Current American social and political forces alarmingly resemble those that helped push the late Roman economy in Western Europe into the Dark Ages. As then, there has been a fragmentation of society, and the concepts that previously unified it, at least to a significant degree. To quote the poet, “the center does not hold.” While this fact is widely perceived, the late Roman experience may help explain the forces that are making it happen.
In The Origins of Business, Money, and Markets I describe these forces in some detail because they explain the decline and near disappearance of business activity in Western Europe after the 3rd century AD, ushering in a period of economic depression that would last a millennium. We do not, of course, wish to see THAT repeated!
The basic similarity between late Rome and present-day America is that in each case manmade political and social developments seriously damaged a formerly robust commercial world, leading to enormous disparities in wealth and opportunity. The few who possessed that wealth and opportunity in the Roman world then demanded tax and legal concessions from the central government that greatly weakened the government, atomized the State, and ultimately destroyed its legitimacy. The concessions that Congress is granting to America’s super-rich today—constantly reduced taxes, freedom from legal restraints—could lead in the same direction.
When Marcus Aurelius became Roman emperor in 161 AD, ruling the largest State the world had ever known, it was “the period in the history of the world,” according to Gibbon, “during which the condition of the human race was most happy and prosperous.” Today, many would say the same for the 21st century USA. In the Roman world, a robust class of knights, entrepreneurs, civic leaders, and well-paid retired soldiers inhabited the Empire’s many cities and towns, enjoying a market-based and monetized economy. The Empire’s per capita money supply was nearly 80% of that which circulates in the US today. Even in primitive northwestern Europe, where Rome stationed its army at frontier posts like Cologne, Mainz, and Vienna, cash salaries and pension payments, plus the use of private businesses to supply food, arms, and other necessities, ensured a city-centered, money-based market economy.
The social and economic restructuring of northwestern Europe in Roman times began with a series of disasters and wars, just as the Great Recession and multiple wars have afflicted the first years of Obama’s Presidency. The Roman population declined, as did production. Marcus’s foolish son Commodus squandered the Empire’s substantial treasury, and his early 3rd century successors launched expensive wars of choice against family enemies, greatly enlarged the imperial armies, and raised military salaries. The emperor who followed Commodus, expressing a view somewhat akin to that of recent Republican administrations, advised his sons: “Be of one mind: enrich the soldiers; trouble about nothing else.”
Since the tax revenues from a diminished Empire could not meet these increased military expenditures, the emperors tried to depreciate their coinage, creating rampant inflation. Credit and commerce collapsed during the 3rd century (much as they did under Germany’s hyperinflation of the 1920’s), and barter became the primary method of trade in poorer parts of the Empire like northwestern Europe, whose land values plummeted. Peasants fled, the urban middle classes floundered, and by the end of the 3rd century the surviving towns and cities, barely hanging on, could no longer protect the countryside and its farms. Only the very rich–Roman senators, imperial generals and the like—had the diversified investments that allowed them to escape the poverty and dangers that engulfed virtually everyone else.
From the late 3rd to the 5th century these wealthy Romans acquired huge tracts of land at bargain prices, becoming the owners of northwestern Europe’s most productive assets. They could offer protection and aid in return for loyal service, and desperate men flocked to their employment (mostly tenancy). The emperors now had to bargain with these great powers for the taxes and manpower they needed to protect the Empire. These bargains gradually sapped imperial power, and soon after the Vandals sacked Rome itself in 455, the last emperor was sent into retirement.
The crisis of the 3rd century AD and its aftermath demolished the happy Roman world that Gibbon described, and led to a social and economic restructuring of late Roman society. In northwestern Europe it produced an oligarchy of a few exceptionally wealthy families. The elevation of the extremely wealthy to oligarchic status is happening differently today, but the earlier example makes the outcome of such a shift troubling to contemplate.
As the very wealthy assume political power through the virtually unlimited campaign spending that the US Supreme Court now allows, do they not also demand tax relief and legal protections? And if their power becomes overwhelming, is it not foreseeable that their demands will debilitate our military strength, and the government’s ability to protect the public interest within its own borders?
Oligarchy in northwestern Europe also froze the economy at near-subsistence levels. The self-sufficient landowners had little short-term interest in maintaining roads, protecting those who were not employees, sharing benefits with those who were their employees, or generating prosperity for others. Except for their own households, life was largely reduced to the terms of subsistence, and in the absence of a more widespread demand for goods and services, even the richest could no longer find or acquire luxuries that had once been commonplace. The same economic laws still apply. If the very rich can use their power to monopolize wealth today, and a prosperous middle class disappears, then the disappearance of demand will force even the wealthiest to suffer a sharply reduced style of life.
Despite its dire economic consequences, the late Roman structure of society suited the powerful, whose dominance could not be challenged, and would last many centuries under the name of feudalism. An oligarchic structure could prove equally stable in the US. We do, however, have two crucial advantages. One is that we know where this road leads, whereas the Romans did not. The second is that, as a democracy, we still have the chance to repudiate oligarchy and the grotesque disparities of wealth that such a political structure brings, and so change our fate.