The Origin of Money 6 – The Roman World

Ancient Rome’s Wall Street as it looks today.

The Roman Empire is a Hellenistic Civilization brutally manhandled by a State apparatus of Italian origin.
–Paul Veyne, A History of Private Life

The Roman Empire expanded the military-coinage-slavery complex to encompass much of the civilized world as David Graeber explains:

In fact, the entire Roman empire, at its height, could be understood as a vast machine for the extraction of precious metals and their coining and distribution to the military-combined with taxation policies designed to encourage conquered populations to adopt coins in their everyday transactions. Even so, for most of its history, use of coins was heavily concentrated in two regions: in Italy and a few major cities, and on the frontiers, where the legions were actually stationed. In areas where there were neither mines nor military operations, older credit systems presumably continued to operate. [1]

The topic of the Roman economy is vast, and too complex for our survey of money. However, some important points can be made.

Ancient Rome was a market economy

One is that the Roman economy was probably the most market-oriented economy at least until the economies of the Age of Exploration in the North Atlantic, and possibly even until the Industrial Revolution in the nineteenth century. Money relationships, especially at the height of the empire, were extensive, and products were moved and traded over long distances, especially over water (land transport would continue to be difficult and expensive until the advent of the railroad). Keith Roberts writes: “Some fifty million people throughout the empire enjoyed a largely peaceful and orderly state, with common languages, currencies, laws, and customs, where a money-based market economy prevailed. Not until the European Union in 1992 did Europe possess a common market of comparable geographic size. [2]”

It is useful to review once again the distinctions between different types of economies made in our study of primitive money: marketless (reciprocity and redistribution prevail); peripheral markets only (markets play only a tangential role with surplus commodities), market-dominated (i.e. peasant) economies (where large amounts of goods are for sale and many people make their living from market sales); and fully-integrated market economies, where all production factors are coordinated by markets and produced for profit.

Peter Temin has argued that the Roman empire should be properly classified as a market economy:

I argue first that many individual actions and interactions are seen best as market transactions. I…argue that there were enough market transactions to constitute a market economy, that is, an economy where many resources are allocated by prices that are free to move in response to changes in underlying conditions. More technically I argue that markets in the early Roman Empire typically were equilibrated by means of prices. P.6

There is no formal test to decide which kind of economy we are observing…for an economy about which we have fewer preconceptions we will need to ask several questions. Do the most important commodities, like food and lodging, have prices that move? Are there many transactions in which price appears to play a large part? Do prices move to clear markets? These questions will be answered affirmatively in the succeeding chapters… P.9

Going from markets to a market economy adds another level of complexity to the discussion. When Hopkins described Rome as a slave society, he did not mean that everybody was a slave. Similarly, not every resource in a market economy is allocated through the market. In both cases, the terms indicate that slaves and markets were important, even dominant, institutions. In twentieth-century America—arguably the purest market economy in history—economists have estimated that one-third of economic activity in the United States takes place within households, that is, in householding. The proportion was even higher in the ancient world, but I argue that the economy of the early Roman Empire was a market economy because of the importance and prevalence of market activity. P. 11 [3]

At one point, even the right to be emperor was auctioned off to the highest bidder:

As the bidding went on, the soldiers reported to each of the two competitors, the one within the fortifications, the other outside the rampart, the sum offered by his rival. Eventually Sulpicianus promised 20,000 sesterces to every soldier; Julianus, fearing that Sulpicianus would gain the throne, then offered 25,000. The guards immediately closed with the offer of Julianus, threw open the gates, saluted him by the name of Caesar, and proclaimed him emperor. Threatened by the military, the senate declared him emperor.

Early Coins

Coinage most likely arrived in the Italian peninsula through the influence of Phoenician and Greek traders and merchants. There is evidence that the Romans used iron and other metals as currency. Rather than circulate as lumps, however, the metals were used in much the same manner as the tally sticks we covered back in part two. That is, they were “struck” from a larger piece to signify debts, and the pieces were matched up to satisfy the debt. Alfred Mitchell-Innes describes the method:

In the treasure hoards of Italy there have been found many pieces of copper generally heavily alloyed with iron. The earliest of these, which date from between 1000 and 2000 years B. C., a thousand years before the introduction of coins, are called aes rude and are either shapeless ingots or are cast into circular discs or oblong cakes.

The later pieces, called aes signdtum, are all cast into cakes or tablets and bear various devices. These pieces of metal are known to have been used as money, and their use was continued some considerable time after the introduction of coins. The characteristic thing about the aes rude and the ags signatum is that, with rare exceptions, all of the pieces have been purposely broken at the time of manufacture while the metal was still hot and brittle or “short,” as it is technically called. A chisel was placed on the metal, and struck a light blow. The chisel was then removed and the metal was easily broken through with a hammer blow, one piece being usually much smaller than the other. There can be no reasonable doubt but that these were ancient tallies, the broken metal affording the debtor the same protection as did the split hazel stick in later days.

The condition of the early Roman coinage shows that the practice of breaking off a piece of the coins – thus amply proving their token character – was common down to the time when the casting of the coins was superseded by the more perfect method of striking them.

