When Friedrich A. Hayek penned The Road to Serfdom in 1944, he dedicated the book to "socialists of all parties" ( 2007). Indeed, the early twentieth century witnessed the rise of communism, corporatism, and British-styled Fabian socialism. Following the Great Depression, socialists of all parties envisioned government controls and massive entitlements as the wave of the future. The various socialists believed that their visions would bring greater economic growth and stability. But Hayek and a comparatively few other economists thought otherwise. The Road to Serfdom purported that economic liberty was the essential ingredient for both political liberty and economic growth. Today, we are quite familiar with Hayek's reasoning, but it was not apparent to the socialists of that day.
Powerful arguments are based on metaphors: Adam Smith's invisible hand and John Rawls's veil of ignorance are two very successful examples. Hayek's critique of runaway entitlements and command-style socialism needed an appropriate metaphor. He found it in an episode in European history that most of the intellectuals had studied. History was then an essential component of intellectual study--even Karl Marx had a PhD in ancient philosophy. Hayek's metaphor contended that the socialist vision was not only incorrect, but that the socialist road was tried a couple of millennia ago and it did not bring peace and prosperity. Instead, it collapsed into insular communities with lords ruling over hapless serfs.
The classical scholars were very familiar with Roman history. Edward Gibbon's 1776 masterpiece The History of the Decline and Fall of the Roman Empire (considered the foundation of modern historical studies) described how politics and economics drove the cycles of history. Following extensive military conquests, Rome's first emperor established institutions that promoted a long-lasting peace. Hayek recognized the ancient Roman roots of our legal system. He credited the Roman stoic Cicero as the primary source of natural law and modern liberalism. Stoicism embraced the brotherhood of men and the injustice of slavery. First century Roman jurisprudence began to distinguish the rule of law from the rule of men, stating that the law's generality restricts the discretionary authority of judges and politicians. Hayek ([I960] 1978, p. 167) writes that this era "was also a period of complete economic freedom to which Rome largely owed its prosperity and power. From the second century A.D., however, state socialism advanced rapidly. In this development the freedom which equality before the law created was progressively destroyed as demands of another kind of equality arose. During the later empire the strict law was weakened as, in the interest of a new policy, the state increased its control over economic life." Thus, the Roman economic regression was the original road to serfdom. According to Hayek, the concept of the rule of law was lost for over a thousand years.
Economics has advanced considerably since Hayek wrote Serfdom. Specifically, economics has embraced new fields: public choice, law and economics, and the new institutional economics. Douglass North (2007) has developed themes on the roles of institutions and path dependence in the course of economic development. North has stressed the importance of a legal framework in reducing transaction costs and expanding value-creating trades. Bruce Frier and Dennis Kehoe (2007) develop this theme for the ancient economies. In the pages that follow, these new tools of economics plus the works of historians will allow us to revisit the rise of the Roman economy to its height during the Golden Age followed by its decline along the original road to serfdom.
The Roman Golden Age (aka Pax Romana) (circa 27 BCE to AD 180)
"If a man were called to fix the period in the history of the world during which the condition of the human race was most happy and prosperous, he would without hesitation, name that which elapsed from 27 BCE--AD 180."
--Edward Gibbon, 1776
Throughout the first century BCE, Roman political generals fought each other in a series of costly civil wars. The last of these struggles pitted Octavian, the nephew of Julius Caesar, against Antony and Cleopatra. Octavian and his generals ended the final struggle by defeating Antony at the Battle of Actium in 31 BCE. Octavian took the name and title of Caesar Augustus in 27 BCE.
Augustus ended the Roman Republic; no longer would political leaders stand for election. Under his new regime, the emperor ruled through the Senate. In theory and only at first, the Roman Senate would retain the power of the purse over the public treasury, while the emperor retained sole discretion over the imperial properties. The imperial properties included the extensive personal holdings of Augustus by virtue of his inheritance from Julius Caesar and his own military victories. The richest plum of the emperor's personal possessions was the new province of Egypt. Cicero had once estimated the public revenues of this province to exceed those of the rest of the then Roman Republic. Augustus also commanded the Roman armies, leaving the Senate much weaker compared to the emperor (Webber and Wildavsky 1986, p. 124).
