Mises Daily

Boom and Depression in Ancient Rome

[The New Deal in Rome (1939; 2009)]


The great achievement of the government that Augustus organized was the Roman peace. Under him and his successors for nearly 400 years the empire kept at bay the hordes that threatened to destroy Western civilization. During this time the Greco-Roman culture became so firmly established and so widespread that it was able to survive the disintegration of the empire that had been its guardian. The legacy of Greece and Rome was thus handed down to become the foundation of the life of the modern world.

By his contemporaries the advent of Augustus was welcomed as something new and glorious that had happened to mankind. After a century of cruel turmoil humanity seemed to be awakening from a long nightmare. The cynical Tacitus, who still cherished the Republican dream, says that the new ruler had “allured the minds of men by the blessings of peace.” Velleius Paterculus, the defender of Cicero, tells what Augustus did “for the Republic, the Roman people, and the world.”

“The civil wars,” he says,

were ended after twenty years, foreign wars suppressed, peace restored, the frenzy of arms everywhere lulled to rest. Validity was restored to the laws, authority to the courts, and dignity to the Senate.… Agriculture returned to the fields, respect to religion; to mankind freedom from anxiety, and to each citizen his property rights were now assured. Old laws were usefully amended and new laws passed for the general good.

This same feeling was given lasting poetic form by Horace and Virgil. Apparently the enthusiasm for the regime expressed in the city of Rome permeated the empire, and with reason. A large degree of home rule was bestowed upon the provinces, crown colonies, and dependent kingdoms.

“The great benefit,” F.E. Adcock writes,

which the Principate had bestowed upon the Mediterranean world was freedom to live its own life, to retain its own variety of customs and institutions.… The keynote of the period [of the imperial peace] was loyalty to Rome, not merely because this loyalty had no rival, but because Rome deserved to receive it.

It is simple fact, in the words of John Buchan in his Augustus, that in many parts of the Mediterranean basin — in Syria and Palestine, in Asia Minor, in Thrace and Macedonia — there was a standard of comfort and security under Augustus that is not reached today. In the latter part of the era we have the tribute of the slave-born Epictetus: “Cæsar [Augustus] has won for us a profound peace. There are neither wars nor battles, robbers nor pirates, and we may travel at all hours and sail from east to west.”

We may still read the inscription of a little town in Asia Minor celebrating Augustus as “ruler of land and sea; benefactor and saviour of the whole cosmos.”

The gossipy biographer Suetonius tells of the final voyage of Augustus down the coast to Capri. The old man was cheered by hearing the shouts from a ship just arriving from Alexandria that “by him they lived, by him they sailed, by him they enjoyed their freedom and all the riches they had.”

This enlightened reign lasted for 45 years. It was as if Grover Cleveland, inaugurated in 1885, had continued in office with increasing power until the early part of the administration of Herbert Hoover in 1930. People assumed the empire would last indefinitely. The poet Tibullus coined the enduring phrase, “the Eternal City.”

A few years later Roman coins carried the motto “Æternitas,” and an inscription found in Asia Minor speaks of a decree guaranteed “by the eternity of the empire of the Romans.”

Here a qualification must be made. We speak of the Roman peace as dating from the reign of Augustus. Probably it did not seem peace to the responsible head of the government. Frequent military expeditions were required to subdue unruly peoples. There was frontier fighting in rounding out the empire. A revolt in the Balkan peninsula a few years before his death proved so formidable that the weary ruler, now advanced in years, is reported to have contemplated suicide. This was followed by a disastrous campaign against the Germans beyond the Rhine in which the Roman general, Varus, lost three legions and took his own life. It was a terrible blow to the pride of Augustus, and his Roman biographer tells how for months thereafter he would walk back and forth crying out, “Varus, give me back my legions.”

The effect of the defeat was far-reaching. The army retired behind the Rhine, and the emperor left a solemn warning to his successors not to advance beyond that river. There were reasons for this policy on grounds of economy and the empire’s need of peace to organize and absorb the turbulent provinces already acquired. These reasons appealed with especial force to a disillusioned old man who had lost both the taste and the energy for further adventure. But it is fascinating to speculate on what might have happened if Rome had advanced to the Elbe at Hamburg and then to the Vistula at Danzig. It would have had to defend a frontier of only 800 miles from the Baltic to the Black Sea, instead of a boundary of twice that length from the mouth of the Rhine on the North Sea to the mouth of the Danube on the Black. Such an expansion to the east would have brought Prussia under the influence of the Roman civilization. Then Prussia might have been made European as south Germany and Austria were made European by Rome, with consequences reaching to the present day.

