I love history – valuable lessons. When looking at us to those in the past – Culturally we are different, but biologically we are not. If any one of us was put back in time to grow up in past civilisations, we would be no different to the local people in that time period – the environment we grow up in has a lot to do with our values and outlooks
One thing is fairly consistent with human nature – path of least resistance – as an aggregate – driver for technology and innovation –
- Making things easier for our lives – Cars – less effort than walking, less mess than horses – getting food – go and hunt or grow it, or go to supermarket or fast food –
- Convenience of safety in numbers and ease of living – towns and cities developed – more people to defend and also produce and specialise – trade – and with this – the requirement of having others be in charge of decisions for the whole group –
- But what happens when the path of lease resistance starts to occur at the societal level in decision making?
- Individual choice gets outsourced – just like what occurs when outsourcing in building a house or getting their food from a supermarket – the rules that govern life and the economy is placed in the hands of others
In this episode – We will be looking back in history – looking at one of the greatest civilisations in history. And how they declined – economically anyway – many many things contributed to their decline – but there is a parable when it comes to their economic decline – what happens when the population becomes reliant on the government that has complete control over the currency?
- misallocation of resources and the devaluation of their own currency
Rome rise – and economic fall from the people losing power – Rome is a good example:
- It was a tiny kingdom that was overthrown in 509BC – for hundreds of years after getting rid of a king – the people were adamantly opposed to any form of centralised rule –
- But the romans were smart and adaptable as a culture – they didn’t invent too much in the way of technology for themselves – but were masters at adapting other technology and integrating it as their own
- With this they started to grow – through war and conquest – the next few hundred years saw Rome and the people start to grow wealthy – wealth through conquest – looking through cultural eyes of the times – this is how it was done – the state grew through conquest
Economic Side – in the early republic
- Citizens were only taxed in times of war – Citizens were land owners and had to have been given citizenship
- 10 years in the Roman Army was the criteria – true that the wealthy ended up getting citizenship – as they could afford the weapons, armour, horses to arm themselves to fight in wars –
- Misconception – Most of the early Roman army were from the middle to upper classes
- They had low tax collection – and only on the land owners – Each province had to pay a certain amount (not ind.)
- Tax collected (who was elected) – Pay Rome upfront then go collect his money back from people – very decentralised – same in rule
- Stay out of the way economic policy – If you weren’t a citizen – you didn’t have to pay any taxes – you had no say in electing senators – but the way they saw it was if you didn’t contribute to rome – through military service or paying taxation – you don’t get to vote
Rome went from a back water swamp to a wealthy country – became the age of Affluence!
- But at the same time – there started to become an economic disruption – the shift from a republic to an empire and Slavery
- What turned rome from the republic to a dictatorship – 27 BC – Augustus Caesar converted the Republic into an Empire
- Prior to this – By 60BC Julius Caesar (more or less godfather to Augustus) was elected consul however used this position to gain further power
- To build favour, he redistributed a lot of land to the poor and the soldiers of his wars
- Major contributor to their economic decline – Government corruption and political instability was growing over this time
- If Rome’s sheer size made it difficult to govern under the new Empire standards – Centralised authority compared to localised under the republic – ineffective and inconsistent leadership only served to magnify the problem
- Being the Roman emperor became a dangerous job – through the second and third centuries it nearly became a death sentence.
- The amount of power put into the political class was what started causing chaos – but also needed the public to like you – why bread and games strategies were so important
- Civil war thrust the empire into chaos, and more than 20 men took the throne in the span of only 75 years, usually after the murder of their predecessor.
- The Praetorian Guard—the emperor’s personal bodyguards—assassinated and installed new sovereigns at will, and once even auctioned the spot off to the highest bidder.
