Empire Killer

“What has been will be again, what has been done will be done again; there is nothing new under the sun.” is stated in the Holy Bible in Ecclesiastes 1:9. This verse of wisdom gives insight into the age old killer of nations and empires of old for generations. This killer is inflation of the economy. A few decades ago, Argentina experienced periods of rising prices that crippled the economy. This same crippling effect is nothing new, but was one major reason for the end of the Roman Empire some time ago. Nations from Roman times to now have to ensure that the levels of inflation do not rise uncontrollably. Currently, Argentina has seen rest from this killer, but if past mistakes by Roman leadership about inflation are not heeded, inflation could rise again in Argentina.

During the 80’s in Argentina, inflation rose exponentially. The hyperinflation that was experienced by Argentina was due to the lack of a strong Central Bank to regulate the money flow. In the early 1980’s, the Central Bank of Argentina (CBA) tried to curb decades of inflation by absorbing excess money from the economy by issuing interest-bearing treasury bills.[i] This plan was working well until 1987 when the interest rates were liberalized.[ii] This caused the debts of the CBA to spiral, which forced the CBA to create money to pay off its high interest debts.[iii] This influx of money reduced the value of the peso that was used in Argentina and caused inflation to grow higher than ever expected.

The rising inflation caused incredibly problems within the Argentinean economy. Black market, tax evasion, and bartering became norm.[iv] Large banks crashed.[v] People were forced to literally bury or hide their money so they would not lose it in a bank.[vi] Citizens switched from the peso to the dollar as fast as they could.[vii] All these reactions and effects to the rising inflation in turn made the inflation rise faster. By 1989, Argentina experienced 1,000% inflation.[viii] Many Argentineans wanted to emigrate.[ix] They feared that their society had disintegrated.[x] However, nothing that Argentina experienced was anything different from what past nations have experienced if they did not control inflation.

The decline of the Roman Empire was caused in part by the high inflation that was present. Inflation started rising early in the Roman Empire, even in the days of Marcus Aurelius.[xi] Soon the Roman Empire stopped conquering new lands and turned their attention to domestic matters.[xii] The Romans wanted luxury items and would pay a premium to get every comfort.[xiii] However, without the influx of gold from conquering, Romans found it hard to afford their new expensive lives. Roman leadership started debasing the coins to make up for the loss of gold within Rome.[xiv] The debasing of the coins devalued the Roman coin. Since the empirical coin was devalued, merchants had to make up the difference by raising prices.[xv] For instance, a clove of wheat that used to cost 100 denarii was selling for 10,000 denarii four decades later.[xvi] The inflation that Roman was experiencing assisted the decline of Rome.

Many emperors tried to control the inflation within the economy with no avail. Diocletian, a strong reformer of the Empire in 284 – 305 a.d., tried to control the prices. He set out an edict detailing the prices of certain products with the intent that “when the pressure of high prices appears anywhere – may the gods avert such a calamity!”[xvii] This edict was incredibly detailed. Diocletian controlled the prices of everything from wheat, barley, rye, wild and fattened pheasants, to sparrows.[xviii] Eventually, these price controls did not work. This caused a great recession in the economy, especially in the agriculture community.[xix] Inflation got so high that most of the Roman merchants did not want to use the Roman coin.[xx] Bartering became the form of exchange even to the extent that taxes were paid by fruits and vegetables instead of by real Roman money.[xxi] This lack of control over the economy by the Romans split the Empire into 3 distinct monetary zones each having its own monetary exchange.[xxii] In the western region, Roman coins were either thrown out or melted down.[xxiii] The Western region used a different monetary convention called the “sceats”.[xxiv] In North Africa and Italy, Roman coins were still used, but were used at their earlier value and denominations.[xxv] In addition, in the east came the birth of the Byzantine coinage.[xxvi] By the end of 700 a.d., the Roman Empire was completely laid to waste, and split, due in part to the lack of a strong central monetary entity to control inflation.

