Twenty-Five Lectures on Modern Balkan History

Lecture 9: Economic and social changes in Balkan life

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Not only political ideas, but also economic innovations came to the Balkans in the 1800s. In the long run, these resulted in better communication and transportation systems, increased agricultural yields, expanded industrial output and more jobs, but in the short run economic change created significant social dislocation.

Traditional Balkan leaders and social institutions had a hard time dealing with change for several reasons. The pace of change accelerated during the nineteenth century, much of it was difficult to understand, and many of the forces behind it originated in distant places. This lecture covers the period of this transformation, between the end of the 1700s and the year 1878.

Changes in trade

In the 1700s, foreign trade was a minor part of the Ottoman (and therefore the Balkan) economy. Muslims were discouraged from trading with the Christian states of Western Europe, and prior to the industrial revolution there were limited markets for exports anywhere. The Ottomans exported luxury goods like silk, furs, tobacco and spices, and had a growing trade in cotton. From Europe, the Ottomans imported goods that they did not make for themselves: woolen cloth, glassware and some special manufactured goods like medicine, gunpowder and clocks. Most trade took place within the vast empire stretching from the Danube to Africa, Arabia and Persia. By one estimate, only 4 percent of the Ottoman gross national product was exported, and the Ottomans imported less than they exported. In the 1700s, France dominated Western European trade with the Eastern Mediterranean. The Austrians had the second greatest volume of trade, thanks to the long border they shared with the Turks.

The Napoleonic Wars disrupted trade patterns for decades, not only during wartime but afterward: even during the 1830s recovery was still underway. Between 1840 and 1870, however, Turkey's foreign trade doubled as a share of the national economy, and the value of commerce rose even more as the overall economy expanded. In the 1840s, the combined annual value of imports and exports was about 13 million pounds sterling; by the 1870s it reached 40 million; and on the eve of World War I, it was over 60 million despite the loss of most of Turkey's Balkan lands.

Trade not only grew, but its nature changed. During the 1800s, the Ottomans began to import more than they exported, although the serious gap between imports and exports only appeared after the 1870s. Bulk goods and manufactures replaced luxuries in the import trade. Cotton cloth and cotton yarn from British mills made up more than half of total imports, followed by food products like sugar, coffee and rice. Agricultural goods made up more than 90 percent of Ottoman exports, typically Mediterranean crops like grapes, figs and olive oil. France never recovered from wartime losses and ceased to be Turkey's leading commercial partner. The British stepped in to replace the French: from a pre-war level of about 10 percent, the British share of Turkish trade rose, eventually reaching 45 percent in 1880. Austria (and Germany) remained important partners as well. This expansion in foreign trade brought little wealth to Muslim Ottoman merchants. The state was unwilling to create a new wealthy class and instead granted commercial licenses to Greeks, Bulgarians, Armenians and other non-Muslim residents of the Ottoman Empire. Thanks to their local knowledge, these Balkan traders rapidly displaced the Western Europeans who had dominated commerce in the 1700s.

These developments caused social dislocation in the Balkans and the Ottoman Empire in several ways.

Agriculture

Agricultural exports offered the Balkans the best opportunity to sell goods on the world market, thanks to the growth of Western European cities as markets. However, local conditions limited the value of this opportunity for three reasons: inappropriate farmland, inadequate transportation and ineffective social institutions.

The farmland in the Balkans was thin and rocky, and produced smaller crops than land in the North European plain. Traditional Balkan farms were small and inefficient: the holdings of an individual peasant consisted of small plots of land scattered around the village. The yield on such farms was too low to create an excess for export. In areas of flat land, plots could be combined and worked as one large field (especially where landlords had direct control of some land, legally or illegally) but in wooded or mountainous parts of the Balkans (like Serbia) this was not practicable.

The second problem was transportation. Even if larger crop yields could be grown in large fields, the lack of roads or navigable rivers often made it impossible to carry the harvest to markets or ports. The Wallachian region in Romania was unusual: it combined good farmland on a flat plain with access to the nearby Danube River, so that grain crops could easily be shipped to the West. The addition of railroads to address this communication problem took place only in the latter part of the 1800s.

