The Decline of the Ottoman Empire: How a Superpower Lost Its Grip

The fall of the Ottoman Empire begins: a quiet takeover in Galata

On a cold morning in the early 1880s, merchants in the Galata district of Istanbul noticed something small but strange.

The men walking from shop to shop to collect certain taxes no longer looked or acted like normal Ottoman officials. Some spoke French first and Ottoman Turkish second. Their paperwork was covered in neat columns of numbers and seals from foreign consulates. Many came from local Christian or Jewish families that worked for European banks.

Above them sat a new institution with a long, dull name: the Ottoman Public Debt Administration.

On paper, it was only a technical arrangement. A council of European representatives would manage part of the empire’s revenues to ensure that interest on foreign bonds got paid on time. In reality, it meant this:

• The Ottoman state had defaulted on its loans.
• As part of the deal to avoid complete financial isolation, it had handed control of major tax streams – salt, tobacco, stamps, silk, some customs duties – to a foreign-run office in its own capital.
• Money that used to flow into the sultan’s treasury now flowed directly to bondholders in London and Paris. The government got what was left.

For ordinary Istanbulites, it was just another layer of bureaucracy. For anyone thinking in macro terms, it was a red flag.

A century earlier, the Ottomans had lived off tributes and customs duties from three continents. Now they were like a heavily indebted company whose creditors had moved into the finance department, taken the good accounts, and left management to fight over scraps.

This is not the start of the decline of the Ottoman Empire. It is closer to the end—by 1881, the empire had been sliding for nearly two centuries. But this scene captures the core problem in one image:

A state that once had strong state capacity – the ability to tax, enforce, and mobilize at scale – had allowed that capacity to leak away, bit by bit, until foreign creditors literally ran parts of its tax system.

To understand how that happens to a giant, we need to go back to the beginning and see how the Ottoman machine was built, what it was good at, and why it was so hard to update.

🗺️ Ottoman Empire history: how the system actually worked

Geography and scale

At its height in the 16th and 17th centuries, the Ottoman Empire covered:

• Most of the Balkans (today’s Greece, Bulgaria, Serbia, Bosnia, etc.).
• Anatolia (most of modern Turkey).
• The Arab lands from Iraq to the Mediterranean, down to today’s Yemen.
• Much of the North African coast from Algeria to Egypt.

It controlled the Bosporus and Dardanelles straits, which link the Black Sea to the Mediterranean. If you wanted grain from southern Ukraine to reach the wider world, or Russian naval forces to leave the Black Sea, you went through Ottoman waters. That’s a classic geographic chokepoint.

Population was on the order of 30+ million people at its peak – huge for a pre-industrial empire.

Everyday life: slow, local, religiously structured

A few features of daily life mattered for how this system behaved.

1. Most people were peasants. The economy was overwhelmingly rural. Villagers in Anatolia or the Balkans grew grain, olives, grapes, tobacco, cotton, and raised animals. They paid taxes mostly in kind (a share of the harvest) or simple coin. Travel was slow. A caravan could take weeks to go from Aleppo (in today’s Syria) to Istanbul. Information moved with people and paper, not wires.

2. Istanbul was a mega-city for its time. With several hundred thousand residents, Istanbul was one of the largest cities in the world. It was dense, smoky, crowded with mosques, markets, and wooden houses. The city depended on grain imports from the Black Sea and Egypt. A bad harvest or disrupted shipping could mean bread riots.

3. Religion structured politics and daily life. The sultan ruled as both emperor and, from the 16th century onward, caliph – political leader of Sunni Islam. Islamic law shaped courts, inheritance, family law, and public norms. At the same time, the empire was religiously mixed: Orthodox Christians in the Balkans, Armenians and other Christians in Anatolia, Jews in many cities. The Ottomans managed this through the millet system: recognized religious communities ran their own schools, courts (for personal matters), and social services, as long as they paid taxes and accepted the sultan’s authority. This kept peace in the short term, but it also kept identities distinct.

