Economic Collapse (Prepping for Tomorrow Book 2)

by Bobby Akart

  The early expansion of Rome in Italy was as much the product of hard work as it was of aggression and domination. Roman advances were strengthened by the settlement of farmers on confiscated territory and a prudent treatment of conquered neighbors minimized the difficulties and dangers. Occasionally, subject communities were admitted to Roman citizenship. The strength of this agriculturally based system was tested severely in wars. The wealth of the Republic was built upon the sweat of the provinces, the loot from wars and the suffering and exploitation of slaves. Like Greece, Rome had inherited a low level of technical skill and achievements were only possible because of the enormous amounts of labor and exploitation involved. The Romans seemed to lack any modern notions of returns and productivity. They appeared to lack the ability to improve methods of production, find superior sources of energy and improve transportation and communications.

  A growing number of provincial taxes brought into being a large class of investors whose speculations tended to generate substantial returns. This ever-expanding and a highly influential class known as the Knights Templar had little care for the rapidly disappearing peasantry. Initially, their primary activity was to squeeze concessions from the Senate thereby meaning that for a time, popular leaders were able to engage their support against the ruling nobility. However, selfish interests gradually became the guiding force, and they joined with the senatorial nobles to form a party of property. Any attempts to reform the system were normally met with hostility. After that, an era of government corruption was born.

  The slave-based economy seemingly worked well but only as long as there was an abundant supply of slaves. The slavery institution declined significantly as a result of the Augustan Peace instituted in the late second century, which led to a period of peace. Historians saw the decline in war and piracy in this so-called "golden age" as an entirely positive thing for the empire, but the Romans did not understand the unintended consequences of their good intentions which are that these two activities were the primary source of slaves. The days of the great slave markets were over, and there was now a severely diminished workforce. Growing humanitarian sentiments within the empire also facilitated this problem as many of the remaining slaves were freed. The fundamental basis of ancient economic activity was significantly undermined.

  The issues of slavery and exploitation were among the root problems of Roman society. The empire was built upon the labor of the conquered subjects. This division of society ensured that the masses of the empire never tasted the fruits of their labor. The two major problems which this lead to were that people lacked the incentive to master their work, and they also had little consuming power for the goods they produced.

  The need to create new trading partners and markets was one of the factors that lead to the continued drive for expansion. The lack of good communications leads to industry increasingly moving into new territories. The growing need to find fresh supplies of slaves was also a factor that contributed to the shifting of industry to the peripheral areas.

  This process of decentralization was also linked to the lack of technology within the Empire. In modern industry, the efficient use of technology reduces overhead significantly, but there was not a tendency to do this in the Roman Empire. Increasing slave concentrations did not reduce overhead, and therefore, there was no incentive to maintain established trading marketplaces, as it was more profitable to move to new areas.

  The lack of adequate transportation also hindered these attempts to expand their markets. Even the best forms of transportation were unsuitable for the high circulation of consumer goods. This was another factor leading to the need for industry to be close to its markets and therefore it encouraged expansion into outlying areas. The ineffectiveness of transportation lead to an inefficient distribution of goods, often creating gluts in one regiion and shortages in another. The communication challenges created market inefficiencies.

  The insecurity of the credit system encouraged industry outwards towards new trading partners and markets. It was very costly to raise capital for a business venture because of the potential risks involved. There was no equivalent of the stock exchange to ensure some degree of responsibility for financial investments. Further problems were created by the primitive nature of the ancient banking system which saw little development of the system of a central bank with branch establishments and in some cases a backward movement towards a system of local independent banks.

  All of the events mentioned did not operate at once or to the same extent but over a period of years. They resulted in a definite movement of industry outwards from the old marketplaces dominating the landscape in the early years of the empire. Overall, there was a slow reversion to small-scale, hand to mouth craftsmanship whose production was focused on the immediate vicinity. Progress in areas like Roman Germany and Gaul was canceled out by the decay of Italy. By the second century A.D., there were indicators that Italy was losing its once predominant position. There were increasing signs of depopulation and large shrinkages in the export of both agricultural and industrial products.

  Soon, large estates became more self-sufficient, which increasingly detracted from the classical economic system, as there were fewer customers for the goods that circulated on the old markets. The constant desire to expand the empire contributed significantly to the restriction of trade and the speeding up of the process of decentralization. By the late third century, history has shown that the rise of the large estate was a real sign of Rome's severe economic decline.

  Alongside this growth of the large estates was the shrinkage of the towns and a reduction in the quality and extent of ancient civilization. The cities began to wither away and urbanization slowed down as the empire became more decentralized in structure.

  Beneath the surface, problems persisted within the currency. Administrative, logistical, and military costs were adding up. The Roman Empire was beginning to feel the weight of hyperinflation, a fractured economy, burdensome taxes, and an overall financial crisis that threatened to cripple Rome. With the strain of foreign demand and the steady movement of currency outward as a result of the adverse trade balance, evasive action was taken.

