The Devaluation of Rome: Roman Inflation and the Demise of the Empire

Inflation is a common economic phenomenon that can have a significant impact on the stability of a country's economy and social structures. This was certainly true for the Roman Empire, which experienced a period of rampant Roman inflation in the centuries leading up to its eventual collapse.

The causes and effects of this period of Roman inflation, which played a key role in the fall of Rome, are complex and multifaceted. However, by examining the economic policies, political events and social conditions that contributed to the inflationary spiral, we can gain a deeper understanding of the factors that led to the decline and eventual collapse of one of the world's most powerful and influential empires.

Roman Inflation and its Role in the Fall of Rome

To fully understand just how disastrous the fall of Rome really was, and how we can learn from it, we first need a little background. When we talk about the Roman Empire we’re talking about the period after 27 BC, when Augustus came to power. The period before this, known as the Roman Republic, lasted from 509 BC to 27 BC and came after the old Roman monarchy, which according to legend began in 753 BC with twins Romulus and Remus.

When we talk about the fall of Rome, we’re talking about the end of the Roman Empire, a collapse that ended a civilization that had already undergone two major changes and survived. The fall of Rome put things to bed for good, and inflation played a large part in its demise.

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The scary thing about the fall of Rome is that for a long time it had seemed like Roman civilization would last forever. Particularly during the Pax Romana (Roman Peace), a period that began in 27 BC and ended in 180 AD. This two-hundred-year stretch was a mostly peaceful period for Rome with minimal internal strife, massive technological advancements and vast economic growth. All this success was largely thanks to the fact that period was overseen by some of Rome’s greatest-ever emperors.

Unfortunately, the centuries following the Pax Romana tell a different story. The Roman Empire was plagued by ineffectual leadership, internal conflict and a series of disasters. In particular, the once-strong Roman economy was devastated by inflation, an often-overlooked aspect of the fall of Rome. 

Roman inflation played an important part in the fall of the Roman Empire. (photoguns / Adobe Stock)

The Currency of the Roman Empire

Of course, you can’t really have inflation without a currency. Records show that the denarius, a silver coin used by the ancient Romans, was being used as Rome’s national currency from around 211 BC. It continued to be minted well into the third century AD, which means that its use lasted for over 400 years.

The denarius wasn’t the only coinage used by Rome. Others like the as (used from the fourth century BC) had come before, but all shared the same fate; They eventually became devalued and needed replacing. After the denarius came the antoninianus, brought in as a temporary measure by Roman Emperor Caracalla to curb inflation, much in the same way the denarius had been brought in earlier.

The denarius was the size of a nickel, and one denarius was worth roughly the same as the daily wages of one Roman craftsman. Often referred to as the silver denarius, each coin was originally minted with 4.5 grams of pure silver, meaning they were of high purity.

Unlike modern currencies, the value of the denarius wasn’t based on how well the Roman economy was doing, public confidence in the government or a gold reserve. Instead, the currency backed itself. This meant the value of the denarius was based on the value of the silver in the coin. It would be the equivalent of us all carrying around golden coins today.

This was how things had been since the days of the as, whose value had come from the bronze it was minted from. As successive rulers had reduced the amount of bronze in each as, the currency had become devalued. Any guesses on what happened to the denarius?

Roman Emperor Caracalla introduced the antoninianus as a temporary measure to curb Roman inflation. (Classical Numismatic Group, Inc. / CC BY-SA 2.5)

Early Problems with Denarius Coinage

Circulation proved to be a big problem when the denarius was first introduced. Making your currency out of a precious metal sounds like a clever idea until you consider they’re valuable because they’re rarer than base metals.

The Roman Empire only had a finite amount of silver entering its borders, which severely limited how many denarii could be minted. This meant there weren’t enough denarii floating around. For the first few decades, there was an exceedingly small number of denarii in circulation, which limited the coin’s use as currency.

