Inflation and the Fall of the Roman Empire

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This is
a transcript of Prof. Joseph Peden’s 50-minute lecture "Inflation
and the Fall of the Roman Empire" given at the Mises
Institute Seminar on Money and Government
in Houston, Texas
on October 27, 1984. The original audio
is available courtesy of the Mises Institute.

Two centuries
ago, in 1776, there were two books published in England, both of
which are read avidly today. One of them was Adam Smith’s The
Wealth of Nations and the other was Edward Gibbon’s Decline
and Fall of the Roman Empire. Gibbon’s multi-volume work is
the tale of a state that survived for twelve centuries in the west
and for another thousand years in the east, at Constantinople.

Yet Gibbon
in looking at this phenomenon commented that the wonder was not
that the Roman Empire had fallen, but rather that it had lasted
so long. And scholars since Gibbon have devoted great deal of energy
to examining that problem: how was it that the Roman Empire lasted
so long, and did it decline or was it simply transformed into something
else? That something else being the European civilization, of which
we are the heirs.

I’ve been asked
to speak on the theme of Roman history, particularly the problem
of inflation and its impact. My analysis is based on the premise
that monetary policy cannot be studied, or understood, in isolation
from the overall policies of the state. Monetary, fiscal, military,
political and economic issues are all very much intertwined. And
the reason they are all so intertwined is, in part, due to the fact
that the state, any state, normally seeks to monopolize the supply
of money within its own territory.

Monetary policy
therefore always serves, even if it serves badly, the perceived
needs of the rulers of the state. If it also happens to enhance
the prosperity and progress of the masses of the people, that is
a secondary benefit; but its first aim is to serve the needs of
the rulers, not the ruled. And this point is central, I believe,
to an understanding of the course of monetary policy in the late
Roman Empire.

We may begin
by looking at simply the mentality of the rulers of the Roman Empire,
beginning at the end of the 2nd century [A.D.] and looking through
to the end of the 3rd century. This period of the 3rd century Roman
historians refer to as the Crisis of the Third Century. And the
reason is that the problems of the Roman society in that period
were so profound, so enormous, that Roman society emerged from the
3rd century very, very different in almost all ways from what it
had been in the first and second centuries, a period the historians
speak of as the Augustan Principate.

To look at
the mentality of the Roman emperors, we can look just at the advice
that the Emperor Septimius Severus gave to his two sons, Caracalla
and Geta. This was supposed to be his final words to his heirs.
He said, "live in harmony; enrich the troops; ignore everyone
else." Now, there is a monetary policy to be marveled at!

Caracalla did
not adhere to the first part of that; in fact, one of his first
acts was to murder his brother. But as for enriching the troops,
he took that so seriously to heart that his mother remonstrated
with him and urged him to be more moderate and to restrain his increasing
military expenditures and his very burdensome new taxes. He responded
by saying there was no longer any revenue, just or unjust, to be
found. But not to worry, "for as long as we have this,"
he insisted, pointing to his sword, "we shall not run short
of money."

His sense of
priorities was made more explicit when he remarked, "nobody
should have any money but I, so that I may bestow it upon the soldiers."
And he was as good as his word: he raised the pay of the soldiers
fifty percent, and to achieve this he doubled the inheritance taxes
paid by Roman citizens. When this was not sufficient to meet his
needs, he admitted almost every inhabitant of the empire to Roman
citizenship. What had formerly been a privilege now became simply
a means of expanding the tax base.

He then went
further by proceeding to debase the coinage. The basic coinage of
the Roman Empire to this time – we’re speaking now about 211
[A.D.] – was the silver denarius introduced by Augustus
at the end of the 1st century before Christ. Augustus had issued
a silver coin, a denarius, that was about 95% silver, and that coin
continued for the better part of two centuries as the basic medium
of exchange in the empire.