4. How the state raised soldiers and money

   The Ottoman state in its classic form had three key tools:

   • The devshirme and Janissaries. The devshirme was a system where Christian boys from Balkan villages were taken as a tax in humans, converted to Islam, and trained for state service. The best went into the elite infantry corps, the Janissaries, or into the bureaucracy. Removed from local ties, loyal only to the sultan, they were a professional ruling class.

   • The timar land system. In principle, all land belonged to the sultan. He granted revenue from villages – the right to collect certain taxes – as timars to cavalry officers called sipahis in exchange for military service. It was less about owning land, more about holding a revenue assignment while you stayed loyal.

   • Central control over trade routes. The empire sat astride old land routes between Europe and Asia and sea routes through the eastern Mediterranean and Red Sea. Caravans and ships paid customs duties. The state also signed capitulations – treaties with European states that let their merchants trade on favored terms (low tariffs, legal privileges). When the Ottomans were strong and sat in the middle of global trade, this arrangement worked for them.

These arrangements gave the Ottomans high early state capacity: they could pull in taxes and men from a vast area and direct them toward military campaigns or big projects.

⏳ Timeline

Act I – The Ottoman Empire at its peak: high tide and hidden limits

The classic high point is the reign of Suleiman the Magnificent (1520–1566).

Under Suleiman:

• The Ottomans took Baghdad from the Safavid Persians.
• They overran much of Hungary.
• They besieged Vienna in 1529, threatening the Habsburg dynasty (the ruling family of Austria and later Austria-Hungary).
• They dominated the eastern Mediterranean, from Algeria to the Levant.

Suleiman himself was highly educated, wrote poetry, and personally led campaigns. European ambassadors described a court that was disciplined, hierarchical, and confident.

From a strategy point of view, the empire was executing a simple, effective playbook:

• Expand into rich agrarian lands on its borders.
• Grant new timars to loyal officers.
• Feed the devshirme with fresh talent.
• Use control of trade routes to extract tolls.

But even at this peak, some hard limits were already in place:

• Geography set the outer bounds. Beyond Hungary lay Central European terrain where local powers like the Habsburgs could match Ottoman logistics. Beyond Iraq lay Persian rivals on difficult ground. The attractive targets were finite.

• The succession mechanism was fragile. Early sultans often killed their brothers to prevent civil war. Cruel, but effective in producing one clear ruler. Over time, practice shifted to keeping potential heirs locked in palace apartments, isolated from real life. They survived, but came to power with no administrative or military experience.

• Institutions were turning into interest groups. The Janissaries started as celibate professional soldiers. Over time, they married, entered business, and passed positions to their sons. They became a corporate body with its own economic base and political agenda.

• The external environment was changing. European powers on the Atlantic – first Portugal and Spain, then the Dutch and British – were shifting long-distance trade to sea routes around Africa and across the Atlantic. That reduced the importance of the overland Silk Road and the eastern Mediterranean.

From the late 1600s, the Ottomans ran into tougher resistance. The failed second siege of Vienna in 1683, followed by the Treaty of Karlowitz in 1699, forced them to give up large parts of Hungary and Transylvania to the Habsburgs. It was a clear sign that military momentum had shifted.

Many historians point to this period—the late 17th century—as when the Ottoman Empire started to decline. But to people in Istanbul or Aleppo at the time, this felt like a setback, not the beginning of a centuries-long slide. That’s how slow-moving structural problems usually feel.

Act II – When did the Ottoman Empire start to decline? The 18th-century drift

In the 1700s, the problem was not that the Ottomans “did nothing.” They fought wars, reformed in bits and pieces, and kept governing. The problem was that the structure of incentives in the system made most changes shallow.

Two concepts explain a lot of what happens here: principal–agent problems and rent-seeking.

• The principal–agent problem is simple: the people at the top (principals) want one thing; the people actually doing the work (agents) often want another. Unless you align incentives and monitor well, agents will pursue their own interests.
• Rent-seeking is when people focus not on creating new value, but on extracting more from existing arrangements – using political power, insider access, or legal privileges.

You can see both everywhere in the 18th-century empire.

