The Collapse of the Roman Economy, Part I: Third Century to the Last Emperor in the West

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It All Came Crashing Down

The collapse of the Roman Empire has been examined and debated by modern historians for centuries. Edward Gibbon was the first historian to tackle this monumental task when he wrote his six volume book, The History of the Decline and Fall of the Roman Empire, which was published between 1776 and 1788. Gibbon gave great detail to all aspects of Roman culture and periods of history, but he essentially argued that Romans were doomed when they turned from their pagan religion and embraced Christianity. Although the central thesis of Gibbon’s work has been discarded by most modern historians, his inquiry into the causes of Rome’s fall has indeed inspired legions of historians to offer their own synopses on the collapse of what many consider to be the world’s greatest empire. Often the numerous “barbarian” invasions of Roman territory and later Rome itself is pointed to as the ultimate reason for Rome’s collapse, but as the modern historian Arnold Toynbee (1889-1975) so eloquently argued, in the course of human history societies have rarely been the victims of homicides and are almost always the victims of suicides. Essentially, Toynbee argued that well before societies are conquered and/or destroyed by outsiders their decline was the result of a number of internal factors that weakened the said society and made it “ripe for the pickings.” In the case of ancient Rome a number of factors led to its decline, but perhaps the one thing that tied all those factors together was the collapse of its economy.

The Romans are known for many inventions and ideas that are still commonly used in modern society: concrete, plumbing/running water, and republican government are just three gifts the Romans gave to the modern world; but certain aspects of their economy also carried through to the modern world. Millions of people took part in the Roman economy, which was at a high point in the first century AD, through trade, speculation, and labor. To a Roman living in the first century AD it may have seemed as though Rome and its economy were indestructible, but within 200 years the economy took a nosedive that it could not recover from and ultimately helped to take down the Empire.

The Background of the Roman Economy

In order to understand how the Roman economy collapsed an examination of the structure and nuances of the economy, especially during its highpoint in the early Imperial period of the first century AD, is warranted. Although the Romans did not keep detailed financial records the way people do today, a number of different sources, such as accounts from ancient historians and various personal accounts, have helped modern historians and economists determine how the economy worked and eventually, how it collapsed. During the high point of the economy in the early Empire, Romans of all classes were able to acquire and build wealth in a number of ways and it has been suggested that the GDP was comparable to that of early modern Europe. As a pre-Capitalist system the Roman economy was fairly simple, with its currency and free markets being the back bone.


The Roman economy was currency based and the standard currency was the silver denarius. State controlled mints made denarii, which were then distributed by the emperors through a variety of ways such as loans and payments to the military. Similar to modern currencies, such as the dollar or the pound, Roman currency also had coins that were of lesser value, namely the bronze sesterce and the copper as. The divisions and conversions of Roman coins were fairly simple; four sestertii equaled one denarius and four asses equaled one sesterce. As the denarius went, so went the Roman economy – in difficult economic periods the denarius’ value was reduced, much like in modern economies. The denarius was the life blood of the Roman economy as it paid for the military and the numerous public works projects; but it is also important to remember that unlike today, the denarius was not fiat money. Besides the fact that Rome operated under a currency economy, another similarity it had to modern economies was the prevalence and for a period, the proliferation of trade and free-enterprise.

Although the Roman economy cannot be accurately termed a capitalist economy, it did employ aspects of free trade, enterprise, and private ownership that are similar to what we see in modern economies. Loans were a common method used by Romans to acquire money/capital in order to buy land or start businesses, which were usually shipping related. As what historians and economists term a “market economy,” Rome’s wealth was based largely on the luxuries and material goods that flowed through the capital city, which often came there as a result of the conquering legions; but it was merchants who brought the goods there with ships. During the early Empire, Rome’s port city, Ostia, was alive with merchant shippers who made fortunes bringing goods to and from Italy. The loans these merchants received were usually around 1% interest, which is of course low by today’s standards. Roman merchants could get their loans from a couple of different sources – wealthy members of the Patrician class often gave loans, but there was also a Roman banking system.


Like other aspects of the Roman economy, Roman banking was also fairly simple and straightforward. The Roman banking system can be traced back to the Greeks who used banks regularly to hold their gold deposits. After the idea of banking migrated to Rome it became a profession not unlike today’s profession of bankers. Roman bankers, known as argentarii, received deposits and gave loans. Most of the loans the argentarii gave were based on the standard 1% interest rate as discussed above and not all paid interest on deposits because even during the Imperial period Romans often looked at usury as a dishonest way to make money. Banking and merchant shipping were two of the most apparent aspects of the Roman economy, but the many roads the Romans built may have been the artery from which all the other vessels of the economy sprang.

Today, most people have heard the saying, “all roads lead to Rome” but few probably ponder its significance. Although the Romans did not invent roads, they were the first people to build some of theirs with concrete and they were also the first people to build such an extensive system, most of which did in fact lead to Rome. The Roman roads were built by the military beginning in the Republican Period and well into the Imperial Period for the purposes of facilitating easier transportation of the military units as well as long distance trade. The Roman roads were built with such expert engineering that many of them still stand today, although many sections have been replaced with modern freeways. The Roman roads were vital for overland trade caravans that needed to travel, sometimes long distances, in order to get their goods to a port where ships could then be used to transport the goods to Ostia. The Roman Roads helped to not only bring wealth to Rome, but also helped to make otherwise backwater locales, such as Palmyra, become wealthy and powerful. Truly, free trade was the life blood of the Roman economy, but as with any stable economy, a solid working/labor class helped move it along.

Most Romans participated in the economy either as consumers or as workers and/or members of the trades. Skilled workers, such as bakers, silversmiths, and wool workers, were an extremely important part of the Roman economy and formed associations known as collegiaCollegia were similar in many ways to modern unions, complete with political undertones, but differed in that religion also played a significant role. Since the Roman economy was currency/cash based, the workers were paid in denarii, with some being paid salaries while others were given daily wages.

The First Signs of Trouble

As with most economic collapses throughout history, the fall of the Roman economy was much less dramatic than many may think and instead was more of a long term problem whereby problems began to manifest and the political leaders either did not have the foresight, will, resources, or a combination of all three to effectively handle the situation. The first two centuries of the Roman Empire progressed fairly well: Rome’s borders expanded slightly, but more importantly wealth was still abundant. By the third century AD the Roman economy experienced its first major fissures in the form of inflation.

Before the third century Rome had experienced some economic problems, for instance a recession took place during the reign of Tiberius (AD 14-37), but the emperor assuaged further economic problems through a number of different policies that ultimately brought prosperity back to his people. In fact throughout most of the first and second centuries modern historians estimate that inflation was less than 1%, but two factors late in the second century helped produce an inflationary cycle from which Rome never seemed to recover. The first major event to hit the Roman Empire was a plague, known as the Antonine Plague. The plague was named for the family of the ruling emperor, Marcus Aurelius (161-180) and was brought back to Rome from legions stationed in the Near East. Modern scholars believe the disease was actually smallpox or measles and without modern medical knowledge the plague ravaged the population for years and ultimately affected the economy by driving up prices on commodities. Around the same time the plague hit Rome the denarius was losing its value, which was the primary factor for Rome’s inflation cycle of the third century.

Continue to PART II


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