A GRAVE WARNING

A GRAVE WARNING

He’s wrong, at least in large part and as to ultimate effect.

The historian, at least. The reason the Roman state was the economic engine is the fact that the Roman state had in effect monopolized higher industries and technologies (used for architecture and building, military expansion and defense, manufacturing, mining, road building, ship building, etc.) and those capable of employing them.

The Roman economy was, in fact, far more reminiscent of the Nazi economy (a state-centered command and demand economy) and had been since the late Augustan age, than ours.

Having stripped away this human talent from elsewhere, and what the ancient world had as an equivalent of private enterprise (just as the Ptolemies did in Alexandria with all the scientists and inventors and philosophers and information specialists) was a Roman state that basically consumed all of the best pragmatic and technological specialists; engineers, administrators, military personnel, inventors, etc.

Once the state began to collapse there was, in effect, no private industry, markets, enterprises, or places to escape to. And trust me, if history is any guide at all then all states will eventually collapse. Entirely, or so thoroughly that it really doesn’t matter if it does survive in some crippled and hamstrung remnant.

He’s right about the fact that the state was the engine of growth, but wrong about that being any kind of real advantage. It assured that once the state had monopolized skills and industries and specializations and knowledge that any kind of state collapse would be utterly disastrous for the wider Roman world.

Once the state fell apart there was little to no private (or higher non-state) infrastructure left with which to rebuild it. The grand effect of relentless centralization is that once the center collapses so too must the frontiers.

This should be a definite warning to us. Binding American civilization wholly or too closely to the government of the United States is the mindset of a propagandized and state-educated fool.

Sure, we are still far from the state being the true engine of enterprise or the monopoly of most human talent in America (if anything the state is the very antithesis of most higher human talent and enterprise, or at least the counter to the same), but a great many ignorant and ill-educated people wish that were indeed the case.

A grave warning for us.

If you wish to bury America then make the state the center of anything and everything truly important.

That kind of ridiculous and simple-minded state-centered bullshit has been going on since Athens and Sparta and even far longer (the Assyrians, the Akkadians, the Hittites, and so on and so forth) and it rarely ends well.

Oh, it might go on a while, true enough, as long as your neighbors have nothing better to offer or are no stronger than you.

But once they do, or once they are, and your state collapses, so does your entire civilization.

Tying your civilization and its achievements and abilities too closely to your state is the most moronic of all human enterprises.

Don’t do it. It assures not only a steep and rapid decline of your nation, but an ultimate and thorough collapse of your entire civilization.

 

 

Why did the Roman Economy Decline?

I want to reflect on one leading account for the economic decline of Europe following the collapse of the Western Roman Empire. I recently encountered an explanation of this decline that strikes me as deeply problematic.

This argument is worth paying attention to as it is advanced by Peter Brownof Princeton University, who is among my favorite historians of late antiquity, and the author of influential, insightful, and often beautifully written reflections on religion and society in the late antique world. As a writer, he has the ability to make the ancient world come alive in original and unexpected ways. I particularly admire his biography of Saint Augustineand recent work on wealth in early Christianity. Nevertheless, in recent work he has been advancing a particular explanation of the decline of the Roman empire which strikes me as incompatible with both basic economics and what we know about other comparable preindustrial societies.

I’ll focus on the summary of the argument that he presents in The Rise of Western Christendom (I’ve been reading the 2013 Tenth Anniversary Revised Edition). His presentation draws heavily on Christopher Wickham’s Framing the Middle Ages . But I focus on Brown’s version here.


It should be clear that I am writing this as an economist and not as an ancient historian. But the problem with Brown’s account does not lie with his treatment of evidence or mastery of the source material but in his use and misuse of economic concepts.


The Roman State as the Engine of Growth?

In the Rise of Western Christendom, Brown summarizes the new wisdom on the transition from late antiquity to the early middle ages. He accepts that this transition brought about an economic decline — a decline evident in the radical simplification in economic life that took place. Long distance trade contracted. Cities shrank and emptied out. The division of labor became less complex. Many professions common in the Roman world disappeared.