In Taranto, the ancient Greek colony of Tarentum, a hoard has lately been found in which were a number of cakes of silver (whether pure or base metal is not stated), stamped with a mark similar to that found on early Greek coins. All of them have a piece purposely broken off. There were also found thin discs with pieces cut or torn off so as to leave an irregularly serrated edge. [4]

Just as with the Greek coins, there seems to have been no consistent metallic standard:

The ancient coins of Rome, unlike these of Greece, had their distinctive marks of value, and the most striking thing about them is the extreme irregularity of their weight. The oldest coins are the As and its fractions, and there has always been a tradition that the As, which was divided into 12 ounces, was originally a pound-weight of copper. But the Roman pound weighed about 327 1/2 grammes and Mommsen, the great historian of the Roman mint, pointed out that not only did none of the extant coins (and there were very many) approach this weight, but that they were besides heavily alloyed with lead; so that even the heaviest of them, which were also the earliest, did not contain more than two-thirds of a pound of copper, while the fractional coins were based on an As still lighter. As early as the third century B.C. the As had fallen to not more than four ounces and by the end of the second century B.C. it weighed no more than half an ounce or less…

An important thing to remember in reference to Roman money is that, while the debased coins were undoubtedly tokens, there is no question of their representing a certain weight of gold or silver. The public had no right to obtain gold or silver in exchange for the coins. They were all equally legal tender, and it was an offense to refuse them; and there is good historical evidence to show that though the government endeavored to fix an official value for gold, it was only obtainable at a premium.

The coins of ancient Gaul and Britain are very various both in types and in composition, and as they were modelled on the coins in circulation in Greece, Sicily and Spain, it may be presumed that they we reissued by foreign, probably Jewish, merchants, though some appear to have been issued by tribal chieftains. Anyhow, there was no metallic standard and though many of the coins are classed by collectors as gold or silver, owing to their being imitated from foreign gold or silver coins, the so-called gold coins more often than not, contain but a small proportion of gold, and the silver coins but little silver. Gold, silver, lead and tin all enter into their composition. None of them bear any mark of value, so that their classification is pure guess-work, and there can be no reasonable doubt but that they were tokens. [5]

Silver mining.

Just as with Athens and its slave-worked mines at Laurium, it was the discovery of vast deposits of silver that allowed Rome to expand its military-coinage-slavery complex. These mines were located in Spain and became part of the empire when Rome defeated Carthage in the Punic Wars and incorporated their territories. The scale of operations at the Rio Tinto mine were vast, so vast, in fact, that nothing like it was seen until comparatively modern times:

…ice-core analysis showed that during the period 366 B.C. to at least A.D. 36, a period when the Roman Empire was at its peak, 70 percent of the global atmospheric lead pollution came from the Roman-operated Rio Tinto mines in what is now southwestern Spain.

The Rio Tinto mining region is known to archeologists as one of the richest sources of silver in the ancient world. Some 6.6 million tons of slag were left by Roman smelting operations there.

The global demand for silver increased dramatically after coinage was introduced in Greece around 650 B.C. But silver was only one of the treasures extracted from its ore. The sulfide ore smelted by the Romans also yielded an enormous harvest of lead.

Because it is easily shaped, melted and molded, lead was widely used by the Romans for plumbing, stapling masonry together, casting statues and manufacturing many kinds of utensils. All these uses presumably contributed to the chronic poisoning of Rome’s peoples.

Adding to the toxic hazard, Romans used lead vessels to boil and concentrate fruit juices and preserves. Fruits contain acetic acid, which reacts with metallic lead to form lead acetate, a compound once known as ”sugar of lead.” Lead acetate adds a pleasant sweet taste to food but causes lead poisoning — an ailment that is often fatal and, even in mild cases, causes debilitation and loss of cognitive ability.

Judging from the Greenland ice core, the smelting of lead-bearing ore declined sharply after the fall of the Roman Empire but gradually increased during the Renaissance. By 1523, the last year for which Dr. Rosman’s group conducted its Greenland ice analysis, atmospheric lead pollution had reached nearly the same level recorded for the year 79 B.C., at the peak of Roman mining pollution.

Ice Cap Shows Ancient Mines Polluted the Globe (NYTimes)

Banking in Ancient Rome

Ancient Rome had a fairly sophisticated banking apparatus. In the city of Rome itself, banking was centered in the Forum, along the Via Sacra (further cementing the link between temples, money and religion). The first “banks” were most likely pawn shops, where items were held as collateral for credit. This was the case in ancient China, for example.

In ancient Rome were two basic forms of banking. One we might compare to the basic moneylending, or “payday loan” stores. This was run by the argentarii, or “silver-men.” These were typically plebeians, or sometimes former slaves. They made short-term loans and money advances with varying rates of interest. They also changed money, and took deposits for safe-keeping. Their behaviors were subject to regulations.

Run-of-the-mill banking was regulated in ancient Rome, and argentarii needed to maintain accounts of their transactions. For Latin jurists, “what characterized a bank [argentaria] was the twofold service that it provided: receiving deposits and advancing credit”. Some deposits were just for safekeeping and yielded no interest (vacua pecunia), while others did earn interest (creditum). The latter could be invested, but not the former. However, most of the loans advanced by the argentarii were apparently short term and local. In essence, the argentarii were your neighborhood bank—that is, banking for the average Joe (or the average Caius).

How Do You Say Wall Street in Latin? (Liberty Street)

High finance was a different story. This was something closer to our modern banking system. Here one could transfer large sums of money to far-flung provinces, or arrange payments and contracts, and even engage in speculation. This was run by members of the upper-class, especially the equites (knight) class. These people already had wealth and estates, but still sought out activities in order to increase their wealth in the market economy.