- The political rot also extended to the Roman Senate, which failed to temper the excesses of the emperors due to its own widespread corruption and incompetence – those with money started buying their way into the senate – as the emperor became the electorate – choosing who could run for office and not the local people
- civic pride waned and many Roman citizens lost trust in their leadership – but also became reliant on them
- There was no stable system of succession – Power disruptions in the Empire
- Created a Stagnant bureaucracy – where the people no longer had any power except in the mob – which could be quelled by the militarised nature of the roman state
- The downfall of Rome was also in part due to the Slave economy – remember that slavery was everywhere in the ancient world – looking through the cultural lens of the day –
- The import of free labour destabilised the economy – Through the conquest of wars and territory, there were a lot of slaves – this was occurring before the empire – towards the end of the republic – but after it got to one point where the majority of the working force were slaves –
- This introduction of free labour replaced those in paid labour positions
- Whilst the practice of slavery didn’t start with Caesar – he needed to keep slavery around but also keep himself popular with the roman people, hence the land redistribution tactic. This was funded by his very wealthy friends and the money he made from selling slaves – At one point, Caesar sold 53,000 people captured into slavery
- Mass importation of slaves caused destabilisation of the economy – displaced many workers – shut down most small businesses or individuals ability to work – through the empires policy to accumulate more wealth in the hands of the already wealthy – shut down whole parts of the economy
- Those in economic power bought more slaves –
- The economic shutdown has put employment in smaller sector down – they got into debt – and had to become workers for the wealthy oligarchs – or became reliant on the state for food and lodging
- But employment at larger estates was massively up
- But rome was still wealthy at the time – Society that is rich, demands free things – the welfare state in rome started to also rise
- Rome switched from Supply to Demand slowly– everything changed from 1AD onwards
- When Rome went to an Empire – Central control increased – like Julius Caesar wanted – Authoritarian nature increases
- The leaders had much greater say in the Roman spending – so needed more income (tax) – also needed more men for Army
- Needed tax – System was transformed into Income Tax (not wealth tax) – war was used as a justification – like in Aus, USA, etc. with our income taxes being introduced as temporary measures in WW1 and expanding in WW2
- Needed more men for army – increase spending as well and reform military – no longer the wealthy fighting – now the lower class –
- Spending requirements grew so much over time that Needed to increase number of citizens – Did have a few good Emperors
- But free entertainment, free bread, free housing was given out to population – keep them happy
- The leaders had much greater say in the Roman spending – so needed more income (tax) – also needed more men for Army
- As moneys value was taken over by empire – spending to keep people happy – needed more –
- Old way was conquest – so outpaced the spending needs of those in charge – who had increased say – instead debased currency
- Needed to keep up the spending and free bread to the people –
- devaluation of denarii (or denarius)
- Like coinage of today, Ancient Rome’s coins represented portions of larger denominations – like our denominations, through inflation they experienced a loss of buying power. During the time of the Roman Republic, you could buy a loaf of bread for ½ As (1 cent coin) or a liter of wine for one As. A year’s pay for a commander in the Roman army around 133 B.C. was 10-2/3 Asses, by Augustus’ rule (27 B.C.-A.D. 14) 74 Denarii, and by the reign of Septimus Severus (A.D. 193-211), it rose to 1,500 Denarii – but was worth less in real terms – how can this happen for a coin based on silver which is limited? Reduce the silver content – same effect of printing money today – stable from 300BC to 1AD –
- You would think that more money being introduced – taxing peoples incomes and making more and more people citizens would result in more tax for the state?
- But by 200AD – Tax collection was 50% less than at 1AD – even though tax rates were up – and the number of citizens had boomed – lowered the requirements of citizenship along the way
- 200AD – Currency was only 40% Silver now – compared to over 95% in 1AD – 200 years ago –
- all territory became a pool of citizens – in 212AD Caracalla– Just as the final collapse started – took about 150y from here for the value of the denarius to hit 0.1% of its value 300 years prior –
- Poor leadership – Free stuff due to loss of jobs through slavery – the final Economic downfall of rome
- Even as Rome was under attack from outside forces, it was also crumbling from within thanks to a severe financial crisis – overspending had significantly lightened imperial coffers, and oppressive taxation and inflation had widened the gap between rich and poor
- The wealthy in political power – to avoid the taxman left to the countryside and set up independent fiefdoms
- At the same time, the empire was rocked by a labor deficit. Rome’s economy depended on slaves to till its fields and work as craftsmen, and its military might had traditionally provided a fresh influx of conquered peoples to put to work. But when expansion ground to a halt in the second century, Rome’s supply of slaves and other war treasures began to dry up.
