Legalizing Extortion:

1
Legalizing Extortion

• Containing Armed Bedouin Tribes by State
  Regulated Protection Payments in Ottoman Gaza
  (1519-1582).

Work in progress
Haggay Etkes (The Hebrew University) (November
1st, 2007)
2
Economic Growth and Secure Property Rights

• Social scientists agree that secure property
  rights promote economic growth.
• Producers, whose property rights are insecure,
  are exposed to raids and extortion of strongmen.
• This paper uses a unique dataset from Ottoman
  Gaza to identify channels, through which securing
  property rights generated economic growth.

• The data from Ottoman Gaza includes details about
  taxation, production and bribes, and thus

3
Main Results

• After the conquest of Syria and Egypt (1516-7)
  the Ottomans legalized and regulated payments
  villages made to armed tribes in Gaza.
• Initially non-bribing villages produced less cash
  crops but more cheap crops and paid higher
  taxes to the state than the bribing villages.
• The consolidation of the ottoman authority
  (1516-60) alleviated the violent threat. Thus
• The state reduced the net bribe rates from 4.3
  (c. 1519) to approximately 2.5 (1531-57) of
  total tax revenues.
• The state reduced tax rates of the non-bribing
  villages.
• The non-bribing villages Increased production of
  cash crops
• An improvement in the technology of banditry
  (1570s) undermined the states rule and adversely
  affected the tax collection from non-bribing
  villages.

4
Paying Off Violent Organizations

• Extortion and racketeering by violent
  organizations are pervasive phenomena in many
  historical and contemporary societies.

• Sometimes states, even strong states, prefer to
  to bribe violent groups, instead of fighting them.

• These transactions are generally hidden, and are
  not recorded or reported.

• The Ottoman policy of regulating and recording
  payments made by villages to armed tribes in 16th
  century Gaza, provides an opportunity to explore
  this usually concealed phenomenon and its
  interaction with taxation and economic growth.

5
The Ottoman Empire (14th-17th Centuries)
The Ottoman Empire (c. 1515)
The province of Damascus Greater Syria is the
borderland of the desert and the frontier of the
rebellious Bedouins. Imperial decree sent from
Istanbul, 1578 (Heyd, 1960).
Few days after capturing Damascus, sultan Selim
the Grim ordered to seize the Mamluk tax books
and officials and to resume tax collection.
6
The Ottoman Policy Towards Bedouin Tribes

• Nomad tribes posed a constant threat to kingdoms
  and empires throughout the history of the Middle
  East, and other regions (China, Roman Empire
  etc.).
• During the late Mamluk period Bedouins tribes
  often raided villages and caravans and even
  pilgrims on their way to Mecca.
• If a state tried to pursue the Bedouins, the
  latter could vanish into the desert beyond its
  reach of the state.
• During the 16th century the Ottomans used a
  combination of military forces and
  economic/political rewards and punishments in
  their efforts to curb, and often to co-opt,
  Bedouin tribes.
• This paper uses data extracted from Ottoman tax
  records to analyze the the interaction between
  bribes paid to armed tribes, taxation by the
  state and agricultural production in the Gaza
  sub-district (1519-82).

7
The Ottoman Policy in 16th Century Gaza
Economic Rewards

• Allocation of entitlements to shares of tax
  collected from villages and grain fields to two
  rival tribes.

Military Forces

• Fortresses (Gaza, Bayt Jibrin K. Yunis).

Lets take a look at the data
8
Main Primary Source
Estate

• Cadastral records (Tahrir Defters) from 1519,
  1531, 1548 1557.
• These documents reflect the economic and
  demographic information the Ottomans collected on
  the district.
• They were the blue print for collecting taxes
  and dividing the tax revenues among tax
  recipients.

• Tax Recipients
• Zeamet (cavalryman) 71.2.
• Arab Sawalma (tribe) 13.
• Arab Bani Ata (tribe) 10.4.
• Waqf Awlad Muhammad 1.7.
• Waqf Sultan Kaitbey 2.4.

