Ideas from the Ancient World: The Economic Emergence of Western Civilization


Modern Ideas from the Ancient World

The modern economic system that has enveloped the globe and the daily lives of most of the world’s inhabitants did not begin overnight, nor did it develop in a vacuum. The highly complex and nuanced global economy of the modern world has evolved throughout the centuries in order to arrive at where it is today, but an examination reveals that many of the basic ideas that serve as a foundation for the modern, Western economy came to be as the result of antecedents in the ancient Near Eastern and Hellenic worlds. Long before what is today generally referred to as Western Civilization existed, the ancient Egyptians developed the first currency system, the Lydians invented the first coins, and the Athenians established the banking methods that were then adopted by the Romans and later Western Europeans.

The Ancient Egyptians and Standardized Weights

The ancient Egyptian economy was fundamentally different than that of the modern world. In theory, all land belonged to the pharaoh, but in practice land holdings were usually managed by the priests of the temples, which were also often vast estates that held immense wealth in the form of grains, livestock, and precious items that were donated to the temples as offerings. Aspects of a free market system did exist, which was essentially barter based, but the ancient Egyptian economy was far from capitalist and for the most part resembled the modern economy in few ways. One way that the ancient Egyptian economy resembled the modern, global economy was its use of standardized weights.

Before the Egyptian state was formed around 3100 BC, Egyptians were already using a standardized weight known as the deben. One deben equaled about 93.3 grams and was used by the Egyptians as a measure of copper, silver, or gold. At the beginning of Egypt’s Middle Kingdom (ca. 2000-1700 BC), the weights were further standardized when the kite was added as a value of weight. Ten kite equaled one deben, but the kite was only used to measure values of items in gold or silver, not copper. Although the Egyptian weighing system used precious metals as a standard, the metals were often not involved in a particular transaction. For example, if a peasant went to the market to sell a donkey, the price may be set at two deben, but he would probably be paid in another material, such as cloth or barley, that he needed more than gold or silver. An amount of cloth or barley that equaled two deben would then be weighed and traded to the peasant for his donkey. The process was extremely cumbersome, but extremely advanced for the time; it was essentially a pseudo or proto-currency. The definition of what constitutes a currency is a bit ambiguous, but the esteemed economic historian, C.T. Seltman. wrote: “Metal when used to facilitate the exchange of goods is currency; currency when used according to specific weight standards is money; money stamped with a device is coin.” Despite the seemingly unwieldy nature of using the deben as a currency, there are a plethora of examples from Egyptian history that depict how the measure was used in trade.


Actual scales and balances that the Egyptians used to weigh precious metals are extant and currently housed in major museums around the world and there are also a number of pictorial representations of the weighing process from the tombs of nobles. These examples show modern scholars what the scales and balances looked like, but to understand the details of their use one must search the available texts. In the fictional tale known as The Tale of Wenamun, which is dated to the reign of Ramesses IX (1090-1080 BC), the story’s protagonist is robbed in the Levant of several precious metals while on a trading expedition for the pharaoh. Wenamun states:

I arrived at Dor, a Tjeker town; and Beder, its prince, had fifty loaves, one jug of wine, and one ox-haunch brought to me. The a man of my ship fled after stealing one vessel of gold worth five deben, four jars of sliver worth 20 deben, and a bag with eleven deben of silver. (Lichtheim, 225)

Although Wenamun is a fictional tale, the story details both the political and economic situation in the region near the end of Egypt’s New Kingdom. The Egyptian Empire has essentially collapsed and it is each man for himself; but despite the perilous economic situation, the economy continued and gold and silver retained their inherent values. The Egyptians may have been the first people to articulate the concept of currency, but they never took the next step and turned the deben into an actual coin. It would take a few more centuries and peoples hundreds of miles to the north of Egypt to put the first coins into circulation.

The Lydians and the First Coins

Today, the idea of coin and paper currency is often taken for granted and few wonder how or why the first coins came to be. At this point, it is difficult for modern scholars to say for certain what led to the creation of the first coins, but archaeological discoveries point towards the eighth century as the period of the birth of coinage. Jasper seal impressions excavated in the ancient Levantine city of Megiddo that date to the eighth century BC show some similarities to actual coins from the Anatolian city of Ephesus dated to about a century later, which indicates that the idea probably began in the Levant and then evolved as it moved northwards. Once the concept of coinage came to Anatolia, it was quickly picked up and refined by the Lydians, who are often credited with being the inventors of coinage.


The Lydian kingdom in western Anatolia was located in a position that was quite conducive for trade as it sat between the Near Eastern kingdoms on one side and the Hellenic world on the other. In the seventh century BC, the Lydians were the premier merchants of the eastern Mediterranean and they used their economic prowess to fund military expeditions against their Carian and Greek neighbors in Anatolia. Greek writers, who on the one hand denounced Lydian tendencies toward ostentatiousness, still admired the wealth that the Lydians used to beautify their capital of Sardis. The fifth century BC Greek historian Herodotus wrote:

When all these nations had been added to the Lydian empire, and Sardis was at the height of her wealth and prosperity, all the great Greek teachers of that epoch, one after another, paid visits to the capital. (Herodotus, The Histories, I, 29)

The ultimate source of the Lydians’ wealth came from the availability of lucrative gold deposits that they were able to use to mint coins.