All of this is relatively uncontroversial. At issue is what caused this decline? Traditional accounts emphasized the destruction brought about by barbarian invasions and civil wars as the frontiers of the Western Empire collapsed. These accounts emphasized a collapse in trade and increased economic insecurity. Brown, however, argues that the bulk of modern research rejects this old fashioned view. Instead, according to Brown:

The fault lay with the weakening of the late Roman state. The state had been built up to an unparalleled level in order to survive the crisis of the third century. The “downsizing” of this state, in the course of of the fifth century, destroyed the “command economy” on which the provinces had become dependent (Brown 2013, 12).

The barbarian invasions, of course, play a role in this story because they put pressure on the Roman state. But their role is peripheral. Rather, Brown contends that the Roman state was the engine of economic growth of late antiquity. Turning on its head the old view associated with Michael Rostovtzeff that attributed the decline of the Roman economy to high taxes imposed by the Emperor Diocletian and his successors, Brown argues that these high taxes were in fact the source of economic dynamism:

High taxation did not ruin the populations of the empire. Rather, high tax demands primed the pump for a century of hectic economic growth. Fiscal pressure forced open the closed economies of the countryside. The peasantry had to increase production so as to earn the money with which to pay taxes” (Brown, 2013, xxv)

He unabashedly presents the state as key to the late Roman economy:

With its insistent gathering of wealth and goods through taxes and their distribution for the maintenance of large armies, of privileged cities, of imperial palaces, and of an entire ruling class implicated in the imperial system, the late Roman state was the crude but vigorous pump which had entered the circulation of goods in an otherwise primitive economy. When this pump was removed (as in Britain) or had lost the will to tax (as in Merovingian Gaul and in the other “barbarian” kingdoms) the Roman-style economy collapsed (Brown 2013, 13).

This, I should add, is not presented by Brown as a tentative hypothesis or conjecture, but introduced as the current historical consensus. Brown is damning of historians who deviate from it, and particularly contemptuous of those inane enough to blame the decline on invading hordes of Germanic barbarians.


Let us grant that Brown is correct to present this argument as the current consensus among historians of late antiquity. The problem with it is that it is at odds with what standard economics and with what economic historians know about other preindustrial societies. To see why it is so flawed, I’ve done my best to reconstruct the argument.

  1. The first premise of Brown’s argument is that the Roman state was a sufficiently large player in Roman economy, in terms of the taxes it collected, and the money it spent on wages and armaments, that a reduction in state expenditure would have had a major impact on the rest of the Roman economy. And that any reduction in state spending would not have been compensated for by an increase in private spending.
  2. The second critical premise in Brown’s argument is that, in the absence of the demands of the tax collector, peasants would not have participated in the market economy. When “the great engine of enrichment stalled and, eventually stopped,” Brown writes: “No longer disciplined by the tax collector, the peasantry slacked off. They returned to subsistence farming”. It is crucial for Brown’s thesis that, without the pressures of the state, peasants would have produced only for subsistence.
  3. The third premise is that urban economy of the Roman empire served solely or predominantly to satisfy demands of Roman elites whose incomes were crucially dependent on the state. So when these state incomes declined so did Roman cities.

From these three premises, it follows that when the ability of the Roman state to collect taxes and spend tax revenues became severely damaged in the fifth century, the Roman economy went into fairly rapid decline. No longer forced to pay taxes in cash, peasants ceased producing goods for market. No longer emporia for the disbursement of state largesse, the cities of the western Empire went into decline. As the Roman fiscal state declined:

incomes dwindled, the rich no long reached out, as they had done in the glory days of the fourth century, to buy fine pottery, statuary, high-quality wines and exotic foods. They made do with the products of their region.

This, then, is Brown’s explanation for the decline of the Roman economy. It turns out that when examined one by one each one of these premises is either on shaky grounds factually, economically, or requires us to make implausible assumptions.


I think the first premise rests on a misunderstanding of textbook Keynesianism. Simply put, conventional Keynesian theory suggests that in a recession when resources are unemployed, an increase in government spending can in the short-run increase aggregate demand (either directly or via inflationary expectations). The details of this simple proposition have been endlessly critiqued and debated. But we will skip over this. What is important to note is that for standard textbook Keynesianism, this is a short-run effect. In the textbook models aggregate demand should eventually recover (via the real-balance effect). Government spending has the ability to speed up the recovery.