9
Economic Growth and Decline in Tax Revenues as
Reflected by Ottoman Tax Revenues
Average Tax Revenues on crops (Akçe) of Villages
in the Gaza sub-district (1519-82)
All periods
(
37
Villages
)
1519-57(tahrir) 1582 (50 v.)
First
4
periods
(
116
Villages
)
12000
10000
8000
Tahrir Defters
Waqf Accounts
Akçe
6000
1560-70s

Acquisition of
1548
/
57
announcement of
1516

Ottoman conquest
.
4000
firearms by Bedouins
,
local regulations
,
which
1520

Revolts involves
and revolt of the Bani
protect peasants
'
the Bani
'
Ata

Sawalma
'
Ata Tribe
property rights
Tribes in the fighting
.
2000
Consolidation of the Ottoman Rule
0
1557 (tahrir)
1557 (waqf)
1519
1531
1548
1582
1525
1538
1548
1555
1557
1582
10
Who Paid?
11
How Much Was Paid?
12
The Tribes Balance
As the Ottomans established their rule, they
reduced the tribes net share in the total tax
revenues from 4.35 (1519) to about 2.5
(1531-57).
13
Regulating Protection Payments The 1557
Regulations

• The lawful procedure of collecting protection
  payments
• It is strictly forbidden for the tribesmen to
  enter villages in groups, so they would not
  impose unbearable dues on the villages.
• 30-40 Bedouin horsemen should arrive to the edge
  of every paying? village.
• Tax revenues are to be collected by the main tax
  recipient, usually a cavalryman.
• The owner should take the defined tribes share
  out of the village.
• The tribes should receive their share from the
  hands of the main tax recipient.
• The transaction should be recorded.
• (Tahrir defteri No. 304)

Clearly, this regulation aimed at protecting the
peasants from a probable harm by the tribesmen.
14
Model Set Up

• Players
• A village produces a rural good (Y) using labor
  (L).
• A tribe exerts costly effort (eT) in raiding
  the village.
• A state sets tax (t) and bribe (q) rates, and
  exerts costly effort (eS) in protecting the
  village.

Booty Rate
15
Model Solution of Stage IV
Tribe
State
FOC
Booty Rate in internal solutions
16
Village
s.t. Booty
Consumption
(Production
Net of Tax
and Booty)
No Profitable Raid
A
B
Protected
Exposed
Retrenching
Village
Villages
Village
17
Model - Results

• Villages could be either exposed to or unexposed
  to raids.
• An exposed village could could be protected from
  raids by
• Bribing the tribe equilibrium only in repeated
  interaction when the parties are sufficiently
  patient.
• Paying high taxes to induce a revenue maximizing
  state to protect the village.
• Retrenching (cutting back) production of
  lucrative products and thus rendering itself an
  unprofitable target for raids.
• In a multi-village setting, an increasing ability
  of the state to coordinate the bribing strategies
  across villages could
• Lower the bribe rates.
• Reduce tax rates of the non-bribing villages.
• allow the non-bribing villages increase
  production.

Increasing lump-sum taxes (table 3)
The concept of coordination is similar to
Bernhiem and Winstons (1990) formalization of
collusion in multi-market setting.
18
Figure 9 Changes in Tax Rates () of Bribing and
Non-Bribing Villages
Table 9-A Full Sample (N453)
Figure 9-B Balanced Sample (N312)
Table 9-C Balanced Sample No Switchers (N244)
Note Balanced Sample B includes villages that
switched from bribing to non-bribing status,
while balanced sample C includes only villages
that did not change their bribing status.
19
Identifying Retrenchment of Non-Bribing Villages

• According to the retrenchment hypothesis,
  exposed non-bribing villages cutback their
  production to avoid raids.
• An ideal identification of retrenchment
  hypothesis involve changing the level of
  exposure to raids of otherwise identical
  villages.
• The following identification strategy draws on
  the similarity in the production of the lucrative
  wheat and the cheap barley.

20
Identifying Retrenchment of Non-Bribing Villages
(continued)

• It examines the temporal changes in the
  production of wheat and barley of the same
  village to test whether non-bribing villages
• retrenched their wheat production, and how
• gradually increased the wheat production with
  time (Dif in dif in dif).

• This empirical strategy avoids much of the
  difficulties that arise from village
  heterogeneity tax rates, raiding costs etc. were
  equal for wheat and barley produced in the same
  village.
• The main limitation of the test barley is less
  sensitive to droughts, and hence it is more
  prevalent in the southern villages.

