127 - Commanding The Economy

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Hello and welcome to the History of Rome, episode 127, Commanding the Economy. When Diocletian first came into office, the Roman economy was pretty much just limping along. In the critical agricultural sector, the combination of war, plague, and forced migration had left Rome with fewer people harvesting fewer crops from fewer functional farms. In the less critical but still important urban centers, the hardships of the past 50 years had essentially brought construction, trade, skilled craft, and banking to a standstill. But as with everything else, Diocletian was optimistic about the future. He had big fancy plans for the economy, and turning it into what he wanted to turn everything into, a rational, centrally controlled mechanism that, once organized properly, would begin producing wealth for everyone in quantities not seen in years. Yes, the problem of inflation would put a kink in his plans, but Diocletian was determined to see the Roman economy reinvented, and by the time he abdicated, economic activity in had taken on an almost wholly different character from what it had been before. Part of the change was the result of the natural evolutionary forces of civilization, but much of it was the result of the reforms Diocletian himself initiated.

Just to give you an idea of where we're going, I want to talk today about four things. The attempt to stabilize the currency, the reorganization of the tax structure, the calcification of professions, and finally, the Edict on Prices, which, though it achieved basically nothing, is a fascinating bit of history nonetheless.

So yeah, it has finally happened. Years of misguided imperial fiscal policy have finally ruined the currency of the Roman Empire. By the 280s AD, prices had begun to soar, wages had become inadequate, and savings were wiped out. It was bound to happen, as I mentioned before, the sheer volume of base metal coins flooding out into circulation would eventually cause major problems for the empire, and it was during the reign of Diocletian that those chickens finally came home to roost. Which was a particularly maddening state of affairs for the senior Augustus, because, in almost every other respect, the empire was recovering from its brush with death. But when it came to the money, not only was the wound not healing, it had only just begun to bleed, and no one knew how to stop it.

As with his predecessors, Diocletian understood that there was something inherently dangerous about making the coins of the empire literally less valuable. Of course, that hadn't stopped his predecessors from going ahead and debasing the coins anyway, but they all sort of grasped that they were playing with fire, which is why debasement went on in secret. Aurelian had finally arrested the free fall, and even turned back the tide a bit, and Diocletian hoped to follow his lead and bring the currency of the Roman empire back into respectability. To this end, he ordered that a new hierarchy of five coins begin circulation immediately, based on the old three-metal system. Two copper coins, and one silver-copper mixed coin for everyday transactions. One nearly pure silver coin, something which had not been seen in years, for larger purposes. And one high-grade gold coin, reserved for major payments, those usually coming from or going to the imperial government.

One of the side effects of debasement had been that cheap silver coins had pushed the more common copper coins, the dollars and cents used on a daily basis by the population, out of circulation, which threw the whole system completely out of whack. Diocletian hoped that his new hierarchy would return balance to the system, but, unfortunately, no dice. See, while there is no denying that the coins Diocletian issued during this period were of far better quality than what had been released over the course of the preceding generation, Diocletian was not practicing monetary policy in a vacuum. Had his new currency system been set up on a blank slate, it probably would have worked great. But the Roman Empire at the end of the third century was anything but a blank slate. There were just millions and millions of bad coins already out there, and given the shortage of precious metals and the exacting standards Diocletian was trying to reassert in the mints, his new coins were simply unable to make a big enough impact to really curb inflation.

Plus, the Romans didn't really understand the root of the problem, and so they missed what is today obvious to us. It is not necessarily the intrinsic value of the coin that is important to setting prices, it is rather the number of coins in circulation. Now the Romans weren't complete dummies. They understood the basics of scarcity and abundance. After all, they lived and died each year with crop failures and bumper harvests driving the prices of grain all over the map. But they never made the leap to understanding that the same laws affect currency. To the Romans, currency was a stable element. A coin was worth exactly what it was worth, whether there were five hundred in circulation or five million. And the thing is, for the most part, that had been true in their experience. The price of goods and the wages of workers and soldiers changed very little over the centuries, in sharp contrast to our own experience of that trip to the movie costing more with each passing year. So they just failed to grasp that the sheer tonnage of coins out in the marketplace was affecting the purchasing power of all those coins.