By the time
of Trajan in 117, it was only about eighty-five percent silver,
down from Augustus’ ninety-five percent. By the age of Marcus Aurelius,
in 180, it was down to about seventy-five percent silver. In Septimius’
time it had dropped to sixty percent, and Caracalla evened it off
at fifty-fifty. Caracalla was assassinated in 217 and there then
followed an age that historians refer to as the Age of the Barrack
Emperors, because throughout the 3rd century all the emperors were
soldiers and all of them came to their power by military coups of
one sort or another. There were about 26 legitimate emperors in
this century and only one of them died a natural death; the rest
were either assassinated or died in battle, which will give you
some idea of the change since this was totally unprecedented in
Roman history – with two exceptions: Nero, a suicide, and Caligula,
assassinated earlier.

Caracalla had
also debased the gold coinage. Under Augustus this circulated at
45 coins to a pound of gold. Caracalla made it 50 to a pound of
gold. Within 20 years after him it was circulating at 72 to the
pound of gold, reduced to 60 at the end of the century by Diocletian,
only to be raised again to 72 by Constantine. So even the gold coinage
was in fact inflated, debased.

But the real
crisis came after Caracalla, between 258 and 275. In a period of
intense civil war and foreign invasions, the emperors simply abandoned,
for all practical purposes, a silver coinage. By 268 there was only
five tenths percent silver in the denarius. And prices in this period
rose in most parts of the empire by nearly a thousand percent. The
only people who were getting paid in gold were the barbarian troops
hired by the emperors. The barbarians were so barbarous that they
would only accept gold in payment for their services.

The situation
did not change until the accession of Diocletian in the year 284.
Shortly after his accession he raised the weight of the gold coinage,
the aureus, to 60 to the pound – this was from a low
of 72. But ten years later, he finally abandoned the silvered coinage,
which by this time was simply a bronze coin dipped in silver rather
quickly. He abandoned that completely and tried to issue a new silver
coin which was struck at 96 coins to the pound of silver, called
the argenteus. This argenteus was fixed as equal to fifty
of the old denarii, the old coinage. It was designed to respond
to the need for higher-tariffed coins in the marketplace, to reflect
the inflation. He also issued a new bronze coin tariffed at ten
denarii, called the nummus. But less than a decade later,
that silver coin had gone from being tariffed at 50 of the old to
now equaling 100 of the old, and the bronze coinage from 10 denarii
to 20; in other words, a hundred percent inflation. In other words,
despite his efforts Diocletian had not been able to stop the inflation.

The next emperor
who interfered with the coinage in a meaningful way was to be Constantine,
the first Christian emperor of Rome. Constantine in the year 312,
which is also the year he issued the Edict of Toleration for Christianity,
issued a new gold piece which he called by a new name, the solidus
– solid gold. This was struck at 72 to the pound, so it was
in fact debased over Diocletian’s. These were very large issues
and historians have puzzled over where he got all the gold; but
I think the puzzle is not so much of a real puzzle once you begin
to look at the legislation that took place.

First of all,
he issued two new taxes: one was taxed on the estates of the senators,
and this was rather new because senators generally were free of
most taxes on their land. He also issued a tax on the capital of
merchants; not their earnings, but their capital. This was to be
levied every five years and it was to be paid in gold. He also required
that the rents from the imperial estates, which were rented out
to tenants, were to be paid only in gold. He took on the bullion
reserves of his former partner Licinius who had extracted, by force,
bullion from the treasuries of the cities of the Eastern Empire.
In other words, any city that had any gold bullion or silver bullion
left in its treasury, this was simply requisitioned by Licinius
and this passed on now into the hands of Constantine who had gotten
rid of Licinius in a civil war.

We’re also
told that he stripped the pagan temples of their treasuries. This
he did rather late in his reign, still somewhat afraid apparently
in the early days of angering the gods of Rome. As his Christianity
became more fixed, he felt greater ease at robbing the temples.
Now, Constantine’s reform in one sense began the reversal of the
process: the gold coinage was sufficiently large that it began to
take hold and to circulate more freely. The silver coinage failed
and, what was worse, at no time in this period did the central government
try to control the token coinage. And the result of that was [that]
token coinage was being minted not only by the imperial mints, but
also by the mints of cities. In other words, if a city couldn’t
pay its costs, pay its salaries to its employees, it simply struck
up some token coinage and issued that.

