The Fall Of The Roman Empire

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The discussion focuses on how economic policies imposed by the government affected the Roman Empire. Notably, the government is often responsible for the flourishment and success of its economy through creating a suitable environment for growth where the individuals will have their rights to property protected, rule of law maintained and also be able to create public goods and services such as infrastructure to facilitate trade (Campbell, 2009). Government spending, tax and money policies also influence the availability of certain resources, thus affecting the incentives that reach these citizens. The paper looks at the Economy of the Roman Empire from the point it reached the maximum level, to the point it subsequently declined. The bad economic policies implemented by succeeding emperors in third and fourth centuries caused high inflation which destabilized the economy and government leading to the collapse of the Roman Empire.

Of note, the Roman Empire flourished in the first and second centuries due to the good economic policies. During this reign, the benefits of governance exceeded the costs, and the investments made on the land resulted in cumulative growth. However, successive leaders in the third and fourth centuries made policies which failed the empire terribly. Wassink (1991, p.465) acknowledges this and states that “evidence suggests that prices in the mid-third century were about three times the level of first-century prices, but that mid-Diocletianic prices were 50-70 times more than those of the first century’. This led to the cost of running of this government exceeding the benefits, investments disappeared followed by economic decline and finally collapse of the empire (Zgur, 2007).

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The success of the Roman Empire from 27 B.C to 180 A.D was influenced by good governance, maintenance of the rule of law and protection of public goods. This was marked by the rule of Emperor Augustus (27 B.C to 14 A.D) up to the reign and death of Marcus Aurelius (161 A.D to 180 A.D) (Zgur, 2007). The emperor was the head of government; he was backed up by the military and a small group of senators. His work was to run military affairs, attend public finance and manage foreign relations, while he left handling of finances, taxes collection and government administration to the local units. The government during this era was relatively stable with very small cases of violence, theft, and fraud, thus releasing resources for production to the system.

The economy was driven by significant growth in agriculture, where farmer accumulated wealth, and traded goods with non-agricultural nations. The Roman Empire Economy was characterized by a common currency which included gold, aureus, silver, denarius, and copper or bronze rather than a crude barter trade system (Zgur, 2007). The tax rates were low and most of them were paid by the wealthy, although a fixed small tax was also paid by the citizens. Specifically as highlighted by Bartlett (1994, p.290) “Republic Rome’s taxes were quite modest, consisting mainly of a wealth tax on all forms of property, including land, houses, slaves, animals, money and personal effects.” The tax system enabled people to keep most of their earned money and this was well reflected by overall commercial growth. This encouraged private and public partnerships in investment between citizens and government. Urban centers emerged, good roads increased trade and public utilities such as health centers and public parks, not to mention the local and international agricultural trade.

Bartlett (1994, p.288) states that “the long years of war, however, had taken a heavy toll on the Roman economy. Steep taxes and requisitions of supplies by the army, as well as rampant inflation and the closing of trade routes, severely depressed economic growth”. Specifically, during the third and fourth centuries, the trends were reversed due to the new oppressive emperors who had centralized military systems to replace the former local self-government. The successors made a number of policies which adversely affected the economy negatively. Typically the proceeding emperors during this reign saw it desirable to increase the size of the empire in order to reduce its reach by the neighbors (Bartlett, 1994). This made relative increased importance of the Roman military where it had to be made more powerful, consequently increasing its resource allocation. As indicated by Barlette (1994, p.294) “As early as the rule of Nero (54—68 AD.) there is evidence that the demand for revenue led to debasement of the coinage. Revenue was needed to pay the increasing costs of defense and a growing bureaucracy”. Local governments were abolished and the government took control in the hands of the emperors. In turn, there was less control over private resources (Bartlett, 1994). The emperors claimed many resources during this period in order to maintain the large military system. They engaged in lavish spending, took hold of estates, and gave them off to individuals with political or military connections. The resources shifted from productive uses, and as revenues decreased people fled to the countryside. Deaths and plagues reduced the number of people, leading to shortage of labor. As a result this reduced production, as there were few people to work.

Government’s taxes shrank and there was a need for the government to increase its funds, thus they increased the tax levels of the wealthy and also imposed taxes on goods and services by the peasants, artisans, and merchants (Bartlett, 1994). The citizens in the empire rebelled by decreasing production and investment. People fled from cities to the countryside where the effects of corruption were less evident. The increased cost of production forced prices to go up, leaving the government with no other option than to turn to internal sources to fund its military and the government (Bartlett, 1994). Thus, they considered two options, namely lowering the value of the currency and changes in the internal tax structure.

The government watered down the value of the currency with a goal of holding as much coinage as possible, that is coinage with relatively silver, gold and copper content for the taxation. In turn, they would use the coins with less bronze, copper and silver to pay military services, fund public events as well as pay for grains for public distribution (Wassink, 1991). In turn, the citizens responded by hoarding the valued coins and using the devalued ones to pay taxes. Consequently, this increased the cost of transacting, slowing down business activities. The emperor and his government were back to their initial problem, where less revenue was received. The cheap coins available in the market caused inefficiencies and fuelled up inflation to 22.9% in the late third century leading to the rise of prices which reduced purchasing power (Wassink, 1991).

In an attempt to curb inflation, Emperor Diocletian brought some reforms where he regulated the price control systems. The Edict on Maximum prices policy was enacted into law in 301 A.D. This was aimed to reduce the price of commodities to a standard price, though little or no attention was paid to this policy (Wassink, 1991).

The Roman suppliers were forced to either slow or cut production completely of the commodities that were very low priced. This led to a shortage of goods as some producers fled elsewhere.

The government also imposed higher tax policies and the citizens fled to rural areas to distance from the tax collectors, and in return the government responded by restricting labor movements (Wassink, 1991). Finally, the money-based tax system was broken as many military men found themselves in due payments. Emperor Diocletian even tried to base taxation system according to the goods and services produced on the land; this was by grading land and its output from the individual peasants.

Here taxation was based on a single man, his family, and output produced by their land. Despite being a successful policy, his approach was not enough to save the Roman economy as the tax burden doubled (Peden, 2009). Industries in Rome were moved to other provinces, this was the final blow and the Roman economy was left in an empty shell. The available revenues could not maintain the national defense; consequently, the remaining land owners rebelled with some using legal and illegal means to evade tax payment. Some of the small landowners even fell to bankruptcy. Wassink, (1991, p.488) insists that “in so far Diocletian and his co-regents followed the example of Augustus, Nero and Septimius Severus but unlike these predecessors they did not experience the favourable influences of their money reform and money issues. Instead a terrible inflation arose. We calculated an average annual inflation of 22.9% over the years 293-301. This means something like 10% or so in 294 mounting to 35% or more in 301.” This statement indicates that the economic policies enacted by the mentioned emperors led to increase in inflation and consequently fall of Rome.

Indeed, the Roman Empire was a success when there were free-market policies which motivated the individuals to produce and invest and carry out a trade during earlier regimes such as Augustine in the 1st and second centuries. However, implementation of bad economic policies such as enlargement of the military system, lowering the value of the currency system and changing of the taxation policies by succeeding Emperors in the third and fourth centuries, led to its fall. Notably, the policies caused excessive taxation and inflation. An attempt by the government to bring things under control by over-regulation of the policies in an effort to gain revenue by imposing higher and higher taxes only worsened the situation. Subsequently, the imposed policies became a burden to the citizens and they rebelled socially against the high taxes and increasing corrupt system of the government. Public-private partnerships, education, good roads and buildings which served as a trademark in the Empire crumbled if not unavailable.             


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