Even if we were to accept that all the pandemic containment measures were absolutely necessary and that all the lockdowns and the shutdowns were the right decisions, the global economic crisis…
Editor’s Note: This is Part II of a two-part series. Click here for Part I.
Lessons from the Fall of the Roman Empire – Part II of II
Gold-backed civilization vs. the Welfare State
Many rational economists and students of history have written countless analyses on the gold standard and the terrible impact that its end has had on the world economy. However, as the Fall of Rome clearly demonstrates, the implications of the introduction of the fiat money system and of the limitless manipulation of the currency by the State reach much further. In fact, they can have civilization-ending effects. Or, as Ludwig von Mises put it in his magnum opus, “Human Action”: “The marvelous civilization of antiquity perished because it did not adjust its moral code and its legal system to the requirements of the market economy. A social order is doomed if the actions which its normal functioning requires are rejected by the standards of morality, are declared illegal by the laws of the country, and are prosecuted as criminal by the courts and the police. The Roman Empire crumbled to dust because it lacked the spirit of liberalism and free enterprise. The policy of intervention-ism and its political corollary, the Führer principle, decomposed the mighty empire as they will by necessity always disintegrate and destroy any social entity.”
It can all really be traced back to the practical advantages that the license to print money at will gives to any ruler. When one has the exclusive and unrestricted power to issue and control the currency, all the other powers follow. Then, as in now, this monopoly can be used, and more frequently abused, to expand and consolidate influence over other areas of the citizens’ lives, other than merely monetary affairs. Fiat money is easily weaponized to fund a crowd-pleasing, vote-grabbing and unrest-soothing Welfare State. Roman majoritarianism and interventionism systematically hindered voluntary exchanges, crippled the productive class, and led to a bloated bureaucracy and an empire of dependents. As ancient historian Lactantius described it, “The number of recipients began to exceed the number of contributors by so much that, with farmers’ resources exhausted by the enormous size of the requisitions, fields became deserted and cultivated land was turned into forest.”
Once this shift takes place, once the percentage of the population that is a “net-receiver” exceeds the “net-contributors”, it is very hard, if not impossible, to go back to a healthy society and a sustainable economic system. The collapse might take years or decades, but it is virtually inevitable, at least not without bloodshed and widespread violence. Efforts to rectify it, usually based on the same principles of interventionism and further centralization, not only fail to achieve their goal, but almost always accelerate the economic and social disintegration. The Roman Empire suffered this slow and painful decline, many parallels of which can be found today in Europe and the US.
Root causes and catalysts
While the “first domino to fall” was the currency, as we discussed earlier, there were certainly other important events and shocks that sped up the process and helped the Empire’s demise along. Barbarian attacks, internal political crises, all significantly contributed to and expedited the Fall of Rome. However, they didn’t actually cause it. Either opportunistically or coincidentally, they just came at a time where the empire was already weakened and extremely vulnerable, but the many preexisting wounds that had brought it to its knees were all self-inflicted.
For the modern citizen, this is arguably the most important lesson that the history of the Roman era has to offer: the ability to differentiate between the actual cause of a crisis and the various forces or events that happen to exacerbate it. This lesson is especially relevant today, in the aftermath of the covid crisis.
Since the start of the pandemic, every politician and institutional figure has pointed to the virus itself as the cause of the global economic destruction that we witnessed over the last year and a half and that is likely to persist for many more to come. They branded the novel coronavirus as “public enemy no.1” and they used the microbe as a scapegoat for everything, from shop closures and mass layoffs, to food shortages and skyrocketing inflation. And yet, the virus didn’t close the borders, it didn’t make productive work illegal for over a year and it didn’t impose restrictions that would decimate the production of basic materials and supplies that the world economy relies on. For all those short sighted and panic driven policies, we only have the political leadership and the central planners to thank.
Nevertheless, even if we were to accept that all the pandemic containment measures were absolutely necessary and that all the lockdowns and the shutdowns were the right decisions – a concession that is already absurdly generous – the global economic crisis that followed was still not their direct result. They might have catalysed it, but they didn’t create it. This crisis was in the works for over a decade, and it was always inevitable.
Much like in the case of Rome, the vulnerabilities that the pandemic “exploited” were all self-inflicted. In fact, the seeds for this crisis were planted during the “rescue” operations from the last one, in 2008. Unprecedented, irresponsible and (at the time) preposterous monetary experiments like QE and negative interest rates paved the way for an entirely unsustainable and fundamentally flawed economic and financial system. A decade later, it was already so obviously fragile and ripe for a cataclysmic collapse that any unexpected event could have triggered an avalanche. A few high-profile defaults or a regular political crisis could have been enough, let alone a global public health emergency. When a system is rotten from the inside, anything can serve as an excuse for its demise, and at that moment ours certainly was: Over-indebted governments relying on bought-out public support through subsidies and handouts, over-leveraged “zombie” companies staying alive thanks to cheap borrowing only and the majority of the population being left behind by runaway asset prices that benefited the ultra-rich and penalized everyone else.
Claudio Grass, Hünenberg See, Switzerland