Currently, Argentina has tried to learn from the mistakes of the Roman Empire and empower their central bank. Argentina has adopted a new policy of liberalizing trade, matching the peso to the dollar, and privatizing government enterprises.[xxvii] This policy has helped to reduce decades of hyperinflation to only 4% per year, which is incredible for the country and the region it is in.[xxviii] Argentina can even actually claim to have deflation. For four months in 2000, they achieved negative inflation.[xxix] These successes are only due to a strong central bank that has started to empower the economy.

Nations must always evaluate themselves in relation to the past. If nations do not learn from the mistakes of past nations, they will unfortunately repeat them. The Romans experienced the killer of inflation to their empire and so did Argentina for many decades. However, once Argentina realized the folly of their past they were able to come to a successful plan to ensure inflation would not rise uncontrollably.

[i] Paul Beckerman, “Central Bank ‘distress’ and hyperinflation in Argentina, 1989-1990,” Journal of Latin American Studies, vol 27 (1995): 665.

[ii] Ibid

[iii] Ibid

[iv] “Inflation more than 1000% in Argentina,” Business Week, 10 June 1985, 66.

[v] Ibid

[vi] Ibid

[vii] Ibid

[viii] Ibid

[ix] Ibid

[x] Ibid

[xi] “Reasons for the fall of the Roman Empire all left Rome open to outside invaders,” [cited 24 March 2002]; available form http://killeenroos.com/1/Romefall.htm; INTERNET.

[xii] Ibid

[xiii] Ibid

[xiv] Ibid

[xv] Ibid

[xvi] Moses Hadas, Imperial Rome, (New York: Time Incorporated, 1965), 145.

[xvii] E. Graser, “Price Controls,” in Aspects of Western Civilization, ed. Perry M. Rogers (New Jersey: Prentice Hall, 2000), 251.

[xviii] Moses Hadas, Imperial Rome, (New York: Time Incorporated, 1965), 145.

[xix] A.H. Jones, The Later Roman Empire 284 – 602, vol II (Norman: University of Oklahoma Press, 1964), 1039.

[xx] A.S. Hunt, “Distrust of Imperial Coinage,” in Aspects of Western Civilization, ed. Perry M. Rogers (New Jersey: Prentice Hall, 2000), 250.

[xxi] “Reasons for the fall of the Roman Empire all left Rome open to outside invaders,” [cited 24 March 2002]; available form http://killeenroos.com/1/Romefall.htm; INTERNET.

[xxii] Kenneth W. Harl, Coinage in the Roman Economy, 300 b.c. to A.D. 700, (Baltimore: John Hopkins University Press, 1996), 181.

[xxiii] Ibid, 182.

[xxiv] Ibid.

[xxv] Ibid, 186.

[xxvi] Ibid, 195.

[xxvii] James C. Cooper and Kathleen Madison, “Argentina Turnabout: Neighbors Take Note,” Business Week, 12 Sept 1994, 11.

[xxviii] Ibid

[xxix] “Argentina inflation,” Global News Wire, 4 July 2000.

Beckerman, Paul. “Central Bank ‘distress’ and hyperinflation in Argentina, 1989-1990.”

Cooper, James C. and Kathleen Madison. “Argentina Turnabout: Neighbors Take Note.”

Graser, E. “Price Controls.” In Aspects of Western Civilization, ed. Perry M. Rogers,

Harl, Kenneth W. Coinage in the Roman Economy, 300 b.c. to A.D. 700. Baltimore: John

Hunt, A.S. “Distrust of Imperial Coinage.” In Aspects of Western Civilization, ed. Perry

“Inflation more than 1000% in Argentina.” Business Week, 10 June 1985, 66.

Jones, A.H. The Later Roman Empire 284 – 602. vol II Norman: University of Oklahoma

“Reasons for the fall of the Roman Empire all left Rome open to outside invaders.” [cited

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