Archive for September 13th, 2019

I’ve been in Rome the past few days with my charming and beautiful daughter.

We visited the usual tourists spots, including the Coliseum and other remnants of Ancient Rome.

And I couldn’t help but wonder how such a powerful empire could collapse, driving people from relative prosperity to the economic misery of the Dark Ages.

I briefly addressed this topic in early 2016, but only to make a point about the (myriad) problems of modern Italy.

So let’s take a closer look at this issue and learn how excessive government helped bring down the Roman Empire.

The Foundation for Economic Education has an excerpt of Will Durant’s book, The Story of Civilization, Vol. 3: Caesar and Christ. And here are my excerpts from that article.

Diocletian, with his aides, faced the problems of economic decay. …he substituted a managed economy for the law of supply and demand. …He distributed food to the poor at half the market price or free, and undertook extensive public works to appease the unemployed. To ensure the supply of necessaries for the cities and the armies, he brought many branches of industry under complete state control, beginning with the import of grain… The state had long since owned most quarries, salt deposits, and mines; now it forbade the export of salt, iron, gold, wine, grain, or oil from Italy, and strictly regulated the importation of these articles. …the majority of industrial establishments and guilds in Italy were brought under the control of the corporate state. Butchers, bakers, masons, builders, glass-blowers, ironworkers, engravers, were ruled by detailed governmental regulations. …Such a system could not work without price control. In 301, Diocletian and his colleagues issued an Edictum de pretiis, dictating maximum legal prices or wages for all important articles or services in the Empire. …The weakness of this managed economy lay in its administrative cost. The required bureaucracy was so extensive that Lactantius, doubtless with political license, estimated it at half the population. …To support the bureaucracy, the court, the army, the building program, and the dole, taxation rose to unprecedented peaks of ubiquitous continuity. …Since every taxpayer sought to evade taxes, the state organized a special force of revenue police to examine every man’s property and income; torture was used upon wives, children, and slaves to make them reveal the hidden wealth or earnings of the household.

Torture?!? Let’s not give the IRS any new ideas.

Here’s an excerpt from FEE’s excerpt from Human Action, the classic tome by Ludwig von Mises.

…the Roman Empire in the second century, the age of the Antonines, the “good” emperors, had reached a high stage of the social division of labor and of interregional commerce. …What brought about the decline of the empire and the decay of its civilization was the disintegration of this economic interconnectedness… The policy of the annona, which was tantamount to a nationalization or municipalization of the grain trade…its effects were rather unsatisfactory. Grain was scarce in the urban agglomerations, and the agriculturists complained about the unremunerativeness of grain growing. …The interference of the authorities upset the adjustment of supply to the rising demand. …in the political troubles of the third and fourth centuries the emperors resorted to currency debasement. With the system of maximum prices the practice of debasement completely paralyzed both the production and the marketing of the vital foodstuffs and disintegrated society’s economic organization. …The Roman Empire crumbled to dust because it lacked the spirit of liberalism and free enterprise. The policy of interventionism and its political corollary, the Führer principle, decomposed the mighty empire as they will by necessity always disintegrate and destroy any social entity.

Just in case it’s not clear, Mises was referring to “classical liberalism.”

In a column for FEE, Professor Richard Ebeling explores the impact of government intervention in Rome.

The Roman government also set price controls on wheat. In the fourth century, B.C., the Roman government would buy grain during periods of shortages and sell it at a price fixed far below the market price. In 58 B.C., this was improved upon; the government gave grain away to the citizens of Rome at a zero price, that is, for free. The result was inevitable: farmers left the land… In 45 B.C., Julius Caesar discovered that almost one-third of the Roman citizenry was receiving their grain supply for free from the State. To deal with the financial cost of these supplies of wheat, the Roman government resorted to debasement of the currency, that is, inflation. Pricing-fixing of grain, shortages of supply, rising budgetary problems for the Roman government, monetary debasement and resulting worsening price inflation were a continual occurrence through long periods of Roman history. …In the Greek parts of the Roman Empire, archeologists have found the price tables listing the government-mandated prices. They list over 1,000 individual prices and wages set by the law and what the permitted price and wage was to be for each of the commodities, goods, and labor services.

Sounds like Elizabeth Warren’s platform.

But not all Roman leaders were economic illiterates. Writing for FEE, Marc Hyden has a reasonably favorable assessment of Antoninus Pius.

