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  • The Invisible Hand

Revelations from Rome: Role of Government

With a trip to Rome planned for this Summer, I thought I would take the opportunity to look at the Ancient Roman economy and compare it to the modern economy. Will there be any similarities or will an ancient economy be totally alien to modern economists? I hope even if you are not interested in ancient history, but just economics, these articles will be an interesting insight into a different system of economics and perhaps it can teach us something about economics today. This is the second part of a four-part miniseries on Ancient Rome with the next sections being released at the start of each of the next two months. I hope you enjoy it. Read the first section here https://www.economics-exchange.com/home/revelations-from-rome-overview-of-the-ancient-roman-economy .

The Bible tells us about a Roman taxman collecting a mere 1% income tax. Indeed in relation to modern day taxes, taxes were effectively non-existent and therefore the government had to have a very limited role in the Roman economy.

Taxes actually accounted for about 5% of GDP because in addition to income tax there was a complicated system of indirect and direct taxes including payments in kind. This included an ‘import and export tax; crop taxes; sales tax; property tax; and that great coverall emergency tax” according to the bible. Additionally, there was a poll tax which charged the same for every person and a land tax which progressive economists advocate today. Like many ancient and medieval economies tax farmers were used. These were when private individuals were responsible for collecting taxes and in return they would collect a share. As one might expect this lead to corruption and scheming so it was ended by Augustus and the responsibility was passed to the cities.

Other taxes included a 4% tax on slave trade, but a 5% tax on freeing a slave. Inheritance tax would be unexpected for an elite, ancient economy such as Rome’s but there was indeed a 5% levy, granted it was only on transfers to non-family members. Furthermore an emperor could confiscate the property of the super rich in times of dire need such as war which was deemed acceptable.

Much like today, taxes, and in particular the poll tax was greatly resented and led to numerous revolts, most notably the Zealot revolt in Judea in 66AD. However, like most ancient and medieval societies, taxes were regressive so the poorest paid less than the rich. In Rome this effectively meant the tax system helped created a wealthy aristocracy who could manipulate tax money to suit their needs.

The only main source of expense for the Roman government was the military. It was the military which fundamentally secured Rome’s status as an empire. Rome’s military, as one might expect, was well funded and formidable. During the first century AD, the size of the army did decrease due to cost pressures from 500,000 to 300,000, but Rome would still remain an empire until 476AD.

Roman Empire at its greatest size under Emperor Trajan

Military campaigns often paid themselves as revenue from conquered states and treasure allowed the government to issue tax breaks and eventually there were no taxes in Rome, only in the provinces. Although we naturally think of Britain in history as being developed and powerful, in the Roman era it was bleak and largely valueless. It generated little revenue and in fact the city of Alexandria raised three times as much as the whole of Britain. It was Egypt which was the global economic superpower, not western Europe. Gaul (modern day France) only produce one-seventh of what Egypt did.

Overall, the role of government in Ancient Rome has little semblance to today. Taxation was much lower because people couldn’t afford to pay higher taxes and there was no need because the government had no intentions to expand its role in society and provide social protection.

Thank you for reading. Please subscribe at the top of this page for updates on new posts and to support this blog. The next installment of this series will look at the main sectors of the Roman economy .