How did economics affect Rome's downfall?

Question

How did economics affect Rome's downfall?

Answer 1

MJR's answer is the best one - The Cato institute is a radical pro-Republican think tank, think they're more than a bit biased in their economic views.

The Senate did well and thrived; they even did well enough to last long after the Empire's fall, when Theoderic the Great (barbarian) ruled - and, gave most of the real work of govt to the Senate.  The Senate itself was not a democratic body, but the self-appointed wealthiest and most powerful of Rome; they are responsible for the most rapacious treatment of provinces that the Roman empire undertook - How the Senate took advantage of the provinces of Sicily and Asia is well-known.  The Senate is responsible for Rome's bad reputation as an empire - a mess that Julius Ceasar was killed for, for trying to clean it up.

More important to Rome's fall was not any taxing of the Senate, but the squeezing of the middle class when by the fourth century, a population decline meant fewer workers.  Few workers meant a smaller tax base, when demands were greatest for a growing external threat.  With the Senate too powerful to be taxed further, Rome had no choice but to squeeze the middle class further.

Answer 2

Rome's economic collapse, as the above person mentioned, was a transition from a market economy, complete with international trade and a middle class, into a feudal economy, where the workers are indentured to their manor lord and are organized into self-sufficient colonies.

The primary economic catastrophe of the Roman Empire was the crisis of the third century, but there were underlining problems that preceded it. A slave market allowed rich landowners to supplement their farms with cheap labor, driving small farm owners out of business and off their land. These impoverished families would then travel to the cities looking for work. This placed a stress on the cosmopolitan local governors, as they had to deal with the increased crime, poor workers, and high unemployment. This was first attempted to be corrected by the Gracchi brothers, but they were assassinated. Then Julius Caesar attempted to have slavery made illegal, but he too was assassinated. Caesar Augustus found a work around by instigating a vast public works program that used state funds to provide shelter, food, and aid to the poor and unemployed and impoverished. The cost was alleviated by war booty, taxes, and inflation.

During the reign of the five good emperors, Rome had reached a critical mass with regards to their economy. Marcus Aurelius, for example, had to pawn off Imperial precious jewels to fund his war against invading Germans. War booty had dried up when everyone with any degree of wealth had been subverted, leaving only economically poor Germania and Parthia. Inflation was beginning to take off. The Emperors would have to resort to ever increasing taxes, but the five good emperors didn't make waves, therefore this was a peaceful time. This changed with Commodus, whose utter unconcern for his state's budget nearly bankrupted it. This would cause a tumultuous decline in the Roman economy, kept stable only by the stern rule of the Severan Dynasty. When the last Severan was assassinated, there was no more strong leaders to take control of a situation rapidly spiraling out of control, and the Crisis of the third century began.

During the third century, dozens of soldiers proclaimed themselves emperor and contested the throne. With no worthy conquest on the horizon, and a now worthless currency, they had to turn to taxation that could be more described as outright theft. No member of society was safe; the wealthy were simply looted, and the middle class was taxed out of existence. The frequent wars broke down the trade routes throughout the empire, causing mass shortages, and the army could no longer be paid, causing soldiers to turn to their generals for leadership.

The situation was stabilized politically by Diocletian, but Diocletian also damaged the empire's economy beyond repair. His Imperial court, and that of subsequent Emperors, became lavishly opulent, expensive, and a top-heavy bureaucracy. His price control programs caused mass shortages of nearly every commodity in the empire, forcing commoners to flee en masse into the countryside looking for work.

Programs enacted by emperors to salvage the economy often did even more damage. Laws were enacted that made quitting your job illegal, then being unemployed illegal, then binding your children to your job, thus forcing Roman citizens to become de facto slaves to their employer. All Roman commerce was collectivised under state run institutions called collegia, which became so corrupt and incompetent that none of them survived the fall of the empire. With the middle class taxed out of existence and the wealthy thoroughly pillaged taxation revenues had to be straddled ever increasingly on the poor. However, as most people became farmer-serfs, and resorted to bartering instead of using the worthless currency, revenues became dangerously low.

By 400 A.D, Rome was dead. Cities that once held millions were now reduced to a few ten thousands, at best. The state was so thoroughly broke that it could not afford to pay its legions; its soldiers survived by virtue of the military town that housed them. New soldiers could not be raised and the Empire became so desperate for manpower that it began "selling" land to German warbands in exchange for a quota of soldiers. This lasted only as long as the German confederates needed them, which is what happened in 476, when the Ostrogothic king deposed the Emperor and did not declare a successor. It may have been a calamity for the state bureaucrats, but for the people, it was a welcomed tax relief, as they found their new German masters less onerous than their old Roman ones.

Answer 3

Inflation:

Especially luxurious emperors like Commodus depleted the imperial coffers. By the time of his assassination, the Empire had almost no money left.

Money could be acquired by taxation or by finding new sources of wealth, like land, but the Empire had reached its furthest limits by the time of Trajan.

Nero and other emperors debased the currency in order to supply a demand for more coins. By debasing the currency is meant that instead of a coin having its own intrinsic value, it became representative of the silver or gold it had once contained. By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly silver denarius was only .02%.

This led to or was severe inflation, depending on how you define inflation.  

Land:

Rome's wealth was originally in land, but this gave way to wealth through taxation.

The Cato Institute says that emperors deliberately overtaxed the senatorial (or ruling) class in order to render it powerless. To do this, the emperors needed a powerful set of enforcers -- the imperial guard.

Once the wealthy and powerful were no longer either rich or powerful, the poor had to pay the bills of the state. These bills included the payment of the imperial guard and the military troops at the empire's borders.  

"Feudalism":

Since the military and the imperial guard were absolutely essential, taxpayers had to be compelled to produce their pay. Workers had to be tied to their land.

To escape the burden of tax, some small landowners sold themselves into slavery, since slaves didn't have to pay tax and freedom from taxes was more desirable than personal liberty. Since the Empire wasn't making money from the slaves, the Emperor Valens (368) declared it illegal to sell oneself into slavery.

The small landowner had become a feudal serf.  

Sources:

How Excessive Government Killed Rome Bruce Bartlett, Cato Institute Volume 14 Number 2, Fall 1994.

"The Other Transition: From the Ancient World to Feudalism," Chris Wickham, Past and Present, No. 103. (May, 1984), pp. 3-36.