In spite of these outlying wars, Italy always was peaceful, along with most of the empire. The world has not yet learned how to maintain peace with anything like the success of the early Roman emperors. The contentment of the people under Roman rule is an immense tribute to the justice and efficiency of the government set up by Augustus. In Gaul, for instance, with the extensive road system constructed in the time of the early empire, commerce rapidly developed and the people became prosperous. The tribute paid to Rome was light in comparison with the cost of the old tribal wars. It is significant that after Britain had settled down in the 2nd century as a Roman province, the only troops needed there were to protect it from invasion. The colonials were proud to be citizens of the empire.

“Throughout the world,” writes a German scholar, Professor F. Oertel, in the Cambridge Ancient History,

there was an interpenetration, a smoothing out of differences to an extent undreamed of before.… If we contemplate the facts from the standpoint of the empire, our verdict must be that, in spite of all the dangers that an exaggerated capitalism has latent in it, industry, trade and commerce accomplished the task which Augustus set them, the task of welding the empire into a unity, thereby rendering possible its survival for centuries to come.

The prosperity associated with Augustus naturally contributed to the prestige that invested his name. Business had been terribly handicapped by the general disorder of the last years of the republic. With the establishment of a firm peace under honest and competent government, and with virtually free trade throughout the empire — for small port dues were not protective duties — a business revival was bound to follow. But when Augustus returned to the capital after Actium he found Rome impoverished and its economic structure disorganized by the civil war. In order to relieve the situation he turned to a policy with which the United States became familiar in the 1920s. To meet somewhat similar conditions the Coolidge administration resorted to the expedient of easy money. Interest rates were kept artificially low to encourage borrowing and keep business on the upgrade. This policy led to extravagant expansion of bank credits that made possible the wild boom that culminated in the panic of 1929 and the subsequent depression. On a more modest scale Augustus adopted an easy-money policy. The results were identical with those under Coolidge. The policy promoted an inflationary boom followed by deflationary hard times and the panic of AD 33. In both instances the boom started in one administration while its fruits appeared in another.

Any investigator of the economic history of Rome must resign himself to the baffling handicap of the absence of government reports and business statistics. Information has to be patiently collected from chance and often exasperatingly indefinite remarks of contemporary writers who had scant interest in economics. Even such an unpromising source as Cicero’s treatise on Moral Duties has to be searched for incidental illustrations referring to some economic policy of the past. Fortunately the methodical Augustus left an exceedingly helpful record of his financial transactions. A few months before his death he prepared a summary account of his administration, a Farewell Address, which was read to the Senate, with the request that it be inscribed upon bronze tablets to be set up before his mausoleum. These tablets have disappeared, but the document was copied on the walls of many temples throughout the empire. The best copy that has come down to us is known as the Ancyrean inscription — “queen of inscriptions,” Mommsen calls it. This was found in both Latin and Greek on the walls of a temple at Ancyra in Asia Minor, to which I have referred in describing the Augustan exposition. From it we may trace huge government expenditures that contributed temporarily to the prosperity in Rome that naturally followed the establishment of the Roman peace.

During his first 20 years Augustus spent lavishly. He had Cæsar’s fortune to draw on, and this was supplemented by the rich treasure confiscated in Egypt. As Suetonius puts it, “When he brought the royal treasures of Egypt to Rome, money became so abundant that the rate of interest fell and the value of real estate rose greatly.”

From another authority, Dio, we learn that interest rates fell from 12 percent to 4, and “the price of goods rose” — the familiar effects of easy money.

Taxes in Italy were low. Augustus wanted a land tax, but the influential opposition of real-estate owners caused him to abandon the plan. He was able, however, to impose a 1 percent tax on auction sales, a 4 percent tax on the sale of slaves, a 5 percent tax on the freeing of slaves, and a 5 percent inheritance tax on indirect legacies above 5 thousand dollars.

