Faced With Inflation, Diocletian Capped Prices Which Didn’t Prevent the Roman Empire From Collapsing
The fall of the Roman Empire was already unstoppable.
“We have decided, as the whole human race seems to be begging us to do, to fix not the price of goods but a maximum so that, if any surge in prices should occur (which God forbid), greed, which like fields stretched to infinity cannot be contained, may be curbed by the limits of our decree or by the bounds of a moderating law...”
Between November 20 and December 9, 301, from the East where he was then, the Roman emperor Diocletian imposed a maximum price for more than a thousand products.
These products included cereals, meat, wine, beer, lentils, and sausages, but also shoes, coats, transport costs, sea travel, salaries, and fees for independent professions. The imperial edict specified that those who exceeded these ceilings or who stockpiled goods to raise their prices would be punished by death.
The objective of this measure was to fight against the galloping inflation that the empire knows since the crisis of the third century …
The crisis of the Third Century
This crisis began with the troubles caused by the successive assassinations of the emperors Caracalla (217), Heliogabalus (222), and Alexander Severus (235). They highlighted one of the structural weaknesses of the empire: the absence of precise rules of succession.
The power is henceforth at the mercy of generals raised to the imperial purple by their soldiers and also quickly eliminated by a new pretender. Between 235 and 288, Michel De Jaeghere reminds us in his book “The Last Days, the end of the Western Roman Empire”, that no less than 18 emperors succeeded each other in Rome. Most of them die of violent death.
The anarchy that settled at the head of the empire and the civil wars that it entailed caused brigandage and looting, contributing in return to disrupting trade. In Gaul, the bagaudes, bands of landless peasants, runaway slaves, and deserters, roamed the countryside for several years, attacking isolated farms and small rural towns.
But there is worse! At the same time, movements of funds agitate the “barbarians” at the borders of the empire. Taking advantage of the general anarchy and pushed by Asian peoples who were biting into their living space, Alamanni, Vandals, Burgundians, Goths, and Franks were jostling each other at the limes, this set of fortifications designed to guard the borders of the empire, which they soon crossed by force. In 250, the Goths invaded Mesia and Thrace before inflicting a crushing defeat on the Romans at the battle of Abrittus. The emperor himself was killed. His body will never be found. In the West, the Alamans made a series of raids on Alsace, while the Franks poured through Gaul and Spain, pillaging everything in their path.
The recovery began with the arrival at the head of the empire, in 268, of Claudius II, a tough soldier from Illyria - current Albania. At the cost of a considerable effort, he and his successors Aurelian, Probus, Diocletian, Constantius Chlorus, and Constantine manage to reject the barbarians beyond the Rhine and the Danube, reduce the secessions that have multiplied in the empire, and restore the unity of the latter.
When Diocletian acceded to the purple, in 284, he knew that it was no longer possible for a single man to ensure the defense of a whole that extended from the shores of the Atlantic to Asia Minor. In 285, he appoints a “co-emperor” in the person of an experienced general, Maximian. A few years later, he took a further step in the reorganization of the empire by appointing two “Caesars” to the two emperors, who were to assist them at the head of well-defined territories and then, when the time came, to succeed them.
The unity of command will be restored in 324 by Constantine at the end of the crisis which was not long to affect in turn the new “governance” of the empire. There were, at certain times, up to six emperors fighting fiercely to recover the totality of the power...
The situation that Diocletian discovered upon his arrival at the head of the empire in 284 was catastrophic. In particular on the economic level. Three or four centuries earlier, the conquest by the Roman Republic of the Mediterranean basin, Gaul, Africa, and the East caused a gigantic influx of wealth. It also turned the economy upside down: in full development, agriculture saw its outlets widen considerably while a dynamic craft industry was born.
But the system has its reverse side: ruined by the competition of the Sicilian, African and Egyptian agriculture, the small landowners who made the strength of Rome came to swell the ranks of the urban plebs, living of games and free distributions of wheat - “the bread and the games”. This evolution was made to the benefit of the great landowners who were enriched in parallel by the influx of captives and precious metals. Exploited by armies of slaves (35% of the Italian population in the first century A.D.) who made any form of technological innovation useless, immense farms were thus created, in which the owners led an idle and luxurious life.
Bartering is becoming more widespread
The prosperity of the system was based on the Mediterranean ports and the vast road network set up in the aftermath of the conquest. Thanks to these infrastructures, merchants could transport, quickly and safely, the products of agriculture from large estates and urban crafts from one end of the empire to the other...