Augustus reigned for forty years and established informal institutions guiding Roman governance that lasted for over a century. Augustus wanted primarily to reduce the number of potential rivals and secondarily to promote prosperity. (1) His chief rivals consisted of senators, provincial governors, tax farmers, and generals. To this end, Augustus sought to redirect entrepreneurs away from rent-seeking military conquests and toward production and trade. Before Augustus, governors sometimes initiated wars and used the spoils to threaten Rome itself. Augustus forbade generals from initiating 1 military actions, but more importantly, he also secured control over the budget for military pay and pensions (Weber and Wildavsky 1986, p. 123). He ended the Roman Republic practice of "tax farming," or auctioning the right to collect provincial taxes to Roman corporations. Tax farmers notoriously collected more than they were due, exceeding the carrying capacity of the tax base. Since Roman aristocrats owned most foreign lands, this change enhanced Augustus's popularity among the senators (Kessler and Temin 2007, p. 317).
Augustus enacted two direct taxes to be applied throughout most of the empire: a wealth tax of 1 percent on all assessed property (land, houses, slaves, and ships) and a head tax (based upon periodic censuses) to be paid by every adult male (Starr 1982, p. 77). Moreover, Italy was exempted from both of these taxes. (2) Under Augustus, every taxpayer knew in advance how much his annual tax bill would be. During Pax Romana, the Augustan tax rates constrained government spending. War booty sometimes provided dividends for expensive public projects, but only after successful operations, which became infrequent during imperial rule. Every free Roman retained a full after-tax claim on his increases in income.
The Roman fiscal arrangement, however, presented a serious problem. Unlike modern governments, Rome never borrowed to make up revenue shortfalls. Whenever an emperor needed to make up for revenue shortfalls, he had two expedients: the debasement of the denarius (reducing the silver content of each coin) and/or the outright commandeering of private assets and people into public service. As the latter option became increasingly common, the rule of law receded and Rome's Golden Age lost its luster (Temin 2006, p. 146).
Researchers have tried to measure the relative size of the government's share of national output during Pax Romana. Goldsmith (1984) estimated the share of local and central governments at less than 5 percent of national product and the imperial state at less than 3 percent. (3) Keith Hopkins (1980, p. 57) compared the administrative costs of governing the vast Roman Empire until about AD 200 to similar conditions under the Chinese mandarins. In Rome, about 150 Roman aristocrats administered approximately the same territory, compared to 4,000 Chinese officials under the Mandarins.
Besides low taxes, Augustus promoted prosperity in other ways. He concluded a peace treaty with Parthia (now Iran), opening trade routes into India and China. (4) He established a common currency, the silver denarius, which circulated throughout the empire, except in Egypt. The Augustan "peace dividend," at the expense of Egypt, financed massive public works projects, including roads and paved city streets, bridges, lighthouses, aqueducts for a running water supply, sewage disposal, fire protection, public baths, temples, and public buildings. By 100 AD, Roman technological development and market integration enabled Roman city dwellers to enjoy better material living standards than the European city dwellers did circa 1800 (Mokyr 1990, p. 20). Various economic historians measuring the extent of urbanization in Roman Italy have also compared it favorably to the seventeenth-century Netherlands (Temin 2006, p. 135). As Adam Smith demonstrated in his An Inquiry into the...
The original road to serfdom: from Rome to feudal Europe.
|Author:||Pecquet, Gary M.|
To continue readingFREE SIGN UP
COPYRIGHT TV Trade Media, Inc.
COPYRIGHT GALE, Cengage Learning. All rights reserved.
COPYRIGHT GALE, Cengage Learning. All rights reserved.