  The primary form of currency used during the first three centuries of the Roman Empire was the denarius. The coin, between the size of a modern nickel and a dime, was worth a day's wages for a skilled laborer or craftsman. During the first days of the Empire, these coins were of high purity, holding about four to five grams of pure silver. The currency was the Roman equivalent of the gold standard.

  However, with a finite supply of silver and gold entering the empire, Rome's spending was limited by the amount of their minting capability. This created a challenge for the expanding bureaucracy and put limits on an emperor's ability to spend.

  The infamous emperor, Nero, undertook to debase the Roman currency. The weight and quality of their coinage constantly fell until the time when inflation was reaching cataclysmic proportions. By decreasing the purity of their coinage, they were able to make more silver coins, at a significantly reduced purity level, with the same face value. With more currency in circulation, the government could spend more. During Nero's reign, the silver denarius sank to one-third of its former value, and wholly ceased to circulate outside the Empire. The gold aureus became so unreliable that by 200 A.D. it had ceased to be accepted abroad without testing for weight and quality. Over a period of two hundred years, the silver contained in the denarius dropped from nearly one hundred percent to less than five percent.

  The recognizable effects of debasement took time to appear. By adding the newly minted coins with lower silver content into circulation, prosperity did not increase. It reduced the purchasing power of Roman citizens. In effect, it transferred wealth away from the people, and it meant that more coins were needed to pay for essential goods and services.

  The story of the third century was one of worsening inflation and the minting of bad money. The situation became so bad that many Romans fell back on th
e natural economy of bartering thus further perpetuating the economic problems.

  Despite the considerable contraction of the population and resources, this was not accompanied by a corresponding reduction in the price of imperial administration. The maintenance costs of the empire were huge and continued to expand all the time. With soaring administrative expenses, and a peacetime period which didn't yield any precious metals in the form of plunder, Rome sought a means by which to raise funds. They began to levy heavy taxes against the population to sustain the Empire.

  Taxes had to be collected, frontiers were defended, while the empire had to be policed and maintained. The upholding of the Roman standard of culture meant huge amounts had to be spent to provide an adequate supply of the amenities that were considered essential to the full life of a Roman citizen.

  There was the cost of building, repairing and maintaining the numerous temples, public baths, municipal buildings, gymnasia, town halls, market places, triumphal columns, and amphitheaters. Civic sacrifices, religious processions, feasts and the Olympic games also drained huge amounts from the financial reserves of the empire.

  The cost of this critical infrastructure and entitlements weakened the empire's finances. Under Marcus Aurelius, there was a daily distribution of pork, oil and bread to the vast majority of Roman citizens. Originally, this was passed out once a month.

  Another area in which Rome spent massive amounts of money was the army. An important implication of the Roman peace was that the military changed its economic role. Whereas previously it had been an important source of plunder it was now mainly used as a peaceful garrison force. The army became a financial liability, as there were thousands of mouths to feed and nothing for them to do. Of course, even in peace, the military was essential to the security of the empire, but the cost of it more than doubled between 96 and 180 AD. The empire was over-spending by epic proportions, yet the economic structure meant that nothing could be done to counter-act this.

  Another crucial cause of the financial problems came during the reign of Marcus Aurelius when there was a sudden explosion of calamities afflicting the empire. For one hundred and fifty years of the Roman golden age, there had been virtually no cataclysmic events with the exception of the civil war and a few other minor revolts. During the reign of Marcus Aurelius, the Roman Empire's good fortunes suddenly changed for the worse.

  Wars erupted on the outskirts of the Roman Empire and proved to be extremely expensive. To make matters worse, the returning army brought back a deadly plague with them. There were several citizen revolts during this period.

  All of these problems put enormous financial pressure on the empire. The evidence supporting this is clearly shown by the fact that Marcus Aurelius and subsequent emperors reduced the gold surplus of three million in 161 A.D. to one million in 193 A.D.

  One of the consequences of the financial crisis was to put a massive amount of stress on the bourgeoisie. There was a huge rise in the financial pressure imposed on wealthy. This was met with a growing reluctance to help ease the growing economic burden. There are many examples of the patrician class in this period being forced to carry out public works. Generally, the wealthy would volunteer to donate to the public, but the fact the Roman aristocracy were being increasingly forced to help shows the direness of the situation.

  By the third century, the burden was so heavy that it began to consume the capital resources of the empire. However, this increase in taxation did not increase production. The increases in tax seemed to coincide with a decrease in manpower and production. The economy became paralyzed as hyperinflation, increased taxation, and worthless money crushed the Roman economy.