None of this suggests that in the long-run government spending is required to “prime the pump”. Indeed this language suggests a misunderstanding. For conventional Keynesians, the multiplier on government spending boosts short-run aggregate demand, but aggregate demand is not the binding constraint on long-run growth, supply is; growth depends on the productive capacity of the economy.

If anything, the impact of the Roman tax state on the productive capacity of the economy was more likely to be negative rather than positive. Resources were diverted from the private hands of peasants, merchants and small landowners and diverted into the hands of soldiers and officeholders.

For Brown’s thesis to hold, therefore, the Roman economy must have been in danger of continuous secular stagnation. Brown’s second premise alludes to one such source of stagnation. If peasants refused to participate in the monied economy this could indeed be a source of involution. That is, if peasant incomes went up and they spent none of this on urban-based manufactured goods but consumed the entirety of their higher incomes in the form of greater leisure. That is, Brown’s argument requires that at the margin, peasants preferred additional leisure to the wide array of affordable manufactured consumers goods that were on offer in markets and shops across the Roman empire. This is not impossible. But it is at odds with what we know about peasant behavior in other commercial societies such as early modern Europe. If we relax this highly implausible assumption, then the argument that the urban economy required the fiscal-military state, falls apart.

A similar knife-edge assumption is required for his third premise. Research on the earlier Roman empire suggests that the large cities of the empire were not merely “consumer cities” parasitical on the countryside but centers of urban production and manufacturing (see). Brown’s argument requires us to believe that if, for instance, the Roman state stopped spending on armor and weapons in a city, then the blacksmith and armor manufacturer would go out of business. This is a classic case of focusing on the seen and missing the unseen. It neglects the fact that lower taxes would give individuals more disposable income and they would likely spend some of this income to purchase amphora, pottery, textiles or other urban goods that we know the Roman economy was capable of producing. The blacksmith might switch to producing pots and pans rather than swords but he would not then go out of business.


If Brown’s account is implausible, what does account for the decline? The best account I am aware of is Bryan Ward-Perkin’s The Fall of the Roman Empire and the End of Civilization which Brown dismisses as “tendentious and ill-supported polemics”.

The collapse of the Roman state was catastrophic, not because the Roman state was an engine of economic growth, as Brown contends, but because it provided, albeit imperfectly, the public good of defense. In the absence of this, transactions costs greatly increased, long-distance trade declined, markets contracted, and urbanization declined.


Addendum: The Size of the Late Roman state.

Here I explore a related aspect of Brown’s account that appears problematic: his claims about the size of the late Roman state.

Brown claims that the post-Diocletian Roman state was a “command economy” capable of mobilizing tremendous resources and driving the Roman economy. I am skeptical of such a description being an accurate description of a premodern state. Prior to the railway and telegraph, there were severe limits to ability of states to direct economic activity. To get a feel for things I tried a back of the envelope calculation of the size of late Roman fiscal military state.

The main component of the Roman state was the army. The army grew considerably after Diocletian’s reforms. The exact size of the new army is subject to considerable controversy. John Lydos estimated the Roman army to comprise 389,704 men and a navy of 45,562. The largest estimates are based on Agathias and date from the mid-sixth century. These suggest that the total size of army and navy was around 645,000 (580,000 in the army and around 65,000 in the navy). Historians tend to think these number are too high but we will accept them for the purpose of the argument (Agathias is critiquing the government of his day by showing that the army had declined greatly from the days of Diocletian).

Unfortunately estimates of the Roman population are extremely rough and we don’t have any good numbers of the 3rd century. The population of the Roman empire c. 160 is estimated to have been between 60–70 million. The population in 300 was likely lower than this, though it is unlikely that it was substantially smaller, as recent research suggests that the economic vitality of the empire did not collapse as rapidly in the 3rd century as was once thought.

If we take the largest estimate of the size of the Roman army and take a pessimistic view of Roman population in 300 estimating it to be 50 million (noting that is a pure guesstimate and not based on any definite evidence), we obtain an estimate that the Roman army made up 1.3% of the population. If we employ John Lydos’s numbers we obtain an estimate of 0.87% of the population.