And here was Diocletian issuing even more coins. Older coins, yes, but still more. This is where the emperor and his advisors made their biggest mistake. They did not call back in nearly enough of the old coins. They cycled some out of circulation, but if he really wanted the currency put back on sound footing, Diocletian needed to put the recall of all the bad coins at the center of his policy, and he just did not do it. As a result, his new five coin system, while definitely introducing an element of stability, failed to do what the emperor wanted it to do. And unfortunately, he did not recognize that he had made this mistake. So when inflation continued, even after he launched his good coin policy, he looked elsewhere for the causes, and as we'll see, he wound up far afield, blaming people, places and things that had nothing at all to do with the real underlying issue.

As he waited patiently for the currency to revalue itself, and then watched helplessly as it did not, Diocletian still had an empire to pay for, and he understood instinctively that he couldn't afford to rely on the cash anymore. Taxes paid in cash were worthless, wages paid in cash were worthless. If Diocletian was going to keep the empire functioning, and just to be clear when I'm talking about the empire what I really mean is the army, for the time being taxes and wages were going to have to be assessed and paid by some standard other than money, something real and tangible, or at least something that seemed real and tangible. For this, Diocletian and his advisors concocted an elaborate and really ingenious new system to calculate imperial revenue and imperial expenses that cut out the middleman of cash, and was based instead directly on the goods and services that money was supposed to be able to purchase.

The origins of Diocletian's new system of taxation lay in the way the army had come to rely on forced requisition to supply itself during the latter part of the crisis years. When times had been good, and the money was sound, everything was done on the up and up, with the army purchasing goods and services from contractors more than willing to do business with the legions. When times got tougher, the goods and services were still purchased by the army, but from far less willing sellers, and commanders often invoked a proto-version of today's eminent domain laws, whereby in an emergency the sale of goods and services were compelable by law. When times got really tough, and the money had become a joke, commanders no longer even bothered with the farce of compulsive transactions, and simply took what they needed. This new means of supplying themselves naturally changed the way that officers and soldiers were paid, as money had simply stopped being a functional medium of exchange. Officers and soldiers were now paid in kind, that is, with the goods themselves, rather than the money to purchase the goods. Grain, shirts, meat, blankets, shoes, whatever was around that approximated what a man would have purchased had his money been worth anything. It used to be that all of these items would have been deducted from a soldier's pay by the quartermaster, now they were the pay.

This was the army that Diocletian had spent the majority of his career in, and though it is clear he was no fan of forced requisition because of the damage it did to the bonds of civil society, he understood that it was necessary. When he became emperor, then, his ideas about how to extract resources from his subjects and how to pass them along to his soldiers was informed by his experience with this ad hoc system of requisition and in-kind payment. But it shouldn't surprise you to learn that the thing that bugged Diocletian the most about the system was how random, arbitrary, and untidy it all was. So he set about to make the empire's new tax structure less all those things.

In order to run a proper army, there were certain things a general learned by heart. If he had a thousand men to feed, clothe, and shelter, he knew exactly how much timber he was going to need, how much wine he was going to need, how many horses he was going to need, and how many boots he was going to need. The army, in fact, had this practically down to a science. They knew down to the fraction of everything how much one soldier was going to add to their supply burden. Diocletian simply took this understanding and blew it up to an empire-wide level. Since the money was no longer any good, Diocletian just added up everything the imperial government required to outfit its army and bureaucracy for one year, which is the very first annual budget in the Western world, by the way, and then ordered his subjects to supply him with what he needed.

But of course, the regions of the empire did not produce goods and services on a uniform basis. One city may specialize in textile production, with nary a pig farmer in sight, while another may have abundant wheat fields, but no brickworks. So you couldn't just divide up the list and demand everyone pony up the same fractions of everything. What Diocletian needed was a way of reducing what a man legally owed in taxes to some standard unit of measurement and exchange, kind of like money, except we can't use money, because the money is no good. So the answer was a new theoretical unit of exchange. Basically what the emperor and his advisors did was take everything listed in the new annual budget and make a giant equivalency chart to track the relative value of all the items. So many bushels of wheat equals so many shirts equals so many miles of transportation provided equals so many chickens and so on. Then they reduced the total of everything down to manageable fractions, and used that as the basis for taxation.

So Farmer Gaius, who doesn't owe cash really anymore, also doesn't owe half a shoe and two-thirds of a shirt and a quarter of a blanket. Instead he owes five units of tax, payable in whatever good or service he can most easily provide, in this case probably bushels of wheat. Mule driver Publius, on the other hand, pays his five units of tax by transporting some swords the army needs from point A to point B. There is an inherent danger, of course, in that, well, what if everyone satisfies their allotment of tax by paying in pigs? But apparently it never came up, and the diversification of the empire's economy produced mostly of its own accord, the supplies Diocletian demanded.

