Thursday, June 16, 2011

Debt Deflationary Crisis in the Late Roman Republic

We hear endlessly from free market ideologues about how inflation allegedly caused the collapse of the Western Roman empire (for a refutation of that, see my post “Inflation and the Fall of the Roman Empire,” June 12, 2011), but they never mention the rather important point that deflation and debt deflation were clearly factors in the economic and social turmoil that saw the fall of the Roman Republic in the first century BC and its replacement with the despotic Roman empire (for a timeline of Roman Republican history, see below).

During the Social War (91–88 BC), Rome was affected by a monetary crisis in which a shock to confidence (or fides in ancient Latin) and the uncertainty caused by the war led to hoarding of money. In Keynesian terms, there was a shift in liquidity preference, owing to the precautionary motive. The idle money that had been taken out of circulation caused a price deflation in commodities and land values (a real asset). Excessive private debt had always been a problem at Rome, and the deflationary troubles caused a debt crisis. This was made worse by King Mithridates VI of Pontus, who invaded Asia Minor, a Roman province, where Romans had lent out considerable sums of money. Repayment of Roman loans in Asia was threatened, which caused creditors in Rome to experience a liquidity crisis and to have trouble servicing their own debts. In turn, other creditors were bankrupted. In other words, a financial crisis followed the deflation (Barlow 1980; see also Lovano 2002: 70–73). Does this sound familiar?

C. T. Barlow explains what happened:
“Land prices probably began to fall again. When the creditors foreclosed, they put more land on the market just when the supply of money was short. This glut on the market, together with the shortage of money, caused land prices to drop swiftly. As the value of most collateral fell, more creditors probably foreclosed, and the collapse quickened. Fides [i.e., confidence] had to give way, undermined by the Social War and the narrow supply of money. Sulla’s march on Rome and the Bellum Octavianum [i.e., the civil war in 87 BC when the faction of Marius occupied Rome] worsened the situation because they paralyzed the government. Meanwhile Rome suffered through a period of general deflation, depressed land prices, and little or no credit. The government could not act until 86 …” (Barlow 1980: 216).
It is not surprising that this debt deflationary crisis coincided with the first period of severe political crisis in the Roman republic in which the state degenerated into open civil war between the supporters of the aristocrat Lucius Cornelius Sulla (c. 138 BC–78 BC) and the popular leader Gaius Marius (157 BC–86 BC), who was the uncle of Julius Caesar. In 88, Sulla had used his army to invade and oust the faction of Marius. When Sulla left for the east to fight the Pontic king Mithridates, the forces of Marius and Cinna won control of Rome (Bringmann 2007: 192).

Although it is anachronistic to talk about solid and clear party politics in ancient Rome, there were nevertheless two loose and broad political movements:
(1) the Optimates and
(2) the Populares.
The Optimates (“the best men”) were traditionalist supporters of the power of the Senate against the people, while the Populares were more favourable to the people and acquired power through the popular assemblies and the office of the tribunate. To the extent that the Populares had a political agenda, it consisted of land reform, food supply, the welfare of the people and debt relief (Wiseman 2009: 14). The major Populares leaders were Gaius Marius, Lucius Cornelius Cinna, Publius Clodius Pulcher, Marcus Licinius Crassus and Julius Caesar.

With popular control of the government from 87 under Cinna, a solution to the debt crisis was implemented, and Cinna’s fellow consul Valerius Flaccus pushed through debt relief:
“The government could not act until 86, when [sc. the consul] L. Valerius Flaccus carried a bill providing debt relief. The need for some such remedy was generally acknowledged, since the lex Valeria de aere alieno passed, in Sallust’s words, ‘with all good men agreeing’ ... The lex Valeria cut all debts by three-fourths, including the government’s. If the vicious circle of foreclosures and falling land prices were to be broken, debts had to be brought into line with land prices, so that debts and the value of their security would balance. The 75% reduction in debts probably reflects the deflation of land prices since 88 and the general deflation caused by hoarding and the shortage of coins in circulation. The lex Valeria brought debts down to the point where land prices and the supply of money could support them. Balancing debts and land prices helped to restore the credit structure and this to resurrect fides [i.e., confidence] ... Sallust indicates that the lex Valeria brought the poor some relief from their debts. If the law brought debts into line with land prices, it would have stopped many foreclosures and saved some small farms. No doubt the wealthy too took advantage of the law, as did the commercial classes. The moneylenders suffered a paper loss, but in reality they probably lost little. With the lex Valeria they now had a chance to recover at least part of their capital. If they foreclosed they still received the same property as before. Furthermore, when they collected on their loans, they received the deflated currency of 86, not the currency of 89 or 88: in real values they may have lost almost nothing” (Barlow 1980: 216).
While action in 86 averted further crisis, this was the first of a number of debt crises of the late Republic, and the role of debt and debt deflation in the fall of Roman Republic cannot be ignored. There were other outbreaks of debt crisis, perhaps exacerbated by deflation in the late Republic:
(1) In 63 BC when the senator Catiline led a conspiracy to overthrow the government by drawing on support from over-indebted segments of the population.

