Discuss the effects of the global capitalist economy on the Middle East up to World War I

The capitalist economy traces its history back to 17 th and 18th century Western Europe, where
technological breakthroughs, rapid industrialization and the organization of trade mark the
beginning of a new global economic system (Gelvin, 39). Europe benefitted from first movers
advantage in introducing this system of a global economy, while capitalist ideologies diffused to
regions around the world, including the Middle East. The effects of the global capitalist economy
on the Middle East are diverse; some would argue that capitalism brought development and
modernity to the region. However, an objective argument points to the data suggesting economic
divergence between Western Europe and the Middle East starting in the 1750s 1. In this essay, I
will look at the Ottoman Empire, challenging the two dominant narratives that explain the
economic stagnation at the dawn of global capitalism; the first blaming external factors,
specifically the Western domination of Ottoman trade and economic resources through
capitulations and colonialism, and the second blaming internal factors, specifically Sharias
(Islamic law) inability to adapt to the demands of a global capitalist economy.
Throughout the 16th and 17th centuries, the Ottoman economy was in many ways similar to any
pre-industrial economy. The main occupation was agriculture, and trade was limited to a specific
class of wealthy notables that exchanged luxury goods on their trips to Mecca and Medina for
Haj (religious pilgrimage). Most of the land of the Middle East was owned by the Ottoman
Empire and peasants worked on this land as tenants. Subsistence farming was a common
practice; any surpluses were taken by the state and distributed amongst other neighboring
provinces (Hanioglu, 19). The Ottoman Empire encouraged self-sufficient practices. They did so
by extending rural security, repairing and building infrastructure, making tax collection more
efficient and less harsh, removing barriers to intraregional trade, establishing government
monopolies, among other things (Gelvin, 38).
The main characteristic of the Ottoman Empire at the end of the 18 th century was decentralization
and fragmentation. The Empire consisted of a strong regional hold in Constantinople, where the
sultanate was based, and several quasi-independent local states that adhered to various
administrative patterns. The Ottoman legal system depended upon two major sources; Sharia, or
traditional Islamic law, and Sultanic Law, or Qanun (Hanioglu, 18). The Ottoman military units,
the janissaries, were largely ineffective and in need of reform.
Two Ottoman leaders, the Sultan Selim III, and Mehmet Ali who ruled in Egypt, were the first to
recognize the need for military and administrative reforms in order to strengthen the Ottoman
Empire and enable it to participate in a growing worldwide capitalist economy. Specifically,
administrative reforms were needed to strengthen the governments ability to collect taxes, to
produce mobilize economic resources for trade, and to protect the empire from potential
uprisings.
1 one example of such data is sited in the first page of The Long Divergence by Timur
Kuran: As of late 1750, the picture was different. Around that time the purchasing power of
the average worker in London or Amsterdam was only twice that of the average worker in
Istanbul, the largest metropolis and leading commercial hub of the Eastern Mediterranean.
The gap between Middle Eastern and western living subsequently widened, until World War
I.

In the case of Egypt, Mehmed Alis destruction of the Mamluk rule brought about 5 major
reforms that supported the integration of Egypt into a modern capitalist system. These reforms
include land tenure, that corresponded with the capitalist view of land as an economic
commodity, tax reforms and the introduction of a modern, Western-style bureaucracy, army and
military reforms, as well as constitutional change in 1876 (Khalidi, Lecture 9/11). Mehmed Alis
reforms brought about mixed economic results. For example, tax revenues were not sufficient to
finance the bureaucratization and improvement of the central state structure, and Mehmed Ali
had to borrow from foreign powers to
The reforms suggested by Sultan Selim III and Mehmed Ali focused on building state structure
and diffusion of technology without the development of commercial institutions that supported
economic integration and trade.
The government and legislative structure of the Ottoman Empire were significant barriers to the
regions integration into the world global economy. The Ottoman Empire spanned a large
geographic space, was largely fragmented, and did not enjoy a strong central state structure that
controlled areas of the periphery. The rise of the global capitalist economy was strongly tied to
the rise of Western European nation-states that were able to organize economic resources and
create industry that competed on the global markets. One effect of the integration into the global
capitalist economy is the reforms undertaken by Mehmed Ali in Egypt, and the tanzimat reforms
in the Ottoman Empire under Sultan AbdulHamid, that developed modern centralized
governments that ran an empire fit to enter into the global capitalist economy.
Instrumental to the involvement in the global capitalist economy is the improvement of
transportation and information systems. Beginning in the 1750s, the Ottoman Empire invested in
infrastructural development to build a transportation network that spanned across the Empire.
Among the major acheivements of Sultan asdkjf;l is the establishment of the Hijaz railway,
which connected Hijaz to Constantinople and went through major Middle Eastern cities
including Damascus.
However, for the development of major infrastructure, the Ottoman Empire had to borrow vast
sums of money from Western powers to implement projects. In addition, they had to borrow cash
in order to finance their bureaucratic reforms by paying employees and military officers salaries.
This borrowing placed major debt burden on the empire, and forced the government to grant
concessions to foreign powers, and access to natural resources. Like oil concessions in Iran, or
access to the Suez canal in Egypt under Mehmet Ali.
In many ways, the Ottoman Empire remodeled and Westernized its system of central state in
order to participate in the global capitalist economy. However, some of the modernizing projects
proved to be a great burden on the economic resources of the empire, and ended up having a
reverse effect. Instead of allowing the Ottoman Empire to advance to Western economic
standards, the bureaucratization of government, improvement of infrastructure and
modernization of the army contributed to the economic divergence of the Middle East from the
Western world because they created systems of economic power where the West was able to take
advantage of the East.