…most Roman emperors, at least at certain points in their lives, were little more than murderous megalomaniacs too willing to spark wars for their own benefit and chip away at the Romans’ liberties. This is true even for the most revered emperors, including Augustus, Hadrian, and Constantine. …one emperor finally came to mind: Antoninus Pius. While imperfect, for the most part, Antoninus ruled with prudence, restraint, and moderation. He is known as one of the so-called “five good emperors,”… Antoninus often seemed to eschew the grandeur of his office. He sold off imperial lands, reduced or eliminated superfluous salaries, and lived in his own villas rather than imperial estates. …he believed he simply could not justify draining the public treasury for travel. …He conscientiously guarded the public treasury while simultaneously reducing confiscations and his subjects’ tax burden. …He so prudently managed the state’s finances that when he died, he left the public treasury with a massive surplus—a rarity in old Rome. Part of this surplus appears to be related to Antoninus’ aversion to vanity projects and unnecessary wars. …His life is perhaps best summed up by his successor, Marcus Aurelius, who described Antoninus as a grounded, introspective, and humble man who was respectful of others’ liberties.

I guess we can say that Antoninus was the Grover Cleveland of the Roman Empire.

By the way, there is an alternative left-of-center explanation of Rome’s decline. Professor Mark Koyama of George Mason University summarizes that viewpoint.

In the Rise of Western Christendom, [Peter] Brown summarizes the new wisdom on the transition from late antiquity to the early middle ages. …Long distance trade contracted. Cities shrank and emptied out. The division of labor became less complex. Many professions common in the Roman world disappeared. All of this is relatively uncontroversial. At issue is what caused this decline? …according to Brown: “The fault lay with the weakening of the late Roman state. The state had been built up to an unparalleled level in order to survive the crisis of the third century. The “downsizing” of this state, in the course of of the fifth century, destroyed the “command economy” on which the provinces had become dependent.” …Brown contends that the Roman state was the engine of economic growth of late antiquity. …Brown argues that these high taxes were in fact the source of economic dynamism: “High taxation did not ruin the populations of the empire. Rather, high tax demands primed the pump for a century of hectic economic growth.”

He then explains why he is not impressed with that analysis.

This, then, is Brown’s explanation for the decline of the Roman economy. It turns out that when examined one by one each one of these premises is either on shaky grounds factually, economically, or requires us to make implausible assumptions. …For conventional Keynesians, the multiplier on government spending boosts short-run aggregate demand, but aggregate demand is not the binding constraint on long-run growth, supply is; growth depends on the productive capacity of the economy. If anything, the impact of the Roman tax state on the productive capacity of the economy was more likely to be negative rather than positive. Resources were diverted from the private hands of peasants, merchants and small landowners and diverted into the hands of soldiers and officeholders. …Brown’s argument requires that at the margin, peasants preferred additional leisure to the wide array of affordable manufactured consumers goods that were on offer in markets and shops across the Roman empire. This is not impossible. But it is at odds with what we know about peasant behavior in other commercial societies such as early modern Europe. …Brown’s argument requires us to believe that if, for instance, the Roman state stopped spending on armor and weapons in a city, then the blacksmith and armor manufacturer would go out of business. This is a classic case of focusing on the seen and missing the unseen. It neglects the fact that lower taxes would give individuals more disposable income and they would likely spend some of this income to purchase amphora, pottery, textiles or other urban goods that we know the Roman economy was capable of producing. The blacksmith might switch to producing pots and pans rather than swords but he would not then go out of business.

Needless to say (but I’ll say it anyway), I side with Koyama over Brown.

Yes, there is ample evidence that some degree of government is important for a thriving and successful economy.

  • A national defense protects a country and gives people confidence to accumulate capital.
  • A justice system protects against criminal activity.
  • A legal system provides a mechanism of resolving disputes.

Rome prospered and grew when the degree of economic intervention was tolerable.

Over time, though, Roman officials went overboard. There was too much intervention, too much dependency, and too much taxation.

The moral of the story (as we see in modern nations such as Venezuela, Greece, and Argentina) is that nations can move in the wrong direction.

The great challenge, of course, is figuring out a way to confine government so it focuses solely on core “public goods.”

America’s Founders produced such a system, but sadly the courts have failed to protect and preserve the Constitution’s limits on the powers of the central government.

September 14, 2019 Addendum: In response to some of the very good comments below, I fully agree that many other factors contributed to Rome’s decline. This columns focuses solely on the role of economic policy.

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