The Fall of the Roman

Empire and the Decline of

the American Empire
A fiscal and economic analysis of an
underestimated correlation.

Josep Adolf Mart i Bouis

INDEX
1. Economy and Fiscal Policy in the Roman Empire6
2. The Fall of the Roman Empires Economy10
3. Comparison with the United States14
4. Conclusion.18

Introduction

Much has been written about the fall of the Roman Empire, and about the
reasons that led to the disaster. Even with the huge amount of literature about the topic,
scholars and members of the academic world do not agree on what were the actions
that drove the Empire to its end, being out there different opinions that go from simple
military reasons or sociological explanations to alleged environmental causes, like
defended by Steve Hallett and others. Roman experts and writers are divided and
fighting all time about this issue, maybe because as Charles Philip Issawi said, "In any
dispute the intensity of feeling is inversely proportional to the value of the issues at
stake. But does this topic actually not matte at all?
Historians identify different empires over history who hold supremacy and stay
superior to their rivals. The Roman Empire, the Ottoman Empire, the British Empire, the
Soviet Union, etc. All of them have common characteristics that make them belong to
the same category of empires, but one of them stands alone: they are all gone. The
British Crown may, today, have nominal dominion over some countries like Canada, but
it is undeniable that its glorious days remain in the past, and it is likely that they will not
come back. One empire still stands today, having de facto power over most of the other
nations in the world. The United States of America, as described by Bruce Fein, is the
only superpower left after the Cold War, and has the shared traits of an Empire.
America is still young and powerful, and her military is deployed all over the
world. With no doubt, the United States are the police of the world and a major force in
every conflict, discussion, negotiation or relation between sovereign nations on Earth.
But, is the path of this country leading to a predictable fall and destruction, just like the
Romans had to follow more than 1,000 years ago? Is there anything in common
between the States and Rome? Is the concept of bad money and the inflation that it
caused in any way related to the Fed and its policies?
This paper tries to analyze the end of the Roman Empire, attaching it to the idea
that inflation and bad fiscal policies were the causes of its fall, in order to follow any
relationship between what happened then and what is happening today. Lots of sources
are available, which makes this work easier, and wise, formed men have written about
this topic in some way. Because of that, rather than bring anything new to the world of
academics, this text tries to put together concepts, ideas, and studies, taken from other
people interested in this very interesting and deep field of knowledge.

1. Economy and Fiscal Policy in the Roman Empire

The study of Roman Economy has different opinions, points of view and
confronted hypothesis, too. There are those who defend that it was an economy based
on subsistence agriculture and that cities consumed more than they produced, like
Moses Finley (who is famous by his theory, presented in The Ancient Economy, that
ancient economy should be studied with sociological methods instead of pure
economically. There are others who believe that, even with the limited means of
communication, the Empire was a great economical network and that commerce was
what made it the political institution that it became. They claim that the fact that
economic growth was greater at that time than in most countries of the world before
industrialization (Mattingly, 2010).
Money, the use of coinage, was generalized in the Empire, and that allowed
economic growth to happen and an early expansion of commerce and industry to
flourish. This also created a new class in society, or at least gave it much more
importance than it had in other communities: the figure of the banker, or argentarius
(Harris, 2008). With no central bank, like the United States during the XIX century,
private banks followed the idea of fraction reserve, keeping less money than the total
lent to third parties. Even with this banks alive, most of todays banks actions were
carried on by the rich, especially the Senators, that took profit from their privileged
position to make business between them and others.
Unlike todays Governments, the State did not borrow
money from banks. When there was deficit, inflation and
physical reserves were used to get to pay debts (DuncanJones, 1998). Also, Government did not generally bailout
banks or give them free money when their risky operations
didnt have success. Only one episode in which the Roman
Empire did bailout a bank is recorded: in 33AD, when a
credit shortage was going on in Rome and the economy was
hurting because of it, the Emperor Tiberius decided to
personally loan 100 million sestertius to the banks (Tacitus).
Taxation was very low in general, but not always paid
with money. Cattle, grain, and other types of in kind payments were made, and some
local or regional taxes were created in the Empire. The justification for the taxes was
mainly military: money was needed for defense and to expand Romes dominion over