The other question, then, was how do you assess how much a person is required to supply? For this, Diocletian turned to his newly enlarged bureaucracy. They fanned out across the empire and cataloged everything. They counted every man, woman, child, and slave. They counted how many chickens you had, and how many horses you had, and how many acres you owned, and what was being grown on them. They noted your profession, your skills, your physical strength, and they drew it all up on a ledger. Then they asked around to see if you were hiding anything. Once everything was cataloged, the empire was reduced to two basic units, manpower and land, which is how imperial agents determine what your share of the tax burden was going to be. Both units were calculated with some nuance, with women and children being counted for less in the manpower department, and rich land being valued differently from poor land, because Diocletian was actually sensitive to matters of fairness. As I said, one of the problems he had with forced requisition was that it was arbitrary and cruel. So Diocletian really was trying to put in place a system that would take a man's particular circumstances into account, rather than just laying some blanket levy on his head, whether his ten acres were prized vineyards or a rocky mountainside.

So this is how it worked then, and I'll just make some numbers up here. Let's say your city has 500 units of land and 200 units of manpower. Well, according to our calculations, you collectively owe 75 units of tax. You can pay with whatever you've got. Shirts, bricks, timber, pigs, just make sure we get it. Payable in three yearly installments to account for spoilage. Thank you and see you next year.

Diocletian's solution was an ingenious way to get around the inflation issue, and in no time, the empire was reaping tax harvests like the good old days. Well, more even than the good old days. Back in its various golden ages, Rome had actually been pretty loose about taxes. As long as enough was coming in, they never really questioned whether there was more to be had, or whether they could be exploiting their empire more efficiently. But after systematically cataloging every single thing in the empire, and then applying a uniform system of collection, Diocletian was able to extract resources from his subjects at a previously unimagined level. He didn't take everything, of course, that would have been counterproductive. Diocletian kept to Tiberius' old maxim that the sheep must be shorn and not skinned, but he now had a far more exact idea of how close he could get without skinning the sheep. Unfortunately, his successors would not be so exact, a problem that we will get to in future episodes.

But in his attempt to mobilize the resources of the empire as quickly and efficiently as possible, Diocletian did not stop with tax policy. He also inserted the imperial government directly into the economy in ways that had never been seen before. As I mentioned last week, Diocletian wanted the empire to function as one unified mechanism to maximize its power. But that did not mean just paying attention to the big stuff. It also meant ensuring that all the little screws and cogs and springs were where they needed to be, doing what they needed to do. In other words, the free market is about to become a lot less free.

The rigid tentacles of the state first worked their way into the economy by way of the trade guilds, and from there extended themselves until they touched every man, woman, and child in the empire. Diocletian was not insensible to the danger that his new tax system would fall apart if everyone paid in pigs, and he was well aware that the chaos of the previous decades had caused massive population upheavals and severe shifts in the economic output of whole swaths of the empire. In other words, if he wasn't careful, the diversified economy Diocletian needed to make his new tax system work would collapse down into a few subsistence industries, with everything else being abandoned as an unsustainable luxury. Worse yet, many of the jobs that needed doing were not at all happy fun jobs. What if young Publius, son of Publius the mule driver, decides that he doesn't want to follow in his father's footsteps? What if all the sons of all the mule drivers decide that? Pretty soon there will be no mule drivers left. It is entirely likely that had he not gotten into it everything would have worked out fine, but Diocletian was never one to not get into something.

As I just said, it started with the trade guilds. One of the first to be enveloped was the Guild of Shippers, who brought the grain from Africa to Italy. After doing business with the empire for centuries as an independent corporation, Diocletian simply took it over and declared the guild an arm of the government, and then took over wages and prices. Then it said that if you wanted to ship anything into Italy you had to join the government's guild. And oh yeah, once you've joined, you can't resign. He followed that same pattern with everyone, brickmakers, cobblers, architects, whoever. Wherever there was a voluntary association of professionals, Diocletian would come in, co-opt it, make it compulsory, and then make it hereditary. This process was amongst the most gradual of his career, but by the time Diocletian abdicated, most of the empire's citizens were attached to some sort of imperially mandated guild that compelled them to keep the job they had been doing, and it further compelled their sons to join the guild, and then their sons to join the guild after that. So if by some random chance you were a tanner in the late third century, that meant that your family was now, forever, tanners. Same for potters, and teachers, and fishermen. And of course, same for farmers.