The introduction of a modern capitalist system in the Ottoman Empire was supported by the
large-scale government reforms. In the case of Egypt, Mehmed Alis destruction of the Mamluk
rule brought about 5 major reforms that supported the integration of Egypt into a modern
capitalist system. These reforms include land tenure, that corresponded with the capitalist view
of land as an economic commodity, tax reforms and the introduction of a modern, Western-style
bureaucracy, army and military reforms, as well as constitutional change in 1876. Mehmed Alis
reforms made supported brought cash crops,
The treaty of Balta Liman, also known as the Anglo-Ottoman treaty is a trade agreement signed
by the Ottoman Empire and The United Kingdom in 1838. The treaty is a classic example of
Western dominance over the Ottoman economy through trade agreements, because it conditions
the Ottoman Empire abolish all monopolies and allow British merchants full access to Ottoman
markets. However, the agreement doesnt stipulate equal concessions by the British; in fact, the
United Kingdom held in place its protectionist policies on agricultural markets. in practice, a
3% tariff was levied on British goods entering the Ottoman market, whereas Ottoman exports
were taxed at a rate of 60%. (Honglulu 70)
The Ottoman Empire faced a major challenge to its integration into the global economy. In the
1750s, the Ottoman Empire was a geographically diverse region that lacked a strong central
government that could effectively organize trade and tax collection. In order to participate in this
global economy, reforms were needed to improve and strengthen the power of the central
government, to increase the power of the military in order to fight against invasion threats, and to
build modern infrastructure to enable for trade. These types of reforms took place in Egypt under
Mehmet Ali, and in the Ottoman Empire under Sultan Abdulhamids tanzimat efforts.
There were no serious efforts to increase industrial production in the Ottoman Empire and Egypt,
however, European trade regulations did not allow for the Middle East to become a significant
industrial power. While Britian and France protected their economies, they forced the Ottoman
Empire to remove all barriers to trade, not allowing them to establish protectionist policies to
boost infant industries.
The Ottoman Empire relied on an old system of money lending that did not charge interest. It
was not until the Tanzimat era until the Ottoman Empire truly joined the global capitalist
economy through the introduction of Western-style financial institutions. The first Ottoman bank
was established. Trading in stocks was also established under Sultan AbdulHamid. By the time
financial reforms came under the Tanzimat, trade with the Ottoman empire was monopolized by
the Christian and Jewish minority because of the capitulations.
The capitulations are economic, commercial, legal and religious rights and privileges granted to
representatives of foreign powers in the Ottoman Empire. They were originally established under
Sultan Selim the Great as a way to foster diplomatic ties with the West. The capitulations placed
non-Muslim Christian and Jews as the heads of Western trade, while the Ottoman Muslims
remained secondary players in trade with the West.
Though the capitulations offer compelling reasons for why trade with the Muslim world lagged,
other internal factors also explain why Muslim merchants were never able to establish profitable

and lasting commercial relationships with the West. Firstly, polygamy and Islamic inheritance
laws diffused individual wealth, while Western merchants were able to capitalize on growing
personal empires.
Taxation was one of the major sources of revenue for the Ottoman government. The tanzimat
reforms under Sultan AbdulHamid aimed at strengthening the control of the central government
and consolidating the ability to collect taxes. However, religious insitutitions, awqaf, people
were able to evade taxes. The government also did not establish a central bank that could make
money through interest on lending.
The modernizers of the Ottoman Empire, Sultan AbdulHamid and Mehmed Ali, recognized the
need for large-scale reforms to strengthen the power of the central state and establish a
government able to leverage resources for economic competition with the west. However, these
rules did not understand that the modernization of systems that enable economic dominance does
not translate to the modernization of private economic lives of individuals within the empire.
Although the reforms put in place the infrastructure to support large-scale trade and business
corporations, individuals did not accept or embrace this capitalist ideology. Many of the
Egyptian farmers rebelled when they were forced to switch the production of cash crops for
trade. Additionally, merchants maintained Muslim religious traditions of business that were
based on personal interactions and relationships of kinship, which barred many Muslim
communities from establishing long term trade with the West.
What started out being Western economic dominance of the Middle East through the era of the
Ottoman Empire became direct occupation and colonialism after the fall of World War I. Tracing
the various effects of the introduction of a global capitalist economy in the Middle East raises
important questions, certainly what Bernard Lewis says what went wrong?. It is difficult to
balance between the arguments that blame Western colonialism and economic dominance
entirely for the economic stagnation of the Middle East. Similarly, it is implausible to adopt an
essentialist stance that inherently blames the Middle East, and its adherence to Islamic Sharia
law, for economic stagnation.
(Gelvin 10) the commercial revolution in Europe. Factores that encouraged the commercial
revolution: technological breakthroughs, such as the use of the compass and adjustable sails and
multiple masts on ships; new institutions for organizing trade and banking, the introduction of
new crops from tomatoes and potatoes to tobacco.