by Jack Weatherford – This text is an extract from The History of Money

The elite associates who surrounded the emperor were not the onlypeople to benefit from Roman successes. Beginning in the days of therepublic, before the foundation of the empire, Roman politiciansfound that they could often increase their power by bribing the masses with bread and circuses. In addition to the exotic free entertainments that were staged in the Colosseum, the politicians exempted free citizens of the city of Rome from taxation and gave themheavily subsidized or even free wheat, paid for by taxes and tribute seized from the hinterlands of the empire. This practice quickly became institutionalized as a public dole.

When Julius Caesar first came to power nearly one-third of the people, approximately 320,000, received free wheat on the public dole, but through skillful maneuvering, he reduced the amount by more than half, to a still substantial 150,000. After Caesar’s assassination, the numbers started to climb once again,8 and the benefits increased. In addition to wheat, Emperor Severus gave the people of Rome olive oil; from time to time, emperors gave cash payments as part of the dole. Emperor Aurelian, who acquired the title Restorer of the Empire, changed the allotment of wheat to a ration of bread so as to spare the masses the expense of baking. He also subsidized the price of wine, salt, and pork for the masses in the city of Rome.

Like people anywhere, once the tax burdens became too high in comparison to the benefits and services offered by the government, the Roman subjects found ways to avoid the taxation. Commerce declined. People produced more of what they needed for themselves and traded less on the open market. While the poor suffered from heavy property taxes, the latifundia, the great landed estates, grew greatly, particularly those that had been granted a tax-free status. The high taxes induced more peasants to abandon their land and move to the tax-free estates where they at least had a steady supply of food and the essential goods produced on the estate itself.

As people left the small farms and towns, the large estates grew; and finally, without sufficient commerce to keep them alive and functioning, the great cities began to decline and to fall prey to marauding tribes. Even though no one at the time thought in terms of economic policy, it was the cumulative actions of the government that strangled the economy of Rome and of much of the rest of the Mediterranean and European world as well. The emperors saw the signs of death in the economy and proposed strenuous measures to revive it, but these measures served only to worsen the situation.

Diocletian, who ruled from 284 until 305, was in a sense the first modern ruler to attempt to regulate and fine-tune the economy in recognition of the fact that it was the true engine of empire. In order to preserve the system, in 301, Diocletian issued his Edict of Prices, which ordered a freeze on all prices and wages. In practice, however, rather than freezing prices, the edict prompted merchants and farmers to withdraw their goods from the market. Production declined.

Diocletian then ordered all male citizens to follow the occupation of their fathers. A merchant’s son must be a merchant, a farmer’s son a farmer, and a bureaucrat’s son a bureaucrat. Soldiers’ sons had to be soldiers, thus creating a hereditary military class. Even the sons of the workers who produced coins had to become mint workers.

Diocletian’s edict forbade the heavily burdened farmers from selling their land, thus permanently tying them to the same plot of land—a practice that foreshadowed the age of feudalism. The empire began to take on the characteristics of a static, caste society, a tendency that grew even stronger inmedieval Europe.

In the last centuries of the Roman Empire, the emperors operated without a workable currency; like the ancient empires that had preceded it, Rome turned to conscription and forced labor to meet its needs. The government often would not allow its citizens to pay taxes in the debased money that it still issued; instead, officials demanded payment in goods, crops, or labor.

As tax policies continued to suppress productivity and commerce, the emperors found it increasingly difficult to supply their armies and the bureaucracy with the equipment and goods necessary to rule the far-flung but diminishing empire. The markets had withered; even the emperor could no longer depend on the open market to supply him with the sandals, armor, weapons, saddles, tents, and other goods that an army needed. Out of desperation, Diocletian created government-sponsored workshops to manufacture armaments and supplies. As privately financed shipping and other transport enterprises declined, Diocletian also had to create government transport companies to move the goods that were manufactured in the workshops.

Well before the end of the third century, these changes made the emperor and the government the greatest manufacturers in the empire, in addition to being the largest owner of land, mines, and quarries. Step by step, the imperial government took over the direct administration of the economy and crowded out the small, independent merchants,landowners, manufacturers, and entrepreneurs.

The government workshops and transport systems never functioned as efficiently as the older ones, which had been based on a network of relations among many different merchants. The creation of these workshops further stifled commerce and drove private entrepreneurs either out of business or into total dependence on government contracts. An increasingly greater portion of the economy fell under direct control of the bureaucracy, which consumed ever more of the national output of agricultural and manufactured goods. By its last decades, Rome had become another state-administered economy, an empire without money and markets. It had reverted to a palace system more like that of pharaonic Egypt or imperial China than that of the republican system on which it had been built.