agreement gave too many concessions and capitulations to the British. - unlimited natural resources and inputs could be exported -Foreigners could participate domestic trade -British merchants would buy Ottoman products from the Ottoman subjects (teba) under the same equal taxes -No taxes would be taken from transit trade -British products that were imported to the Ottoman Empire would be subject to taxation only once. This hampered further efforts for Ottoman manufacturing and industry. DEU, Faculty of Business Department of Economics

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  45. Nevertheless industry in the Ottoman was small sized and production was usually consumer goods. Most production was in the form of labour intensive industries and trade was based on artisanship (esnaf-zanaatkar). Industry in Anatolia was carried out together with the trade of the produced goods. Ownership of industrial enterprises were mainly in the hands of the foreigners. The bourgeoisie (the class which improved capitalism) was those foreigners and some minorities and a handful of Turkish Ottoman citizens. Foreigners and minorities didn’t share a feeling of nationalism or any belonging. Non-industrial activities had more returns and were profitable such as banking, loaning, trade, transportation, land and residence speculation 1913:The law for encouraging theindustry. Industry was located in the west. İstanbul 55%, İzmir 22%, rest 23% Sectoral Distribution:Food: 70.3%, Textile: 11.9%, Leather: 8.3% DEU, Faculty of Business Department of Economics

  46. Someimportantdatesabouteconomicregulations 1839 Reforms (Tanzimat) Heavydebts in 1850. 1856 Reforms (Islahat) 1856 Ottoman Bank founded in England with British capital and in 1863 French participated. 1860 an attemptfor ‘Ottoman Enlighment’(Young Turks) 1863 agricultural credit cooperatives (like a bank) wereformedbased on domestic capital 1876-1878 First Constitutional reform (meşrutiyet) first constitution (kanun-i esasiye) parliaments were constituted. 1888 cooperative was converted to Ziraat Bank. No more domestic taxeswereenforced. Incentivesfor industrial production such as free land, exemption from the taxes of machineries; taxes be paid in installmentswere put intoeffectfor a national market. Ottoman Empire was forced to adapt to free market but this couldnt cohere with the nature of the Ottoman economicand social organization. DEU, Faculty of Business Department of Economics

  47. Financial andMonetarySituation Duringitslast 50-60 years, the Ottoman Empire was not able to control its public finance, foreign trade and money supply. Itdidn’thaveindependentmonetaryandfiscalpolicies. The public revenues less than the expenses; resulting to heavy debts. Total foreign investment in services and agriculture in Western Anatolia. Revenues had to be gained from what? Only left is agriculture but problem there too. ( 40 percent of public revenues in 1909-1910 were from agrcultural taxes) Half of the taxes were from the rural but public expenses to the rural area was very little. NO taxes from the minorities and foreignersweretaken! No taxes from the merchants, businessmen, industrialists, and Istanbul residents. Money regime was of various coins and banknotes issued by the OsmanlıBankası. In addition a lot of foreign money also was in use.During the 1st world war, the government took over the authority of issuing banknotes and increased money supply. This triggered inflation and caused to abolish the use of golden lira. («kötüpara, iyiparayıkovdu»). DEU, Faculty of Business Department of Economics

  48. FOREIGN DEBTS Foreign debts were not used in production. Foreign debts: 53.8 percent French, 11.2 Brittish, 10.4 German,the rest 24.5 Galata bankers Those foreign debts were used for current expenses. When not paid, the foreigners put hand on the public revenues. Result? A council made up of foreign and Ottoman representatives to govern the foreign debts and revenues: Düyun-u Umumiyeİdaresi (General Liabilities Administration) founded in 1881- MuharremKararnamesi (decree). FOREIGN INVESTMENT Foreign Investment was mainly in banking, insurance, trade, transportation (railways), electricity and water supply and maintenance. Most foreign investment done in railways (68 percent) Banking and insurance was the second. Noindustrial investment! The returns of the investment: more than 10 percent in banking and insurance and second place 8.7 percent in giving loans to the Ottoman government. Very profitable business!!! All foreign investment : 44 percent French, 34 German, 17 Brittish, rest is Belgian and American. FOREIGN TRADE Deficit. Transfer of the country’s resources to other countries Main trading partner: UK Exports: Agricultural products (cotton, tobacco, hazelnut), mining products Imports: Textile, clothing, food (sugar, flour) DEU, Faculty of Business Department of Economics

  49. An effort for national capital accumulation was made during the last 10 years of the Ottoman Empire. But system of the ownership of capital; the use of capital; agricultural regime weren’t sufficient for such an economic development. In other words, there was an incompatibility between the Ottoman administration system and the sources of capital accumulation. Even the concessions and the grants provided to the local national capitalists were not enough to enhance the capital accumulation in the country. DEU, Faculty of Business Department of Economics

  50. Whycapitalismdidn’tcomeout in theOttoman? The land system didn’t allow capital accumulation as did in the Europe. Continuous wars set off by the Ottoman Empire prohibited agricultural surplus for capital accumulation. In the dawn of the 17th century, the Ottoman Empire came to the end of acquiring new territories and thus revenues from new territories stopped. Concurrently the world trade moved from the Mediterranean to the other ports. Influx of gold and silver bullions from America to Europe deteriorated the prices and led to inflation. The Ottoman had to open its market to the goods produced in the Western Europe countries where industry started to advance rapidly. This caused to further decay of present industry in the Ottoman economy. Commercial capitalism occurred only by the minorities and foreigners. Profits gained from industry, trade and services werenot transferred to production. DEU, Faculty of Business Department of Economics

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