For the most part, it didn't. Excluding brief periods like the first decades of the 19th century, technology was not the chief reason for the Ottoman Empire's military misfortunes, nor its economic woes. Rather, Ottoman military effectiveness and economic development waxed and waned throughout the long 19th century, with both successes and failures.
At the turn of the 19th century, Ottoman forces were unquestionably outdated, weighed down by the institutional inertia of the praetorian Janissary corps. The corps' purge in 1826 triggered a military modernization along Western lines, and from that point forward, obsolescence of technology or ideas ceased to become the chief problem for the Ottoman army. Their new problems were harder to solve - they were constantly at war with Russia, a country with many times more people, and lacked the funds to properly equip and motivate a large army. The Ottoman army in 1905 had more than a million soldiers, but spent only £14 per soldier. In contrast, the German army spent £60. Such attempts to save money resulted in an army of underpaid, under-equipped troops who had no motivation to stay and fight.
In spite of these issues, the Ottoman army achieved not inconsiderable success. In the Crimean War, a conflict mired by incompetence on all sides, the performance of general Osman Pasha was outstanding. In 1878, the Ottomans had a lone highlight during the Siege of Pleven, where they inflicted heavy casualties on the Russians. The Ottomans were fully capable of defeating minor powers, triumphing over Serbia in 1876 and Greece in 1897. In the First World War, Ottoman forces famously held back a massive Anglo-French landing at Gallipoli, and encircled the British at Kut. When evaluating Ottoman military performance, it is helpful to abandon Orientalist tropes about the empire not being "modern", but rather to see the Ottoman Empire as equivalent to other multi-ethnic and economically peripheral empires, chief among them Russia. The problems of the Ottoman military were largely the same as those of the Russian military - a budget not suited to its size, illiteracy among enlisted ranks, and a neverending game of "catch up" to the West. As in Russia, the fortunes of the Ottoman military rose and fell with politics - the force saw a sharp decline after the accession of Abdul Hamid II, who forbade land or naval maneuvers since they could be cover for a coup.
The empire's economic fortunes were just as uneven. The Ottoman Empire embraced a version of the laissez faire economics that were mainstream at the time, and, most decades, spent less than 20% of its budget on economic development. That said, Ottoman taxes were generally less than 16% of the country's GDP, so this in no way meant that the majority of the country's resources were being directed towards war and debt repayments. The Ottoman Empire did see economic development during the 19th century, with numerous railroads and industries built. While it was forced to invite foreign firms to modernize its financial and industrial sectors, the economic effect of these firms was not as broadly negative as historians once imagined - the much-maligned Ottoman Public Debt Administration, for example, was actually a much more efficient tax collection authority than the previous Ottoman revenue office.
The fate of states is not just constrained by ideas but resources. By all indications, the Ottoman government had all the right ideas after the Auspicious Incident of 1826, but the country was too poor and its population too small and diverse (in an age of rising nationalism) to save the great majority of its territory from foreign and domestic enemies.
Sources:
Birdal, Murat. The Political Economy of Ottoman Public Debt: Insolvency and European Financial Control in the late Nineteenth Century.
Agoston, Gabor. Guns for the Sultan: Military Power and the Weapons Industry in the Ottoman Empire.
Mesut Uyar, Edward J. Erickson, A Military History of the Ottomans: From Osman to Ataturk.
Statesman's Yearbook, 1905.
Maddison Project Historical GDP Tables. <I used this source and the one above to calculate Ottoman defense spending per active duty soldier in 1905>
I feel compelled to point out something unrelated to the core of your question, but one which I can't find a satisfactory comment that addresses elsewhere here on AskHistorians: the notion that China was isolationist during the Ming and Qing dynasties. In my opinion, this common trope, while true in some senses (for example, the restriction of foreigners to specific locations, which was largely politically and economically motivated), is mostly inaccurate.
There are two main features to isolationism that I can think of: first, a failure to adopt new ideas, and second, a failure to engage with the outside world politically or economically. Qing China did neither of these things. While the Ming famously ended Zheng He's exploratory voyages, the reasons had more to do with the costs and political factionalism at the Ming court than an intentional policy of isolation. Furthermore, Chinese captains still dominated the waters of Southeast Asia, as discussed by /u/Tiaco in this post. I also discussed the degree to which China remained connected to the rest of the world in the Ming and early Qing period in this answer to a question about Chinese global exploration. Ming and Qing literati were interested in Western science, despite being more advanced than the West in fields like astronomy and textile production. To this end, they patronized the Jesuits. I quote from Benjamin Elman in the following short article:
"Arguably, by 1600, Europe was ahead of Asia in producing clocks, screws, levers, and pulleys that would be applied increasingly to the mechanization of agricultural and industrial production. In the seventeenth and eighteenth centuries, however, Europeans still sought the technological secrets for silk production, textile weaving, porcelain making, and large-scale tea production from the Chinese. Chinese literati in turn, before 1800, borrowed from Europe new algebraic notations (of Hindu-Arabic origins), Tychonic earth-centered cosmology, Euclidean geometry, spherical trigonometry, and arithmetic and trigonometric logarithms.