By the late
3rd century we also begin to have massive appearance of what numismatists
call counterfeits. I would say it would be called credit money today.
People need small change, and they simply go and manufacture it
– all of which of course means that the amount of token coinage
in circulation is uncontrolled and increasingly massive. Now, one
of the things that had happened in the course of this 3rd century
inflation was that the government found that when it paid its troops
in token coinage, or even in these debased silver coins, prices
immediately rose. Every time the silver value of the denarius dropped,
prices naturally rose; and the result of this was [that] the government,
in order to try to protect its civil servants and its soldiers from
the effects of inflation, began to demand payment of taxes in kind
and services rather than in coin. They wound up, in effect, in repudiating
their own issues, not accepting them for tax collection purposes.

With Constantine’s
reform, this situation changed somewhat and, slowly but surely,
the government began to move away from collecting taxes in kind
and from paying salaries in kind, and began to substitute paying
salaries in gold and collecting taxes in gold. Over the long run,
this meant that the gold standard was strengthened and gold remained
the real money of the Roman Empire. However, the inflation did not
end for the masses of the people. In other words, gold was a hedge
against inflation for those who had it, and these were principally
the troops and the civil servants. The taxpayers had to buy these
gold coins in order to pay their taxes and so, if they were wealthy
enough, they could afford to buy these gold coins which were increasingly
expensive in terms of token money. If they were poorer they simply
couldn’t pay the taxes and this meant they lost their lands in one
form or another or became delinquents; and we hear constant references
to people abandoning their land, disappearing.

As a matter
of fact in the 3rd century this was a constant problem in Rome:
all sorts of people were trying to escape the increased taxes that
the military needed. The army itself [had grown] from the time of
Augustus, when they had about a quarter of a million troops, [to
where] by the time of Diocletian they had somewhat over 600,000.
So the army itself had doubled in size in the course of this inflationary
spiral, and obviously that contributed greatly to the inflation.

In addition,
the administration of the state had grown enormously. Under Augustus
essentially you had the imperial administration at Rome and the
governors of different provinces, the secondary level of administration,
and then the primary governmental units in the Roman Empire in this
time were the cities, the municipalities. By the time of Diocletian
this pattern had been broken apart. You had not one emperor but
you had, under Diocletian, four emperors. Which meant four imperial
courts, four Praetorian Guards, four palaces, four staffs, etc.

Under them
were four Praetorian prefectures, regional administrative units
with their staffs and their budgets. Under these four prefectures,
they were then divided into 12 dioceses, each diocese having its
administrative staff and so on. Under the diocesan rulers, the vicars
of the diocese, we have the provinces. In Augustus’ time there were
approximately 20 provinces. Three hundred years later, with no substantial
increase in territory, there were over a hundred provinces. They
had simply began to divide and subdivide provinces for purposes
of maintaining internal military control of these regions. In other
words, the cost of policing the Roman state became increasingly

All these costs,
then, are some of the reasons why the inflation took place; I’ll
get to others in a moment. To give you some idea of the situation
after Constantine’s reform of the gold, let me just briefly give
you the figures for what it cost in terms of the silver coinage,
or token coinage now, the denarius, for a pound of gold. In Diocletian’s
time, in the year 301, he fixed the price at 50,000 denarii for
one pound of gold. Ten years later it had risen to 120,000. In 324,
in other words 23 years after it was 50,000, it was now 300,000;
and in 337, the year of Constantine’s death, a pound of gold brought
20,000,000 denarii. And by the way, just as we are all familiar
with the German currency of the [1920s] with the bigger stamp on
it, the Roman coinage also has stamps and over-stamps on the metal,
indicating multiples of value.

