Sunday, 22 September 2013

Why did Rome Fall? Here is Ludwig von Mises's answer.

By Austrian economist Pat Gunning

The truth is that what destroyed this ancient civilization was something similar, almost identical to the dangers that threaten our civilization today: on the one hand it was interventionism, and on the other hand, inflation. The interventionism of the Roman Empire consisted in the fact that the Roman Empire, following the preceding Greek policy, did not abstain from price control. This price control was mild, practically without any consequences, because for centuries it did not try to reduce prices below the market level.

But when inflation began in the third century, the poor Romans did not yet have our technical means for inflation. They could not print money; they had to debase the coinage, and this was a much inferior system of inflation compared to the present system, which— through the use of the modern printing press—can so easily destroy the value of money. But it was efficient enough, and it brought about the same result as price control, for the prices which the authorities tolerated were now below the potential price to which inflation had brought the prices of the various commodities.

The result, of course, was that the supply of foodstuffs in the cities declined. The people in the cities were forced to go back to the country and to return to agricultural life. The Romans never realized what was happening. They did not understand it. They had not developed the mental tools to interpret the problems of the division of labor and the consequences of inflation upon market prices. That this currency inflation, currency debasement, was bad, this they knew of course very well.

Consequently, the emperors made laws against this movement. There were laws preventing the city dweller from moving to the country, but such laws were ineffective. As the people did not have anything to eat in the city, as they were starving, no law could keep them from leaving the city and going back into agriculture. The city dweller could no longer work in the processing industries of the cities as an artisan. And, with the loss of the markets in the cities, no one could buy anything there anymore.

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