the world. Because of that, in some cases, after the capture

of a surplus of booty repayments and refunds to the
taxpayers were made (Ando, 2006).
Taxes were advanced in structure, and made up most of the
Tax Collector
revenue of Government. The main direct taxes were a poll tax
on every citizen (not on the income, like in the United States
and most countries today) and a tax on land. There were even exemptions under the
Roman Rule (for example, exemptions for Egyptian farmers whenever the Nile had a
flood) (Ando, 2006). Other taxes included a 4% on slaves sales (Cassius), an
inheritance tax of 5% and a 1% sales tax on auctions that went to the veterans of the
military. While taxes were low and that created lots of opportunities, later on they were
raised and modified, in a process that contributed to the Fall of Rome as it is gonna be
demonstrated in the next parts of the paper.
So, with no public debt and low taxes, was there any fiscal problem in the Roman
Empire at all before its Fall? Lots of them! Corruption was generalized, and some of the
basic roles of Government were not being done because of a lack of structure and
power. As Wilhem Ihne says:
Though individually the Romans were exceedingly economical and careful in the
management of their private property, the state as such was extravagant and
careless with the state revenue. It was found impossible to protect the public
property from being plundered by private individuals, and the feeling of
powerlessness resulted in reckless indifference. It was felt that revenues which
could not be preserved intact and devoted to the common good were of no value
to the state and might as well be abandoned.

But, even with that corruption, the standard of living of citizens living in the
Empire at 100AD was much superior to the one enjoyed in many european citizens in
the early XIX century. The evidence for that is not massive, but a study carried on by
Keith Hopkins estimated that the Italian peninsula was about 30% urbanized in the Early
Roman Empire. Since urbanization rates can be used as an index of per capita income
(done in economic history by many famous historians; David 1967, Craig and Fisher
2002, etc.), we can estimate that GDP per capita in Roman Italy was similar to the one
in Spain or France in 1700, when those two nations were among the most powerful on

Earth (Temin, 2006). However, outside Italy and the capital, only 10% was urbanized.
This disparity shows a huge gap
between regions that can be also
supported by this graph:
An important characteristic of
the Roman economy is the decisive
role of the Mediterranean Sea, the
Mare Nostrum, or Our Sea, that
was used for commerce and
transportation. One of the best
examples that can be found for this
is the grain supply in Rome. The
capital of the Empire, Rome, had
about one million inhabitants in the
Early Roman Empire. Accepting that number, calculations show that about
150,000-300,000 tons of grain would be needed every year, plus olive oil and wine.
Because it was cheaper to send this goods by sea rather than by land, the
Mediterranean was critical. All this supplies were sent from Africa, Spain and other
colonies around the sea, and it is calculated that a 30% of the grain received in the city
was given for free through a kind of social program named Annona (Hopkins, 1980).
Although theres not consensus on whether the Roman economy was local or
based on global commerce, most of todays experts on roman history believe that
commerce was a huge part of roman macroeconomics and it contributed to the GDP
almost as much as agriculture. Here is a map with the basic goods exported in each
part of the empire and the routes that those goods followed in the mid-Roman Empire.
Internal commerce among Provinces was the most common, but to some degree there
were commercial relationships with the barbarians.

The analysis of the Roman economic structure and institutions presented here is,
anyway, based on the idea that we can understand those with our current ideas of what
human behavior is. Moses Finley (1973), Karl Bcher (1911) and others have argued
that because the social and cultural institutions of the ancient economies were not
market oriented we cannot understand them. This paper follows the studies done by
Eduard Meyer, who in 1910 demonstrated that the ancient economy was modern and
capitalist in nature, only restricted by the technological conditions available at that time.
M. Rostovtzeff (1926) also worked on that idea, and his book The Social and Economic
History of the Roman Empire was predominant in the academic world.

