| February 6, 2012

The Debt Crisis in Ancient Rome: Lessons for Today

"The Government simply cannot make up their minds, or they cannot get the Prime Minister to make up his mind. So they go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent. So we go on preparing more months and years—precious, perhaps vital to the greatness of Britain—for the locusts to eat.”

This is Winston Churchill in 1936 speaking to Parliament. He is, of course, describing the weakness of the British government and its Prime Minister to deal with the obvious determination of Germany to fight a new war.

We do not necessarily face a new war now, but all over the world a crisis of potentially equal destructiveness faces us in the economy.

The Congress of the United States is powerful only to be impotent, and whether in the United States, Great Britain, France, or Germany, the leadership is decided only to be undecided. These may indeed be the years that the locusts eat, for billions of people all over the world.

Debt crises and debt impasses are not new to history. The refusal of great nations to solve their debt problems has had catastrophic results, from the days of ancient Athens in the 5th century B.C. right on up until our own time. Instructive examples include the fall of the Roman Republic, the French Revolution, and the rise to power of Adolf Hitler.

Let’s start with Rome in the year 60 B.C. Rome was still a republic. It had the balanced constitution that was so admired by the founders of the United States. There was a strong chief executive in the form of two annually elected consuls. Their primary role was as Commanders in Chief of the Roman army. There was the assembly of all Roman people—this was democracy, but it was carefully checked by the power of the aristocratic Senate. No motion traditionally could be brought before the people unless sanctioned by the Senate. Most instructively, the Senate had complete control of the finances—no consul could carry out any action without the financial approval of the Senate. That lesson was the reason why the founders of the United States gave Congress complete control over the purse strings, including debt and borrowing.

In 60 B.C., Rome was a superpower. It had a professional army, which was superb, but also a heavy drain upon the treasury. Rome had also allowed two great threats to grow up on her frontiers—one was in central Europe, the tribes of Germans and Gauls, and the other was Iran. In less than a century Iran had grown from a divided and weak country into an economic powerhouse with a superb army, much underrated by the Romans. Iran held a great deal of Roman debt, and Rome had a huge negative trade imbalance with Iran. (Think China.)

This lack of foresight by the Romans in foreign policy was matched by their lack of foresight in fiscal matters. It was the belief of the most profound thinkers of antiquity, like Plato and Aristotle, that democracies are inherently fiscally irresponsible. The Athenian statesman Pericles (leader from 461 to 420 B.C.) was said to be the first politician to understand the true mechanism of power in a democracy: to get the people to bribe themselves with their own money—creating massive entitlements. This had also come to be true in Rome—the entitlements of the Roman citizens included everything from free food to free entertainment in the form of gladiatorial games and chariot races. Roman citizens also paid no taxes whatsoever. No politician in Rome dared to either cut these entitlements or impose taxes. All tax money was wrung from the provincials, who were not Roman citizens. This taxation system was corrupt and oppressive, and led to the hatred of Roman power by provincials all the way from Spain to Syria.

However, even with the taxes from the provincials, the Roman treasury was empty in the year 60 B.C. In fact, it had a huge debt. The public debt was matched only by the massive private debt. Every Roman seemed to think he had an unlimited ability to borrow money. This was also true of the Roman Senate.

Bill after bill was brought forward to balance the budget and to pay down the debt. Massive infusions of money into the economy had no effect. Every sensible bill was blocked by the bitter partisan politics in the Senate.

Roman political life was divided between two parties. One was the Populares. That means, literally, the Democrats. They were the party of entitlements and an aggressive foreign policy. (It is interesting to note, by the way, that President Obama has either started or enhanced more foreign wars than any Nobel Peace Prize winner in history.)

The other party was the Optimates. That means, literally, the Best People. But what it translates into is the party of traditional and Roman family values. They were, in principle, opposed to entitlements. In fact, they shoveled out entitlements as fast as they could.

In 60 B.C., a crisis of almost unprecedented proportion had been reached over the lack of a budget and the national debt. The two leading politicians of the day were Gnaeus Pompeius (known to history as Pompey) and Marcus Licinius Crassus. Pompey was, for the moment, a Democrat. Crassus, the richest man in Rome, was, for the moment, a member of the party of traditional values. Both wanted to be the leader of Rome, but neither had any vision whatsoever. However, both had problems in 60 B.C.

Crassus had made a deal with his business partners to bail them out of tremendous debt by use of government funds. His enemies in the Senate blocked that bill.

In 63 B.C., Pompey had carried out an extremely successful military campaign of shock and awe in the Middle East. His political settlement was a superb solution to the instability of the Middle East. But for three years, partisan gridlock in the Senate prevented the ratification of his program.

So, these two “canny politicians” turned to a man who was widely regarded as a drunkard, a womanizer, and a man of no ambition whatsoever: Julius Caesar. They backed him to become consul for the year 59 B.C. He rewarded them by getting all of their wished-for legislation passed. And unlike his colleagues in the Senate and unlike Pompey and Crassus, Julius Caesar had a vision. He understood that the only solution to Rome’s problems was a dictator—a dictator for life, a king in fact. And over the next 12 years, through the conquest of Gaul, through civil war, and by the complete manipulation of the Roman political system, he achieved that goal. As dictator for life, he solved the debt problem. He not only balanced the budget, but, in fact, the surplus of the Roman budget would be in the trillions of dollars in today’s currency as a result of Caesar’s strong action.

One example: the private debt problem was solved totally by requiring all debtors to pay back the principal but not the interest. It didn’t satisfy everybody fully but it got the job done. He filled the Roman treasury by wars of conquest. He made the economy so sound that the welfare rolls were cut in half. And he established an equitable tax system by which the inhabitants of the Roman Empire worked two days a year to pay their taxes. The frontiers were safe. A serious immigration problem was solved by the bold stroke of turning the provincials into Roman citizens but making them pay taxes.

So Caesar saved Rome. The cost was that the Roman people gave up their political freedom. You know what? The Romans were glad to get rid of it. They wanted to be free to live as individuals, pursue their own careers, and not be bothered by the constant wrangling of politicians. In the end, the Romans would say they made a good deal. After all, the 1st and 2nd centuries A.D., building upon the reforms of Caesar, were the most prosperous and peaceful centuries that the world had ever known, and, in many parts of the Roman Empire, like the Middle East, the age of Roman rule remains the most peaceful these areas have ever known.

So, the message to the world today is to get your debt in order. You cannot push this off on future generations, and you cannot leave it in the hands of inept, greedy politicians. As Churchill was warning England, the weakness and indecisiveness of political leaders like Stanley Baldwin and Neville Chamberlain brought Great Britain to the brink of destruction and cost the world 50 million lives. This economic crisis can have the same terrifying results.

The only difference with Rome is that there is no politician on the current scene worthy even to shine the sandals of Great Caesar.

J. Rufus Fears (Ph.D., Harvard University) is a classics professor at the University of Oklahoma, where he holds the G.T. and Libby Blankenship Chair in the History of Liberty. He also serves as the Dr. David and Ann Brown Distinguished Fellow for Freedom Enhancement at OCPA.

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