Oct. 12, 2009

Roman Empire's economic recovery has lessons for today, Cornell professor tells alumni

Our economic climate may seem grim, but our situation is far better than that of Rome in the third century, said Kim Bowes, Cornell assistant professor of classical archaeology, to a packed room of alumni at the Weill Greenberg Center in New York City Oct. 8.

"Almost everything that has happened [in the United States] over the last year has happened in some deviation before in the period that I study," she said, which "is essentially the equivalent of 2008 for the Roman Empire." That period, when the empire's economy collapsed, is also known as the later Roman Empire or late antiquity.

Bowes' lecture, "An Important Lesson in Finance: Bailing Out the Roman Empire," was the highlight of an evening coordinated by Cornell Wall Street and Cornell on the Road. Thanks to big government, high taxes, a "sophisticated use of corruption" and monetarism, two Roman emperors instituted the world's greatest bailout package and saved the Roman empire, which flourished in the fourth century, Bowes said.

The collapse was triggered in 260 AD when Roman Emperor Valerian lost a war to Persia, and political instability in Rome followed. Inflation rose to 700 percent. Archaeologists haven't been able to unearth many objects in the countryside of this largely agrarian society from this time period because the people were so poor, Bowes said.

"This was an age of extraordinary economic collapse," she said.

Diocletian, whom Bowes called "the best Roman emperor ever," halted the empire's decline when he came into power at the end of the third century, she said. He split the territory into two parts, and then further subdivided the parts into managerial districts, increasing government personnel eight times, a modern forerunner to big government.

"The idea that you have people on the ground for the government to run efficiently is Diocletian's idea," Bowes said.

As the states grew, so did tax collection, which became an industry itself. Tax collecting was highly desirable as those involved skimmed off the top. People were encouraged to pay their taxes, because they hoped to be employed by the tax officials one day, according to Bowes.

As the government and the tax collectors became richer, so did the entire population, said Bowes, who was part of the Roman Peasant Project in Cinigiano, Tuscany, in collaboration with the Universita di Siena, which revealed that in the fourth century, the rural poor had far more consumer goods than in previous centuries.

"Somehow, even in a landscape not important to the empire, the money [was] trickling down," Bowes said.

She said her pick for the No. 2 Roman leader of all time is Diocletian's successor, Constantine: "He introduced the first gold standard," Bowes said. Previously, the values of the silver and gold coins in circulation played off each other, resulting in constant confusion over the worth of money.

"People had faith in money again," Bowes said, which led to the creation of the commodities market. "People [could] now produce agricultural surpluses whose value could be determined and be traded off of," she said. The end result was that "the fourth century was rich, rich, rich," Bowes said.

Liz Borod Wright '99 is a freelance writer in New York City.