Finally, Balkan institutions were not conducive to farming for export and profit. The Ottoman feudal system was based on subsistence agriculture: local landlords took a portion of the diverse crops raised by self-sufficient peasants for their own use. The system was not easily altered to accomodate specialized agriculture, even if good farmland and transportation was available. Peasants expected to raise and consume a variety of crops; if a peasant family began to raise a single cereal grain, there were no economic mechanisms in place to import the other meat, vegetable and dairy products they needed to eat. Where intensive agriculture was possible, it also tended to further destabilize the Ottoman system because it enriched local notables whose interests were at odds with the central state apparatus. Among figures like the boyars in Romania, wealth from grain sales fostered social and cultural aspirations that led in turn to a nationalist revival and a challenge to the Ottoman status quo. In a sense, this was little different from the earlier phenomenon of the chiftlik: local notables and ayans like Pasvanoglu achieved wealth and power by retaining revenue at the local level, and denying it to the central state.

Industrial change

Of course, enclosure of fields and the dislocation of rural dwellers was a major step in the Industrial Revolution in Western Europe. Displaced peasants became factory workers in the enterprise financed by wealthy landlords. In the long run, Western European standards of living rose. In the Balkans, however, the spread of capitalist agriculture did not lead to an industrial revolution. This was due to other aspects of the socio-economic changes that took place in the 1800s.

In the early modern period, manufacturing in the Ottoman Balkans was in the hands of guilds. Each guild governed a trade such as iron-working, shoe-making, tanning, silk-weaving and so on (typical of Ottoman associations, guilds also had roles in local government, the tax system and religious rituals).

Importation of manufactured goods from the West, especially from Britain, was a major blow to many guilds. In 1816 (just after the end of the Napoleonic Wars) Britain exported some 250,000 pounds worth of goods to Turkey; by 1835 that figure had risen ten-fold, to some 2.7 million pounds; and by 1845 the figure had nearly tripled again, reaching 7.6 million pounds. Much of this consisted of yarn or cloth.

Goods made using Western factory techniques cost less than traditional hand-made goods, and this put some guilds out of business. Western values and fashions also played a role in a decline in Ottoman industry: Balkan and Turkish customers began to prefer cotton cloth (imported) over silk cloth (woven domestically) and later switched to ready-made Western-style clothing.

As an example, we have available figures showing the collapse of the silk-weavers' guild in Bursa, an Anatolian city near Istanbul: while not in the Balkans, it is representative of the trend. In 1815 the Bursa silk-weavers produced about 100,000 pieces of cloth on their looms. In the 1830s, imports of Western cloth began to cut into their market. At the same time, competing Western demand caused the cost of important dyes (like indigo) to double. The price of raw silk also went up making it even harder for the Turkish weavers to get by. By the 1840s silk cloth production had fallen to 20,000 pieces, and in the 1850s it fell to 12,000 pieces.

Ottoman industry was not always simply eliminated by Western competition: sometimes it was transformed. While silk weaving was in decline, production of silk thread increased by a factor of four in the same period (1815-1845). French capitalists established a modern spinning mill in Bursa in 1834 and by 1860 there were 46 steam-powered mills in the city. By 1870, the output of silk thread was eight times what it had been in 1815.

However, this kind of new industry was fundamentally different from the old weavers' guild. It produced only raw goods, which were exported to the West for advanced processing before the final product was reimported to Turkey for sale as cloth and clothing. Ownership of the expensive new mills was in foreign hands. The workforce also was substantially different. The traditional weavers were heads of households, worked at home and acted as officers in a guild that fulfilled important roles in the society: training apprentices, ensuring quality of goods, performing rituals and collecting taxes. Mill workers filled none of these autonomous, socially important roles. The work was hard and unpleasant; there was no opportunity to advance, certainly not to own one's own business. Former weavers refused to enter the mills, so the workers were drawn from low-status groups: at first, migratory factory workers from Greece or Armenia, later women and girls drawn from the poor countryside nearby. These workers lived in dormitories and contributed little to the local city economy. They left after short careers, often to marry; their mill experience was a merely temporary interaction with a modern economy.

Failures of state leadership

The Ottoman state was not very successful in dealing with modernization. As we will see next week, there was a major reform movement in nineteenth century Turkey, but it concentrated on legal codes and failed to master the intricacies of international investment, foreign loans and rural development. Issues of this kind are common around the globe today, but these were new problems in the 1800s and solutions were sought by a process of trial and error.

