Did the Command Economy kill the Khalifah?

An Economic and Social History of the Ottoman Empire by Prof. Halil Inalcik is an excellent resource for anyone who wishes to understand, in detail, the nature of Ottoman economics. It is particularly interesting, for example, to note that one of the reasons that the author gives for the decline of Ottoman economic power relative to Europe was that the Ottomans had implemented a command economy and found themselves unable to compete with the dynamic free markets of Europe.

Inalcik describes the silk and dye trades — two of the most important industries to the Ottoman economy — and how the government had tightly regulated these industries: controlling the quantity, price and even quality of the output. Even though markets were rapidly expanding and there was increasing demand for new and cheaper products, the Ottoman central planners refused to allow this demand to be met and went so far as to regulate the quantities of silk and other fibres that could be used in particular textiles. Indeed, it became necessary for craftsman in the 15th century to actually bribe Ottoman officials in order to be allowed to produce more than what the central planners deemed necessary or to produce textiles of differing quality to that legislated by the state. This kept prices artificially high, but it also left considerable demand unmet and exposed markets under Ottoman control to cheaper imports from the rapidly growing economies of Europe.

Of this issue, Inalcik writes:

This case illustrates how the Ottoman economy was bound under the strict control of a strong centralist state to follow a typical medieval economy with a fixed market and production levels. This also explains, I believe, the dichotomy between stagnant Ottoman industries and commerce and the dynamic European market economy which first appeared in Italy and the Low Countries and then in other Western countries. Thus, it was European market expansion and competition which stimulated new technologies producing cheaper and better quality goods. These changes secured Western economic supremacy and the decline of Eastern industries. Ottoman woolen and silk industries and mining were severely affected by the growing import of cheaper Western products at the end of the sixteenth century.

Whereas the market economies of Europe had led to the development of more efficient means of production, initially in textiles and metallurgy but then in all sectors in the Industrial Revolution, the commnd economy of the Ottomans had led to stagnation because, when the state is controlling your production, there is little incentive to innovate. Whilst there were obviously other factors that led to Ottoman decline — such as war with the Russians and later in World War I — it seems almost certain that a failure to develop a free economy was one of the contributing factors.