Economic collapse of the Roman Empire

What long-term economic factors led to the collapse of the Roman Empire? There were a few reasons, including rapid inflation through the ‘debasement’ of their currency, costly wars, political instability, corruption, and loss of land.

Any civilization will have problems, particularly as they grow in size and become more complex. If these problems are not addressed, they can cause conflict and eventually collapse the civilization itself.

The Roman civilization was no different. While there are a multitude of reasons for its collapse, the overwhelming majority of reasons can trace its origins – whether directly or indirectly – to money. Let’s take a look.

The main reason for the economic collapse of the Roman Empire was rampant inflation due to the debasement of its currency.

‘Debasement’ reduces the amount of precious metal in a coin while retaining the same ‘face value.’ Emperors could reduce the amount of silver in a coin by a percentage. They could also reduce the coin’s weight, so although the percentage stayed the same, the amount of silver was reduced.

An example of the latter would be a 10-gram coin with 90% silver content, which would contain 9 grams of silver, but a 9-gram coin with the same percentage (90%) would contain 8.1 grams of silver.

The problem with debasement is that people knew that with less precious metal in the coin (which is what people held as important), the coins themselves were less valuable. This means that for people selling their wares to attain the same precious metal in real-weight terms, they would need to increase their prices. Instead of something costing ten denarii, it would now cost 11.

This process continued right until the ‘fall’ of the Roman empire.

Roman coins minted in the early empire were backed by precious metals like gold and silver. The most well-known coin from the empire was the denarius. It originally contained 95-98% silver, meaning it was worth its weight in silver. Other coins were made of less precious metals. Still, the denarius allowed for more significant transactions, making it more user-friendly.

The coins would experience its first ‘debasement’ during the time of Emperor Titus. Due to the eruption of Mt Vesuvius in AD 79 and the destruction that took place, the emperor needed vast sums of money in a short timeframe.

Titus temporarily ‘debased’ the currency to pay for repairs and help those dislodged due to the volcanic eruption.

The silver content remained relatively high but was reduced slowly over the first and second centuries AD. It was not generally an issue because the empire was still expanding, meaning that the empire was still bringing in new money in the way of ‘spoils of war.’

While expanding, the Romans also conquered regions with functioning gold and silver mines. It allowed the production of coins to continue and the economy to remain relatively stable.

This process was manageable while the empire was expanding, but when the expansion stopped after the death of Trajan, problems started. As the influx of new money entering Roman coffers dried up and the mines began producing less precious metals, the emperor had to find new ways to fund things.

By the end of the end of the reign of Marcus Aurelius, the silver content of a denarius had dropped to around 78%.

During the crisis of the third century, chaos reigned, and power struggles were a constant in the empire. These power struggles required large armies, which all needed money to maintain them. The debasement continued with new coin denominations minted with considerably higher face value and less precious metal content.

By the mid-to-late third century AD, the silver content had plummeted to just 2% as inflation ran rampant. In a little over 100 years, the silver content had dropped from 78% to 2%. Considering the silver content took over 150 years to drop from 98% to 78%, it is striking how chaotic the third century was.

A few emperors attempted to correct inflation and debasement, with Emperor Aurelian minting much larger coins (4.5 grams) with a 5% silver content in AD 270-275. This is compared to 2% of the approximately 2.5-gram coins minted under the emperor who preceded him, Claudius Gothicus.

The monetary system was reformed again under Emperor Diocletian at the end of the third century AD. He would do away with some of the old denominations introduced over the last 100 years. His follis was a much larger coin (10 grams) and contained 5% silver, so the overall amount of silver had increased.

These reforms lasted only briefly, and future emperors continued debasing the currency until the end.

There are a few things to consider here. As mentioned above, these issues were not much of a problem when the empire was still expanding. However, when the empire stopped its expansion, the costs of everything came into focus.

The third century AD is when a lot of the costly wars began.

Wars invariably cost money, with soldiers needing to be paid to remain in the army. The Roman military had swelled in numbers by this point, with the empire also employing auxiliary units to fight alongside Roman soldiers.

