Earlier today, I watched a discussion between Ron Paul and Paul Krugman:
http://www.bloomberg.com/video/91689761
If you have no interest in watching that, there’s a moment that I focussed on involving Paul’s accusation that Krugman wants to take us back 1,000 years to the Roman Empire and its debasement of currency. Krugman had a pretty good quip about Diocletian in response, but the conversation moved on.
This has been something of a bugbear of mine, and admittedly a lot of this comes down to personal interpretation, but I just don’t like the narrative that the Roman Empire “fell” because of economic collapse, and certainly not in the economic collapse as alluded to here. This is a narrative that gained prominence (as far as I know, anyway) in the 90s, through papers published by the right-wing, free market think tank The Cato Institute. They posit that big government spending necessitated an unending series of currency debasement (i.e. quantitative easing, in their minds anyway) that led to economic mayhem and the collapse of their society and structures. I’m being a bit reductive, sure, but that’s the basic gist.
It is a far more complex issue than that, however, and their conclusions feel way off to me. Yes, the Roman government debased its currency quite often, and this did lead to a time of economic woes (as far as we know, as contemporaries didn’t write all that much about it). We know from the prices of wares in various regions and with the poor quality of certain coins, as well as the scrambling attempts for the government to right the ship as it were by striking even more and cover their tracks. However, these serious issues came about in the 3rd century, famous for its particularly brutal civil wars and a continuous crisis over the succession. Factions formed and fought and people were in power for only months. For at least a few centuries before that, the currency was routinely debased in times of war or unrest, but it always evened out. Once confidence was restored everything ran relatively smoothly again, or in the case of wars (probably the biggest reason), the influx of booty and new goods through conquest into the economy more than made up for the debasement. Nero’s debasement was something of a disaster, but it was short-lived (probably necessary to rebuild Rome as well as, yes, his own extravagancies).
So yes, the Third Century Crisis did cause a huge rise in inflation and a massive drop in confidence amongst the Roman people and even to the trading partners in the East (they all had different methods of payment, mind, but still), but that was because of a succession of claimants to the throne, each with their own armies. To fight off rivals the new Emperors needed money fast, so striking more coins was the obvious option to take. Unfortunately this didn’t bring in any extra revenue. Nor did much else, as the Roman Empire reached its limits during Trajan’s reign in the early 2nd Century. No new conquests to flood the economy, plus the silver and gold mines in Dacia and elsewhere were drying up, which meant no new metal to convert. It was not, then, down to Big Government Expansion that led to the ‘robbing’ of the people, as Paul likes to think.
Just to briefly defend Diocletian here - he did an extraordinary thing by re-monetizing the entire Empire to fight inflation, bringing the currency back to almost Augustinian levels of silver, but he got some details wrong with regards to the value and it all descended quickly, which led to short-lived edicts to fix prices. It didn’t work, but he was able to re-monetize because of relative stability in the early 4th Century, something that would have been impossible through the civil wars, which were steeped in succession issues all left by Augustus, but I digress.
There are a few things we know that should be taken into consideration.
1.) Even at its strongest, the value of money was never precisely known. It varied to some degree from region to region, and the Romans would actually bring in foreign coin and restamp it, and it was difficult to parse exactly what everything was really *worth*. There’s a pamphlet written by a senator/law expert to Marcus Aurelius that attempts to explain the basics of the variations on the value of coin, but it also admits that this doesn’t mean much. To borrow (as ever) from David Milch, it was all “a lie agreed upon”. They knew that there was no intrinsic value to gold or silver, and were fully aware that what it represented meant more than what it was “worth”.
2.) Which brings us to the fact that the Roman currency, like any currency, is based in faith in the institution. It’s not quite fiat money, but the principle is relatively similar. When the Emperor and the Empire were in good stead, so was the currency. When it was torn apart by civil wars and uncertainty, so was the currency. This might seem similar to what free market hawks are complaining about, but it’s hard to truly compare the two. There’s having debt, and then there’s genuine governmental instability to the extent that nobody is quite sure who is going to be running things from one day to the next. America has huge debt, and it needs to be dealt with at some point, but the markets aren’t afraid about the collapse of the US government.
Rome “fell” for a number of reasons. The economy might have played a part in civil unrest from time to time, but factors like poor leadership, increasingly strict religious mandates (Christianity was the official religion, but only when the pagan religions were outlawed did it become an issue…and it was a big one), foolish wars, and the fact that the Empire was hiring out migrating barbarian tribes to be its army - and fight other barbarian tribes - that all led to the “fall” or “assimilation” or whatever you want to call it.
Paul’s arguments, and those of the right-wing, free market historians who no-doubt influenced him, take a sliver of reality and expand it to fit their narrative. ”Look at the Roman Empire! Big Government led to unnatural financial controls and thus it all collapsed!” It’s an absurdly pick-and-choose position, and even on top of that, it’s foolhardy to point to a civilisation from 1,000 years ago and try to apply it to our specific economy and culture. Financial institutions and private business, not to mention the realities of defending and conquering the Empire, are so much different now that it beggars belief that anyone would try to draw an informative comparison. History can teach us a lot of things, and we can occasionally learn from the great follies (for instance, a ground invasion of Russia is probably not a brilliant plan), but to claim modern America’s on the precipice of a Roman collapse is ridiculous.
Not that this is new. I went to a Christian High School in southern Alabama, and we were regularly told in Bible class and in chapel services that Rome fell because of “decadence”. This was total bullshit, but it was used in attempt to scare us into believing in the utter immorality of America’s permissive culture of sex and homosexuality. Right-wing economists are trying to do the same thing here. After all, what is more immoral and decadent to the Republicans than Big Government Spending?