By the 1830s, Western European capitalists were investing in factories and other enterprises in the Ottoman Empire. After 1850, Western investors began to make loans to the Turkish government itself. The Ottoman state borrowed foreign money for the first time in 1854, to offset the high costs of the Crimean War. This set the pattern for state borrowing in the Balkans: the Turkish government (and later the successor states) tended to borrow in times of crisis, and used the money to pay for the state apparatus itself (especially military forces) and not for investments like factories that would later produce income. When the loans came due, there were no new sources of revenue to pay them off: in many cases new loans were taken out simply to pay off old loans.

By 1875 the Ottomans owned 200 million pounds sterling to foreign investors; the interest payments alone amounted to 12 million pounds a year, approximately half of the state revenues. In 1874, thanks to a combination of agricultural failure, military costs from unrest in the Balkans and a worldwide economic depression, the Turkish government could no longer pay even the interest due on its loans and went into formal bankruptcy. To preserve the Ottoman state and Balkan stability, and to ensure payment to Western Europeans holding Turkish state bonds, the Great Powers took partial control of the Turkish revenues in 1875 through an international agency, the Administration of the Ottoman Public Debt. In order to restore access to credit, the sultan had to grant the OPDA control over major parts of the state income, money that thereafter left the country.

As a result of this bankruptcy, state finance came to share in the problems of private industrial development. In both cases, decisions about modernization in Turkey were made by foreigners who were interested in profits, not development. In both cases, future investment followed channels not necessarily to the best advantage of the local people, and the fruits of investment tended to leave the country.

If social and econmic modernization failed to take off in the Ottoman Empire, it was not because the Ottoman state was uniquely incapable of dealing with the novelties of modern life. In the new Balkan states, events followed rather similar paths despite their success in replacing the Turkish government with national regimes. Most of the industrial development in the new Balkan states took place later than the 1870s; much of it extended into the twentieth century, and will be dealt with later. In the area of agrarian change, however, we can look at trends in the 1800s.

Land reform

In the transformation of the silk industry, urban craftsmen were replaced by migrant workers coming from the countryside to take jobs in the mills. Rural people were available for this kind of low-paid, low-skill work because social and economic modernization was creating a surplus of rural labor. While census figures are lacking or inaccurate, it is fair to say that the population of the Balkans doubled during the 1800s thanks to improvements in health care, especially reductions in death from famine and epidemic.

However, there were still not enough industries to create a demand for that potential labor force. Most of the surplus population remained in rural areas where the shift to agriculture for export often reduced the demand for farm labor, or at least reduced wages. With so many people trapped in rural situations, land reform became a growing issue in the Balkans, especially in the new successor states. When popular, nationalist movements expelled the Turks, the newly independent populations often expected that political revival would be accompanied by economic revival. In practice, this was very difficult to achieve, as we can see by looking at developments in Serbia, Greece and Romania. In each of these new states, the new political system was called upon to solve socio-economic problems, and land reform was usually the most important issue.

Serbia

Dynastic disputes and factional fighting were mainstays of Serbian political life in the 1800s. However, all parties agreed that peasant farms were the foundation of national life. Profits from peasant entrepreneurs underlaid the national cultural revival, and peasant soldiers fought in the revolution from 1804 to 1816. The new Serbian state was expected to solve the rural economic problems that had been one source of dissatisfaction with Ottoman rule.

In the years before Serbia achieved self-rule, most peasant families had been self-sufficient and existed outside any kind of modern economy. They lived in remote forest areas without roads. The only significant trade involved livestock; the only significant use of money was the payment of certain cash dues. Many peasants lived in a "communal joint-family" known as a "zadruga" in which two or more nuclear families shared a farm, the necessary work and its produce. The zadruga was a useful institution under traditional conditions: it provided a pool of labor to cover all necessities, even when illness, war-time service or the need to drive herds to distant pastures took some members of the clan away from the farm.