At one point
one of the Roman emperors had a marvelous idea: instead of issuing
a single coin he devised a method to handle the inflation. He took
brass slugs and put them in a leather pouch and called it a follis;
and people began passing these pouches back and forth as value.
I guess it was the Roman equivalent to those baskets of paper we
see in the pictures of Germany in the [1920s]. Interestingly enough,
within ten years or so after that began, the word follis –
which had meant this bag of coins – had now drifted to mean
one of those slugs. One of those slugs was now the follis; so they
couldn’t even keep the bags stable, they too were inflated.

Now one interesting
thing with all this inflation, I think it should be a great comfort
to us: historians of prices in the Roman Empire have come to the
conclusion that despite all of this inflation – or perhaps
we should say, because of all this inflation – the price of
gold, in terms of its purchasing power, remained stable from the
first through the fourth century. In other words, gold remained,
in terms of its purchasing power, a stable value whereas all this
coinage just became increasingly worthless.

What were the
causes of this inflation? First of all, war; the soldiers’ pay rose
from 225 denarii during the time of Augustus to 300 denarii in the
time of Domitian, about a hundred years later. A century after Domitian,
in the time of Septimius, it had gone from 300 to 500 denarii; and
in the time of Caracalla, about 10 years later, it had gone to 750
denarii. In other words, the cost of the army was also rising in
the terms of the coinage; so, as the coinage became more worthless,
the cost of the army had to be increased. The advance in the soldier’s
pay in the rest of the 3rd century and into the 4th century is not
known, we don’t have figures. And one reason is that the soldiers
were increasingly paid in terms of requisitions of supplies and
goods in kind. They were literally given food, clothing, shelter
and other commodities in lieu of pay – and this applied also to
the civil service.

When one Roman
emperor refused to pay a donative on his accession – this was
a bonus given to the soldiers on the accession of the emperor –
he was simply murdered by his troops. The Romans had had this kind
of problem even in the days of the Republic: if the soldiers don’t
get paid they rather resent it. What we find is that the donatives
had been given on the accession of a new emperor from the time of
Augustus on; then they began to be given in the 3rd century every
five years. By the time of Diocletian, donatives were given every
year, so that the soldiers’ donatives had in fact become part of
their basic salary.

The size of
the army, I think I indicated already, had increased. Doubled from
the time of Augustus to Diocletian, and the size of the civil service
I indicated also. Now, all these events strained the fiscal resources
of the state beyond its ability to sustain itself, and the debasement
and the taxation were both used to keep the ship of state going;
frequently by debasing, then by taxation, and then often simply
by accusing people of treason and confiscating their estates.

One of the
Christian fathers, Saint Gregory Nazianzus, commented that war is
the mother of taxes and I think that’s a wonderful thing to keep
in mind: war is the mother of taxes. And it’s also, of course, the
mother of inflation.

Now, what were
the consequences of inflation? One of the odd things about inflation
is, in the Roman Empire, that while the Roman state survived –
the Roman state was not destroyed by inflation – what was destroyed
by inflation was the freedom of the Roman people, and particularly
the first victim was their economic freedom. Rome had basically
a laissez-faire concept of state/economy relations. Except in emergencies,
which were usually related to war, the Roman government generally
followed a policy of free trade and minimal restriction on the economic
activities of its population. But now under the pressure of this
need to pay the troops and under the pressure of inflation, the
liberty of the people began to be seriously eroded – and very

We could start
with the class known as the decurions. This was your prosperous,
small and middle landowning class who were the dominate elements
of the cities of the Roman Empire. They were the class from which
were chosen the municipal counsels, the municipal magistrates and
officials. Traditionally, they had viewed service in the governments
of their towns as an honor and they had responded to this by donating,
not merely their time, but their wealth to the betterment of the
urban environment: building stadiums and bathhouses and repairing
the streets and providing for pure water. These were considered
benefactions, it was a kind of philanthropic element and their reward
was, of course, public recognition and esteem.