Tax farming and provincial bosses

As the old timar system weakened, the state increasingly used tax farming (iltizam). Instead of sending officials to collect a village’s taxes, the treasury auctioned off the right to collect them for a certain period. The tax farmer paid the state upfront, then collected what he could from locals.

• For the central treasury, this was quick cash.
• For the tax farmer, this was a license to squeeze as hard as possible, especially with short-term contracts.
• For peasants, it often meant over-taxation.

This is textbook principal–agent:

• Principal (the state) wants long-term, sustainable tax extraction.
• Agent (the tax farmer) wants to maximize personal profit before his contract ends.
• Monitoring is weak; rural society is opaque.

Tax farmers and local notables – often called ayan – built their own armed followings and started acting as semi-independent power brokers. In many provinces, they were the real authority people dealt with, not distant Istanbul.

That is rent-seeking at scale: instead of investing in improved agriculture or trade, local elites invest in political clout and muscle to control tax nodes and squeeze them.

Military lag and Janissary resistance

Meanwhile, European armies kept innovating. Prussia, Austria, and Russia built more disciplined infantry, better artillery, and more professional officer corps. Russia, under rulers like Peter the Great and Catherine the Great, pushed south, seeking warm-water ports and access to the Black Sea.

The Ottomans did import advisors and try to copy some European techniques. Reformers like Sultan Selim III in the late 1700s tried to build new-style units trained with European drill and weapons.

But every meaningful reform hit the same wall:

• Janissaries feared losing their privileges and stipends.
• Religious conservatives worried that copying “infidel” practices would undermine Islamic norms.
• Local elites knew that a modern centralized army would be better at taxing and disciplining them.

So the “agents” whose cooperation was needed to modernize had strong incentives to block modernization. They mutinied against Selim III and later reform efforts.

Russia and legal erosion

While this played out, Russia used war and diplomacy to chip away at Ottoman positions on the Black Sea.

The Treaty of Küçük Kaynarca in 1774, after another Russo–Turkish war, did several damaging things at once:

• It gave Russia the right to protect Orthodox Christians in the Ottoman Empire – an open-ended excuse to interfere in Ottoman internal affairs.
• It allowed Russian merchant ships to use Black Sea and Ottoman straits, weakening Ottoman control over regional trade.
• It led, later, to the loss of Crimea, which had been an Ottoman vassal.

This wasn’t yet colonization. But it was a legal and geopolitical downgrade. The empire’s sovereignty now came with asterisk clauses and foreign “protector” roles attached.

In balance-of-power terms, the Ottomans were shifting from being a feared player to being an object in great-power negotiations – the beginning of what Europeans would later call the “Eastern Question”: what to do about a weakening empire sitting on strategically critical real estate. By the 19th century, European diplomats had a blunter nickname for the empire: the “Sick Man of Europe.”

Act III – The Janissaries destroyed: Mahmud II’s radical reform

By the early 1800s, the ceiling became a wall.

Napoleon’s 1798 expedition to Egypt showed that a European army could land in Ottoman territory, beat local forces, and rewire administration without asking permission. Even more painful, Muhammad Ali – an Albanian Ottoman officer sent to stabilize Egypt – used the chaos to build his own modern army and govern Egypt as a practically independent ruler. He taxed harshly, conscripted peasants, imported European expertise, and nearly overran Ottoman Syria.

In Istanbul, Sultan Mahmud II (reigned 1808–1839) knew the empire could not keep operating with a 16th-century military structure in a 19th-century world. But between him and a modern army stood the Janissaries.

For decades, the Janissary corps had resisted change:

• They blocked new training.
• They opposed new units.
• They used their position in the capital to pressure and sometimes overthrow sultans.

They had become a classic rent-seeking interest group, using their historic prestige to protect their cash flows and status against reforms that would benefit the state as a whole.

In June 1826, Mahmud decided to break them.

After announcing a new, European-style military unit, he had the edict read to the Janissaries. They responded in the traditional way: overturning their cauldrons, the symbol of their corps, and rioting.

