A central question of economic history since the 19th century has been why capitalist development (often identified with modern transformation) took place in western Europe and not in other parts of the world, notably, in China and Islamic lands, which experienced commercial expansion and the beginnings of industrial development. Diverging patterns of institutional change in the West and elsewhere, representing divergent responses to changing conditions of trade and production, have attracted historians’ attention especially at moments of dramatic institutional shifts such as those of the 19th century. These moments coincided with the establishment of the hegemony of one region over others. With respect to the Ottoman Empire, Islam and its institutional deficiencies—most notably, of its law—have been invoked as explanations for the region's inability to achieve modern economic development.Footnote ¹ Scholars have portrayed a pragmatist state culture as responsible for the empire's longevity, while the same scholars also held that culture responsible for impeding liberal market development by allowing intensive state intervention in the economy.Footnote ²

Culturalist perspectives are projections of a 19th-century liberal worldview and its antinomies on to a bifurcated view of world history, with Europe representing the privileged realms of market development, rational and secular law, and a state presence circumscribed by the rule of law, while non-Europe describes a sphere of economic stagnation where nonrational religious law and interventionist governments impede the development of market institutions. Culturalist perspectives of irreconcilably divergent trajectories in world history, in which economic development presupposes the adoption of Western institutions and the abandonment of Islamic or statist ones, have often provided justification for Western presence in non-Western areas.Footnote ³ These perspectives are challenged by tradist explanations of Middle East history, which point to the adverse effects of European trade and its relegation of the region to perpetual economic subordination. Yet in viewing European trade penetration as the sole agent of change, tradist perspectives concede to the notions of the region's stagnation prior to European expansion and lack of any internal dynamics of its own.Footnote ⁴

A rethinking of economic history requires transcending notions of grand divergences between Western and non-Western regions. It implies a perception of modern transformation as a universal historical process that is not confined to the West. It refers to the continuous exploration of new institutional configurations that emerged to cope with the challenges posed by commercial expansion, state formation, and interstate competition throughout Eurasia since the 15th century (and later in other continents).Footnote ⁵ The Ottoman Empire partook in this world-historical context: its survival depended on the abilities of different actors (including officials, merchants, artisans, and cultivators) to generate innovative institutional configurations (financial instruments, land tenure and taxation systems, weapon technologies, agricultural techniques, etc.) to continuously order and reorder social reality. One can trace a shared history of different regions responding to the demands of a new world-historical context and, in doing so, relating to each other. A rethinking of economic history also implies understanding institutions as embedded in societal dynamics rather than as disembodied instruments for pursuing particular interests or responding to state or market imperatives.

Economic histories of the Ottoman Empire, most notably for the 19th century, do not attach sufficient importance to processes of institutional change and innovation in the context of changing societal relations and forms of state power. Institutional changes in this period were not limited to the adoption of Western laws and institutions nor were they simply reforms hastily put together by desperate administrators of a sinking empire in response to European threats or pressures. For one thing, they involved a radical recasting of the laws and other rules ordering property relations on land and commercial transactions.Footnote ⁶ While institutional construction in earlier periods was primarily the work of individual jurists, in the 19th century juridical councils, judges, and local councils prevailed.Footnote ⁷ These constructions were grounded in arguments about assimilating customary practices or conventions, arguments that underplayed the extent of change and were careful not to provoke social reaction.

Law is always part of historical processes. In the Ottoman context, legal practice represented a kneading together of fiqh precepts with concerns of statecraft. In the environment of commercial expansion, legal and institutional changes sought a balance between demands for wealth generation or economic growth, on the one hand, and distributional concerns related to the adverse effects of commercial expansion, on the other. Max Weber identified the moral/religious dimension of Islamic law as preventing that law from being rationalized and used to formulate institutional solutions to address changing societal conditions. Yet moral concern was a central feature of statecraft since the 16th centuryFootnote ⁸ and remained so during the modernization of the 19th century, not only in the Ottoman Empire but also throughout Europe.Footnote ⁹ It evolved into an imperative of societal survival in the new commercial environments, increasingly focusing on the state and distancing itself from religion. In the 19th century, codified Ottoman laws spoke to these very “modern” moral concerns of statecraft rather than to a reified vision of Islamic law. Such concerns were painstakingly construed in legal texts through incessant qualifications and delimitations of property and commercial transaction rules (e.g., payment of debts and foreclosures), with an eye toward minimizing risks for weaker parties threatened with dispossession.

An economic history that takes institutions and law seriously should also take the state seriously as a political arena of power relations wherein different societal claims are staked, dominances established, and consent or resistance registered.Footnote ¹⁰ In the 19th century, actors with conflicting claims confronted each other to negotiate or contest the terms of the law and institutional orderings, seeking remedies for injustices and the betterment of living conditions. In the process, law was assimilated into individual lives; it was living law. In the Ottoman context, local councils in the 19th century—like the courts in earlier periods—were settings in which such assimilations and remakings of the law took place. In the Land Code of 1858, these processes are reflected in numerous addendums, amendments, and special provisions; these texts carry the imprint of conflicts, of social struggles.Footnote ¹¹ This characteristic rootedness in societal practice may help to explain the continuation of elements of both the Land Code and the Mecelle in the legal practices of former Ottoman territories long after the empire's collapse.

Institutionalist economic history represents political or moral interventions as constraints on economic growth, thus confining itself to a very narrow vision of modern development. For instance, due to such constraints the Ottoman Land Code did not result in large-scale dispossessions of peasant cultivators or in dramatic upheavals in the land market. Any adverse effects such “constraints” might have had on the establishment of full-fledged capitalist land relations were largely offset by societal gains associated with the prevention of major disruptions in the social fabric. In Anatolia and the Balkans during the 19th century, the effort to minimize such disruptions influenced the patterns of rural development, which was premised on small holdings rather than large ones. It may also help to account for present-day trajectories of capitalist development in these regions (most notably, in Turkey) with their relatively diffused allocations of wealth and resources, including land. In this sense, one may think of capitalist market development actualized by institutions as ongoing processes: an institutional arrangement that represents a constraint in one historical context may provide openings for hitherto unexplored venues of market development in another context.