2. The Fall of the Roman Empires economy

Although there is not really a general consensus among historians on the
reasons that led the Roman Empire to failure, if instead of seeking for reasons one just
looks at the facts some conclusions can be taken from that episode of history. The
Empire, during the final years of the II century and the whole III century, was different
and in some way weaker than the previous centuries. Some emperors, like Caracalla,
will exemplify this fact, but the fact that most rulers at that time started getting into
power through military coups dtat says a lot about how the conditions changed (there
were 26 legitimate emperors during this third century and only one of them died
because of a natural death.
We can easily find evidence that the fall of
the Roman Empire was because of failed fiscal
and economic policies that led to other outcomes
traditionally studied. The basic coinage of the
Roman Empire to this time we're speaking
now about 211 AD was the silver denarius
introduced by Augustus at about 95 percent silver
at the end of the 1st century BC. The denarius
continued for the better part of two centuries as
the basic medium of exchange in the empire. By
the time of Trajan in 117 AD, the denarius was
only about 85 percent silver, down from
Augustus's 95 percent. By the age of Marcus
Aurelius, in 180, it was down to about 75 percent
silver. In Septimius's time it had
dropped to 60 percent, and Caracalla
evened it off at 50/50 (Duncan-Jones,
1994 and Walker, 1975). This process
of putting non noble metals to lower a
currencys value is called
Debasement, and was one of the
techniques used by the roman
emperors to pay their debts and
military expansions.

The evidence described above is rejected by some other historians like Lo

Cascio (1997), but the plurality of academic community sides with the idea that inflation
was a major problem by the mid-third century.
The biggest crisis came between 258 and 275, in a period of intense civil war
and foreign invasions. The emperors simply abandoned, for all practical purposes, a
silver coinage. By 268 there was only 0.5 percent silver in the denarius. (Peden, 1984).
After that, many emperors issued new currency not supported by silver nor gold
to try to revitalize the economy and stop inflation, that was literally killing roman citizens
(quality of life dropped hugely as prices rose by, sometimes, 1000%). Not only that, to
support a oversized military new taxes were created. Caracalla created two new tributes
on inheritances, and then many emperors did the similar things.
As mentioned, new taxes and inflation existed partially because of the roman
military. he soldiers' pay rose from 225 denarii during the time of Augustus to 300
denarii in the time of Domitian, about a hundred years later. A century after Domitian, in
the time of Septimius, it had gone from 300 to 500 denarii; and in the time of Caracalla,
about 10 years later, it had gone to 750 denarii. In other words, the cost of the army was
also rising in terms of the coinage; so, as the coinage became more worthless, the cost
of the army had to be increased. (Sabin et al, 2007).
As we saw during the first part of this chapter, for a long time the Roman Empire
enjoyed a pretty much laissez-faire economy, and citizens in Rome had many liberties
that other civilizations didnt have. But, under the crisis that the Emperors had created
and the fiscal mess that rose in the Empire, the economic freedoms of the people of
Rome started to be eroded. Temples were destroyed (Warren, 1999), land was taken
away (Herber, 2015), etc.
Other statist policies were created or enlarged if they already existed as the State
grew bigger and bigger. One of the most famous ones was the Cura Annonae, that
consisted of giving away free grain to the citizens of Rome, the city. At the beginning it
was intended to serve only those that lived under poverty and not the general
population, but some calculations say that actually about 25-30% of the citizens of the
City of Rome were receiving this kind of public aid. This grain had to come from some
place, and so the Empire started buying huge amounts of grain from Spain, Anatolia,
Egypt, etc., raising the price for everybody else (Jongman, 1997).