It is all this system that the crisis of the third century made fly in splinters, particularly in Occident, much more affected than the East. The civil wars with repetition and the invasions involved a collapse of the exchanges, whereas the stop of the conquests had for effect to stop the flow of the richness drawn from the military expansion.
In the countryside, the labor force, whether free or slave, was decimated. Many peasants deserted their fields to seek refuge in the city or to engage in brigandage. Abandoned, their lands became wastelands while the infrastructures that had been the strength of Rome - roads, bridges, aqueducts... - were severely degraded due to lack of maintenance.
Unable to export their crops over long distances, the great landowners began to produce subsistence foodstuffs and engage in barter. Unable to import manufactured goods from the large urban areas of the empire, they also began to produce them themselves, on their estates.
Thus, a domestic economy living in autarky was gradually put in place, which was to blossom fully a few centuries later, in the Middle Ages. The beginnings of serfdom then began: with the crisis, many small farmers placed themselves under the protection of large landowners. They became colonists, a half-free class of Roman citizens. Imperial law made their status hereditary, forcing them to remain attached to the land and the master who held it.
The situation of the cities was hardly more brilliant: threatened by famine, surrounded by ramparts, and populated by refugees, they closed in on themselves... Disorganization of trade, the collapse of agricultural production, rural exodus...
These were the causes of the price explosion that became particularly uncontrollable in the second half of the third century. As Michel De Jaeghere reminds us, a measure of wheat that was worth 1 denarius under Augustus and 4 in 250 AD, was worth 50 in 276, 75 in 294, and 330 in 301!
The money supply in circulation is multiplied by 7 between 238 and 274
Inflation was further aggravated by the repeated monetary issues undertaken by successive emperors to meet the increase in military expenditure. Between 238 and 274, the money supply was multiplied by seven!
During his accession to power, Diocletian tried a monetary reform, abandoning the silver denarius and creating a new coin, the argenteus, as well as three new bronze coins. But these reforms do not slow down inflation.
On the contrary: prices doubled in less than ten years! This is because the old coins continue to circulate. Rather than exchanging the old currency for the new at a fixed rate to gradually withdraw it from circulation, Diocletian also only inflated the money supply, further accentuating the rise in prices.
The price ceiling, thanks to the promulgation of the edict of the Maximum, was the ultimate response of the authorities to counter their rise, which nothing seemed to stop. But it had no effect: merchants preferred to keep their products rather than sell them at a loss, which further disrupted trade, aggravated shortages, and accentuated the depreciation of the value of the currency. In the countryside as well as in the cities, the use of bartering became widespread. Useless and unenforceable, the edict gradually fell into disuse.
In 312, Constantine, who had become sole emperor, created a new gold currency, the solidus, which remained in circulation in the Eastern Empire until the 11th century. But its appearance devalued the small currencies issued by his predecessors to pay their troops' salaries on the cheap and contributed to maintaining inflation at high levels. The rise in prices hit mainly the holders of bronze and copper coins, whose value continued to decline.
Those who held gold, however, managed to get away with it...
From this long crisis, the Roman Empire is deeply transformed. To ensure the defense of its borders, the State never ceased to increase its fiscal hold, multiplying taxes and duties, which taxpayers were now obliged to pay in gold. Those who did not have any, i.e. the majority of the population, were reduced to abandoning their land and simply disappearing into the wilderness, which in turn led to a worsening of the status of settlers.
The urban elites, on the other hand, are given the task of collecting taxes on behalf of the central government. If they fail, which is increasingly the case, it is their wealth that is put to contribution!
As a result, the urban magistrates also fled the cities and tried to hide. Those who are caught are brought back to their posts by force, in chains. To better control them, the State also pushed merchants to form brotherhoods and increased the tax obligations that they had to meet. As for the power, it was the object of an unprecedented sacralization.
The empire no longer had anything to do with a magistracy: it had become an oriental-style monarchy whose holder, dressed in purple and gold and covered with precious stones, was a part of the divine. The empire is sliding into dirigisme and authoritarianism, thus aggravating the evils it claimed to fight. Its Western part will last another century and a half before collapsing …
Some reading
History Often Rhymes — Lessons for the US Dollar From the Collapse of the Roman Denarius. For some, America is in the midst of a modern Diocletian moment.
The Endless Fall of the Great British Pound Value During the 70 Years of Queen Elizabeth II’s Reign. 4 key events of this fall.
On Why Buying Bitcoin Is Your the Best Way To Stop an Unfair System. You will never change anything that you are willing to tolerate.