The Economics of the Roman Empire

• 3 minute read •

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The whole story of ‘Obelix and Co.’ (the 27th edition of the Asterix comic book series) is a parody of capitalism. Obelix, who makes menhirs (large tear-drop shaped stone structures) comes across Preposterus, a graduate from the Latin School of Economics (haha), who devises a scheme to keep the Gauls busy so that Caesar could capture the village they lived in. The comic references several economic concepts such as production, labour, efficiency, competition and marketing. While it is quite a stretch to imagine that the Romans would hold menhirs at such high esteem, the Roman economy isn’t actually too different from most modern economies.

 

The Roman Empire, one of the largest and most powerful empires over history, at its peak covered almost 5 million square kilometres governing people of varying ethnicities and cultures. From 27BCE to 476CE, wars were fought, trade flourished, the empires expanded and the stories of legends were born. Ruled by various people the economy grew with twists and turns.

 

The economy ran on mainly agrarian trading practices with wares such as wine and grain.  Markets came about to trade in these goods, and as one would expect, these markets expanded to include sales of trinkets, memorabilia, silk, cotton and jewellery. Institutions from where people lent money and credit were established through the wealth of families together. As agriculture held such a big role in the economy, it is obvious that there may have been times of crisis. In response to these scenarios, Roman officials responded by minting money. Over time, the whole empire began to run on this monetary system with coins of the era having been unearthed as far east as India.

 

Trade routes criss-crossed the Roman Empire. They consisted of sea routes that traversed the Black and Mediterranean Seas and a great many land routes were built, as they say ‘all roads lead to Rome’. The universal currency system made trade easy and it boomed.  Commodities included olives, fish, meat, leather and hide, gold, silver and of course, slaves. Apart from being used in manual labour, they were tasked with many other jobs such as domestic services, and highly skilled jobs such as a physician. Unskilled slaves were normally made to engage in work related to farms and mills.

 

While sea routes were preferred for trade, the road network was mainly used (and, in most cases, built) by the Army. The Roman Army was a force to be reckoned with. Conquering area after area, looting them and bringing back slaves, they were one of the strongest elements the Roman Empire had in their arsenal. The economic gains made by the empire by the annexation of various states motivated the soldiers for successful warfare.

 

Believe it or not, the Roman people were taxed as well. The responsibility of tax collection of provinces was auctioned to Tax Farmers who paid the state in advance; on this amount, the state paid them interest for a period of time. They converted the goods (aka the tax) they collected into coins and gave this to the state. Whatever was left over went into their own pockets. This was a major source of income in the Roman Republic, and clearly, this system was rife with corruption. Augustus, the first ruler of the Roman Empire, did away with Tax Farming and introduced a system where each province was told to pay wealth tax of around 1% and each individual had to pay a tax based on their income or wealth status – very similar to the Progressive Tax System in place in modern times. However, as time went on, the costs and prices of administration rose and many emperors struggled with economic policies to govern the state. By the late 3rd Century, large inflation rates coupled with debased coinage values forced the Emperor Diocletion to make very dramatic reforms. He capped high prices, levied a tax on Italian landowners and instigated multiple other taxes in order to bump up the amount in tax collected.

 

As with any society, entertainment played a huge role in their lives. What cricket and films are to us Indians, the shows in the Colosseum and other smaller amphitheatres were to the Romans. The stories we have of the shows are infamous. Romans enjoyed watching gladiatorial fights and fights between people and animals. Roman emperors were known for putting up free shows for the public. In fact, the rich would even have vials of their favourite gladiators’ sweat and use it as face cream!

 

When one thinks about the Roman Empire we think about it as an empire completely different from modern economies, which in some ways it was, but it also was similar, they too faced economic challenges and it is interesting to see what policies they implemented to overcome them.