His expenditures are given in detail in the Ancyrean inscription. He paid 30 million dollars for land for his ex-service men. Repeatedly he made gifts of money to the poor, perhaps in the hope of tiding them over while they looked for jobs. In addition he instituted great public works, partly for work relief for the unemployed, partly because of his natural love of the magnificent. His public works repaired all the roads in Italy and the streets in Rome. He aided many cities by gifts of aqueducts, baths, temples, and public buildings. Work relief was taken so seriously that in the latter part of the 1st century the government refused to use a new invention to move large columns into Rome because it was feared the labor-saving device would throw men out of jobs.

In four years, Professor Frank estimates, 50 million dollars in new money flowed out to the public. All Italy shared in the prosperity. Extensive private as well as public building operations went on in the cities.

Doubtless many of the new fortunes of the period had their source in the increasing real-estate values and in the rapid expansion of cities due to easy credits, increased circulation, and the sense of security in property-holding that came with the re-establishment of peace.

All this is curiously like what happened in the boom years in America.

A further parallel is found in the money policy of Augustus, which recalls the Coolidge policy of keeping bank credits abundant and cheap. The government owned gold and silver mines. The product was available for coinage. During the first 20 years of the regime several mints were opened in Spain, a large one at Lyons in Gaul, and there was heavy coinage in the mint in Rome. Undoubtedly this policy contributed to the expansion of business and the boom.

One class of the population failed to share in the general prosperity. The Roman failure to make an adequate industrial development, and the presence in the city of a large number of slaves, left continuing unemployment. The condition of the unemployed and the unemployable was a pressing problem. They had to be taken care of if jobs could not be found on public works or in colonial settlements. Even during the civil wars it had proved necessary to continue the free grain distribution. Indeed, the relief rolls had climbed after Cæsar’s death from the 150,000 which he had set, to the old figures of 320,000.

Augustus once more introduced a means test and reduced the number to 200,000. Suetonius tells of a crisis when the government, in order to reduce the expense of relief, expelled foreign residents, except physicians and teachers. So wise a statesman could not avoid realizing the pauperizing effects of the system.

“He wrote,” says his biographer,

that he was inclined to abolish forever the public distribution of grain, for the people had come to rely upon it and had ceased to till the fields; but he had not proceeded further in the matter because he was sure that, from a desire to please the people, it would be revived at one time or another.

In other words, the situation had got out of hand. Many persons preferred relief to wages. Thereafter during the imperial prosperity the number on relief continued at about 200,000. Nearly 300 years later the dole was extended and made hereditary. Two pounds of bread were issued daily to all registered citizens who applied. In addition pork, olive oil, and salt were distributed free at regular intervals. When Constantinople was founded, right to relief was attached to the new houses in order to encourage building.

The Augustan boom, as was said earlier, was partly the result of a heavy spending program. This had been made possible primarily by the spoils collected in Egypt. But eventually the money ran out. In his later years Augustus spent far less on public buildings and popular entertainments than in his earlier ones. The wars just referred to had proved a heavy financial drain. Large sums of money went back to the provinces to pay for luxuries imported by the rich. With the exhaustion of mines the flow of gold and silver to the mints was checked. Coinage, according to Professor Frank’s estimate, fell to about 5 percent of its former rate. This was deflation with a vengeance. Interest rose and prices fell. The next emperor, Tiberius, by rigid economy succeeded eventually in balancing the budget without increasing taxes; in some cases he was able to reduce them. When his representative in Egypt turned in more money than was due from the regular imperial taxes, the emperor sent back word that he wished his sheep sheared but not shaved. A sternly conscientious man — in spite of scandalous stories circulated by his enemies — Tiberius risked unpopularity in the capital by cutting out the expensive public shows that his predecessor had thought necessary to keep the people in a good humor.

His thrifty attitude is indicated by an incident related by Tacitus. The aristocracy believed the old families ought to be subsidized, if necessary, in order to maintain a proper governing class. A spendthrift senator brought his four young sons to the Senate and delivered a public plea to the emperor to make them a grant of money. The senators were sympathetic; it wasn’t their money that was to be given away. Tiberius took a more responsible view. “If every poor man is to come to this chamber,” he replied, “and ask for money for his children, there will be no satisfying the claimants, and the public exchequer will be emptied.”