This time, Mahmud had prepared. He gathered religious approval from key scholars, branding the rebels as enemies of order. He called in loyal cavalry and artillery units.

Artillery batteries around the city shelled the Janissary barracks. Fighting lasted for hours. When it was over, thousands of Janissaries were dead or captured. Their corps was formally abolished in what the regime called the “Auspicious Incident.” Their barracks were demolished. The very word “Janissary” was banned in official use.

From a systems perspective, Mahmud had just done what many reformers dream of: eliminating a powerful agent that blocked modernization.

But a few problems remained:

• The state still lacked a deep pool of trained officers and NCOs.
• The fiscal base was still weak and dependent on outdated taxes.
• Local power holders remained semi-autonomous.

He had removed one big constraint, but the environment – foreign threats, tech gap, fiscal instability – was still harsh.

Act IV – The Tanzimat reforms: modernization on borrowed money

After Mahmud, a new generation of bureaucrats and sultans launched the Tanzimat era (“reorganization”), roughly from 1839 to 1876.

Their goals:

• Modernize the legal and administrative system.
• Create a more regular tax regime.
• Build a modern army and infrastructure (roads, telegraphs, railways).
• Convince European powers that the empire was a “civilized” state deserving of independence and respect.

Key moves included:

• The Gülhane Edict (1839), which promised more predictable taxation, regular conscription, and security of life and property for all subjects, Muslim and non-Muslim.
• The Imperial Reform Edict (1856), which pushed further toward legal equality for non-Muslims, reorganized provincial councils, and aligned parts of Ottoman law with European commercial norms.

These were serious attempts to upgrade the “operating system” of the state.

But reforms cost money. Railways, new courts, conscript armies, and telegraphs all require capital and expertise.

The Ottomans did not have a domestic industrial base able to fund this. They did have something Europe wanted: strategic alignment.

In the Crimean War (1853–56), the empire fought alongside Britain and France against Russia. To finance the war, the Ottomans began issuing bonds on European markets, borrowing heavily from London and Paris bankers.

This created a classic soft budget constraint dynamic.

• A hard budget constraint means: if you don’t have the money, you stop.
• A soft budget constraint means: if you overspend, someone (a bank, another state) will likely bail you out or roll over your debts, so the cost of overshooting feels low.

For the Ottoman government:

• Foreign loans made it easy to avoid painful choices: raising taxes at home, cutting court luxuries, shrinking the army, or canceling projects.
• There was always another bond issue to cover gaps, often encouraged by European bankers who earned fees and were backed by their governments’ diplomatic muscle.

Through the 1860s and early 1870s:

• Debt piled up.
• Some money funded useful infrastructure and reforms.
• A lot went to cover budget deficits and military spending.

When harvests were bad or international conditions worsened, there was no buffer. In 1875, the empire announced that it would suspend full interest payments on its debt. For European bondholders, this was a violation of the implicit deal: “We lend, you pay, and our governments support you.”

Diplomatic pressure mounted. At the same time, nationalist uprisings in Bosnia and Bulgaria and another war with Russia (1877–78) added military and political strain.

The resolution was the Decree of Muharrem (1881). In exchange for a restructuring of the debt, the empire accepted the creation of the Ottoman Public Debt Administration – that foreign-run tax office from the opening scene.

• The OPDA was run by a council representing creditor states.
• It directly controlled revenues from salt, tobacco, stamps, certain customs duties, and more.
• It employed thousands of staff inside the empire.

In one move, the Ottomans had partially outsourced their fiscal core to foreign principals whose goal was to extract predictable payments, not to develop the empire.

The principal–agent chain now looked like this:

• European bondholders (principal) → OPDA (agent but in practice strong) → Ottoman taxpayers.
• Ottoman government was almost a side-player: it got the leftovers.

This is what a soft budget constraint looks like at the end of the cycle: you avoid saying “no” for decades, then someone else shows up and says “no” for you, on harsher terms.

