Saturday, October 25, 2014

"Inflating an Empire"

"Inflating an Empire" 
By Ben Potter

"Imagine a world where Europe is united under a common banner, has shared interests, open markets and... a single currency. A currency that has such an impact on the continent that it leads to mass inflation and threatens the existence of the union.  Imagine... it's easy if you try. You may be thinking of the ongoing euro-zone crisis. But this is an event that happened more than 1,500 years ago – in Ancient Rome before its fall. 

There were only a few methods by which Roman emperors could raise funds. Although finding a convenient traitor and confiscating his lands was a good one, the two most popular were: (a) expand the empire, and (b) debase the denarius, the preferred Roman currency. Although the first was easier said than done, the Romans did it with aplomb. The problem was that, after an initial boon to the coffers and a swelling of the slave class, not every province was an automatic money-spinner. Some required a great deal of maintenance, in terms of both infrastructure and the military personnel needed to keep the peace. 

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The Height of Power: The best way to deal with these problems? Expand even further. But the Roman Empire reached the height of its imperial power relatively early on, under Trajan (98-117 A.D.). And a great deal of time, effort and – crucially – money was spent maintaining the great straining behemoth. 

So many emperors saw debasing the silver denarius as a simpler and swifter way to swell their treasuries and give an embattled government some pecuniary respite... however brief. The advantage was that, although the market would eventually adjust to the devalued coin, the imperial court would have a jump on this information and could spend its heart out. By the time the weaker currency reached the hands of the common people, its lesser worth had already been revealed. 

If the emperor was lucky enough to die soon after this devaluation... then he'd be leaving a big mess for his successor. If he had the poor fortune to survive... he'd have to deal with the fallout himself. But how much damage could shaving a sliver of silver off the coin do? The denarius in the first century A.D. had a silver content of above 90%. After 100 years, that dropped to 60%. And by the time the empire had split into east and west, it was down to a paltry 5%. 

A New Regime: But this wasn’t a simple, direct, one-way trajectory. The Western Roman Empire did manage to regain some of its financial bearings before its eventual fall. One such rebound was due to the economic reforms of Constantine the Great, who used his newfound Christianity as an excuse to melt down offending iconography and rebase the currency in one fell swoop. But this was not enough to stop the empire’s collapse. There were other larger forces at play. 

For instance, the army, which many saw as an inevitable expense, was hemorrhaging denarii, not least because of Rome's ever-increasing reliance on mercenaries. The use of these was a double-edged sword. They were not merely of fickle loyalty but also often broke out in open revolt against their paymasters. 

The origin of problems such as this are often traced back to the emperor Commodus, the sinister figure portrayed by Joaquin Phoenix in the Ridley Scott movie "Gladiator." Although he did bankrupt the state, he was probably no more culpable than many of his successors. His problem was that his ineptitude came on the heels of the era of the “five good emperors,” so his incompetence was far starker by comparison. 

Other causes of the western empire’s dissolution have been identified as a lack of cooperation from the Eastern Roman Empire, diminishing trade routes, a rise in piracy, mass lead poisoning – even Christianity eroding traditional Roman values. 

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The Last Emperor: But none of these could compete with the effect left behind by the Huns. As they drove into northern Europe in the fourth century, not only did they make incursions into Roman territory, but they also forced Germanic tribes to flee southward.  The reason the empire fell was not because of just silver but also iron and steel. 

The defeat to the Goths at the battle of Adrianople in 378 A.D. was not merely a crushing military blow but also one that made the barbarian hordes realize Rome was not all she once had been. The next 70 years saw defeat after defeat as the various tribes chipped away at Rome's mighty empire. When the end finally came, it was with a whimper rather than a scream. The last emperor, Romulus Augustulus, was deposed with such little fuss that it's rumored his conqueror, Odoacer, may have let him live a quiet retirement rather than put him to the sword. 

Sure, it had financial problems. But the Western Roman Empire fell because it had stopped being good at what had made it great in the first place: war. Or maybe Rome was just rich, swollen, gouty and infected by its own success. These are certainly the thoughts of historian Edward Gibbon: "The decline of Rome was the natural and inevitable effect of immoderate greatness. Prosperity ripened the principle of decay; the causes of destruction multiplied with the extent of conquest; and as soon as time or accident had removed the artificial supports, the stupendous fabric yielded to the pressure of its own weight."

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