 

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The Weakening Rupee

 

rupee
• 2 minute read •

The Indian rupee fell to its lowest level in over 16 months closing at 67.8750 per dollar on Wednesday, 16th May. It closed at 68.57 at the time of writing this article (12th July 2018) just a smidgen above the lowest value. It is the worst performing Asian currency and has fallen by over 5% to the dollar since the beginning of 2018. It is thought that the RBI has intervened to lend some support to the currency, as some state-owned banks were selling dollars intensively.

  • What does a ‘weak’ currency mean?

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The Rise of the AIIB  

AIIB
• 4 minute read •

After World War II, Asia and Europe were devastated, over 80 million had died, many, many more injured and much of the world lived in abject poverty. Countries were in the process of rising from the ashes (literally, in some cases) and for this, they needed some strong financial support. From the Bretton Woods Conference, held near the end of the war, diplomats talked about the need for financial institutions to restore the World Economy after the devastating war. Soon after, in 1945, the World Bank and the International Monetary Fund were born. The aim being that the two institutions combined would regulate and rebuild the international monetary system. Over time the integrity of the two institutions grew leaps and bounds and together are now viewed as the dependable backbone of the international economy.

What do the World Bank & IMF do and what have critics said?

Simply put, the World Bank provides loans for capital projects to help promote economic development and infrastructure undertaken by countries and the IMF offers loans to countries facing monetary issues. Over the years, the 2 institutions have received flak from critics all over the world. Loans issued by the World Bank and the IMF have a number of fiscal and policy conditions the recipient must accept or else they run the risk of not receiving the loan.

Renowned economist Joseph Stiglitz, former Chief Economist of the World Bank, has stated the conditions are very rigid and sometimes dictated without thought, no matter the recipient country’s individual characteristics. Some of the conditions include limitations on Government Expenditure and reduced roles for the State among others.

President of the Eurasia group and American political scientist, Ian Bremmer stated that America had used its authority in the affairs of the World Bank and IMF to influence developing countries into adopting western values. America and its allies seemed to dominate the working of both institutions. China, for its part, held very small roles in the two institutions – although the country is the second largest economy.

Isn’t there an Asian bank already?

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Most ‘Wealth’ Has Been Accumulated by Being Idle and Unproductive!

 

One of the basic claims of capitalism is that people are rewarded in line with their effort and productivity. Another is that the economy is not a zero-sum game. The beauty of a capitalist economy, we are told, is that people who work hard can get rich without making others poorer.

In a surprising twist though, data from UK says that 2/3rds of all wealth created in the last 2 decades is attributable to land and dwellings. Furthermore, and this is the crux of the findings, the creation of this wealth has come straight out of the pockets of those who don’t own property!

Continue reading “Most ‘Wealth’ Has Been Accumulated by Being Idle and Unproductive!”

Why Are Global Policymakers Gloomy?

As officials gather for the I.M.F. and World Bank meetings in Washington, worries about trade and debt are on the rise.

“The present good times will not last for long,” said Maurice Obstfeld, chief economist of the International Monetary Fund, as he released the fund’s latest projections, which foresee a solid 3.9 percent expansion of the global economy in 2018, as noted in The New York Times.

There are trade war worries, financial imbalances, high debt, low-interest rates, and the imminent end of a 10-year bull run – quite a plateful for economists to worry about!

Continue reading “Why Are Global Policymakers Gloomy?”

UK Interest Rates

Expectations that UK interest rates will rise in May could be overblown, the governor of the Bank of England has indicated.

 

Recent economic data has come in softer than what was expected. Investors and City economists are widely predicting that the Bank’s monetary policy committee will raise interest rates from 0.5% to 0.75% at its next meeting in May. However, more data will be considered when Office for National Statistics publishes first-quarter UK growth figures. Also, the Brexit effect has to be taken to be taken into account. (https://www.theguardian.com/business/2018/apr/19/uk-interest-rates-bank-mark-carney)

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The Journey Begins

This blog is dedicated to newbies in Economics – like me.

Hopefully, you’ll find it interesting. Thanks for joining me!

Good company in a journey makes the way seem shorter. — Izaak Walton

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