MONETARY EXPANSION & REPUBLICAN MILITARISM - ROME, 200BC
by Paul Tustain
Editor, www.galmarley.com
January 26, 2004

The Roman Republic was the intelligent beneficiary of monetary accidents which befell so many of its forebears. Unquestionably the Romans learnt from the experience of others.

Their money was entirely representative. It was copper and issued with a face value of about 3 times its commodity value. It was carefully made using the innovation of striking, rather than casting, and the dies used were of the highest quality and artistic complexity. They were extremely difficult to forge and the penalties were heavy.

Furthermore the monopoly on coin fabrication was jealously guarded by the state, and the extent to which coins remained overvalued was supported by disciplined fiscal government. The Romans were probably the first to obey their own monetary laws limiting the supply of coins.

As a result for 178 years there is no evidence of demonetisation. On the contrary. As the population and economy increased, the money - limited in supply - increased in value too.

The Romans had come to understand the danger of monetary over-issuance. An example of nearly contemporary Roman writing on the subject shows an analysis which Milton Freidman (a famous 20th century monetarist) would have been hard pressed to better.

"The origin of buying and selling began with exchange. Anciently money was unknown, and there existed no terms by which merchandise could be precisely valued, but every one, according to the wants of the time and circumstances, exchanged things useless to him, against things which were useful; for it commonly happens that one is in need of what another has in excess. But, as it seldom coincided in time that what one possessed the other wanted, or conversely, a device was chosen, whose legal and permanent value remedied, by its homogeneity, the difficulties of barter. This device - being officially promulgated - circulated and maintained its purchasing power not so much from its substance, as from its quantity." Julius Paulus

Unfortunately the result of strict Roman monetary discipline was a perennial shortage of capital, and a tendency not to put what there was into economically productive use. By law the patrician class was prevented from investing in straightforward commercial enterprises, and instead they were involved in primarily civil projects, which contributed to the grandeur of Rome. As a result the economy lagged the political and civic development of the republic, and there were hostilities which broke out periodically between the patrician and plebeian classes. The Romans discovered a social side to monetary policy, namely that the inequitable wealth distribution which arises when money supply is too tight tends to produce social unrest.

But in the end it was not social unrest which undermined the monetary system of the Roman Republic: it was Hannibal. In the legendary campaign in which he traveled, with his elephants, from Carthage in North Africa, through silver rich Spain and across the Alps, he threatened Rome from the north.

Hannibal took control of the Roman copper mines in what is now Tuscany in northern Italy, and overran many cities where the Roman currency circulated. It became valueless under him. Ahead of his advancing army swathes of the peasant population retreated to Rome itself, where the Romans were forced to issue underweight and overvalued coinage, even more so to finance the massive military effort which was required to repulse the enemy. Even though Hannibal never did take Rome, the threat of the implosion of the Roman state irrevocably undermined the money.

What came out afterwards was a very different Rome. It was necessarily more militarist, and expansionist (which it had to be to sustain its militarism) and within 100 years its republican politics had subsided into what was effectively dictatorship.

Nevertheless the republic's original money system lasted "for nearly two centuries, during which all that was admirable of Roman civilisation saw its origin, its growth and its maturity. When the system fell Rome had lost its liberties. The state was to grow yet more powerful and dreaded, but that state and its people were no longer one." Alexander Del Mar � 1886.

© 2004 Paul Tustain
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Paul Tustain
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