Act V – The “Sick Man of Europe”: Abdulhamid II and great-power politics

Around the same time, the empire lost much of its remaining Balkan territory. The Treaty of Berlin (1878) recognized or expanded the independence of Romania, Serbia, Montenegro, and Bulgaria. The Balkans, once a core recruiting ground for devshirme and tax revenue, were largely gone.

European powers – Britain, France, Russia, Austria-Hungary – managed this process through constant negotiation and crisis management. They did not want the Ottoman Empire to be too strong, but they also feared a total collapse that would trigger a general war over who got which pieces. So they propped it up in some situations and carved it up in others. This is balance of power dynamics in action.

Inside this pressure cooker, Sultan Abdulhamid II (reigned 1876–1909) tried a different mix:

• He briefly allowed a constitution and parliament in 1876, then suspended them in 1878 and ruled as an autocrat.
• He used censorship, informers, and tight control over the press to manage opposition.
• He invested in schools, telegraphs, and railways, including the Hijaz Railway from Damascus toward Medina, which served both strategic and religious symbolism.
• He emphasized his role as caliph and tried to bind Muslims across the empire (and even in British India) to him through a kind of early Pan-Islamic messaging.

It was a rational attempt to rebuild legitimacy among Muslims while using technology to strengthen the center.

But Abdulhamid was still boxed in:

• The OPDA controlled much of his revenue.
• European powers blocked some military projects and intervened when they felt like it.
• Non-Turkish and non-Muslim groups often saw him as a step backward from the Tanzimat equality promises.

Underneath, new elites were emerging: officers, doctors, engineers, and civil servants educated in modern schools, some in Europe. Many of them concluded that the problem was not just details of policy, but the entire autocratic structure.

They would soon be called the Young Turks.

Act VI – The Young Turks, World War I, and the final collapse

The Young Turk movement started as a loose network of exiles and dissidents who wanted constitutional government and a more modern, centralized state. One key faction, the Committee of Union and Progress (CUP), eventually dominated.

In 1908, part of the Ottoman army stationed in Macedonia mutinied, angry at corruption and fearful that Abdulhamid would use them to crush reform. Troops marched, and the sultan, under pressure, restored the constitution and reconvened parliament. This is known as the Young Turk Revolution.

For a year or two, Istanbul experienced a burst of political energy:

• Censorship eased.
• Newspapers and political clubs multiplied.
• Different ethnic groups hoped they might negotiate a fairer place in a reformed empire.

But the structural problems did not go away:

• Bulgaria declared full independence.
• Austria-Hungary formally annexed Bosnia.
• Greece and other Balkan states continued to press territorial claims.
• The great powers still viewed the empire as a weak link in the system.

Inside the CUP, a more hard-edged Turkish nationalist wing gained control. Their basic view:

• The empire had over-privileged non-Muslim minorities and accepted too many humiliating foreign concessions.
• The only way to survive was to centralize power and build a more homogenous core around Turkish-speaking Muslims in Anatolia and parts of the remaining provinces.

This alienated many Arab, Armenian, and other elites. Instead of solving the multi-ethnic problem, the new rulers sharpened it.

Then came the big strategic bet: World War I.

In 1914, Europe split into two main alliance blocks:

• The Allies: Britain, France, Russia (later joined by Italy and others).
• The Central Powers: Germany and Austria-Hungary.

The Young Turk leadership, especially Enver Pasha, chose to join the Central Powers. Their reasoning:

• Germany had shown impressive military performance and industrial strength.
• Russia was a traditional enemy.
• If the Central Powers won, the Ottomans might recover lost territories and prestige.

It was a huge gamble taken from a weak position:

• The army was partially modernized but still uneven.
• The economy was fragile.
• The empire was geographically exposed: Caucasus front against Russia, Mesopotamia and Palestine against Britain, Dardanelles and Gallipoli against Allied naval power.

The war went badly:

• Early offensives in the Caucasus ended in disaster.
• The British eventually took Baghdad and later Jerusalem.
• Naval and land battles around the Dardanelles were bloody; the Ottomans held Gallipoli but at great cost.
• Under cover of war, Ottoman authorities deported and killed large numbers of Armenians in 1915–16, a catastrophe for the Armenian population and a permanent stain on the state.