(2) In 47 BC, violent strife broke out between Publius Cornelius Dolabella and Mark Antony over debt relief legislation, with Julius Caesar eventually coming out in support of rent relief (Bringmann 2007: 264).

(3) Caesar had to take further measures to deal with a debt and credit crisis in reforms he implemented down to 46 BC (Bringmann 2007: 271).
These problems are summed by M. Aglietta:
“struggles between debtors and creditors tore the political elite [sc. of the Roman Republic] apart. It occurred in the Catiline conspiracy (64 to 62 B.C), the civil war triggered by rivalry between Caesar and ... [Pompey] (49 to 44 B.C) and acute indebtedness under Tiberius (32 to 33 A.D). In these episodes patrician debtors could gain the support of plebeians who were structurally in debt. Because of the importance of keeping assets in the political arena, debtors refrained from selling their estates to settle their debts, lest land prices fall and depreciate their assets. At times of acute political strife, financial crises could trigger a drying up in circulation through hoarding of the means of payments due to concerns about political instability. The velocity of money in circulation changed abruptly. Solving the debt crisis was the precondition for restoring normal payments. It depended on the structure of political power within the state, which was much different in the Republic and the Empire. In the Republic the men wielding the ultimate power were partisans in the financial struggle. Such was Cicero in 63 who imposed the interests of the creditors by sheer violence. In the Empire, the authority rested beyond the conflicting interests. The Emperor was intent on compromising by rescheduling the debts, partially reducing them in principal or in interests, and granting gifts or low-interest loans from the state” (Aglietta 2002b: 20–21).
I have provided a Timeline below of Late Republican history.


133 BC – Tiberius Gracchus elected tribune in 133 BC.

123 BC – Tiberius’ brother Gaius Gracchus elected tribune.

121 BC – Gaius Gracchus murdered when he stood for election as tribune for a third term.

112 BC – Roman Senate declares war on Numidia.

112 BC–105 BC – Jugurthine War.

late 110/early 109 BC – Jugurtha defeats Roman army led by Aulus Postumus Albinus.

107 BC – Marius elected consul.

105 BC – Marius was elected consul.

104 BC–100 BC – Marius serves as consul for five successive terms.

104 BC – Marius returns to Rome by January 1, and celebrates his triumph over Jugurtha.

91–88 BC – Social War.

91–86 BC – Debt deflationary crisis.

88 BC – King Mithridates VI of Pontus (king from 120 BC to 63 BC) invades Asia Minor and causes the massacre of 80,000 Romans and Italians.

88 BC – Lucius Cornelius Sulla (c. 138 BC–78 BC) and Quintus Pompeius Rufus are consuls. Sulla invades Rome and defeats the populares.

87–84 BC – Sulla fights the Mithridatic war.

87 BC Marius and Cinna occupy Rome and kill their opponents. This was called the Bellum Octavianum.

86 BC – Gaius Marius dies on January 13.

86–84 BC Rome dominated by Cinna.

83 BC – Sulla ends war with Mithridates and marches on Rome.

83–82 BC – Civil war between Sulla and the party of Caius Marius the younger and Cinna.

82 BC – Victory for Sulla at the Battle of the Colline Gate.

end of 82 BC/early 81 BC – the Senate appoints Sulla dictator legibus faciendis et reipublicae constituendae causa (“dictator for the making of laws and for the settling of the constitution”), without a term limit.

82–80 BC – Constitutional reforms of Sulla.

end of 81 BC – Sulla resigns his dictatorship.

80 BC – Sulla holds the consulship.

70 BC – Pompey and Crassus elected consuls and dismantle significant parts of Sulla’s constitution.

63 BC – conspiracy of Catiline defeated by the consul Marcus Tullius Cicero.

62 BC – Pompey returns from Asia.

59 BC – First Triumvirate (59–53 BC) is formed and includes Gaius Julius Caesar, Marcus Licinius Crassus, and Gnaeus Pompeius Magnus.