The city of Sardis was landlocked – which put it at a trade disadvantage compared to most ancient cities – but the Pactolus River ran through it, bringing not only life sustaining water to its inhabitants, but more importantly, large gold and electrum deposits that the Lydians mined to make coins. To the Greeks, the Pactolus gold deposits were Lydia’s greatest wonder: “The country, unlike some others, has few marvels of much consequence for a historian to describe, except the gold dust which is washed down from Tmoulus” (Herodotus, The Histories, I, 93).

Interestingly, modern numismatic studies of Lydian coins, along with archaeological excavations at Sardis, have revealed that the deposits were not purely gold. Examination of gold Lydian coins has shown that most had small amounts of silver infused within the gold, which means that technically the gold of the Pactolus River was actually a naturally occurring alloy of gold and silver – electrum. The amount of silver in most of the coins is extremely minute and only discernable in most cases through modern technology, so the Lydians probably did not know that their coins were actually electrum. Before the Lydians, electrum was known to ancient peoples, most notably the Egyptians, who used the mineral to adorn their obelisks during the New Kingdom. But it was the Lydians who were the first people in history to use the alloy taken from the Pactolus River to make coins.

The rich mineral deposits from the Pactolus River gave the Lydians their wealth, but they were not unlike gold deposits that other ancient peoples exploited. Since modern technology was not available to ancient miners, most of the abundant mineral deposits were either mined from rivers, as the Lydians did, or very close to the surface. Miners of the Pactolus River would have resembled those of nineteenth century America in many ways: they would have stood in the river sifting through mud and rocks in order to small amounts of gold and worked as individuals, not in teams. The Lydian miners though would have sifted the mud and dirt through a sheepskin instead of a metal screen. This mining process proved to be quite effective and was later followed by the Greeks, which may have at least partially inspired the legend of the “Golden Fleece.” The early Lydian kings definitely saw the economic potential of the Pactolus River so they built Sardis on its banks and then later, a royal mint in the middle of the city.

The process of mining and then minting the gold and electrum from the Pactolus River is believed to have started during the reign of the Lydian King Gyges (ca. 680-652 BC). Gyges was the first Lydian king of the Heracleide Dynasty and like the founders of most dynasties throughout history, the new king worked assiduously to cement his family’s powerbase. The earliest known Lydian coins bear the name of Gyges, which also makes them the first stamped coins in the western world. The Greeks recognized that “the Lydians were the first people we know of to use a gold and silver coinage and to introduce retail trade” (Herodotus, The Histories, I, 94). Gyges’ efforts allowed Lydia to become one of the most politically and economically powerful kingdoms in the region and by all accounts his successors followed in his financially lucrative footprints; but eventually the Lydian, like all kingdoms, met its demise through two primary factors. The last Lydian king, Croesus (ca. 560s-540s BC), made the political mistake of siding with the Median Empire against the Achaemenid Empire. The Achaemenid Persians proved to be a military juggernaut, conquering and obliterating any kingdom that gave them resistance. The Lydians were also plagued by a lack of financial diversification; when the Pactolus mineral deposits were exhausted around 500 BC the Lydians had no means to rebuild their military in an effort to throw off the Persian yoke. Despite the disappearance of the Lydian kingdom, the economic ideas of the Lydians, such as coinage, were carried on by the Greeks.

The Athenian Greeks and Banking

Many of the economic ideas that were first formulated by the Egyptians and Lydians were adopted and improved by the Greeks, especially the Athenians who demonstrated excellent business acumen. Actually, most Greeks eschewed the business professions and instead favored careers in the military or intellectual disciplines but the Athenians developed a keen aptitude for business, as is demonstrated by numerous records and texts from the fifth century BC. Many of the Athenian economic decrees and documents were written during the period of the Peloponnesian War (431-404 BC), which was between Athens and its allies, known as the Delian League, against the Spartan led Peloponnesian League. The Peloponnesian War was essentially a war for control of the Hellenic world, but some of its root causes were based on economics.

The Athenian led Delian League began as an anti-Persian alliance of Greek city-states after the conclusion of the Greek-Persian Wars (499-479 BC). Although the Athenians and Spartans vanquished the Persians from mainland Greece, the Greeks of Ionia remained under Persian control and so the Athenians sought to liberate their cousins through the formation of the Delian League. The Delian League got its name from one of the member states, the isle of Delos, which is where the alliance members kept their trireme warships and the gold to fund any campaigns. The gold was actually stored in the treasure house of the Apollo Temple in Delos, similar to other prominent Greek cities that housed significant holy sanctuaries, such as the well-known sites of Delphi and Olympia. The sacred treasure houses acquired most of their wealth through votive offerings of all sorts, which included gold bullion, coins, and statues. The treasure house of Delos, as well as other treasure houses, began to function as proto-banks and simultaneously played the role of sacred site, civic center, and economic institution. Sometime around 454 BC, the Athenian general Pericles (495-429 BC) decided that treasury of Delos should be moved to the larger and more fortified city of Athens. Shortly after the treasury of Delos was transferred, the Athenians decreed that their allies must adopt the use of Athenian coins, weights, and measures. By forcing their “allies” to accept their currency and essentially their economy, the Athenians created an economic and imperial template that was duplicated countless times throughout history. Remnants of Athenian economic imperialism can be seen in modern history where colonial powers, such as Britain, forced their colonies to become economically dependent through the regulation of currency and their economies.