By 1918, the Central Powers collapsed. German and Austro-Hungarian surrender left the Ottomans exposed. Allied warships sailed into Istanbul. Foreign troops occupied parts of Anatolia and the Arab provinces.

The Treaty of Sèvres in 1920 proposed to carve up even the Anatolian heartland into zones of Greek, Italian, French, and Armenian control, leaving only a small inland Turkish zone. This was the ultimate humiliation—the complete dismemberment of the “Sick Man of Europe.” For the Ottoman dynasty, it was existential.

At this point, a group of nationalist officers led by Mustafa Kemal – later known as Atatürk – rejected the treaty and organized a resistance movement based in central Anatolia. Through a series of wars against Greek armies and diplomatic negotiations with the great powers, they forced a revision.

The Treaty of Lausanne in 1923 recognized the Republic of Turkey within most of Anatolia and Eastern Thrace. The Ottoman sultanate was formally abolished in 1922, and the caliphate in 1924.

The empire was gone. A smaller, more national state took its place. The rise and fall of the Ottoman Empire—from a tiny Anatolian principality in 1299 to a global power to a collapsed state in 1922—had taken over six centuries.

What caused the Ottoman Empire to decline? The real reasons

If we strip away romantic language and nationalist myths, the decline of the Ottoman Empire looks less like a moral tale and more like a systems problem. So what caused the Ottoman Empire to decline? Here are the key factors:

1. Early institutions were optimized for a world that disappeared. The devshirme–Janissary system, timar land grants, caravan taxes, and capitulations to European merchants worked in a 1500–1600s environment of land wars, pre-industrial technology, and overland trade. Once Atlantic trade, industrialization, and modern finance restructured the global game, those same institutions became constraints.

2. State capacity eroded long before the map shrank. Tax farming, provincial notables, and later the OPDA hollowed out the state’s ability to see and tax its society directly. The empire still looked big on a map, but its fiscal core was weak.

3. Principal–agent and rent-seeking dynamics blocked reform. Janissaries, tax farmers, local bosses, and later some foreign-backed commercial groups all benefited from the existing setup. They used their leverage to resist or water down reforms that would have strengthened the center but reduced their privileges.

4. Soft budget constraints delayed adjustment but made the crash worse. Access to foreign credit, especially after the Crimean War, allowed the state to finance wars and reforms without fully fixing its tax base or spending. Politically, this was the path of least resistance. Economically, it led to default and external control over key revenues through the OPDA.

5. Great-power balance-of-power politics kept the empire on life support – until they did not. Britain, Russia, Austria-Hungary, and France wanted an Ottoman Empire weak enough not to threaten them, but strong enough to prevent rivals from seizing critical territory. This “managed decline” kept the empire alive longer than pure internal logic would suggest. Once World War I scrambled the balance and the CUP gambled on Germany, that external support disappeared.

The actual “collapse” after 1918 was the fast final stage of a much longer process in which the state’s fiscal and administrative muscles had withered, while the environment kept getting harsher.

🧠 Mental models & lessons

Let’s link this story to the five models we chose and make them useful outside Ottoman history.

1. State capacity

What it is: State capacity is a state’s ability to reliably collect taxes, enforce rules, and mobilize resources across its territory. It’s about practical control, not just legal sovereignty.

In this case: Early on, the Ottomans had high state capacity through the devshirme, Janissaries, and timar system. Over time, tax farming, provincial notables, corruption, and finally the OPDA eroded that capacity. By the late 19th century, much of the empire’s revenue and enforcement power sat with local bosses or foreign administrators, not the central government.

Lesson: Maps and titles lie. When judging a state, company, or organization, focus on its ability to execute: can it see what is happening, tax or charge for it, and enforce decisions? The moment you outsource too much of that to agents or external partners, you are living on brand and inertia.