Allegations that Chinese literati were not curious about European science in the seventeenth and eighteenth centuries are untrue. The Jesuits devised an accommodation approach in China that focused on mathematics and astronomy—an approach that differed from the method they used in Japan, India, Persia, and Southeast Asia, as well as the New World. To gain the trust of the throne and its literati, Matteo Ricci (1552–1610) and his followers prioritized natural studies and mathematical astronomy during the late Ming and early Qing precisely because they recognized that literati and emperors were interested in such fields. They realized that such interest would improve the cultural environment for converting the Chinese to Christianity."
Of course, the Jesuits ultimately disappeared from China, but as Elman notes, this was not due to disinterest but rather developments in Europe that led to the demise of the Jesuit order. "The Jesuit demise delayed information from Europe about the role of calculus as the engineer’s toolkit, for example, and mechanics as the physicist’s building blocks for almost a century." While the Chinese did not explicitly seek this knowledge out, it is hard to ask why someone did not seek out knowledge they did not know about. Although conceptually, Ming and Qing China considered itself at the "center of the universe" and superior to the outside world in terms of culture and technology, this was not a particularly uncommon viewpoint at the time.
Furthermore, at least until the 17th or 18th century, China was the center of the Asian universe, and the economic center of gravity of the world. [1] China's economy was also strongly by an influx of European silver, an indication of the degree to which China was a part of the world economy even as the center of gravity gradually began shifting towards Europe. Chinese technology did not particularly lag behind Europe until the 1800s, and when this lag was made apparent in the 1840s by a series of defeats at the hands of the colonial powers, like the Ottomans, the Chinese court responded by undertaking a series of military and technological reforms designed to import Western science and technology in a way that was compatible with Chinese culture. In 1842, Wei Yuan (1794-1856), a scholar and adviser to the government, concluded that the West had beset China because of the West's more advanced military technology. He outlined a plan for maritime defense which included "building ships, making weapons, and learning the superior techniques of the barbarians." This became known as the "Self-Strengthening Movement". [2]
The Self-Strengthening Movement sought to reform the Qing Dynasty by integrating Western approaches to science, warfare, and government with Chinese imperial traditions. Like the Ottomans, China experienced a decline of international prestige and military power relative to the West in the 19th century. Also like the Ottomans, China was subject to humiliating demands following a string of military defeat, often referred to as the Unequal Treaties. The first of these was the Treaty of Nanking (1843), imposed upon China by the British after the First Opium War (1839-1842). [3] In addition to monetary concessions, tax exemptions, and extraterritorial rights for British citizens, it also demanded four treaty ports and the island of Hong Kong. The treaties of Whampoa (1844) and Aigun (1858) soon followed, which established similar legal rights for the French and the Russian Empires. Soon, Europeans controlled most modern Chinese industries and even oversaw tax collection, ostensibly to ensure repayment of indemnities from the Opium Wars. China was “carved up like a melon” into various spheres of influence, an image that remains a potent memory in Chinese nationalism to this day. [4]. Like in the Ottoman Empire, these crises forced the Qing government to acknowledge the seriousness of the situation and make attempts to reform, while simultaneously entangling them in relations with European powers that would make successful reform nearly impossible.
Early proponents of the movement like Li Hongzhang, Zeng Guofan (1811-1872), and Zuo Zongtong (1812-1885) prioritized military modernization and created arsenals in Nanjing, Tianjin, Shanghai, and Fuzhou. Despite having no official government sponsorship, Li Hongzhang took it upon himself to modernize the military units under his control. Later, he used tax revenue under his control to sponsor the famed Beiyang Fleet (北洋舰队), one of four modern navies created by the Qing during the 1880s and 1890s. Despite some successes, in 1895, the much-vaunted fleet was annihilated by the Japanese at the Battle of Weihaiwei. [5] Like the Ottoman, Chinese Self-Strengthening resulted in a modern army on par with similar multi-ethnic empires, but it had neither the revenue nor the time necessary to prevent the state's collapse. It's worth remembering that the Japanese also defeated the "Western" armies of Russia a decade later in the Russo-Japanese War. I'm not a Japanese historian, so I can't discuss the reasons for their more successful attempts at militarization, but I want to emphasize that China's defeat was not the result of a failure or refusal to modernize, nor a policy of deliberate isolation.
In short, the Chinese were not isolated from developments in the outside world. Their decline relative to the West was not a question of foolish isolation, but of historical processes and developments largely outside their control. In hindsight, other paths could have been taken, but hindsight is 20/20.
[1] Gunder Frank, Andre. ReORIENT: Global Economy in the Asian Age (1998)
Pomeranz, Ken. The Great Divergence: China, Europe, and the Making of the Modern World Economy. Princeton University Press (2000)
[2] Self Strengthening is a major part of most overviews of modern Chinese history. I recommend Jonathan Spence's The Search for Modern China, especially Chapter 10. For an overview of recent scholarship on the Self-Strengthening Movement, see: Chang, Adam. “Reappraising Zhang Zhidong: Forgotten Continuities During China’s Self-Strengthening, 1884-1901”. Journal of Chinese Military History 6.2, 157-192 (2017).
[3] Platt, Stephen R. Imperial Twilight: The Opium War and the End of China’s Last Golden Age. Knopf (2018)
[4] Gries, Peter Hayes. “Narratives to Live By: The ‘Century of Humiliation’ and Chinese National Identity Today,” in Lionel M. Jensen and Timothy B. Weston, eds., China's Transformations: The Stories Beyond the Headlines. Rowman and Littlefield pp. 112–128 (2006)
[5] Phillips, Steve. The Second Sino-japanese War (1937-1945). Oxford University Press (2013)