Aristocratic finance—the faeneratores—was quite a different business, a sort of proto-“shadow banking system.” Elite financiers weren’t subject to any special regulations. They would invest in far-flung places, especially the provinces, and would have intermediaries (societas danistaria) making sure their loans produced a good return. Sometimes they would act as private wealth managers (procuratores) for other patricians who didn’t want or didn’t know how to invest their money (unlike in the Middle Ages, lending with interest was not taboo in Rome, but spending all the time in the Forum was not considered very classy for a senator). Elite financiers had political power and, throughout Roman history, they would exercise it.

The First Financial Crisis – 33 A.D.

We tend to have images of people in ancient times primarily making purchases of vegetables in farmer’s markets with gold and silver coins, yet even by the time of Christ fairly complicated and interlinked banking systems were already commonplace. Money was already virtual, and capital moved long distances with the stroke of a stylus on a wax tablet, or the movements of beads in an abacus.

Looking back, it was easy to see that the crash was coming. There had been too much cheap money. Debt had exploded. Speculation was rife. The gap between rich and poor had widened. Welfare spending had risen. The financial system was so stretched that even a modest tightening of policy was enough to make it impossible for over-borrowed debtors to service their debts.

The US in 2007? No, this was imperial Rome during the reign of Tiberius in AD33. It was not the first documented financial crisis; that dubious accolade goes to the states of the Delian League in ancient Greece, which defaulted on their debts following a naval blockade by Sparta.

But a time traveller would see remarkable similarities between the unfolding of the Roman crisis of almost two millennia ago and the 2007-09 crash. The calling in of loans led to a credit crunch. Debtors went to the wall. Prices fell. The emperor arranged for the most heavily indebted to get interest-free loans for three years. A “bad bank” was set up. Tiberius financed his own version of quantitative easing, not by selling imperial bonds but by confiscating wealthy Romans’ assets.

Banks fiddled while Rome burned: how to predict the next global financial crisis (The Guardian)

Even back in these times, The crisis appears to have been a case of financial contagion.

“The important firm of Seuthes and Son, of Alexandria, was facing difficulties because of the loss of three richly laden ships in a Red Sea storm, followed by a fall in the value of ostrich feather and ivory. About the same time the great house of Malchus and Co. of Tyre with branches at Antioch and Ephesus, suddenly became bankrupt as a result of a strike among their Phoenician workmen and the embezzlements of a freedman manager. These failures affected the Roman banking house, Quintus Maximus and Lucious Vibo…These two firms looked to other bankers for aid, as is done today. Unfortunately, rebellion had occurred among the semi civilized people of North Gaul, where a great deal of Roman capital had been invested, and a moratorium had been declared by the governments on account of the distributed conditions. Other bankers, fearing the suspended conditions, refused to aid the first two houses and this augmented the crisis.”

When Publius Spencer, a wealthy noblemen, requested 30 million sesterces from his banker Balbus Ollius, the firm was unable to fulfill his request and closed its doors. Over the next few days, prominent banks in Corinth, Carthage, Lyons and Byzantium announced they had to “rearrange their accounts,” i.e. they had failed. This led to a bank panic and the closure of several banks along the Via Sacra in Rome. The confluence of these seemingly unrelated events led to a financial panic.

To protect themselves, banks began calling in some of their loans. When debtors could not meet the demands of their creditors, they were forced to sell their homes and possessions, and with money unavailable even at the legal limit of 12%, prices of real estate and other goods collapsed since there were so few buyers. A full scale panic followed. The panic occurred not only in Rome, but throughout the Empire…

Once again, we see that the system of money is really not coins or precious metals, but an underlying system of debits and credits.

The response to this contagion by the Roman state has been compared to the “quantitative easing” done by the Federal Reserve after 2008, except with the Roman state bailing out the banks by expanding the money supply:

100 million sesterces were to be taken from the imperial treasury and distributed among reliable bankers, to be loaned to the neediest debtors. A loaf of bread sold for half a sestertius and soldiers earned around 1000 sesterces annually. So this was about an equivalent of around $2 billion in modern terms considering the lower population at that time. The loans were to be interest free. No interest was to be collected for three years. Security was to be offered at double value in real property. This enabled many people to avoid selling their estates at distress prices, arresting the contraction in prices and ensuring that the lack of liquidity would be addressed. Many banks just never survived.

Financial Panic of 33AD (Armstrong Economics)

This ought to put to rest the idea that there was ever a “pure” market economy that could function indefinitely without any sort of government involvement or “interference” whatsoever, as libertarians claim. If such a thing could not be accomplished in the “primitive” pre-industrial conditions of the ancient Roman economy, how can we be so delusional as to think it would be possible in the fully-integrated international market economies of the Space Age, where money moves around the world at the speed of light and all production factors are coordinated by anarchic markets?

Offshore Banking and Tax Havens

The Classical world developed offshore banking centers similar to modern-day entrepots like the Cayman Islands, Panama and Singapore. These trading areas were “neutral zones” outside of the control of any formal states, and as a result, social protections did not exist. As a result such places developed into places where wealth was traded and hidden beyond the control of governments. Michael Hudson describes the most famous of these havens—the island of Delos.

[Delos’] commercial role was catalyzed in 146 BC when Rome destroyed Corinth and Carthage, and by the general breakdown of authority in the Aegean resulting from the fact that in destroying Rhodian naval power, Rome removed the single major check to piracy. Delos did not take its place in keeping Aegean commerce free from pirates. Indeed, it became their major market!

Matters were greatly aggravated after 142 BC when an ambitious military officer, Diodotus Tryphon, led a revolt to break Cilicia (in what is now southern Turkey) and neighboring Syria away from their Seleucid rulers. He organized the Cilicians into pirate fleets, and his freebooters managed to take over such government as there was in the region.