This class,
in the mid-3rd century, was assigned a task of collecting the taxes
in the municipality that were being assessed by the central government.
The central government could no longer collect its taxes effectively,
so they made the decurion class collectively responsible for getting
revenues and passing them on to the imperial government. The decurions,
of course, had as much difficulty as anyone else in doing this,
and the returns were, again, frequently inadequate so the government
solved that problem by simply passing a law that any taxes that
decurions could not collect from others, they would have to pay
out of their own pocket. That’s known as the incentive method for
the tax collect. [laughter]

As you can
well imagine, as the crises became greater and the economy was disrupted
by civil conflicts and invasions and the effects of inflation, the
decurions, strangely enough, no longer wanted to be decurions; and
they began to abandon their lands, abandon their cities, and escape
to wherever they could find refuge in other larger cities or other
provinces. But they were not to be allowed to do that with impunity,
and the law was then passed that any decurion discovered somewhere
else was to be arrested, bound like a slave and carted back to his
hometown where he was restored to his dignity as a decurion. [laughter]

This third
century is also the period of the persecution of the church, and
we find that at least some of the emperors must have had a sense
of humor because when they passed a regulation that if a Christian
was arrested and found guilty of capital punishment, namely believing
in Christ, he was to not be executed but offered the option of becoming
a decurion. [laughter]

Now, the merchants
and the artisans were traditionally organized into guilds and chambers
of commerce and that sort of thing. They now, too, came under government
pressure because the government could not obtain enough material
for the war machine through regular channels – people after
all don’t want all that token coinage – and so they were now
compelled to make deliveries of goods. So that if you had a factory
making garments, you now had to deliver so many garments to the
government requisitions. If you had ships, you had to carry government
goods in your ships. In other words, what we have here is a kind
of nationalization of private enterprises, and this nationalization
means that the people who risk their money and their talent are
compelled to now serve the state whether they like it or not.

When people
tried to get out of this they were then, by law, compelled to remain
in the occupation that they were in. In other words, you couldn’t
change your job or your business. This was not sufficient because,
after all, death is always a relief from taxes; and so the occupations
were now made hereditary. When you died, your son had to take up
your business, your trade, your profession. If your father was a
shoemaker, you had to be a shoemaker. These started by being restricted
to the defense-oriented industries but, of course, gradually it
was realized that everything is defense-oriented and the system
just developed.

The peasantry,
known as the coloni, these were leaseholders on both imperial
and private estates. They, too, formerly a free class were now under
the same kinds of pressures that all smallholders were in this situation,
and they began to drift away trying to find better opportunities,
better leases, better occupations; and so under Diocletian the coloni
were now bound to the soil. Anyone who had a lease on a particular
piece of land could not give that lease up. More than that, they
had to stay on the land and work it. In effect, this is the beginning
of what in the Middle Ages is called serfdom, but it actually has
its origins here in the late Roman society.

We know for
example from studies of Palestine, particularly in the Rabbinical
writings, that in the course of the 3rd and early 4th century the
structure of landholding in Palestine changed very dramatically.
Palestine in the 2nd century was largely composed of small peasant
landholders with very small acreage, perhaps an average of two and
a half acres. By the 4th century those small holders had virtually
disappeared and been replaced by vast estates controlled by a few
large landowners. The peasants working the estates were the same
people, but they had in the meantime lost their land to the larger

In other words,
landholding became a massive kind of agribusiness. In [the] course
of this the population of Palestine, still principally Jewish, also
changed in that the ownership of land passed from Jews to Gentiles;
and the reason for that undoubtedly was that the only people with
large amounts of cash who could buy out these smallholders who were
in distress were, of course, the government officials. And we hear
of them being called potentates, powerful ones. In effect there
is a shift in the distribution of wealth in Palestine; and obviously,
from other evidence, similar things were happening in other places.