- But by 200AD – Tax collection was 50% less than at 1AD – even though tax rates were up – and the number of citizens had boomed – lowered the requirements of citizenship along the way
Moral of the story – Fuelling demand through authoritarian controls never works – long term – can show promise in theory
- Hence – Demanded by the population (to be voted in) for an increase in the demand (consumption) of the citizens
- Required to tax more, reduce freedoms, increase controls on populations – as a government to be able to give you everything needs to also control everything – but at the same time can take it away
- Power/Authority of ruler – Created civil wars, infighting – leading to further authoritarian powers
- Julius Caesar wanted power to stop more civil wars – ended up creating one almost every time a leader died – 84% murdered
- The need to have public support for your wars/grab at powers – Creates need for providing more goods to population
- Rome became fat and lazy – lost what made them great and became solely reliant on their benevolent dictators – a lot of people lost their jobs – and the state was put under more pressure to fund the public –
- But without the ability to fund the war machine due to taxes dropping – started to debase the currency which created more problems down the road –
- When you have a system that rewards popularity of demand – not supply and independence of the people – it tends to last a while before collapsing
- Supply side isn’t some uncaring beast – it actually give people more than just money payments (or bread handouts)
- It gives people the freedom of choice – to choose what you do, how much you earn, how much you want to pay for thing
- The market decides – the market isn’t moral, but it determines the optimal outcome for pricing (based around our wants and demands)
- Until you get regulation and controls – then unfair competition increases
- Emperors couldn’t afford not to – their sole grip on power came from making the masses happy – started trying to one up one another for support of the crowd – but needed more and more money to do so – Their option:
- Expansion – but territory grew, so spending on military had to increase (along with everything else) – Lower requitement standards as well – but eventually couldn’t afford military
- Taking the path of least resistance takes the power away from the individual – something to watch out for
- Even with Rome – Along the way to their economic decline – People were fleeing Italy due to the inevitable collapse – but Emperor made it illegal to leave – they were placed on lock down – couldn’t cross their territory boarders
- People were working their jobs, but due to devaluation of currency, running at losses, so stopped working
- Emperor put in laws to force people to work, not leave and then also – their kids had to do the ‘family’ occupation
- Even with Rome – Along the way to their economic decline – People were fleeing Italy due to the inevitable collapse – but Emperor made it illegal to leave – they were placed on lock down – couldn’t cross their territory boarders
- Emperors couldn’t afford not to – their sole grip on power came from making the masses happy – started trying to one up one another for support of the crowd – but needed more and more money to do so – Their option:
- Until you get regulation and controls – then unfair competition increases
- Due to being stuck in a job, losing money, you become despaired and broke – so working class became indentured servitude to wealthy land owners –
- This all was the birth of feudalism and Monarchy again in medieval Europe from 500AD onwards
- This lock down on individual freedoms is a trend through history when those in power start to feel like they are losing power – they tend to freak out and become more draconian –
- If someone is assured in themselves – there is no need to crack down on the population or take supreme control
- Julius Caesar took dictatorship powers and marched on rome as the senate under the republic wanted him dead for war crimes – but he had immunity whilst he was a consul- but you had term limits under this – so had to create an empire and become dictator for life – same time – got popular through writing his own press releases – needed to keep that going and fund bread and games – it was self interest as he couldn’t lose power –
- The people have been pawns of greater powers all through history – the days of kings started through conquest – taking power – to the modern form of Greater power – what are known as Governments
- Founding father quote – Government is like fire, when it is well controlled it can help a country to grow and support it, when it gets out of control – it will destroy everything in its path – just like the Empire when it had too much political power in its hands – over the people and the economy – they started down the path of inevitable failure – the economic problem of unlimited wants but finite resources is ignored – as the Government is seen to have infinite resources if they can produce it at will – and to remain in power to keep the mobs happy – they will tend to do so – or lose office/power – easy choice for them
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