We all know about aqueducts, baths and roads, but what economic legacy did the Romans leave us? And what’s its relevance now? Paul Harwood asks actuary and classicist George Maher
The Roman Empire lasted 600 years – then died. The most successful trading bloc ever seen disappeared. In Pugnare: Economic Success and Failure, actuary George Maher investigates how it went so right for so long, and then so wrong so quickly. After a PhD on the empire’s economy, he concluded that Rome grew, prospered and died due to motivations and behaviours that are little changed from ours today. Can we learn from its story?
How successful was Rome plc?
More successful than any human endeavour before it, measured by trade over centuries. The common trade area was larger than Europe is today. The volume of goods traded at the empire’s height was not exceeded in Europe until the early 1900s. There have been other great civilisations, but none so vast or so advanced in terms of trade.
What were the key factors for its growth and stability?
The Romans introduced a fiat currency, upheld the rule of law and built infrastructure – so they could be trusted. People who wanted to get rich could do so via trading and conquest. Those who wanted to better themselves could join a profession or trade. There was a reason for working other than survival. This organisation and maintenance generated economic benefits for those involved, and these solutions have all been reinvented in building today’s modern economies.
What led to its fall?
After a period of extraordinary stability, people became complacent, losing their respect for democracy and tolerating dictatorial leaders. The leaders had to bribe the army to keep control, which was unaffordable and led to a form of quantitative easing. This struck at the backbone of the empire’s stability: its currency. Not only was the bribe unaffordable but also paying the people twice for the same work was inflationary. With a debased currency, the empire crumbled within a century. This feels similar to the circumstances of today.
How bad was the fall?
Devastating. Over 100 years, from 250 AD, the civilisation crumbles. People go back to living in tribes or feudal societies. Life expectancy falls. Quality of life worsens. It takes 1,000 years of creeping progress before Europe returns to anything like the same level.
What drove the success?
People. Romans wanted more money, power and prestige. The motivation to achieve a more comfortable existence is unchanging. It’s interesting that work developed in Roman times to be more than a necessity or a means to gain money. There was increasing specialism and professionalism. People could have very niche jobs, such as ‘maker of eyes for statues’. Society was sophisticated.
How was this achieved?
The Romans created a community that extended beyond the tribal, then grew it over several generations – beyond Rome, beyond Italy and further afield. The community had leadership and discipline, was dynamic and democratically organised, and could manage structures that enriched the state and individuals. There was a hierarchy that was organised to deploy resources, reducing barriers and generating profit.
At first, Rome grew under the direction of the Senate. Two Consuls were elected for single-year terms, and each could countermand the orders of the other, a little like today’s ‘no unfettered powers of decision’. The emperors emerged later, but worked with the Senate, which retained significant political respect. It was only later that the emperor became a dictator and the Senate’s influence waned.
More important was the government machine. Likely candidates for high office were first elected to minor public roles, such as maintaining aqueducts. Based on performance, the successful would be elected to more important roles. The resulting government was a blend of merit and democracy, driven by competence.
To what extent did the army drive growth?
The army was the only public service. It ensured the empire’s stability and was its greatest expense. The army never stopped conquering new territories – akin to modern companies growing by acquisition. Conquest continued because the vast sums seized from new territories were shared between army leaders and the state. Again, the motivations have parallels with today. The army was also responsible for collecting taxes and keeping the peace – providing a reliable income and ensuring that trade grew. This was as important as invasion.
Was there more to trade than leadership and the army?
The Romans knew that infrastructure was key to joining up conquered territories and maintaining influence. Straight roads prevented ambushes. Garrisons created demand for buildings, bath houses, goods and services. Showing conquered people that they could prosper under occupation provided an alternative to dissent. Infrastructure improved quality of life. The state commissioned it and provided the capital. Once it was established, Rome organised its maintenance, collected taxes that paid for it, and provided the army so work could be done without disturbance.
All supported by a reliable currency…
The Roman currency was accepted throughout the empire. In part, it was set up to pay the army across its vast territory. Embedding it did not happen overnight and interventions were necessary. Yet over time, a fiat currency evolved, and then banking and credit facilities. It was a remarkable achievement.
How did leadership contribute?
There were three distinct phases, starting with the Republic. From BC 500–50, the Senate was the ultimate political body. There was no emperor. Senate members and public officials were elected. The lower the rank, the wider the electorate. This was democracy.
The second phase began with Julius Caesar as dictator, but he didn’t last long, and was replaced by his adopted son Augustus. Augustus was canny. He nurtured the Senate, which was strong and effective. He slowly acquired absolute power but used it carefully, and led a surge in infrastructure spending.
A succession of emperors followed, some good, some bad. Democracy survived and the Empire prospered.
Decline began around 193 AD – the third phase. Emperor Severus presided over a worsening political situation. His predecessor had been contemptuous of the Senate, weakening its authority. He failed to halt the decline and became a dictator, and subsequent emperors followed suit. Accountability vanished. There was no counterweight to the emperor’s power and the rot set in.
What was the impact of army pay on the empire’s economics?
Julius Caesar doubled army pay in BC 50 just before he became dictator, despite not having the authority to do so. He who controlled the army – or their pay – controlled the empire. By announcing the pay rise, he strengthened his grip on power. The increase, once announced, was impossible to revoke.
He didn’t last long, but the pay rise then was there to stay. The second increase took place in 193 AD and was a desperate measure. Caracalla made the award and also increased the army’s size by a third, with a further increase 20 years later.
This bankrupted the Roman state, which didn’t have the money. Choices had to be made between paying the army or funding infrastructure. The currency was debased, a version of quantitative easing was applied and inflation, unseen for 200 years, resulted. Trust began to fail. People began to retreat. Resistant communities began to revolt. The end was in sight.
From 400–1500, Europe was in the Dark Ages. How different was life post-Rome?
Life expectancies fell, people reverted to living in smaller tribal communities, science all but disappeared. Living standards did not recover for more than 1,000 years. The universal currency was gone. It took until 1816 for the British to introduce the next fiat currency accepted across borders. Trade reverted to small, local transactions.
Today, growth is accepted as central to economic success. Was it in Rome?
It was. The system started to unravel in the second century when growth stalled. For example, after 100 AD there were no more port infrastructure developments around Rome and the volume of goods manufactured, such as glass, stabilised. One conclusion might be that children no longer had their parents’ opportunities. States can survive this if institutions and traditions can develop and are respected while doing so, as Augustus showed. Commodus, hooked on quantitative easing, smashed up the system, and the empire failed.
What is most remarkable about the Roman story?
I still wonder why it took 1,000 years to recapture what they achieved. What would society look like now if we had had an extra millennium of urban civilisation? People motivated just like us built a wildly successful economic trading system that rapidly came unstuck. Could that happen to us? Are we looking at a 1,000-year discontinuity, where civilisation disappears? Instinctively, we think not, but I doubt many people thought in February 2020 that governments would step in to pay people’s wages. Unthinkable things can and do happen.
One driver of Rome’s fall was the complacency of the populus. The Romans forgot why it was important to have good, experienced, qualified people in high office. When Commodus belittled the Senate, the system was being attacked from inside with no push back for the first time. This feels familiar.
The Roman currency was underpinned by a balance of income from conquest, taxation and spending. Trust in a currency today is based on a population’s ability to service the national debt through taxation, reliant ideally on growth, but latterly on printing money. It feels too easy to spend too much and lose that balance. Is that what we are seeing?
Paul Harwood is a consulting actuary
Image credit | Shutterstock | iStock