Money and the State
A great deal of scholarly blood has been shed over the particulars of how currency functioned in the Roman Empire. Imperial monetary policy, such as it was, varied considerably over time. The Romans maintained some form of hegemony over most of the Mediterranean world for about six hundred years. Variation is to be expected, but what made the Romans unusual was how broadly coinage was embraced.
An economy can be monetized without having a great deal of circulating currency. Monetization seems to have frequently been adopted as a way of translating the value of one commodity into another commodity. Greek temple records document the amount of oil and grain provided by temple benefactors in monetary denominations rather than commodity specific units like the bushel or jar-full. Farming documents and contracts written on papyrus from Roman Egypt provide information about the cost of staple goods — donkeys, grain, land rental, bricks and such. These too are denominated in the closed monetary system the Romans maintained just for Egypt, an indication of how important the grain supply was to the mother city.
This was a monetized economy that lacked the accelerant of currency. Monetization that allows for stable exchange in a sophisticate barter economy is still a slow way to exchange goods. Without the benefit of ready coinage to act as an inert reservoir of value, markets cannot clear, goods are wasted, economies lost. The Romans were only dimly aware of how these macroeconomic effects played out. It would not be until the writing of Ibin Khaldun’s al Muqaddimah in 1377 that the western world would begin to talk about markets abstractly, and not often even then.
Major demands for coinage occurred for a few reasons, but none of them had to do with reducing friction in the daily economy. In the main, coins were minted to satisfy particular needs. First among them, paying the army. Septimius Severus, who’s reign opened the 3rd century (somewhat unduly infamous for its periods of economic upheaval) warned his sons and heirs that they needed to do three things to maintain power in the Roman Empire — get along with each other, enrich the soldiers, and scorn other men. This is not the monetary policy of an enlightened monarch.
Coins were also minted for religious and donative purposes. They were used to pay client states and built infrastructure. The Romans minted a modest silver coin called the denarius, during the Republican period it was worth a days wage for a skilled worker or a bit less than half of a legionnaire’s pay before food and kit were subtracted. Denarius from this period often show ships, bridges, and other civic artifices that were associated with the production of the coins.
These projects had the familiar Keynesian effect of stimulating growth through government spending. New ships required wood, rope, sail, bitumen for caulking, and the sailors to control them. These projects had an expansionary effect on the economy but also allowed for greater velocity of exchange in secondary markets. Cities became highly reliant on coinage and coins would flow from there into more rural economies.
The later Roman imperial mints produced gold coins in large numbers, but they were closer to the preferred stock of their day. Gold coins, because of their great value, circulated with less frequency and provided little utility to the average agriculturist in a Roman paradigm. In fact, we find more examples of people taking it upon themselves to divide silver and bronze coins into smaller, fractional pieces. The wealth flowing from Spanish American after European colonization began in earnest posed a similar problem. Pieces-of-eight, a name used broadly for Spanish silver coins, alludes to an earlier, more valuable coin that was divided into eight pieces so often that the state eventually re-denominated. Perhaps as a sign of total inflation gold becomes more frequently minted in late imperial times, this also may reflect an overall lack of new silver entering the economy. Or, it may show a hyper-rich imperial elite who were already transforming into the petty dukes, barons, and earls they would become, and who imperial tax policy had been creating for over a century.
Ancient notions of economics differ dramatically from contemporary understanding of the subject. Coinage differs from monetization. Policies around the minting of coinage were intended to accomplish concrete goals of the state rather than a more modern notion of maintaining liquidity. Overly valuable money is less useful money, from the perspective of the economy. It may be that what has long been regarded as the Crisis of the Third Century was a period of full monetization that coincided with a period of weak imperial leadership. Inept emperors were capable of causing enough expensive problems that inflation may have had little to do with the Crisis. The greatest likelihood is that the broad scope of imperial time gives us a series of case studies in how economies evolve.