With regard
to taxes, they naturally increased across the board, but Diocletian
decided that it was a very inefficient system that he had inherited;
every province more or less had its own system of taxation going
back to pre-Roman times, actually. And so he, with his military
mind, demanded standardization. And what he did was to have all
wealth, which was of course landed wealth, assessed in units of
productivity. In other words, every person who had land was either
singly, if he was a large landowner, fit into a particular unit,
a tax unit called iugum, and those who were smaller landowners
were collectively put into a iugum. This meant that the emperor
for the first time had the basis of a national budget, something
the Romans never had until Diocletian, and therefore he knew at
any given time how many taxable units of wealth there were in any
province, and he could simply levy an assessment and expect to get
a fixed amount of money.

this took no account of the fact that in agriculture productivity
varies considerably from season to season, and that if an army has
passed through your district it may take years to recover. The result
is, we hear of massive petitions from whole regions asking the emperor
to forgive them their taxes, to remit five years of past dues and
so on and so forth; or to reduce the number of units of productivity
to reflect the loss of population or the loss of materials. As a
matter of fact, when people began to say "it used to be I had
five people paying this unit of taxation, but two them have fled
and it’s only half the land in production," the response of
the government was to say, "that doesn’t matter, you still
have to pay for the land that is now out of production." So,
I mean, there’s no relationship between taxes and actual productivity.

How did people
protect themselves from this? Well, first of all, mortgages virtually
ceased; long-term mortgages virtually ceased to be given. Long-term
loans of any kind disappeared. No one will lend unless they are
guaranteed payment in gold or silver bullion. In fact the government
itself, under Diocletian and Constantine, refused to accept gold
coins in payment of taxes, but insisted instead on gold bullion.
So that the coins that you bought in the marketplace had to then
be melted down and presented in the form of bullion; and the reason
was [that] the government was never sure how adulterated its own
gold coinage really was so they insisted on bullion.

Pledges and
securities for crops and for loans were always in either gold, silver
or indeed in crops themselves. In Egypt we have a document in which
the banks have been refusing to accept coins with the divine image
of the emperor; in other words, state issues. The government’s reaction
to that, of course, was to force the banks to accept the coinage.
This led to wholesale corruption in Roman society as the black market
became a normal part, as people refused to pass, to exchange, coinage
at the officially fixed tariffs but instead coinage was passed on
a market principle.

There were,
obviously, flight from the land, massive evasion of taxes, people
left their jobs, they left their homes, they left their social status.
Now, Diocletian’s final contribution to this continuing disaster
was to issue his famous Edict on Prices [of] 301, a very famous
instance of a massive effort by the government to control inflation
by price controls. You have to realize that there is a little problem:
the Roman Empire was a vast region running from Britain in the west
to Iraq, Mesopotamia in the east; from the Rhine and the Danube
to the Sahara. It included areas of very sophisticated and very
primitive economies, and the result of that was the cost of living
varied considerably from province to province. Egypt seems to have
had the lowest cost of living, Palestine had a cost of living twice
that of Egypt, and [Rome in Italy] had a cost of living twice that
of Palestine.

ignored that; he just issued a single standard price for the entire
empire. The result was that in Egypt the effects of the Edict probably
didn’t exist because the price, the maximum price fixed in the Edict,
was very rarely reached in Egypt. But it was the people in Rome,
of course, [who] had the maximum price lower than the market price.
The result of that, of course, was riots in the street, disappearance
of goods; the penalty for violating the law was death, a very common
penalty in Rome for almost anything; and the mentality of Diocletian
comes out, and the cause of [the] maximum price edict comes out
in the preface to the law. I’ll just quote briefly some of it; when
you hear these first words I’d like you to pay attention because
you may have a different interpretation of them than Diocletian
meant. He says, "if the excesses perpetrated by persons of
unlimited and frenzied avarice could be checked," he doesn’t
mean himself [laughter], "if the general welfare could endure
without harm this riotous license, if these uncontrolled madmen,
the unscrupulous, the immoderate, the avaricious, could be persuaded
to desist from plundering the wealth of all, then all would be well."
Now who are these people? They are the merchants; they are the avaricious
greedy types who cause inflation as we all know.

Then he speaks
about himself and his three partners. "[We, the protectors
of the] human race," sounds familiar doesn’t it [laughter],
"we are agreed that decisive legislation is necessary, so that
the long-hoped-for solutions, which mankind itself could not provide…"
You know, it’s the same stuff [laughter], we can’t do anything
ourselves, we need the legislator. "By the remedies provided
by our foresight [laughter], these things may be remedied
for the general betterment of all." In fact, as you read through
the rest of the thing it becomes clear that the reason the Edict
on Prices [was] issued was that the soldiers were the principal
victims of the inflation, and that Diocletian was afraid he was
losing control of his army. And so the people who are to be protected
are the soldiers and the other servants of the state.