The number of zadrugas steadily declined after 1830 when new crops (like potatoes and maize corn), better communications, trade opportunities, cash money and credit began to penetrate Serbian village life. The self-sufficient zadruga was suited for a farm that raised mixed crops and livestock, but farmers increasingly raised a single crop, often for cash sale. Population pressure reduced the number of animals on farms by about 50%. It was easier for a single nuclear family to make the decision to plant new crops, or to take out a loan for more land or some craft venture, than it was for all members of a zadruga to do so. Other sources of strain included the growth of industrial jobs which led some family members to leave the village, and the resulting differences of income among family members. In addition, the growth of population put a strain on the available land.

The Constitutionalist regimes of the middle of the 1800s, with their Liberal economic tendencies, were partly responsible for dislocations in rural areas because they took steps to end legal restrictions on trade and improve roads. However, it was never their intention to jeopardize the peasant backbone of the country. After all, most members of the leading classes were themselves merely peasants who had grown rich.

Serbian ambivalence -- or simple misunderstanding -- about the path to modernization can be seen in the legislation passed by the Serbian assembly, the Skupstina. To promote industry, Serbia in 1873 adopted the metric system and a new currency, and moved to attract foreign investors with grants of ten-year tariff-free monopolies. The same session of the assembly, however, passed laws intended to shield peasants from the kind of abuses that became possible in the unfamiliar climate of cash and credit, and even from their own mistakes. Such laws had been passed periodically to protect and preserve peasant life all through the century. The "Law of Six Days Plowing" prevented any lender except the state from accepting the core 8 1/2 acres of a farm as collateral for a loan. Such a measure kept safe the country's social foundations, but it also retarded the concentration of capital in the countryside and was an obstacle to industrialization.

Combined with population growth and the subdivision of land, laws like this worked to maintain large numbers of family farms but kept them small. By 1897, 58% of Serbian farms occupied five hectares or less. This was well below the accepted figure of 7-8 hectares needed for a family's support, and future generations of Serbs moved to industrial jobs in the growing cities as quickly as they could find them. Nearly all, however, retained ties to the small family farm in their home village, which offered a safe haven to which they could retire when financial hard times hit.

By deliberate policy, then, Serbia addressed its socio-economic problems by becaming a nation of small peasants, and did so with a minimum of political debate because such a course suited the national electorate. In the short term this satisfied peasant needs; in the long run, it prevented industrialization and modernization, and institutionalized the sources of peasant poverty.

Greece

Greece entered its period of new-won independence in a somewhat different state than Serbia, but land and land reform were still leading political issues. In 1833, the Greeks took control of a countryside devastated by war, depopulated in places and hampered by primitive agriculture and marginal soils. Just as in Serbia, communications were bad, presenting obstacles for any wider foreign commerce.

Unlike Serbia, Greece had a substantial wealthy class of rural notables and island shipowners, and access to 9,000,000 acres of land expropriated from Muslim owners who had fled or been killed. This land was at the government's discretion and represented over 80% of the country's arable acreage. The new state needed to establish legitimate land ownership quickly, bring the land back into cultivation to restore both the national economy and sources of tax revenue, and meet the land needs of refugees and war veterans (many of whom had been promised land in recognition for their service).

As in Serbia, the new Greek government deliberately adopted land reforms intended to create of class of free peasants. The "Law for the Dotation of Greek Families" of 1835 extended 2,000 drachmas credit to every family, to be used to buy a 12-acre farm at auction under a low-cost loan plan. The planners were inexperienced and had failed to anticipate inflation: so much available credit drove up the price of land. As a result, only half of the expected 150,000 families bought land and most of these families could buy only 7-8 acres. In 1871, an additional law completed the transfer of land from the "National Estates" to the public. This time there were no auctions: families merely filed government claims, often claiming land that they had been occupying and working for many years in the absence of a clear legal title. Unoccupied land was also available for claim by landless families. Over the next forty years, about 350,000 families secured 700,000 acres of land under this program.

Obviously, like the Serbian program, the Greek plan succeeded in creating a class of free peasants, but also like Serbia, the farms created were too small to be viable. Unlike Serbia, other economic measures were available to offer industrial employment, thanks to the strengths of traditional Greek commerce. The state improved shipping facilities at Piraeus, the port of Athens. New roads and railroads were constructed. After export outlets became available, most Greek farmers shifted to growing cash crops suitable for export: tobacco, olives, wine and dried fruit. In the 1880s, foreign investment capital was brought in to build up a cotton textile industry. A major outlet for rural overpopulation after the 1880s was emigration to the United States: by 1914 a quarter million Greeks had come to America and were sending dollars back to Greece.