This is one of the reasons countries print and mint new notes and coins each year. People can’t spend what they don’t have. The problem was especially bad for the Roman emperors. Emperors tended to have expensive pet projects like wars, monuments and gladiatorial games, amongst others. The small circulation of denarii made financing these great works next to impossible.

Roman officials came up with a startlingly simple solution. All they needed to do was lower the purity of the denarius by using cheaper materials along with the silver, and they could make a lot more denarii. 

This plan hinged on everyone agreeing that these new and cheaper coins were still worth the same as their old counterparts. By reducing the purity of their coins from 4.5g of silver they managed to print way more coins and circulation quickly reached a level where the denarius became a practical currency. This also meant emperors and their officials could spend the new denarii on pet projects and on improving Rome's infrastructure while also getting the new coins into people's hands. High fives all around.

Before Economics: Understanding the Dilution of the Denarius

This plan seems great until you remember that the coin’s entire worth was supposedly based on its silver content - a silver content that had been reduced. Over time what had once happened to the as began happening to the denarius.

To be fair to the Romans, the idea of “economics” as it exists today didn’t really exist yet. Monetary policy and financial regulation were over a thousand years away, and inflation as a concept didn’t exist. Essentially, the Roman use of coinage was barely a step up from the old systems of barter.

Rather than a short, sharp shock, the devaluation of the denarius took decades. Happening bit by bit during the second and third centuries AD as the Roman Empire expanded and its leaders chipped away at the coin’s silver content.

When Marcus Aurelius came to power in 161 AD, the coin’s silver content was down to around 3.4g, 75% of its original value. Just over 80 years later, in 244 AD, it was less than half of its original value at 45%. From there things began to pick up pace and a decade later it was down to 5%. 

This was the beginning of the end for the Roman currency. Another decade later and in 265 AD the coin’s purity was at 0.5%. Each coin was made of mostly bronze with only the thinnest coating of silver. Prices had also soared by over 1000%.

Denarius featuring emperor Marcus Aurelius. By the time he came to power, the silver content in the denarius had gone down to 75% of its original value. (Rasiel / CC BY-SA 3.0)

Hello Hyperinflation – Attempts to Remedy Roman Inflation

Few things, if any, are worse for an economy than hyperinflation. Hyperinflation is defined by an extreme and rapid increase in the general price of goods and services within an economy. This leads to the value of money decreasing very quickly, prices going up and the money losing all purchasing power. This results in situations like in post-war Germany where people would use suitcases of money to buy one loaf of bread.

Once it’s begun it is also a self-fulfilling cycle. The worse prices get, the weaker the currency; the weaker the currency, the worse the prices, and so on. There are two primary options. To give up and create a new currency, like the German introduction of the Rentenmark. Or to do what Turkey did in 2005 and just announce your currency has a new exchange rate (one new lira was worth 1 million old lira).

While we have no concrete number, historians and economists have estimated that Roman inflation hit around 15,000% between 200 and 300 AD. By 301 AD, one pound of gold was worth an insane 75,000 denarii. Something had to change. Emperor Diocletian opted for the first option, introducing price controls along with a new silver coin called the argenteus. One argenteus was worth 50 denarii.

Diocletian’s new currency helped slow down the hyperinflation, but only temporarily. Less than a decade later one argenteus was worth 100 denarii. This unending inflation, combined with the denarius’ devolution, meant the Roman Empire was hemorrhaging money.

To try and claw back some of this money, Emperors began doing whatever they could to increase tax revenue. A classic example of this was in 212 AD when Emperor Caracalla announced that all free men within the empire were now citizens with the aim of boosting the empire's tax base. With taxes and prices rising, people went back to simply bartering for things rather than bothering with the almost worthless denarius.

The Effect of Roman Inflation and the Fall of the Roman Empire

The deterioration of the Roman denarius clearly played a significant role in the decline and eventual fall of the Roman Empire. But the reasons behind Rome’s fall were multifaceted. Rather than inflation being the only cause, it tended to worsen others.