The pirates quickly monopolized the most lucrative trade of the period — that in slaves. As Strabo described matters: “Prisoners were an easy catch, and the island of Delos provided a large and wealthy market not far away, which was capable of receiving and exporting ten thousand slaves a day . . . The pirates seeing the easy gains to be made, blossomed forth in large numbers, acting simultaneously as pirates and slave traders.” They sold spoils and captives from Asia Minor, Syria and Egypt to the burgeoning southern Italian market to work as slaves on the large agricultural plantations, in handicraft workshops, or simply as household servants.

The temple of Apollo, sun-god of justice, supporting rather than curtailing the activities of the influx of pirates, merchants and usurers, provided a protective screen for the basest commercial speculations. The historian Mikhail Rostovtzeff has described how “the free port of Delos [was] left completely in the hands of bankers, merchants and traders . . . While in the early days of Delos the city was an annex to the temple, now the temple became a kind of appendix to the community, bankers with the corresponding amount of labor, mostly servile.” Each of the island’s ethnic and professional groupings formed its own cult association to represent its mercantile, shipping and banking interests. From southern Italy, for instance, came the cults of Mercury and Maia, Apollo and Poseidon. A Phoenician cult was centered in a temple replete with porticoes to display its members’ merchandise.

Yves Garlan refers to pirate-controlled Cilicia and its emporium on Delos as “counterstates,” and Rostovtzeff calls them “a new phenomenon among the city-states of Greece.” Tarn calls Delos’s relationship with the Cilician pirates an “unholy alliance . . . Delos became the greatest slave-market yet known, and as the eastern governments began to grow weaker their subjects were drained away; Bithynia is said to have been half depopulated.” He concurs that Delos represented “a unique kind of form . . . the foreign business associations became ‘settlers,’ and in their totality constituted ‘Delos,’ seemingly without any city forms at all, but under an Athenian governor; that is, political precedents were subordinated to the requirements of trade.”

The last thing the Delian merchant class wanted was a public authority to regulate its entrepot trade in captured cargoes, slaves or, for that matter, honest goods. “It is evident that the residents of Delos were not very much interested either in the temple or in the city,” concludes Rostovtzeff. “Delos was for them not their home but their business residence. What they cared for most was not the city or the temple but the harbors, the famous sacred harbor, and especially the three adjoining so-called basins with their large and spacious storehouses. It is striking that while these storehouses are open to the sea there is almost no access to them from the city. This shows that very few goods stored in them ever went as far as even the marketplaces of the city. Many of them came to the harbor, spent time in the storehouses, and moved on, leaving considerable sums in the hands of the Delian brokers. In fact in the Athenian period the city of Delos was but an appendix to the harbor. So soon as the activity of the harbor stopped, the city became a heap of ruins and it was again the temple which towered over these in splendid isolation.”

The anti-Roman leader Mithradates of Pontus received support from the Cilician pirates, and in turn gave his support to Delos. An uprising against Rome resulted in the massacre of Italian merchants and creditors throughout Asia Minor and Greece in 88 BC. Some 20,000 Romans and their retinues reportedly were killed on Delos and the neighboring islands. The pirates later turned on Delos and looted it. Rome retaliated, and the accession of Augustus a half-century later finally cleared the Mediterranean of piracy and restored peace. This dried up the sources of the Delian trade in slaves and pirate contraband.

From Sacred Enclave to Temple City (Michael Hudson)

‘Debasing’ the Currency

The causes of Rome’s collapse is a heavily politicized subject. Every political viewpoint has their own pet theory about “the” reason why Rome fell, which they project onto the past. Environmentalists might cite environmental destruction. Conservatives like to point to some sort of “moral rot”. The Alt-right points to the welfare state and breeding rates of the “inferior” poor people, i.e. dysgenics. More leftist political activists might point to extreme inequality and out-of-control military spending.

Advocates of anti-government libertarianism such as Ron Paul and Zero Hedge tirelessly argue for a return to the gold standard and argue that debasing the currency and government spending is what caused Rome to fall. In their telling, wasteful government spending was “out of control” causing the Romans to issue coins with less and less precious metal, thereby causing a loss of faith in the currency and the “free market” economy to fall apart. If only Rome had pursued “sound money” policies, they argue, we would still be building aqueducts and speaking Latin today.

However, there is another explanation for the inflation which plagued the Roman Empire, as Tim Johnson explains, citing the work of Geoffrey Ingham:

Monetarists have long argued that the fall of the Roman Empire was facilitated by an economic collapse caused by a dilution of the currency resulting in inflation. The Monetarist explanation is that the Emperors’ needed more coins to pay their armies and since they had a fixed amount of gold bullion to make coins, the coins had to be debased. Since the ‘gold price’ of goods was fixed, the ‘money (coin) price’ had to rise, because with debasement more coins were needed to deliver a fixed quantity of gold.

Advocate of fiat money theories counter argue that the Emperors raised taxes in the core provinces of Gaul, Spain and the Middle-East, and spent these taxes in Rome (public entertainment) and the frontier provinces (on the army). The core provinces obtained coins, tokens that enabled them to pay taxes, by selling goods to Rome. As long as this circulation was maintained all was well. However a combination of factors, over-reach by the Empire, natural famine and a decline in the supply of slaves — the main means of production— began to disrupt the circulation. Since the state still had to pay the army, coin flowed into the system, but taxes did not drain it out again and more money chased fewer goods, resulting in the inflation.
Fiat money is representative money but not necessarily credit money. In the Roman Empire banks did not exist, and the state could not fund its activity by borrowing from the market, as states started to do in the medieval period. There was a credit-debt type relation in the Roman economy, the state was buying goods with IOUs, in the form of the coin, which it redeemed through the tax system. If you were living on the Danube and felt the presence of the Goths more keenly than the Legions, you might well not bother to trade your produce for Roman tokens, causing scaricty at the centre and disrupting the circulation of currency.