2. Principal–agent problem

What it is: The principal–agent problem arises when the people in charge (principals) want one outcome, but the people doing the work (agents) have different incentives and more information. Without good monitoring and aligned rewards, agents pursue their own goals.

In this case:

• The sultan and reformist ministers wanted a modern, disciplined army; the Janissaries wanted to keep hereditary posts and stipends.
• The central treasury wanted stable tax revenue; tax farmers wanted to maximize short-term extraction.
• European bondholders wanted safe interest payments; OPDA officials focused on protecting those revenue streams even if it hurt Ottoman development.

Each time, agents could block or distort reforms. The center lacked the monitoring tools, alternative personnel, and fiscal resources to discipline them.

Lesson: Whenever your success depends on agents whose incentives diverge from yours, you must either redesign the system (new contracts, new monitoring, new personnel) or accept that they will use their position for themselves. Hoping “shared mission” will override concrete incentives is a good way to drift into Ottoman-style stagnation.

3. Rent-seeking

What it is: Rent-seeking is when individuals or groups focus on capturing existing value – through political power, legal privileges, or control of bottlenecks – instead of creating new value.

In this case:

• Janissaries extracted salaries, tax exemptions, and political influence from their historic role, while resisting changes that would have increased the army’s actual effectiveness.
• Tax farmers used their contracts to squeeze peasants beyond sustainable levels because that maximized their short-term profits.
• Foreign merchants and creditors used capitulations and the OPDA to lock in low tariffs and privileged access, even as the empire’s fiscal health worsened.

These behaviors were rational for the individuals involved. Together, they made the system less dynamic and more fragile.

Lesson: In any complex system, ask: where are the rents? Who can get paid simply by sitting on a gate, not by improving the product? Over time, those positions attract smart, politically savvy people – and they will fight to preserve their gate, even if it slowly kills the larger organism.

4. Soft budget constraints

What it is: A soft budget constraint exists when an organization can overspend without immediately facing the consequences, because some outside actor will bail it out or roll over its debts. This encourages risky or lazy decision-making.

In this case:

• After the Crimean War, European credit allowed the Ottomans to fund reforms and wars without building a robust domestic tax base or cutting spending.
• Politicians learned that when deficits appeared, they could borrow more instead of making unpopular choices.
• Eventually, the empire defaulted. The “bailout” came in the form of the OPDA, which imposed discipline but on terms that reduced sovereignty and limited future options.

It’s the classic “borrow your way out of pain until someone else moves into your finance department” story.

Lesson: Cheap and easy money is not neutral. In a weak institutional setting, it often delays necessary reforms and concentrates power in creditors’ hands. Whether you run a company, city, or state, treat long-term reliance on external bailouts as a structural risk, not a neutral tool.

5. Balance of power

What it is: The balance-of-power model says that in a system of states, major powers try to prevent any one state from becoming dominant. They will sometimes support weaker states to block stronger rivals, and they often manage weaker states’ internal affairs to keep the overall balance.

In this case:

• For much of the 19th century, Britain and others supported the territorial integrity of the Ottoman Empire not out of love, but to block Russian expansion toward the Mediterranean.
• The empire survived several crises because great powers preferred a weak Ottoman buffer to a rival’s gains.
• When World War I reordered all priorities and the empire joined the “wrong” side, that support vanished. There was no longer any balance-of-power reason to preserve it in its old form.

The empire’s survival was tied to other players’ strategic calculations as much as to its own choices.

Lesson: If your organization or country exists in a competitive ecosystem, understand how others’ strategic interests shape your room for error. You may be protected for a time because someone powerful finds you useful. That protection can vanish overnight if their incentives change. Building internal strength is harder in the short term, but it is the only insurance that does not depend on someone else’s spreadsheet.

Seen through these lenses, the decline and fall of the Ottoman Empire is not some exotic, old-world drama. It is a familiar pattern: early success builds institutions; those institutions become interest groups; the environment changes; the system resists adaptation; cheap credit papers over the gap; external players manage the decline until a shock pushes everything over the edge.

Frequently asked questions

This article was produced with AI assistance and human editing. Last updated Dec 14, 2025.