The Cura Annonae

was also used as a political
weapon. Emperors and
Senators would promise to
give away more food if the
populace and the masses
supported them. From this
policy comes the phrase
Bread and Circuses,
because thats what the
rulers would give to the
citizens of Rome to keep
t h e m q u i e t ( G a r n s e y,
1988).
The barbarian
invasions that happened in
the late Roman Empire
were not made up of stronger warriors than the ones that same Empire had rejected,
but they took advantage of the weak fiscal situation of the Empire to push the borders
because they knew that they would face no counter attacks. In fact, due to the
excessive taxation of the last emperors and the poor economic situation, some people
living in the frontier preferred to be attacked by the nordic tribes than to live under the
Roman Occupation (de Soto, 2010).
Because of the financial problems and the continual waste of public money in the
military, soon that institution was corrupted and not able to carry on its duty of protecting
the borders and lands of the Empire. By the beginning of the fifth century there was not
effective regular army that could defend Rome against barbarian war chiefs like Alaric.
Also, because of the continuous wars, thousands of miles of good land, that
had been worked until that point, became useless. That created unemployment and
shortage in some regions of the Roman Empire, although it was something that had
happened before the Third Century Crisis (during the Punic Wars, for instance). This
non-stopping lack of resources dried the internal commerce of the Empire, that was not
been very strong before that anyway (Whittacker, 1997).

As the military became a weaker force (it is funny, though, that it became a
weaker institution because the useless effort of the emperors that wanted a strong
army) the commerce in the Mediterranean Sea, one of the greatest contributions of the
Roman Empire, also started to fall down. Pirates, from Sicily and other places, started to
dominate the waves and to take the merchants goods (Omerod, 1974). This kind of
pillage, added to the high taxes, made it less attractive for people to invest in
commerce. Economy started getting more and more local in a process that many
historians believe led to the starting point of the Middle Age economy.
Eventually, price controls were instructed in the Roman Empire. Lactantius
(1984), that lived by that time, tells that blood was shed over small and cheap items
and that goods disappeared from sale. Yet, the rise in price got much worse. After
many had met their deaths, sheer necessity led to the repeal of the law. As always,
price control and socialist measures do not work.
In conclusion, the fall of Rome was essentially due to economic deterioration
resulting from excessive taxation, inflation and over-regulation. Higher taxes did not
create the needed revenue and the process of debasement made it impossible to save,
thus stopping investments and commerce.

3. Comparison with the United States

The correlation between the current economic situation in the United States of
America (and to some extent the rest of the Western Civilization) and the Late Roman
Empire is clear. In fact, many scholars have started calling the United States of America
the American Empire since the XX century for its military actions overseas (Bachevich,
2008; Boot, 2002; Johnson, 2004; Todd, 2004; etc.).
When historians talk about the American Empire and compare it to the Roman
Empire they often do so by looking at the military, political, social and cultural side of the
coin. Only a few have written about the monetary policies and the consequences of
those that both nations have in common. Like the Roman Empire, America is a huge
free trade area with lots of inhabitants and commerce. Like the Roman Empire, America
has a past of incredible prosperity and low taxes and regulations, in a pro-market
society, during the XIX century and before (Rothbard, 1975). And, like the Roman
Empire, the United States are going down the path of economic failure (Schiff, 2012).
But why?
As in the Roman Empire, the United States presidents and its Congress have
been using the process of debasement to make it easier for the Government to rule the
economy (through the Fed), have been adding debt to the nation (nearly 19 trillion at the
time this papers being printed), and have created a big Government that consumes a
huge portion of Americas GDP.
The great american economist Murray Rothbard said in a documentary in the
80s:
For more than twenty years, the living standards of middle class Americans have
steadily declined; incomes have remained flat or falling and the opportunities and security we
once took for granted have begun to fade. For most families, one income no longer pays the
bills; it requires two or more incomes to afford a home, pay medical and childcare expenses,
and put children through school. Unless present trends change, young workers are unlikely to
ever live as well as their parents. Good jobs with a future are harder to come by; education
doesn't count for what it once did; taxes continue to rise while social security is going bankrupt.
Private pensions are no longer reliable; economic volatility and uncertainty are on the rise.
Politicians espouse numerous theories about the cause of this country's economic woes;

seldom however do these officials look below the surface: the roots of our economic ills can be
traced to central banking and our present monetary system.