Lady Credit (Magic Maths and Money)


One notable aspect of the Roman Empire is how much of it was built not through the activities of the state, but through private efforts oriented towards profit. Keith Roberts writes, “Yet another Roman difference was the public sector’s heavy use of private business. In the ancient Middle East, the rulers had largely operated the production and distribution of goods and services, leaving private business a marginal role. In Greek and Hellenistic cities, by contrast, the state left virtually all production and distribution to private entities [4]”

Rome pioneered the use of the publicly traded business corporation, where shares were tradeable and fungible, and production was undertaken for profit. Military supply and requisition was done by publican societies, which were essentially private contractors. Rome’s private contractors behaved exactly as the private contractors supplying America’s vast military machine do today: by profiteering and price-gouging to the maximum extent possible. The result was the same: funneling the state’s wealth to a small circle of corrupt and wealthy insiders who use their money to keep the gravy train going. It also undermined the professionalism and competence required to keep Rome’s far-flung military operations viable:

During the [Punic] war, the Roman army, which had previously provided its own food and clothing, needed others to provision, arm, and supply it. Since there were few public employees, the Senate turned to private businesses. The need for public contractors became even greater after the war, when Rome required managers, accountants, and tax collectors to operate its captured mines, quarries, forests, grazing meadows, and fisheries. The army, keeping order, had little capacity to manage these new resources. Its forces consisted only of militias raised for particular expeditions. The governors, who served only a year or so, rarely cared enough to build managerial staffs. Their eyes remained firmly fixed on a future in Rome.

The contracts for managing state resources, ultimately extended to providing public supplies and services, including the collection of customs dues and other levies, were auctioned off around the Ides of March, when an official would solicit bids in the Roman Forum. The bidder, known as the manceps, had to provide guarantees of performance, secured with pledged property. A guarantor’s liability passed to his heirs, and title to the pledged property was held under seal in the temple of Mercury.

Many of these contracts were too large, risky, long lasting, and complex for individuals. Nor could individuals or partnerships risk the open-ended financial liabilities that the contracts could entail. Partnerships, which dissolved when any partner died, were also too unreliable. Roman lawyers instead found and adapted an ancient entity, the societas publicani. Publican societies became the first business corporations in Western history. As public contractors, publican societies could hire employees; own necessary assets like cash, land, buildings, and slaves; and make contracts.

Limited liability and perpetual life allowed them to attract the large investments they needed. They profited not only from contracts, but also seized every business opportunity that their large staff and financial power could turn to profit. They supplied and traded with the Roman legions and their soldiers and often dominated local commerce as well [6]

Perhaps the major task of the publican societies was tax collection for the state. Tax collection in the provinces was “outsourced” to tax farmers, who agreed to deliver a set amount of money to the central government. Anything over and above that amount was pure profit, incentivizing them to squeeze as much profit as they could from the provinces. This tended to cause tax revolts, which needed to put down by the state (with the tax farmers keeping the profits, of course):

Their most valuable public contracts were for tax farming: private tax collection. Roman taxes took many forms. Property taxes were the most important, although the Senate, whose members owned a great deal of Italian land, used the spoils of victory over Macedonia to eliminate property taxes in Italy–an exemption they enjoyed for several centuries. There were also border tolls, customs duties, and sales taxes on slaves. Augustus created the inheritance tax for Roman citizens in 6 C.E. Caligula taxed food, lawsuits, porters’ wages, and prostitutes, and his successor Vespasian added -vegetables and public toilets…

Publican societies became so profitable that virtually the entire Roman elite, including senators who were theoretically prohibited from commerce, avidly invested in them. Shares of ownership, called particuiae (“little parts”), were traded in the Forum, making it perhaps the world’s first stock exchange. Equestrians, who faced no bar to active involvement even if they belonged to senatorial families, often sponsored the societies and managed operations…

The government’s relationship to publicans evolved over time in a way that strikingly resembles the evolution of international business by modern corporations. Initially, the government sold territories to the publicans, who like independent distributors ran their own operations and took a large share of the revenues. These deals were often corrupt and costly to the treasury. Later, when a large imperial staff allowed closer supervision, the publicans merely earned a commission on the revenues collected. By the third century C.E. the imperial staff had taken over collections completely and publican societies disappeared. [7]

The combination of private organizations and the desire for riches and loot from the provinces, were the prime drivers for imperial expansion. But as Rome expanded, conquering new territories brought increasingly diminishing returns. The people at the top of the hierarchy, whether businessmen, equestrians, senators, or generals, got rich. But for the average Roman, however, including the “middle class” in the provinces who bore the brunt of taxation, as well as the troops, these developments only led to more poverty, corruption, and violence:

While generating huge profits the publican societies were causing the military considerable grief in the provinces. Publicans aimed to maximize revenues, and the short term of their five-year contracts made exploitation rather than cultivation the method of choice. With revenue a simple measure of success, their agents had to be ruthless or lose their jobs, whatever their personal sympathies. The managers and financiers back in Rome lived far away, like the upper management of multinationals today, and could easily ignore the hardships they imposed. The result was that the publicans “were often dishonest and probably always cruel. In Spain, where powerful tribes remained hostile to Rome, the publicans provoked such frequent rebellions that the Romans called it the horrida et bellicosa provincia (“horrible and warlike province”).