Rome had always tangled with Germanic tribes. When its economy, and armed forces, were strong this never caused too much trouble. However, by 300 AD the Roman Empire, weakend by things like hyperinflation, wasn’t the powerhouse it had once been and groups like the Goths had managed to settle within the Empire’s borders. This constant fighting with the barbarians, and the repairs needed for the damage they did, only served to weaken Rome and its economy even more. 

It wasn’t just hyperinflation that the Romans had to deal with towards the end. Constant wars, like those against the barbarians, had done a fantastic job of depleting imperial coffers. This combined with inflation and increased taxes widened the gap between the haves and the have-nots. Some wealthy Romans even fled completely, in the hopes of avoiding the taxman, leaving to set up their own fiefdoms.

The Roman Empire was also facing a labor shortage. The empire’s economy had always relied on slave labor for things like working in the fields and working as craftsmen. These slaves traditionally came from lands that the Roman army had conquered. When expansion began to ground to a halt in the second century AD, so did the supply of slaves.

With fewer and fewer slaves, Rome’s commercial and agricultural production began to fall off. A sensible person might think the answer would be for Roman citizens to pick up the slack. Unfortunately, greed makes people stupid and Rome continued to rely on slave labor even as its supply of slaves began to dry up. Wealthy slave owners were simply unwilling to pay poor citizens and free men when they could work their slaves for free. 

As the economy struggled and poorer citizens felt the brunt, this reliance on slave labor began to cause civil unrest. People wanted to make money and work for a living but were being prevented from doing so by Rome’s continued reliance on “free” slave labor. 

The Sack of Rome in 410 by the Barbarians, by Joseph-Noël Sylvestre. (Public domain)

Overexpansion and Military Overspending

At its peak, the Roman Empire was immense, stretching from the Atlantic Ocean to the Euphrates River in the Middle East. While the empire is remembered for its vast size, it probably also contributed to its downfall.

A territory so large was an administrative and logistical nightmare. The Romans may have been famed for their Roman roads, but they were still limited in how quickly they could communicate. Sending a message from one end of the Empire to the other could take days or even weeks.

Maintaining control was also a major problem. An empire so large needed a vast army to defend its borders, repel outside attacks, and put down local rebellions. Armies are awfully expensive. Which is a problem when your economy is in shambles. Unwilling to give up its vast territories, Rome began overspending on its military and neglecting things like technological advancement and infrastructure.

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Eventually, the Roman legions began to suffer too. The army became so large that the Roman citizenry couldn't keep up with the constant demand for more troops. Roman Emperors became increasingly reliant on foreign mercenaries, like Germanic Goths. 

These mercenaries held no loyalty to Rome and their power-hungry officers would happily turn against their employers if they weren’t paid on time. This tended to happen more and more as hyperinflation devastated the economy. As Rome faced increased attacks from Barbarian tribes this reliance on mercenaries became an increasing problem. Many of the barbarians who attacked Rome in 410, 455 and 476 had once worked for the Empire.

Lessons from the Fall of Rome and Roman Inflation

This is all without mentioning factors like the splitting of Rome into East and West and the competition between the two. Other factors that combined to ensure the fall of Rome included rampant government corruption and political instability caused by countless inept, self-serving emperors. Some historians also believe that Rome’s conversion to Christianity caused a loss of traditional Roman values that helped lead to the Roman Empire’s downfall.

The reasons behind the empire’s collapse are multifaceted and it's impossible to name just one contributing factor. In fact, it’s impossible to limit it to just two or three reasons. Rome’s decline was not short and violent. The rot spread over decades, centuries even.

At its apex, the Roman Empire seemed unstoppable. But nothing lasts forever, and eventually Roman civilization fell like countless others before it. The parallels to what happened to the Roman Empire and what is happening across the world today, like rapidly increasing prices, civil unrest and a widening rich-poor divide, are a stark reminder of how often history repeats itself and how often the human race fails to learn from its past mistakes.

Top image: Silver denarii coins played a crucial role in Roman inflation and the collapse of the Roman empire. Source: Glevalex / Adobe Stock

By Robbie Mitchell