These numbers do not suggest that the Roman army was especially large or burdensome in comparison to other advanced preindustrial societies. In the late seventeenth century, the armies of Louis XIV represented as much as 2% of the French population of 20 million. The Dutch Republic in the 1750s also employed 2% of its population in its armed forces (45,000 out of a population of 2.25 million). The Prussian state employed around 3.5% of its population in the army in the mid-eighteenth centuries. Even Britain employed around 1.2% of its population in its army as perhaps as much as 3.8% of its population in the navy at the height of the Napoleonic wars (approximately 400,000 out of a population of 10.5 million).

What about the size of the Roman bureaucracy? It is accepted that the bureaucracy of the principate was tiny (perhaps 10,000 individuals, many of them freemen and slaves of the imperial household). The late Roman bureaucracy was substantially larger. But even if the bureaucracy after Diocletian was ten or fifteen times larger than that of the Augustinian empire, it would not meaningfully change our comparisons. At most around 1.6 % of the population would have been state employees (either soldiers or bureaucrats).

These numbers are not trivial. They certainly attest to the tax-raising powers of the Roman state. The successor states would not be able to maintain professional armies or bureaucrats at all. Nevertheless, it seems implausible to describe a state that employed less than 2% of the population as a “command economy”.

Advertisements

WHEN GOVERNMENTS DIRECT from POLITICAL CAUSE

WHEN GOVERNMENTS DIRECT THE MARKETS

When governments direct markets the very best that they can possibly hope to achieve is misdirection.

 

Germany’s Energy Poverty: How Electricity Became a Luxury Good

By SPIEGEL Staff

Photo Gallery: The Costs of Green EnergyPhotos
DPA

Germany’s agressive and reckless expansion of wind and solar power has come with a hefty pricetag for consumers, and the costs often fall disproportionately on the poor. Government advisors are calling for a completely new start.

If you want to do something big, you have to start small. That’s something German Environment Minister Peter Altmaier knows all too well. The politician, a member of the center-right Christian Democratic Union (CDU), has put together a manual of practical tips on how everyone can make small, everyday contributions to the shift away from nuclear power and toward green energy. The so-called Energiewende, or energy revolution, is Chancellor Angela Merkel’s project of the century.

“Join in and start today,” Altmaier writes in the introduction. He then turns to such everyday activities as baking and cooking. “Avoid preheating and utilize residual heat,” Altmaier advises. TV viewers can also save a lot of electricity, albeit at the expense of picture quality. “For instance, you can reduce brightness and contrast,” his booklet suggests.Altmaier and others are on a mission to help people save money on their electricity bills, because they’re about to receive some bad news. The government predicts that the renewable energy surcharge added to every consumer’s electricity bill will increase from 5.3 cents today to between 6.2 and 6.5 cents per kilowatt hour — a 20-percent price hike.

German consumers already pay the highest electricity prices in Europe. But because the government is failing to get the costs of its new energypolicy under control, rising prices are already on the horizon. Electricity is becoming a luxury good in Germany, and one of the country’s most important future-oriented projects is acutely at risk.

After the Fukushima nuclear accident in Japan two and a half years ago, Merkel quickly decided to begin phasing out nuclear power and lead the country into the age of wind and solar. But now many Germans are realizing the coalition government of Merkel’s CDU and the pro-business Free Democrats (FDP) is unable to cope with this shift. Of course, this doesn’t mean that the public has any more confidence in a potential alliance of the center-left Social Democrats (SPD) and the Greens. The political world is wedged between the green-energy lobby, masquerading as saviors of the world, and the established electric utilities, with their dire warnings of chaotic supply problems and job losses.

Even well-informed citizens can no longer keep track of all the additional costs being imposed on them. According to government sources, the surcharge to finance the power grids will increase by 0.2 to 0.4 cents per kilowatt hour next year. On top of that, consumers pay a host of taxes, surcharges and fees that would make any consumer’s head spin.

