Wednesday, July 27, 2011

The United States and the Lessons of Rome - Part 3



If one thing is for certain, it is that ancient Rome’s fall was contingent primarily on the weakness and subsequent failure of its economy. If it had had a vibrant economy, they would have been able to better fund and raise armies to defend against encroaching barbarians. Rome would have been better able to provide incentives to join the military as well as fund infrastructure projects that would have made the frontiers more secure. But sadly, this was not to be, and Rome faced its doom with empty pockets unable to cope with the problems facing it. It was only through expansion and through the occasional moderation of benevolent emperors that it lasted as long as it did.

One of the primary causes of economic failure was Rome’s emphasis on the supremacy of the upper class and the special interests that came with them. Rome’s was a system so stratified that, throughout its history, it was often difficult to point to a group of people who classified as “middle class”. If you wanted to run for office at any level, you had to have a great amount of wealth, preferably backed by a powerful and influential family name. It was a system built upon favoritism and  the “good-old-boy” network. Consequently, Rome’s politics became essentially designed to provide favors and benefits to special interests that supported the rich as well as those who made such policies. Taxation of the rich? Not bloody likely. Improving the lot of the blue-collar workers so that they may obtain better living conditions and thus better serve the economy? Haha... no. Support an overwhelming dependence on slaves that took away jobs from actual citizens? Absolutely!
When funds were needed, both for maintaining the frontiers and for domestic requirements, Rome also made the dubious decision to tax the crap out of all their provinces. Over time, this taxation (along with extortion of the populace by the surprisingly typical greedy governor) ravaged the ability of the empire to grow and innovate. In addition, the currency was made increasingly useless (through inflation) by the minting of new cash for one short-term fix after another. All of these factors combined to strain and eventually reduce Rome’s economy from a relatively free market economy to an economy where it was financially painful to do anything, leading merchants and investors to try elsewhere, and directly contributing to Rome’s eventual demise.
United States

Many of Rome’s economic causes of decline have little relation or relevance to the modern economy of the United States. For example, slaves aren’t stealing anyone’s job because slavery no longer exists in America. Our economy is not based upon or even supported by plunder; despite our involvement in oil-rich Middle Eastern nations such as Iraq, we only get around 2.23% of our total foreign oil imports from that nation. We have a recognizable middle-class and, unless you are completely cynical, it is clear that policies are being passed all the time that have the aim of supporting and making better the lives of “the average Joe”. Our rich, while they may appear privileged, are taxed and susceptible to further taxation where the Roman upper class wasn’t. And we aren’t vulnerable to the occasional crazy, stupid, or corrupt emperor messing everything up due to our system of checks and balances.
From this comparison it is clear to see that our economy is in an astronomically better place than ancient Rome’s was, even at its zenith. But we may derive lessons from Rome’s decline. It is abundantly clear that a free and vibrant economy is of paramount importance. Focusing more and more on taxes negatively impacted Rome’s ability to innovate and grow; we should make sure we don’t tax to an extreme. Minting one’s currency also shouldn’t be used as an escape route, though thankfully that idea seems taboo enough among economists that it isn’t likely the United States would try to inflate its own dollar into oblivion like Rome did with its denarii. Altogether, it is clear that the United States, if it is declining at all, is not following Rome’s example on an economic basis.

1 comment:

  1. Not so fast

    "politics designed to provide favors and benefits to special interests that supported the [corporations]" check

    "minting of new cash for one short-term fix after another" check

    Our economy is based upon cheap oil.

    "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation." Chairman of the Fed