59 BC – Caesar and Marcus Calpurnius Bibulus become consuls.

59 BC – Caesar becomes governor of Cisalpine Gaul, Illyricum and Transalpine Gaul.

57–51 BC – Caesar conquers Gaul.

52 BC – January, Clodius is murdered in a gang war by Milo.

49 BC – 7 January, the senate passes a senatus consultum ultimum. Caesar crosses the Rubicon on 10 January.

49–46 – Civil war.

45 BC – Caesar defeats opponents in the Battle of Munda in March 45 BC.

46 BC – Caesar defeats Republican forces in Africa. Cato commits suicide.

44 BC – Caesar assassinated.

43–33 BC – Second Triumvirate is formed on 26 November 43 BC, and consists of Octavius (Augustus), Marcus Aemilius Lepidus, and Mark Antony.

42 BC – Republican forces defeated by Mark Antony and Gaius Octavian at Philippi in October.

31 BC – Gaius Octavian defeats Antony at the naval Battle of Actium on September 31. Beginning of the Roman empire.

29 BC – Octavian accepts the title of Augustus.


Aglietta, M. 2002a. “Whence and Whither Money,” in The Future of Money (OECD Forum for the Future. Conference, 2001: Luxembourg), OECD, Paris. 31–72.

Aglietta, M. 2002b. “Money: A Matter of Credit and Trust,” Les journées internationales d’économie monétaire et bancaire, Lyon, 6–7 June 2002.

Barlow, C. T. 1980. “The Roman Government and the Roman Economy, 92–80 B.C.,” American Journal of Philology 101.2: 202–219.

Bringmann, K. 2007. A History of the Roman Republic, Polity, Cambridge, UK.

Lovano, M. 2002. The Age of Cinna: Crucible of Late Republican Rome, Franz Steiner Verlag, Stuttgart.

Wiseman, T. P. 2009. Remembering the Roman People: Essays on Late-Republican Politics and Literature, Oxford University Press, Oxford and New York.


Andreau, J. 1987. La vie financière dans le monde romain: les métiers de manieurs d’argent: (4e siècle av. J.-C.–3e siècle ap. J.-C.), Ecole Française de Rome, Rome.

Andreau, J. 1999. Banking and Business in the Roman World (trans. J. Lloyd), Cambridge University Press, Cambridge, UK and New York.

Barlow, C. T. 1980. “The Roman Government and the Roman Economy, 92–80 B.C.,” American Journal of Philology 101.2: 202–219.

Flynn, D. O. 1984. “The Use and Misuse of the Quantity Theory of Money in Early Modern Historiography,” in E. Van Cauwenberghe and F. Irsigler (eds), Minting, Monetary Circulation and Exchange Rates, Verlag Trierer Historische Forschungen, Trier. 383–414.

Frederiksen, M. W. 1966. “Caesar, Cicero and the Problem of Debt,” JRS 56: 128–141.

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

Shaw, B. D. 1975. “Debt in Sallust,” Latomus 34: 187–196.

Verboven, K. 2009 “Currency, Bullion and Accounts Monetary Modes in the Roman World,” Revue belge de numismatique et de sigillographie 155: 91–124.

Wolters, R. 1987. “Die Kreditkrise des Jahres 33 n. Chr.,” Litterae Numismaticae Vindobonenses 3: 25–58.

1 comment:

  1. I am amazed that Crassus was a Populares who wanted welfare reforms and debt relief, given that Crassus was also one of the greediest men ever known and used to confiscate land and property by force to add to his large pile of wealth. His proposals to the peoples was that he would reform the system (including land reform!) make it harder for people like himself to make their ill begotten gains?

    Looking at the timeline of the last decades of the Roman Republic and M. Aglietta's explanation, one senses the deflation was largely aggravated by permanently changing political landscape, in which reforms would be brought in and then discarded, and in which people would permanently turn against each other out of ambition.

    Speaking purely from realpolitik, I wonder if there's a lesson to be drawn that junior politicians should sometimes tow the line with the senior members of the establishment, no matter how crude and reckless their policies - if the result of dissent is going to be political instability. Baron Skidelsky recently suggested in a column Democracy v. Finance, that the politicians in the crisis-struck Eurozone regions should act more as a class than as ambitious individuals in these times.