Inflation and the Fall of the Roman Empire

The myth that the Roman empire fell because of economic problems caused by inflation dies hard, and you can find it used by Austrians and free market libertarians:

Peden, Joseph R. 2009. “Inflation and the Fall of the Roman Empire,” Mises Daily, September 7.

Bartlett, B. 1994. “How Excessive Government Killed Ancient Rome,” Cato Journal 14.2 (Fall): 287–303.

There are a number of points to make in response to these attempts to blame government intervention and inflation for Rome’s fall:

(1) What do we mean by the “fall of the Roman empire”? In fact, the Roman empire split into two by the fourth century AD, with one emperor in the West and one in the East. The expression the “fall of the Roman empire” actually refers to the collapse of the western Roman empire: the Eastern Roman empire (or the “Byzantine” empire) continued, with its fortunes waxing and waning, until 1453 AD. The “fall of the Roman empire” describes the loss of territory the Western empire experienced from about 400 AD onwards.

(2) While the Roman empire was hit by severe monetary inflation from the late third century to the early fourth century AD, the economic crisis largely abated by the mid-fourth century (Whittaker 1980). The Eastern Roman empire had been hit by the same inflationary crisis, but it never fell. Moreover, while the inflation had bad social effects, the full effects are not clear to us. The majority of the population of the Roman empire were peasants, but they were largely self-sufficient:

“modern scholars seem agreed that inflation only hurt a small section of the population; maybe ‘craftmen’, or possibly only ‘the small creditor class and urban professional (a teacher for instance)’, but neither the peasant nor the magnate suffered. Whatever stratum of society suffered, it did not do so across the whole empire. The Roman empire was never a unified economy; each province followed its own trajectory” (Sidebottom 1998: 2800–2801).

Since the vast majority of the population was rural and engaged in farming (the most important productive activity in the empire), the inflationary crisis of the late empire probably had no great effect on them.

(3) The Western empire persisted for nearly 50 years after the end of the inflation before it began to gradually lose its territory, and as late as 357 the Roman Caesar Julian the Apostate (emperor from 355 to 363) was able to inflict a crushing defeat on the Germans (the Alamanni and Franks) at the Battle of Argentoratum, when they were attempting to invade the empire. The devastating defeat the Romans later experienced at the battle of Adrianople (378 AD) when the eastern Roman Emperor Valens fought a Gothic army was clearly caused by strategic and tactical errors, and not because of the empire’s fiscal problems or inability to field an army.

(4) The West lost most of its empire owing to barbarian invasions from 400–450, and there is an obvious explanation for this: military and strategic errors by generals and emperors. The Western empire ended in 476 AD because of a simple internal rebellion when the last Roman emperor (Romulus Augustulus) was deposed by Odoacer, the barbarian leader of mercenaries in Italy who had been proclaimed king of Italy.

(5) The economic problems that the Roman empire faced after the third century AD were of course real, but not the result of the simple morality tale about inflation spun by apologists for free market economics:

“According to the monetarist view, what buried Rome was inflation stemming from government spending and adulteration of the coinage, coupled with what Mikhail Rostovtzoff deemed to be over-taxation of the middle class. But what actually led to fiscal and monetary breakdown in the every major society from Babylonia through the Roman and Byzantine empires to more modern times was the ability of large property owners to break free of taxes. The Roman treasury was bankrupted by wealthy landowners using their control of the senate to shift the fiscal burden onto classes below them. Lacking the means to pay, these classes were driven below the break-even point. As debt deflation drained the economy of money, barter arrangements ensued. Trade collapsed and the economy shrunk into local self-sufficient manor units” (Hudson 2003: 53).

In other words, it was the super rich and propertied classes who evaded taxation and forced a highly regressive tax system on the middle classes and poor. The economic problems can be related to the structure and unfair burden of taxation, not taxation per se.

(6) The effects of deflation and debt deflation are ignored by Austrian economists and others. The Roman Republic (which existed before the empire) in fact faced excessive debt and deflationary periods in the first century BC, especially in the 90s and 80s BC, which caused serious social and economic problems (for deflation in the Republic, see Barlow 1980; Nicolet 1971; cf. Verboven 1997). Thus it was not just inflation that had undesirable effects, but also deflation (see my post “Debt Deflationary Crisis in the Late Roman Republic,” June 16, 2011).

BIBLIOGRAPHY

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Nicolet, C. 1971. “Les variations des prix et la ‘théorie quantitative de la monnaie’ à Rome, de Cicéron à Pline l’Ancien,” Annales, Économies, Sociétés, Civilisations 26: 1208-1227.

Sidebottom, H. 1998. “Herodian’s Historical Methods and Understanding of History,” ANRW II.34.4: 2775–2836.

Verboven, K. 1997. “Caritas Nummorum. Deflation in the Late Roman Republic?,” Munstersche Beitrage zur Antiken Handelsgeschichte 16.2: 40–78.

Whittaker, C. R. 1980. “Inflation and the Economy in the Fourth Century A.D.,” in C. E. King (ed.), Imperial Revenue, Expenditure, and Monetary Policy in the Fourth Century A.D., B.A.R., Oxford, 1–22.


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