Uprisings were of little concern to publican management so long as the army suppressed them. Normally, then, publicans reaped the benefits of their ruthlessness while largely escaping its costs. The soldiers, on the other hand, were endangered. They also suffered personally from dishonest publican suppliers.

In one horrible instance, when Rome was on the brink of destruction by Hannibal it hired publicans to gather and deliver urgently needed provisions for Scipio’s army in Spain where it was desperately trying to cut Hannibal’s supply route. Instead, the patriots bought and sank rotting old ships to simulate a natural loss, sold the provisions on the black market, and claimed compensation for the alleged loss.

Governors had difficulty controlling publicans. Short terms and minuscule staffs made supervision difficult. Moreover, they or their families were often investors. Governors also depended on publican societies. Publican couriers carried their mail, and the societies often provided branch funding governors abroad and collecting reimbursement in Rome…many governors … joined the publicans in exploiting the provinces for themselves. So despite enormous military antagonism, the publicans usually had a free hand. [8]

In his book Are We Rome?, Cullen Murphy indicts creeping privatization–the substitution of private interests seeking gain in place of the public good–as a critical factor in the fall of the Rome:

Serious challenges to any society can come from outside forces-environmental catastrophe, foreign invasion. Privatization is fundamentally an internal factor, though it has an impact on the ability to face external threats. [Ramsay MacMullen in his important study Corruption and the Decline of Rome]…asked this question–How does power become powerless–out of dissatisfaction with the many theories put forward to explain Rome’s gradual decline in the West. His answer is privatization–the deflection of public purpose by private interest.

Such deflection of purpose occurs in any number of ways. It occurs whenever official positions are bought and sold. It occurs when people must pay before officials will act, and it occurs if payment also determines how they will act. And it can occur anytime public tasks (the collecting of taxes, the quartering of troops, the management of projects) are lodged in private hands, no matter how honest the intention or efficient the arrangement, because private and public interests tend to diverge over time. Privatization, whether legal or corrupt. is how the gears of government come to break. In Rome. the consequences were felt in every area of society… [9]

Roman Agribusiness

The existence of well-developed and lucrative export markets spurred the development of what we might today call agribusinesses. These were centered around plantations called latifundia which were staffed by gangs of slaves under the supervision of a foreman. These were owned by absentee owners instead of owner-operators and were focused on export commodities. While most other ancient societies attempted to preserve self-sufficiency for their citizens on the land, the Roman world removed systems of self-support for many people, turning them into dependents and eviscerating the agrarian “middle class.” This gave rise to the “bread and circuses” which were designed to pacify the restless urban proletariat.

Roman agribusiness…began with the Second Carthaginian War. As in Greece and Pergamum, war’s slaughter of peasants made it possible. Italian deaths numbered in the hundreds of thousands and even survivors were often absent for seven years or more while Hannibal’s armies ravaged their families and farms. Many peasants lost their land or sold it at distressed prices, and others fared worse, as noted by Sallust: “While the generals and the cliques seized the spoils of war, their soldiers’ parents and children were driven from house and home if they had stronger neigbbors.

Just as this calamity for peasants was allowing those who profited from the war-patricians whose estates supplied the city and the army, officers enriched with Carthage’s booty, and sundry war profiteers–to acquire land at fire-sale prices, the market system that had replaced subsistence farming around Rome was making it feasible to generate profits by raising crops for sale. The value of supplying that market would only increase during the republic’s remaining centuries as more and more Romans got their provisions from it: 60-90 percent of Rome’s residents by the end of the republic in 31 B.C.

Patrician eagerness for profit helped drive this commercialization. Rome enjoyed an explosion of wealth as publican societies won huge new contracts to operate the mines, forests, fisheries, and other facilities captured from the Carthaginians in Spain. Newly prosperous landowners, publican shareholders, and military officers flush with Carthaginian booty financed increasingly extravagant displays of luxury. An intense new interest in money took hold while conservatives like the historian Sallust complained that avarice was “the root of all evil. Greed undermined loyalty, honesty and the other virtues. In their place it taught arrogance, cruelty, disregard for the gods and the view that everything was for sale.

After the war with Hannibal, patricians with access to markets were therefore keen to make farming pay…The greatest innovation…was to use enslaved farm labor. This became feasible where land acquired in the wake of the war came largely free of peasants, clearing the way to use slaves. Slaves were more productive than peasants. Peasants came with hungry families, set their own work schedules, and produced no more than they had to. They participated only marginally in the cash economy, consuming roughly 60 percent of what they produced, using 20 percent for seed, and paying rent and taxes before they could make the occasional purchase. They stoutly resisted change, and as citizens they could not be easily coerced.

Slaves, on the other hand, did what they were told. They were normally single men fed five pounds of mostly cheap gruel per day. It has been estimated that twenty slaves could be fed on what eight peasants and their families consumed. Moreover, in the decades after the war little or nothing was spent to clothe or house field slaves, who were branded in the face, slept in chicken coops, and normally went chained and naked under the overseer’s whips. Although they quickly died, replacements were cheap. In Italy, the use of slaves even cut the one tax landowners had to pay, a head tax on peasants. According to most historians, the Italian slave population, most of them on farms 86 rapidly grew to what contemporaries estimated at two million by the late republic and remained at that level for centuries afterward.[10]


The guild system appears to have been the major way of organizing skilled labor from its beginnings up through the Industrial revolution (outside of household methods of production, that is). While the guild system is associated by most people with the Medieval period, it turns out that guild systems existed as far back as ancient Babylon, and guilds were plentiful in Ancient Roman times. Guilds had a monopoly on the service they provided. At its heart, the guild system provided the following:

  • A way of ensuring high quality standards of workmanship and consistency or goods and services.
  • A way of passing down essential craft skills to future generations (apprenticeship), and a way of ensuring the competence of practitioners (mastery).
  • A way of pooling resources among the guild members for mutual support. Guilds pooled their resources to pay for insurance.

