Transformation of the financial institutions: A comparison between Great Britain and the Ottoman Empire

The evolution of military strategy and technologies in the early modern period, made wars longer and more costly. The political and financial reforms that took place at the end of the XVII. century, increased Britain's financial capacity. The British could easily finance wars by public debts and pay these debts thanks to the reforms made in the administrative bureaucracy and the new taxes well determined by the social and economic conditions of the country. The expansion of international trade and the development of the British economy during the mercantilist era facilitated the collection of these taxes. Thus, Britain succeeded in increasing its financial capacity by using new sources of income to expand its war capacity. Initially, it became the leading military and political power of continental Europe, and then of the whole world. The Ottoman Empire, which built a compatible financial system in line with the economic realities of the empire in the Classical period, when the population was largely rural and engaged in subsistence production; started to falter in the middle of the XVII. century when wars became more costly. Although the Ottoman government tried to expand the empire's fiscal capacity by reforming established institutions in the following periods, effective reforms implemented by rival states could not be imitated since the basic philosophy of the Ottoman economy did not change. The reforms made on the settled financial institutions contributed to the empire's self-sufficiency until the Crimean War, however, it could not prevent the empire's losses of territory. Nevertheless, the first external loans were borrowed during the Crimean War and thus the process leading to the financial bankruptcy of the empire began.