Pericles is generally viewed as one of the greatest Athenian leaders as the period of his generalship is often referred to as Athens’ “golden age.” The Athenian general used funds from the Delian treasury to build the Parthenon in 447 BC, which would later serve as Athens’ primary bank and source of income during the Peloponnesian War. The Greek historian Thucydides detailed the revenue sources that Pericles raised for the Delian League on the eve of the Peloponnesian War:

Their strength came from the financial income they paid and that, for the most part, success in war was a matter of judgment and abundant revenues. He told them they could take confidence, since six hundred talents in tribute usually came in every year from the allies apart from other revenue, and on the acropolis there was still six thousand talents in coined silver remaining at that time (the largest amount had been nine thousand seven hundred, from which they had made expenditures for the gateway of the acropolis and the other buildings as well as for Portiada) and, apart from that, uncoined silver in private and public dedications, and there was all the sacred equipment for processions and contests and booty from the Mede and everything else of that sort, not less than five hundred talents; going further, he added the considerable amount from the other sanctuaries. (Thucydides, The Peloponnesian War, II, 13)

Minted coins were made from the bullion and golden Nikai statues in the Temple of Athena. The tribute payments combined with the available gold and silver meant that at the onset of the Peloponnesian War the Athenians were financially sound, but as the war dragged on the Delian League had to search for new revenue streams.

War can have both devastating and invigorating effects on a nation’s economy. Obviously, wars can bring a lot of destruction to a country’s infrastructure and lost lives are never easy to replace. Wars also often have adverse impacts on economies, but they can also stimulate an economy through increased production. The long enduring Peloponnesian War began to slowly drain the sacred coffers of the Athena Temple, which led to interest being charged for most loans that were made for non-sacred purposes. In other words, the Athenians began to charge interest on loans they took out to fund military campaigns and other building projects. Records show that initially the bankers of the Athena Temple charged one drachma a day for one talent until the end of fiscal year 426/427 BC and then the rate dropped from one to five; the rate therefore dropped from 6% to about 1.2%. The low interest rates meant that Pericles and the other leaders of Athens could borrow more money to fund their ventures. The increasingly complex Athenian economy then made the next logical step in its evolution – regulation.

As the Peloponnesian War dragged on and the Athenians became more dependent on the Temple of Athena for their economic survival, a decree was issued that established a board of treasurers for the temple treasury. The board assumed management of not only Athena’s funds, but also those of the other local sanctuaries in Athens. Not unlike the Federal Reserve or the Securities and Exchange Commission, the board of treasurers of the Athena Temple diligently recorded all economic transactions related to Athena and the other sanctuaries in order to retain what was Athena’s property and to curb any potential economic malfeasance on the part of the borrowers.

One final economic tool to raise money that the Athenians introduced during the Peloponnesian War was property taxes. Today, property taxes are a ubiquitous, although often derided, part of modern, industrialized economies. Feeling the economic pinch of their protracted struggle against Sparta, the Athenians levied property taxes on its citizens in 428 BC, which raised 200 Talents of revenue for the war effort. Despite their clever economic maneuvering during the Peloponnesian War, the ongoing war with the Spartans proved to be too much for Athens and its economy.

The Decline of Athens and Its Economy

As the Athenians tried to keep up with the Spartans, they found themselves in a position similar to that of the current United States government – in debt and barely able to afford interest payments. By the end of fiscal year 423/422 BC, the Athenian debt to Athena and other sacred treasuries had reached 5,600 Talents with an accumulated interest of 1,400 Talents. The situation was compounded by other factors. First, the Athenians and Spartans were quickly making Greece a wasteland, which meant that there was little booty for the Athenians to take that they could pay to the Athena Temple. Second, the Laurerion silver mines, which the Athenians relied on to fund their navy since the early years of the Greek-Persian Wars, was exhausted by 413 BC. With no new sources of gold or silver, the Athenians were forced to introduce copper coins, which only served to devalue the existing Athenian currency. The final blow came when the Athenians and the Delian League were forced to surrender to Sparta and its allies; but it was a Pyrrhic victory as most of Greece was left physically and economically devastated.

The Macedonians and then the Romans dominated Greece in the centuries after the Peloponnesian War and with their dominance the role of the sacred treasuries began to diminish and eventually was replaced by the banking methods of the Romans. The Romans then adopted many of the economic ideas of their forbearers, such as coinage and interest rates, which they then passed along to the nascent Western Civilization of the Middle Ages. Therefore some of the most basic economic ideas of today can be traced back to the practices of the Egyptians, Lydians, and Greeks.


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