The prime agents of this industrial freedom were the craft guilds: independent self-governing bodies, established typically in equally self-governing cities, which provided for the education, the discipline, and the sustenance of their members, from youth to old age, in sickness and health, and cared for the widows and orphans of their brothers in need. Not least, the guilds set for themselves standards of qualitative performance: quantity production, as such, did not play a part except where the guild system itself had broken down. [11]

Guilds functioned as the ancient world’s licensing bodies, lobbying groups, regulatory standards bodies, and unions, all in one. When they were smashed, many of these functions had to be taken over by the state out of necessity, including the provision of social insurance, which was formerly provided by the guilds.

As the number of crafts and the number of craftsmen…multiplied, the practitioners of the various skills tended to collect in certain quarters of the city or on certain streets for the convenience of customers and suppliers. This congregation of specialists led to one of the most far-reaching and long-lasting socioeconomic innovations of the ancient world: the craft corporation or guild.

In its beginnings the craft association was evidently religious-social in character. Each association had its patron god or goddess, and its members held their own communal religious services, while a mutual-aid function similar to that of modern trade unions included funds for sickness and burial- but in time the guilds came to undertake the regulation of production and fixing of standards. In the Roman Empire the government gave its sanction and reinforcement to the guild movement, out of an interest in assuring continuation of craft production and in regulating it for the benefit of the state. Ultimately the Roman corporations became so closely controlled that they functioned virtually as a part of the state apparatus.

Related to the historical development of craft guilds was the tendency toward occupational heredity, a trend best documented, like the guild movement, in Rome. The naturalness of occupational heredity-a father teaching his son his trade-is evident enough, but in the later Roman Empire it received the powerful sanction of law. The reason lay in the general economic decay that affected various occupations unevenly-rendering some ill paid or debt ridden. Practitioners of these crafts naturally sought to escape into more lucrative or easier work.

Consequently, among the “reforms” of Diocletian were laws compelling sons to follow in their fathers’ footsteps lest trades essential to the state wither. Among these essential occupations were those of the millers and bakers who supplied Rome with bread, the carpenters and masons w ho built and maintained the public buildings, the armorers and ironworkers who equipped the legions, and the transport workers on land and sea. Eventually” as the catastrophic economic decline of Rome continued, the reactionary and harmful system was extended to nearly all crafts and professions, There is little doubt that Diocletian’s laws received support from popular attitudes, which favored people’s staying in “their place” and frowned on upward mobility. [12]

Guilds are depicted by the modern economic priesthood as enemies of progress because they resisted the techniques of mechanized mass production. However, the guild members were independent and self-sufficient, and not property-less workers dependent on wages to survive.


Roman “business” and politics was conducted through the patronage system, which was at the heart of the Roman social relationships. Patronage was a relationship between a patron and one or more clients. Similar to the feudal system, the patronage system entailed duties and obligations between people, mediated by status (as opposed to contractus–legal contracts).

The patronage system has been compared to the honor bonds between members of the Sicilian Mafia, or the Japanese concept of giri. Giri undergirds Japanese business in a way that is alien to those of in the Western World where business is impersonal, and relationships are just conveniences mediated by cash transactions alone. Keith Roberts writes, “Another Roman innovation was its patronage system, a binding norm of relationships that regulated social and organizational life. This loyalty-based type of relationship so effectively inspired trust that it allowed Roman businesses to transcend the family-based model of earlier times, while ensuring a far more meritocratic and free-flowing distribution of credit.” [13] The patronage system, rather than impersonal legal contracts, is how stuff got done:

By modem standards there were not a great many officials or bureaucrats in Rome until late in the empire; the administration and well-being of the capital and all the other cities and towns depended on the talents and the largesse of the upper classes, and on the patronage networks they controlled.

In the system’s idealized form, the elites and their clients constituted an interlocking force for cohesion. A memorable passage in Jerome Carcopino’s Daily Life in Ancient Rome describes what happened every morning soon after Romans woke up, when all around the city clients visited their patrons, and each was alert to the other’s needs. …Carcopino writes:

“From the parasite do-nothing up to the great aristocrat there was no man in Rome who did not feel himself bound to someone more powerful above him by the same obligations of respect, or, to use the technical term, the same obsequium, that bound the ex-slave to the master who had manumitted him. The patronus, for his part, was in honour bound to welcome his client to his house, to invite him from time to time to his table, to come to his assistance, and to make him gifts.”

