Tuesday, December 4, 2012

The long march to collapse

The decline and fall of the Roman Empire is--to put it mildly--a heavily debated topic, every since Gibbon's classic work by the same name. I'm not going to venture an opinion--though I certainly have one--on the topic, per se. I bring it up only as a lead in for the events that occurred under the rule of the Emperor Diocletian, from 284 to 305 c.e. A scant 21 years, short by some standards, quite long by others.

Diocletian became Emperor via proclamation: the army declared him Emperor and he successfully fought off other claimants to the throne (specifically Carinus, brother to the suddenly deceased Emperor Numerian, who had ruled for but a year). Diocletian was of humble origins, born not in Rome or even Italy, but in the province of Dalmatia (now Croatia). Like other Emperors of the period, his path to the throne was via the military. Emperor Carus--father of Numeria--had been born in Gaul, though educated in Rome, and had moved from leading the Praetorion Guard to the throne. Beset on all sides with foes and potential foes, leading the Empire meant defending it, thus the Roman army was the principle source of power: it could make or break an Emperor at the drop of a hat (or the drop of a laurel wreath, to be less anachronistic).

But when Diocletian took the throne, the Empire was in turmoil within, as well. Revenues were down and collection of such was sporadic, at best. There was a lack of continuity from province to province, both with regard to leadership and laws. Much of this was the fault of the continuous warring of Emperors and generals, to be fair, but the situation had reached something of a tipping point, as Diocletian found himself barely able to finance continued campaigning (in a war-sense, not an election-sense).

In the early part of this year, there was quite a bit of buzz about Diocletian, thanks to an exchange between Ron Paul and Paul Krugman, covered here by John Aziz at Azizonomics. The exchange in full:


A transcript of the exchange can be found here. Paul Krugman says:
I’m not a defender of the economic policies of the Emperor Diocletion, so let’s just make that clear.
To which Paul replies:
Well you are, in a way you are. That's exactly what you're defending.
So, what economic polices are they talking about, here? What did Diocletian actually do, in this regard? Simply put, he raised taxes on the upper classes, expanded government bureaucracies, stomped on or took over businesses he viewed as monopolies, handed out food to the poor, and issued the Edict on Maximum Prices. The last made coinage worth more--twice then-current levels--relative to goods, even though newly minted coins had a lower real value. In effect, it slashed all prices by 50% and made it a crime to raise them (punishable by death).

Ron Paul's point is that--aside from the obvious parallels of bureaucratic and entitlement growth--Krugman is also advocating inflationary policy via an ill-conceived expansion of the money supply that debases the currency even further, that destroys wealth at all levels of society by allowing inflation to outpace saving rates as a matter of course.

The fallout from the debate yielded a letter from one Dennis Gartman--a market trader--who offered up a short take on Diocletian from the historians Will and Ariel Durant, worth quoting in full (my boldface):
Rome had its socialist interlude under Diocletian. Faced with increasing poverty and restlessness among the masses, and with the imminent danger of barbarian invasion, he issued in A.D. 3[01] an edictum de pretiis, which denounced monopolists for keeping goods from the market to raise prices, and set maximum prices and wages for all important articles and services. Extensive public works were undertaken to put the unemployed to work, and food was distributed gratis, or at reduced prices, to the poor. The government – which already owned most mines, quarries, and salt deposits – brought nearly all major industries and guilds under detailed control. “In every large town,” we are told, “the state became a powerful employer, standing head and shoulders above the private industrialists, who were in any case crushed by taxation.” When businessmen predicted ruin, Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure. The socialism of Diocletian was a war economy, made possible by fear of foreign attack. Other factors equal, internal liberty varies inversely with external danger.  
The task of controlling men in economic detail proved too much for Diocletian's expanding, expensive, and corrupt bureaucracy. To support this officialdom – the army, the courts, public works, and the dole – taxation rose to such heights that people lost the incentive to work or earn, and an erosive contest began between lawyers finding devices to evade taxes and lawyers formulating laws to prevent evasion. Thousands of Romans, to escape the tax gatherer, fled over the frontiers to seek refuge among the barbarians. Seeking to check this elusive mobility and to facilitate regulation and taxation, the government issued decrees binding the peasant to his field and the worker to his shop until all their debts and taxes had been paid. In this and other ways medieval serfdom began.
The beginning and end tie up the story in a neat little bow of Hayek-ian theory, though I can't say if this was intentional or not.

Regardless, all of this is worth revisiting now, as we teeter on the edge of the so-called fiscal cliff. Increasing taxes and fashioning even more new ones are the only steps left in setting up a Diocletian future for the United States. Europe appears to be already there, for the second time oddly enough (proving once again the old adage about forgetting history). The future of the U.S. is apparent across the Atlantic, but also on the shores of the Pacific in the State of California, which has already "achieved" a feudal economy:
In California, you're an aristocrat, you work for the State, or you're a peasant. There's not much else, these days. Yet, amazingly, California is the de facto capital of liberals and progressives, particularly in those regions--like Marin County--that so typify this class system. It remains a lock-solid "Blue State," an easy win in the column of the Democrats for Presidential and Senate elections.
The 2012 Elections made the outcome even more certain for the State, as voters there actually sent even more liberals to the state legislature. I'd say it's just that they are getting what they deserve, only there are two problems with that:

1) Most people don't understand the phony bill of goods they're being sold; they're voting away their own future and that of their children but wrongly believe exactly the opposite.

2) The rest of the nation will be picking up the bill in California. Which will, of course, hasten it down the path to serfdom as a whole.

But fear not, happy campers. Rome lasted for centuries after Diocletian. Of course, the West was necessarily discarded to stave off collapse; we'll probably need to do the same with California in the not so distant future. Still, we've got some time, at least enough to see an iPhone 8 or maybe 9, at least enough for our children and their children. Beyond that? I hear land is cheap in Romania...

Cheers, all.