21
Table 7 Balancing Test for Production of
Barley and Wheat
22
Table 8 Retrenchment in Barley and Wheat
Production Naïve estimations (Full Sample)
23
Convergence in Wheat-Barley Production
Figure 10-B Wheat Production (Bushels) by
Payments to Bedouins (c.1519-57)
Figure 10-A Barley Production (Bushels) by
Payments to Bedouins (c.1519-57)
Figure 10-C Ln(Wheat/Barley) by Payments to
Bedouins (c.1519-57)
24
Table 9 Convergence of ln(Wheat/Barley) of
Bribing and Non-bribing Villages (Linear Trend
Specification)
25
Convergence and Overtaking in Wheat Other
Products
Figure 10-B Wheat Production (Bushels)
Figure 10-A Barley Production (Bushels)
Figure 12 Tax Revenues on Goats, Sheep and
Beehives (akçe)
Figure 11 Sesame Production (Bushel)
26
Technological Improvement in Violent Expropriation

• Until the 1560s the Ottoman had an effective
  monopoly on firearms, while the Bedouins used
  cold arms.
• During the 1560s-1570s Ottoman subjects,
  including Bedouin tribes in Safed and Jerusalem,
  acquired large quantities of firearms.
• During the late 1570s the Bani Ata tribe, which
  was one of the payments recipients, rebelled
  against the Ottomans. The governor of Egypt was
  ordered to send 400 troops to suppress the revolt
  in Gaza.
• In 1596 the Sublime Porte initiated a trade
  boycott on the Bani Ata and another tribe, who
  are in a state of permanent rebellion (Hyed, 85)

27
Technological Improvement in Banditry
Table 11 Average Hasil (akçe) of Villages by
Sources and Bribing Status (1557-1582)
28
Average Hasil
(
Akçe
)
of Villages
in the Gaza Sub
-
District
(
1519
-
1582
)

12000
Rapid decline in Hasil of non-bribing villages
10000
8000

• Increase in wheat production by non-bribing
  villages.
• Decrease n tax rates of non-bribing villages.
• Increase in lump-sum taxes collected from the
  tribes.

Akçe
6000
1570s Acquisition of firearms by Bedouins and
revolt of the Bani Ata.
.
4000
'
2000
Tahrir Defters
Waqf Accounts
Consolidation of the Ottoman Rule
0
1557 (tahrir)
1557 (waqf)
1519
1531
1548
1582
1525
1538
1548
1555
1557
1582
29
Main Results

• In a world with insecure property rights
  producers can be protected from violent
  expropriation by
• Bribing the strongman.
• Paying higher taxes to a specialist in violence
  (state).
• Retrenching production.
• The consolidation of the states authority in
  Ottoman Gaza (1516-60) alleviated the violent
  threat and facilitated
• A reduction in the net bribe rates.
• A reduction in tax rates of the non-bribing
  villages.
• An increase in the production of lucrative crops
  by the non-bribing villages.
• An improvement in the technology of banditry
  (1570s) undermined the states rule and adversely
  affected the tax collection from, and possibly
  production of, the non-bribing villages.

30
The Late Sixteenth Century and Beyond

• During the late sixteenth century and early
  seventeenth century, bands of brigands roved
  across Anatolia and Northern Syria. They used
  their firearms to raid villages and towns, and
  brought destruction and economic decay to large
  areas in the Ottoman Empire.
• The Ottoman rule in the Arabic speaking regions
  in the seventeenth and much of the eighteenth
  century the age of European absolutism by
  decentralized and indirect rule.

31
The Biblical King David as a Racketeer
2 And there was a man Nabal in Maon, whose
possessions were in Carmel and the man was very
great, and he had three thousand sheep, and a
thousand goats and he was shearing his sheep in
Carmel. 4 And David heard in the wilderness
that Nabal did shear his sheep. 5 And David sent
out ten young men, and David said unto the young
men, 7 And now I have heard that thou hast
shearers now thy shepherds which were with us,
we hurt them not, neither was there ought missing
unto them, all the while they were in Carmel. 8
give whatsoever cometh to thine hand unto thy
servants, and to thy son David. 9 10 And Nabal
answered David's servants, and said, Who is
David? and who is the son of Jesse? 11 Shall I
then take my bread, and my water, and my flesh
that I have killed for my shearers, and give it
unto men, whom I know not whence they be? 13
And David said unto his men, Gird ye on every man
his sword. And they girded on every man his
sword and David also girded on his sword and
there went up after David about four hundred men
. (Bible, Samual 1, Ch. 25)