The patron-client relationship was so pervasive that it helps illuminate not only Rome’s social architecture but also, quently, its way of conducting foreign affairs. The term “client state” came into being for a reason… Patronage spilled over into communal adornment; it was in fact inseparable from it. The Roman magnates competed with one another to endow the capital with improvements…

The expectation in Rome, maintained over many centuries, was that affluent citizens, as individuals rather than as taxpayers, should provide for community needs. Did the city require another aqueduct? An emergency supply of wheat? A fountain? New roads? Baths? A stadium? A temple? Repairs to the walls? Some magnate would surely provide it-in return, implicitly, for a measure of public power, and of course for ample public recognition. Inscriptions on countless marble fragments attest to such generosity ….. an early version of “brought to you by . .’ You can’t sit drinking an espresso in front of the Pantheon without noticing that you have M. Agrippa (the name rendered in very big letters) to thank for the original building…[14]

Ancient Rome as Creditor Oligarchy

According to Michael Hudson, Rome eventually developed into what he calls a “creditor oligarchy.” Money relationships allowed a small portion of the population to enslave the majority in debt.

[10:00] What people think is the start of Western civilization was the falling apart of [the] Near Eastern origins of civilization; of this economy that had been put together in a very well-organized [way]. All of a sudden, instead of the public institutions, you had local chieftains occurring, and in Rome, very soon you had the aristocratic families overthrow the kings and the functions that were in the public sector in the Near East all of a sudden were taken over by private families. Let’s call them the mafia, because that’s basically what the Roman oligarchy was.

And there was a complete change in policy from the Near Eastern Bronze Age to Classical Antiquity. When a new ruler would come to the throne in Mesopotamia, the first thing they would do on their first full year on the throne was to proclaim a clean slate, and that’s because a lot of the debts that were denominated in barley couldn’t be paid…there was a general understanding that debts tended to grow faster than the ability to pay…

…What happened by the time of 133 BC was, in Rome, you had basically a Milton Friedman philosophy of free markets by the oligarchy. And what they realized in Rome was exactly what Richard Nixon and Henry Kissinger realized in Chile. You can’t have a free market for creditors if you don’t murder everyone who disagrees with you. If you don’t kill everyone who wants to cancel the debts, if you don’t kill everyone who knows history, if you don’t kill the labor leaders, you can’t have a free market oligarchy-style.

So they murdered the Gracchi. They murdered the supporters of the debt cancellation. Essentially there was a hundred-year social war in Rome. And the result was by the time the empire got going, one quarter of the Roman population was in debt bondage or outright slavery.

Michael Hudson: Money & Debt (YouTube)

It is thought that this extreme inequality was a fundamental factor in Rome’s collapse. An impoverished and demoralized population has no investment in the continuance of a society which offers them little but exploitation and immiseration.

Economic Growth

This link gives a good summary of the rise and fall of the Roman economy based on the work of Dr. Phillip Kay: Economic Growth in Ancient Rome (Capitalism’s Cradle)

The Fall

The dispersal of the public good into private hands led to a disintegration of the state. Eventually, there simply was no state anymore; the government’s orders went unheeded and people lost faith in the ability to declare and enforce laws. Private power, often exercised by local chieftains and warlords, filled the void, resulting in in a political fragmentation.

IN THE END, Rome was heading toward something the Romans couldn’t, by definition, have a term for. But we do: it’s the Middle Ages. The precise definition of “feudalism” is one of those things on which medievalists can’t quite agree-the field is divided into warring fiefdoms- but the historian F. L. Ganshof discerned in feudal society one basic quality: a dispersal of political authority amongst a hierarchy of persons who exercise in their own interest powers normally attributed to the state. Public interest had become private.

This isn’t the place for an extended excursion across a thousand years of Western history. In brief, for many centuries power was wielded in Europe by monarchs and vassals as if it were a form of private property. ‘The levying of taxes, the raising of armies. the meting out of justice-these things were done in the name of the ruler, and the fruits of his administration were enjoyed by those who acknowledged the ruler’s personal lordship. The eventual path away from the Middle Ages was marked by the halting emergence of governments defined by communal interest rather than private prerogative…

Whatever the root cause, the result was undisputable: a dissolution of centralized authority, relocalization of the economy, simplification of society, flight from cities and cancelling of debts. Many economies returned to subsistence. Nomadic Tribes settled in many parts of the empire, and traditional tribal arrangements prevailed. Money and markets, for the most part, went away. [15]

Money and markets make a comeback in the Middle Ages, beginning with the great recoinage under Charlemagne. However, while the Roman coins were introduced into a unified monetary space, the new coins would be introduced into a fragmented political landscape. This had profound ramifications that we’ll consider next time.

[1] David Graeber; Debt: The First 5000 Years, pp. 230-231

[2] Keith Roberts; The Origin of Business, Money and Markets, p. 133

[3] Peter Temin; The Roman Market Economy

[4] Wray, Credit and State Theories of Money: The Contributions of Alfred Mitchell-Innes, p.38

[5] Wray, Credit and State Theories of Money: The Contributions of Alfred Mitchell-Innes, p.25

[6] Keith Roberts; The Origin of Business, Money and Markets, p. 149

[7] Keith Roberts; The Origin of Business, Money and Markets, p. 149-151

[8] Keith Roberts; The Origin of Business, Money and Markets, p. 160

[9] Cullen Murphy; Are We Rome?, pp. 97-99

[10] Keith Roberts; The Origin of Business, Money and Markets

[11] Lewis Mumford; The Myth of the Machine, Vol. 1, pp. 133-13

[12] Melvin Kranzberg and Joseph Geis, By the Sweat of Thy Brow: Work in the Western World, pp. 41-41

[13] Keith Roberts; The Origin of Business, Money and Markets, p. 133

[14] Cullen Murphy; Are We Rome? pp. 97-99

[15] Cullen Murphy; Are We Rome? pp. 97-99

Note: some of this materials was cited in my summary of Privatization in the Ancient World. I have removed it from there and placed it here.

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