Many of these wars were civil wars, as influential figures within the empire were all vying for the position of emperor. The century was dominated by Roman vs Roman battles. It not only depleted the priceless manpower within the empire but armies were being paid to do it!

The lust for power displayed by some meant they would stop at nothing to become emperor. It required the would-be emperor to have an army under his control. He would have to entice them with ever-increasing amounts of money to do that. These civil wars crippled Rome and would have long-lasting ramifications, leading to its downfall.

Costly wars also occurred against barbarian armies and armies in the east throughout the later empire.

Emperors tried to extend the empire further east, taking on the Parthians beyond their eastern border in Syria. However, poor leadership and tactics cost the empire dearly. Every major war was costly. Every loss from those wars cost even more, with no new land and ‘spoils,’ and the loss of manpower, meaning the war was pointless.

Defensive wars (when barbarians invaded Roman territory) were costly as well. With a weakened military, the Romans could not always fight off barbarians. It led to the two most likely scenarios – the Romans would have to pay the barbarians to leave Roman land, or the Romans would have to let the barbarians settle within the empire’s borders. As you can see, these are both very costly.

As the empire grew weaker, its borders were quickly overrun. The settlement of Roman land by the barbarians meant there was less tax revenue for the state to maintain its armies. Weaker armies led to easier defeats on the battlefield, which meant further tax revenue was lost.

When the empire lost important places like Carthage and Egypt, not only did they lose tax revenue, but they also lost critical grain supplies. It had the effect of pushing up grain prices while providing less food for the city of Rome. People then started to move out of the city, weakening it further.

The sack of Rome itself was a mortal wound for the empire. When Alaric and his Goths sacked the city in AD 410, they plundered it for three days, stripping the wealth from it.

Corruption is a problem with any civilization – ancient or modern.

From emperors and senators buying the support of the troops to mint workers stealing precious metals, Rome had it all.

One such event came to a head under the emperor Aurelian (AD 270-275). The empire endured years of theft and corruption at its mints. Generally, when the empire would reduce the amount of silver in their coins, they would decrease it by more than the emperor requested, and the workers kept the rest.

Aurelian wanted to put an end to this. He confronted Felicissimus, who was a rationalis (a high-ranking fiscal officer in charge of the imperial mints). The emperor blamed Felicissimus for the theft and corruption, but Felicissimus took exception. He incited the mint workers to revolt, and all hell broke loose.

The book Historia Augusta – the Life of Aurelian, XXXVIII it explains how the revolt got out of control, with many soldiers killed in the uprising (other plebeians likely joined the revolt, while it is also possible that the numbers mentioned have been exaggerated):

“There was also during the rule of Aurelian a revolt among the mint-workers, under the leader­ship of Felicissimus, the supervisor of the privy-purse.​ This revolt he crushed with the utmost vigor and harshness, but still seven thousand of his soldiers were slain, as is shown by a letter addressed to Ulpius Crinitus, thrice consul, by whom he had formerly been adopted:

“From Aurelian Augustus to Ulpius, his father. Just as though it were ordained for me by Fate that all the wars that I wage and all commotions only become more difficult, so also a revolt within the city has stirred up for me a most grievous struggle. For under the leader­ship of Felicissimus, the lowest of all my slaves, to whom I had committed the care of the privy-purse, the mint-workers have shown the spirit of rebellion. They have indeed been crushed, but with the loss of seven thousand men, boatmen,​ bank-troops, camp-troops​ and Dacians. Hence it is clear that the immortal gods have granted me no victory without some hardship.”

As you can see, the empire was plagued by many monetary problems, which started when times were good and exposed badly when times were terrible. Ultimately, these problems could not be fixed and helped contribute to the empire’s downfall.

For a detailed breakdown of what happens when the currency is debased and inflation runs rampant, check out this video by the Classical Numismatics YouTube channel – a great visual explanation of the folly of debasement.