  From the third century onwards, the question of how to fund the Empire became fundamental due to widespread economic contraction. The problem of indebtedness was so common that it was seriously hindering economic enterprise. It got to the stage when taxpayers simply had to pay what was demanded of them. The police powers of the Empire would necessarily have to become strengthened in order to collect the taxes.

  Here we see the growth of bureaucracy and a parallel development of what we today would call the police-state. During the Republic, the money for Rome's expansion came mostly from the plunder of foreign war. However during the Pax Romana, we see a morose state of affairs emerging whereby the only means of keeping the empire funded was through legalized extortion. By the start of the third century, the Roman bureaucracy was intertwined in every aspect of the citizen's lives, similar to modern times. This tendency sowed the seeds for the tyranny of the third century.

  The relentless system of taxation, requisition, and compulsory labor was administered by an army of military bureaucrats. Soon, there was the development of a system of secret police and informers, the personal agents of the emperor, who were rewarded for reporting on the slightest hint of tax evasion.

  The over-consumption and pampering of the Roman citizens during the imperial period also created other problems. It has often been suggested that the increasingly materialistic and greedy lifestyles that many Romans lead began to affect them spiritually and intellectually. A sense of futility seemed to be permeating society. The Roman spirit which had conquered the world was becoming increasingly lethargic. During the Pax Romana period, it seemed that peace, comfort and security took priority above political freedom and trying to solve the problems which were blighting their civilization.

  Many historians mention the change in racial stock as a reason for this. Others say that plague and malaria were also possible causes. Others suspect that the real reason was the disease of materialism and the rise of the entitlement society.

  We need not look solely to Rome for this tendency; it is happening in the west today. The price that western society seems to be paying for the considerable wealth and comfort of most of its inhabitants is a corresponding rise in apathy, complacency, and unreflective indulgence. Consumerism is the leading economic driver in the United States.

  The modern industrialized West seems to share several of the characteristics which predominated during the golden era of the Roman Empire. The growing sense of negativity existed then and now, as does the obsession with violence (blood-sports in Rome versus Hollywood films and video games), sex, and indulgences.

  Another interesting parallel is the growth of Oriental and Muslim religions which appeared in Rome in the third century. The increasing popularity of non-Christian religions throughout the Roman Empire was also a sign of the influence which the lower classes were increasingly having on the upper classes and therefore represented a sort of barbarization of the Roman culture. This represents a prominent feature in the Roman world which included the gradual absorption of the higher classes by the lower classes, resulting in a subsequent leveling down of standards.

  As if all this wasn't enough to be concerned with, the Romans suffered a second devastating plague in 252 A.D, which proceeded to devastate the Roman world for fifteen years. Alexandria lost two-thirds of its population and at its peak, Rome lost five thousand each day. During the invasions, there is evidence to suggest that due to the exploitation and maltreatment of many of the Roman citizens, the invasions and disintegration of the empire was often met with indifference.

  By the time the Persians and Barbarians invaded the Roman Empire at the end of the third century, the Roman world was in a state of disarray, and all that was required to create a total collapse was a gentle push. The empire was split into three states and was in free-fall. During the seemingly happy period of Pax Romana in the first and second century, Rome was sleepwalking into a catastrophe. The invasions of the third century were not so much a cause of Rome's decline as a result of its significant economic and political weakness at this stage.

  The attitude of the lower classes towards the Barbarians was by no means always one of fear and hostility. They were often met with feelings of relief and the desire to co-operate especially amongst the poorer men who were unendurably burdened by taxation. Evidence shows us ex
amples of people deserting to the barbarians or of appealing for help from them. Some of the numbers mentioned are so strikingly huge that there must have been civilian defectors as well as military defectors. The fact that so many people wished to rebel against their empire speaks volumes about the state of the empire during the third century.

  Economic weaknesses and their social repercussions were largely to blame for the decline which Rome went through during the third century. The costs of running the empire continued to increase exponentially along with a corresponding decrease in productivity and the ability of many to pay. From this, we see the rising bureaucracy and therefore further pressure on the Roman citizens and the middle classes, in particular.

  The increasing materialism of the Romans also seemed to contribute to a general weakening of the Roman spirit. The empire had dug itself into a hole from which it could not escape and went into terminal decline.

  The civil wars which were the result of this along with its political, economic and social problems affected the empire to such an extent that it could no longer defend itself effectively against its enemies. By the fourth century, such damage had been inflicted that the Roman world was never the same again and eventually collapsed.

  Chapter Fourteen

  The Great Depression

  Economists crunch numbers; they apply theory, and then they hope for the best. Some believe in government intervention and manipulation. Others prefer to let the free market adjust to economic conditions. All would agree that a perfect market with no recessions or crashes is preferable, but not likely. The one factor that applies, making predicting the ebb and flow of market conditions as unpredictable as chaos theory, is the human factor. It is the collective mindset of humanity—human behavior—that can turn an ordinary financial bubble or recession into a full-blown economic depression.