Former Environment Minister Jürgen Tritten of the Green Party once claimed that switching Germany to renewable energy wasn’t going to cost citizens more than one scoop of ice cream. Today his successor Altmaier admits consumers are paying enough to “eat everything on the ice cream menu.”

Paying Big for Nothing

For society as a whole, the costs have reached levels comparable only to the euro-zone bailouts. This year, German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants — electricity with a market price of just over €3 billion. Even the figure of €20 billion is disputable if you include all the unintended costs and collateral damage associated with the project. Solar panels and wind turbines at times generate huge amounts of electricity, and sometimes none at all. Depending on the weather and the time of day, the country can face absurd states of energy surplus or deficit.

If there is too much power coming from the grid, wind turbines have to be shut down. Nevertheless, consumers are still paying for the “phantom electricity” the turbines are theoretically generating. Occasionally, Germany has to pay fees to dump already subsidized green energy, creating what experts refer to as “negative electricity prices.”

On the other hand, when the wind suddenly stops blowing, and in particular during the cold season, supply becomes scarce. That’s when heavy oil and coal power plants have to be fired up to close the gap, which is why Germany’s energy producers in 2012 actually released more climate-damaging carbon dioxide into the atmosphere than in 2011.

If there is still an electricity shortfall, energy-hungry plants like the ArcelorMittal steel mill in Hamburg are sometimes asked to shut down production to protect the grid. Of course, ordinary electricity customers are then expected to pay for the compensation these businesses are entitled to for lost profits.

The government has high hopes for the expansion of offshore wind farms. But the construction sites are in a state of chaos: Wind turbines off the North Sea island of Borkum are currently rotating without being connected to the grid. The connection cable will probably not be finished until next year. In the meantime, the turbines are being run with diesel fuel to prevent them from rusting.

In the current election campaign, the parties are blaming each other for the disaster. Meanwhile, the federal government would prefer to avoid discussing its energy policies entirely. “It exposes us to criticism,” says a government spokesman. “There are undeniably major problems,” admits a cabinet member.

But this week, the issue is forcing its way onto the agenda. On Thursday, a government-sanctioned commission plans to submit a special report called “Competition in Times of the Energy Transition.” The report is sharply critical, arguing that Germany’s current system actually rewards the most inefficient plants, doesn’t contribute to protecting the climate, jeopardizes the energy supply and puts the poor at a disadvantage.

The experts propose changing the system to resemble a model long successful in Sweden. If implemented, it would eliminate the more than 4,000 different subsidies currently in place. Instead of bureaucrats setting green energy prices, they would be allowed to develop indepedently on a separate market. The report’s authors believe the Swedish model would lead to faster and cheaper implementation of renewable energy, and that the system would also become what it is not today: socially just.

Trouble Paying the Bills

When Stefan Becker of the Berlin office of the Catholic charity Caritas makes a house call, he likes to bring along a few energy-saving bulbs. Many residents still use old light bulbs, which consume a lot of electricity but are cheaper than newer bulbs. “People here have to decide between spending money on an expensive energy-saving bulb or a hot meal,” says Becker. In other words, saving energy is well and good — but only if people can afford it.

A family Becker recently visited is a case in point. They live in a dark, ground-floor apartment in Berlin’s Neukölln neighborhood. On a sunny summer day, the two children inside had to keep the lights on — which drives up the electricity bill, even if the family is using energy-saving bulbs.

Becker wants to prevent his clients from having their electricity shut off for not paying their bill. After sending out a few warning notices, the power company typically sends someone to the apartment to shut off the power — leaving the customers with no functioning refrigerator, stove or bathroom fan. Unless they happen to have a camping stove, they can’t even boil water for a cup of tea. It’s like living in the Stone Age.

Once the power has been shut off, it’s difficult to have it switched on again. Customers have to negotiate a payment plan, and are also charged a reconnection fee of up to €100. “When people get their late payment notices in the spring, our phones start ringing,” says Becker.

In the near future, an average three-person household will spend about €90 a month for electricity. That’s about twice as much as in 2000.Two-thirds of the price increase is due to new government fees, surcharges and taxes. But despite those price hikes, government pensions and social welfare payments have not been adjusted. As a result, every new fee becomes a threat to low-income consumers.