However, in view of the generous mood of the Senate he weakened and made each boy a grant of 10 thousand dollars. The affair gives a clue to the unpopularity of Tiberius in Rome as contrasted with the popularity which his efficient administration won him in the provinces. The ungraciousness of his words spoiled the effect of his generosity. Tacitus thought them an indication of the emperor’s “sour temper.” The tactful Augustus might have refused to make the gift, without arousing resentment. It used to be said of two American presidents that Benjamin Harrison could make an enemy by the way he said yes, while William McKinley could make a friend by the way he said no.

But this essential policy of prudent spending by Tiberius, continuing as it did the Augustan deflation, brought on hard times, which culminated in the panic of AD 33. We find the story in Tacitus. He says that Julius Cæsar’s laws on usury and land holdings had been disregarded for a long time. In the year 33, distressed debtors, perhaps stirred up by shysters, began to prosecute their creditors for usury. There were so many cases that the government allowed a period of 18 months in which offenders might adjust their affairs in accordance with the law. This precipitated a crisis because loans were called and land values collapsed.

To bolster the market the Cæsarian law was revived, and lenders were ordered to invest two thirds of their capital in Italian land. The effect of the edict was the direct opposite of what was intended. With a falling market, reinvestment in land was postponed for lower prices, and the collapse continued. Thereupon the government set up a Home Owners’ Loan Corporation, the modern HOLC. Perhaps its operations were more like those of the Reconstruction Finance Corporation, the RFC, for its loans probably were only to the larger operators. It was authorized to lend distressed landowners 5 million dollars from the treasury, without interest, for a period up to three years. This help stabilized the market and ended the crisis. It was not a complex industrial civilization. So the results of the panic were not so devastating and lasting as the result of the panic that ended the boom years in the United States.

Two more New Deal experiments come within this period. An Agricultural Adjustment Administration, the familiar AAA, was set up under Domitian, AD 91, and a Farm Credit Administration, the FCA, a few years later under Nerva and Trajan. Italian farmers, especially the big landowners, had found wine and oil more profitable than wheat. When vineyard cultivation was an infant industry the Italian farm bloc had been able to induce the government at various times to restrict the planting of vineyards in the provinces. Nevertheless provincial competition had continued. In the year 91 there was a bad wheat harvest and an overproduction of wine. To stimulate the production of wheat and at the same time to protect the vineyard interests, the Department of Agriculture provided an AAA. It decreed that no more vineyards be planted in Italy and that half the vineyards in the provinces be destroyed. America was following Roman precedent when it plowed up the cotton in 1933. Enforcement was spotted. It is the judgment of Professor Rostovtzeff that the Italian wine industry was helped “at least to a certain extent.” But the measures adopted “did not succeed in saving progressive agriculture in Italy in general.”

The failure may be inferred from the further action by the government under Nerva and Trajan at the beginning of the 2nd century. It sought to attract capital into farming and to help established farmers with cheap loans. Senators were compelled to invest at least one third of their capital in Italian land — the old panacea — and a Farm Credit Administration was set up. Under this FCA, farmers were allowed to borrow from the government on mortgage security at 5 percent, which was less than half the rural commercial rate.

Trajan had conquered Dacia, the modern Rumania. The country had productive mines and large accumulated treasure. Professor Frank estimates the loot that Trajan obtained at a 100 million dollars. Under the spell of the Dacian windfall the government proceeded in the grand manner. The money was not needed in Rome. So it was used to establish the greatest philanthropic fund in history up to the time of the Rockefeller Foundation.

The size of poor families had fallen off because children could not be supported. The repercussions were being felt in Italian industry, which needed a larger domestic market. The government was desperately anxious to encourage the growth of population. It provided that the interest of the FCA loans should go to town commissioners throughout Italy to be paid to poor families to help support their children. The records show what happened to this huge philanthropy. It gradually melted under the repeated devaluation of the denarius. The interest was sufficient to meet only the expenses of the administrative staff in the “bureau of roads and alimentation.”

This article is excerpted from The New Deal in Rome, chapter 10, “Boom and Depression” (1939; 2009).

All Rights Reserved ©
What is the Mises Institute?

The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard. 

Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.

Become a Member
Mises Institute