On top of everything else, you weren't even allowed to move anymore without permission, even if you planned to keep the same job, because Diocletian didn't want industries to die off in a given city due to unplanned population migrations. If you think this sounds an awful lot like the beginnings of medieval serfdom, then gold star for you. We are, right now, transitioning away from the Roman empire of old, and into pre-feudal society. Diocletian was the author of a lot of what defines the next thousand years of history. He did it as a response to the particular economic necessities of his day, but once it all took root, it really took root.

One thing he did, that most definitely did not take root, is the last thing I want to talk about today. The infamous Edict on Maximum Prices, which represented Diocletian's last furious attempt to put a stop to inflationary prices. I don't want to spend too much time on it because, well, it was more or less abandoned an hour and a half after it was issued, but still, it is a fascinating little piece of history that deserves some attention, for no other reason than it lets us know that the Romans had three kinds of beer, Pannonian, Celtic, and Egyptian, and that the Egyptian kind was considered half as good as the other two because apparently Egyptian beer was the schlitz of the ancient world.

After sixteen years on the throne, inflation continued to ravage the empire and nothing Diocletian did seemed to even slow it down. Though his tax structure had been mostly taken off the gold, silver, copper standard, there was no getting away from currency completely and it drove Diocletian crazy that he could never ensure that wages kept up with prices, especially when it came to his soldiers. Paid to risk their lives in defense of the empire, Diocletian was outraged every time he heard of a soldier being forced to drop a whole year's pay on a single shirt. Price gouging and war profiteering was nothing new, but things had gotten ridiculous and Diocletian decided that the main culprits were the evil, no-good merchants who were taking advantage of the situation. They were thieving the life savings of good, honest, hard-working soldiers and it had to stop.

In 301, Diocletian had finally had enough and he issued in typical Diocletianic fashion an encyclopedic edict, divided into thirty-two sections, breaking down practically every single thing that could be bought and sold and then setting a maximum price for it. The emperor was careful to note that he was not setting the price, he was only setting the maximum price. If you wanted to charge less, that was your prerogative, just don't charge more. If you charged more, the edict was crystal clear in the consequences of your greed. Death. Of course, even with the death penalty hanging over their heads, no one paid any attention to the edict, no one had any motivation to turn anyone in for violating it, and everyone paid the going rate for everything, just as usually happens when draconian price controls are put into effect. But nonetheless, the edict was carved in stone and posted all over the empire, so we get to learn fascinating things about what an idealized version of Roman economic values looks like.

Per day farm laborers made 25 denarii a day, compared to the 50 earned by a stonemason or a cabinetmaker. There were seven kinds of wine, all listed at 30 denarii each, and one, listed as simply ordinary wine, which sold for just 16. Aged wine actually lowered the price, as each of the seven more expensive varieties dropped a 24 denarii once it was a year old. A lawyer could make a thousand denarii for pleading a case, and 250 just for filing the opening paperwork. Our old friend Publius the mule driver would have made with maintenance 25 denarii per day, or 4 denarii per mile, for one mule load of goods. Every kind of grain, seed, or bean you can think of gets its due price, as does every kind of shoe, boot, sandal, and shirt imaginable. Famously, the most expensive item listed is one pound of purple dyed silk, which a merchant was not allowed to charge more than 150,000 denarii for. And since the only person who was probably buying purple dyed silk by the pound was the emperor himself, I would wager to guess that it was maybe one of the few items that actually went for the price listed.

As I said, the edict was quietly abandoned just a few years after it was issued, and many historians believe that Maximian and Constantius never even got around to announcing it because they recognized what a terribly unenforceable idea it was. But for a while there, wherever Diocletian went, so went the price edict, until even he began to recognize that he was tilting at windmills. That was right around the time he decided to retire. Not that the two are in any way connected.

With that, I'll bring to a close our brief little tour through Diocletian's reforms. We've seen the deep impact he had on the military, the government, and the economy, and in many respects, he was as transformative a figure as Rome had ever known. The empire Diocletian inherited was not the same one he bequeathed to his successors. And perhaps even more importantly, the answer to the age-old question, are you better off now than you were four years ago, was almost everywhere a resounding yes. Which is to say that there is nothing at all that prevents us from comfortably placing Diocletian among the top five emperors of all time.

Next week, though, we'll start to get into why we can't put him at the very top of the pile, and some of the curious moves he made at the end of his reign that damned the stability of the empire, stability that he had worked so hard to establish, so that when he handed the reins of power off, his successors were more than able, and more than willing, to take Rome right back into the snake pit of civil war.