The biggest setbacks for Greece involved the political commitment toward the Greek irredenta, co-nationals still living under Turkish rule. As we will see later, substantial resources were diverted from internal improvements to the military because of the hope to liberate other Greeks. At the same time, refugees from regions under Turkish rule streamed into the Greek Kingdom where they contributed to overpopulation. Additional land came under Greek control in 1864 (the British-held Ionian Islands) and 1881 (Ottoman-held Thessaly and Epirus). Each such episode required some degree of economic adjustment.

The twin burden of a nationalist foreign policy and domestic economic reform eventually proved too much for Greek resources. In 1897, Greece lost an ill-advised war with Turkey. The defeat followed years of a depressed world market for agricultural goods, which had already brought the country to the brink of bankruptcy due to the reduction in exports. After the defeat, the state went into formal bankruptcy when it was unable to repay foreign loans. However, by accepting an International Financial Commission of Control made up of European representatives of the country's creditors, Greek credit was restored at some cost to national pride, and the resulting fiscal stability actually improved the climate for investment.

Like Serbia, Greek leaders made decisions that produced a nation of small holders and small merchants. The greater possibilities of export made this choice somewhat more successful in Greece, even though the level of industrialization remained low.

Romania

Land reform policy followed a different line in Romania and was less successful. More accurately stated, the reform was implemented in ways that sustained the power of the landholding boyar class, the same class that wrote the laws. The boyars paid attention to land and the rural economy at the time of Romania's autonomy. The Agrarian Law of 1864 emancipated the peasants and gave them title to some farm land, but left the best land in the hands of the former landlords. Those boyars also received state compensation payments for the land they gave up, which they were able to use to advance their activity in the international grain trade.

Like Greek and Serbian farmers, Romanian farmers faced the problem of surviving on farms that were too small. Figures for Moldavian farms after the Law of 1864 show that only 72,000 peasant holdings (those define as "four oxen" farms) had the necessary 7-8 hectares. There were over 200,000 "two oxen" holdings consisted of 6 hectares, and 134,000 "one ox" holdings of only three and a half hectares (half the necessary size). Another 60,000 families owned only enough land for a house and garden, without any fields at all.

In order to have enough land to raise the crops they needed to survive, most peasants had to pay high rents to use additional land that was now owned outright by their former boyar masters. There was also an absence of credit institutions, and peasants needing loans often found themselves paying usurious rates, sometimes to boyars and sometimes to Jewish merchants who often were the only sources of ready cash in rural areas since there were no banks. Once they fell behind in payments, peasants found themselves trapped in conditions which differed little from the serfdom that they had recently escaped. In contrast, the 5,000 wealthy landlord families now had legal title to half the arable land in the country. Such a system perpetuated both economic and political inequality.

Real reform did not come to Romania until after the great peasant revolt of 1907, an event that demonstrated the depths of misery and dissatisfaction in rural areas. Beginning in Moldavia, peasant mobs attacked Jewish houses and stores, and sacked the estate houses of the boyar landlords. Before the unrest ended a month later, the army had been forced to turn artillery against villages and over 10,000 people were killed.

After the revolt, the government passed measures to end abuse of the peasants. Agricultural contracts were to be regulated at fair terms, size limits were placed on leased land to make more of it available to small farmers, and state agencies were created to assist peasants in buying land or renting it through cooperatives. Because enforcement remained in the hands of the old political class, however, little really changed. It was not until after World War that effective land reform measures finally went into effect. And in Romania, like Serbia and Greece, the kind of true industrial growth that might have solved the problem of rural poverty was far in the future.

Conclusion

Economic factors thus played a role as great or greater than political factors in changing Balkan society from 1800-1878. In both cases, novel forces led to social dislocations that could not be locally controlled, interacted with Balkan conditions in unexpected ways, and produced results that were not necessarily to the advantage of the Balkan peoples.

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This page created 19 November 1996; last modified 11 June 2009.

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Copyright 1996 by Steven W. Sowards