These words can be repeated today with the same strength, conviction and
truthfulness. Whos to blame for the desperation of the middle-class, the failure of Social
Security and other Big Government programs and the loss of jobs and economic
freedom? The Federal Reserve, created in 1913 to stabilize the dollar, is the culmination
of 50 years of Government intervention in the monetary system. Before 1862, private
banks issued their own money under the guidance of the House of Representatives,
and many economists believe that that system created less inflation and crisis
(Rothbard, 2002).
Since the creation of the Federal Reserve in 1913, the U.S Dollar has lost most
of its value. A dollar owned in the first decade of the XX century would equal less than
five cents today and Americas currency is no longer based on anything but trust in the
Government. Or not even this, since the Federal Reserve has almost no checks at all.
Looking at todays system it is easy to say that Congress, the House of
Representatives, has lost all of its power to create money as specified in the
Constitution of the United States of America.

The idea of the Federal Reserve of printing more money, infinitely, without
backing it with anything whatsoever is the cause of the graph above. If you cross the
Value of a $1 Federal Reserve Note data (since 1971, when the United States official
left the Gold Standard System) and the amount of money printed, you get an almost
perfect correlation:

And not only the Feds policies have destroyed any value that the US dollar used
to have. It has allowed the US Government to get a debt that is virtually impossible itll
ever get paid. If the Federal Reserve had never been created, and the U.S. government
had been issuing debt-free currency all this time, it is entirely conceivable that we would
have absolutely no federal government debt at this point (Snyder, 2013).
As said before, the Roman Empire had no debt at all at the beginning. But as
wars started to become common and Government spending went up, so did debt with
private companies. Many economists believe that this debt that Rome got into was one
of the main causes of its eventual destruction (Hudson, 2013), and some economists,
scholars and politicians are today saying that America is following the example settled
by the Empire.

Under president Obama,

Americas public debt has
tripled and its assumed
that it will keep going up.
Every children born in this
country has a shared part
of the national debt of
$60,000.
If you include to the amount
of debt just presented the
unfunded liabilities of Social
security and Medicare, the
U.S real indebtedness
exceeds $83 trillion
(Tanner, 2015).
Added to the huge national
debt of the United States
holder by the Federal
Government, theres a
80,000 pages long IRS Tax
Code and other taxes that
create on of the biggest
bureaucracies in the world.
While some companies have to pay almost 50% of their revenue in taxes and some
citizens have to do the same with their income, the free-market dream on which
America was founded is slowly dying. Regulations, restriction to commerce, police
state many of the liberties that formed the core spirit of the United States are now
being ignored by the Government or Society, and at the same time economic growth is
almost gone.
With such big figures, is there anyway that America will not become the new
ancient civilization whose Fall will be studied in years to come? Is this economic and
fiscal situation gonna last forever?

4. Conclusion
The Republic of the United States of America looks like the Roman Empire in
many ways. Fiscally, its high taxes, regulations, and restrictions to commerce, are killing
what once was the paradigm of free market capitalism. In monetary policy, the
destructive policies of the Federal Reserve, headed by Janet Yellen, are doing to the
U.S dollar what the emperors did to the denarius during the third century. And yet,
theres a huge difference between those two empires.
The Western Roman Empire has been gone for about 1,500 years, while the
United States have been around only for about 240 years. The time to change is still
there, and the opportunities to rethink and reconsider the current path of the nation are
available. Looking at the evidence presented in the third part of this chapter, the reader
may feel overhaul by the numbers that appear in there. However, modern investigation
reveals that citizens implication in Government is the most powerful way of lobbying,
and so nothing is impossible for a compromised and decided group of citizens (Miller,
1994).
Because of that, while the citizens of Rome may not be able to decide anymore
what they want to do with their countrys situation, americans do have the opportunity to
do so. Thus, the future is open to any kind of ending. One possibility, as presented in
this paper, is that the United States of America will end up falling under the enemy that
destroyed Rome: the Empire itself.

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