Now Diocletian’s
monetary reforms were tentative steps in the right direction; except
for the Edict on Prices which, by the way, simply didn’t work and
was gradually dropped. But his steps were not radical enough; his
inability to create a sufficient supply of gold and silver coinage,
combined with his continued reliance on payments in kind for taxes
and salaries, and the continued issuance of fiat bronze coinage
in endless amounts, failed to make a significant dent in the problem.

reforms were also partial, but of sufficient vigor and radical character
to make a difference. Through his willingness to extract by compulsion
the gold reserves of the taxpayers, forcing them to disgorge their
bullion, he placed an ever-increasing supply of gold in the hands
of the government officials. This was increasingly used to pay military
bonuses, salaries for bureaucrats, and even payments for certain
public works. Increasingly, then, a two-tier monetary system emerged
in which the government, the soldiers and the bureaucrats enjoyed
the benefits of a gold standard while the non-governmental portion
of the economy continued to struggle with a rapidly-inflating fiat

The new gold
solidus – circulated widely by its possessors, the government-salaried
employees – sold at various market rates to customers who desperately
needed it to pay their taxes. Thus the state had found a way to
protect itself and its servants from the unwholesome effects of
its own earlier inflationary cycle, while slowly withdrawing itself
from the cumbersome and wasteful system of accepting taxes and paying
salaries in kind. Meanwhile, the masses suffered from [a] massive
injection of fiat money which they had to accept in payment for
government requisitions of such gold or silver or other commodities
which the government demanded.

Now, we may
wish to find some lessons in this tale of [the] monetary policies
of the late Roman Empire. The first lesson, I think, must be that
if war is the health of the state, as Randolph Bourne said, it is
poison to a stable and sound money. The Roman monetary crisis therefore
was closely connected with the Roman military problem. Another lesson
is that the problems become solvable when a ruler decides that something
can be done and must be done. Diocletian and Constantine clearly
were willing to act to protect their own ruling-class interest,
the military and the civil service. Monetary reforms were necessary
to win the support of the troops and the bureaucrats that composed
the only real constituency of the Roman state, and the two-tier
system was designed to this end. It brought about a stable monetary
standard for the ruling group who did not hesitate to secure it
at the expense of the mass of the population.

The Roman state
survived. The liberty of the Roman people did not. When freedom
became possible in the west in the 5th century, with the barbarian
invasions, people took advantage of the possibility of change. The
tax burden remained burdensome even after the gold standard was
re-established. The peasantry had become totally alienated from
the Roman state because it was no longer free. The business community
likewise was no longer free, and the middle class of the urban cities
was no longer free.

The economy
of the west was perhaps more fatally weakened than that of the east,
and when we read in the writings of the early 5th century Christian
priest Salvian of Marseille his account of why the Roman state was
collapsing in the west – he was writing from France, Gaul –
Salvian says that the Roman state is collapsing because it deserved
collapse; because it had denied the first premise of good government
which was justice to the people. And by justice he meant a just
system of taxation. Salvian tells us, and I don’t think he’s exaggerating,
that one of the reasons why the Roman state collapsed in the 5th
century was that the Roman people, the mass of the population, had
but one wish after being captured by the barbarians: that they would
never again fall under the rule of the Roman bureaucracy. In other
words, the Roman state was the enemy, the barbarians were the liberators.
And this undoubtedly was due to the inflation of the 3rd century.
While the state had solved the monetary problem for its own constituents,
it had failed to solve that monetary problem for the masses and
continued to use an oppressive system of taxation in order to fill
the coffers of the ruling bureaucrats and military. Thank you.

This was
transcribed by Arto
from an audio

18, 2009

The late
Joe Peden, an instructor in history at Baruch College, was a close
friend and colleague of Murray Rothbard’s.

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