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H - 118 : How Rome run out of Money

Updated: Apr 1

Nothing is certain but death and taxes. Was reminded of this quote from Benjamin Franklin (1789) recently when I read how Roman Emperor Honorius run out of money and failed to pay his Gothic army in 400 AD. Not surprisingly, having waited for six months, they stormed and looted Rome. It was probably the gentlest plunder ever. The mercenaries wanted precious metals and stones. Murders and rapes were the exceptions. The Roman Emperor though decamped to the safety of Ravenna with as much treasury as he and his entourage could carry. The Roman Empire never died. It run out of money.

Roman Memento Mori Mosaic from Pompeii - under

the Skull the Wheel of Fortune - to the left a rich Man's

purple Robe - to the right a poor Man's Goat Skin

Wonder how this happened 400 years after Augustus expanded Rome’s tax base and stabilised its finances. The Emperor (= the State) collected annual taxes of 1 billon sesterces (= 1’125 tons of silver). 75% came from Egypt which he had made a Roman province The populous country on the Nile contributed significantly to Rome's land and poll taxes, delivered import duties on goods from trading with Asia and Africa (25% of value) , shipped gold from mining in the Red Sea desert and paid its annual tribute as a conquered province. It was the anchor of Rome's financial stability.

Custom Duties on Trade contributed about 25% or Rome's Tax Revenue

Augustus used 80% of this money for his army (220’000 soldiers). With the rest he financed public projects such as aqueducts, harbours, market places and temples. Of course, the Imperial Court needed money too. They lived a life of luxury that was well beyond anyone’s dream. All in all, the tax burden under Roman rule was light. Romans living in Italy paid no taxes. With GDP at 20 bn sesterces, the tax rate was 5%. Our tax rates today fluctuate between 40 – 45%, mainly due to social services and welfare programs. Under the Roman Empire, there was no welfare and no service. Everybody was on his own.

A Hord of 100 Sesterces that was recently auctioned off to Private Collectors

Egypt had shown the Romans how conquest can result in enormous wealth. But Egypt was the exception rather than the rule. Augustus also tried to conquer Germania but lost 3 Legions in the Teutoburger Wald. His campaign to conquer Yemen to control the incense trade also failed. Emperor Claudius campaign to conquer Britain (43 – 47 AD) was successful but required a permanent garrison of 3 Legions without any responding tax revenue. Trajan’s conquest of Dacia (101 – 106 AD) netted the Roman Empire 700 million sesterces in loot and gave access to its gold and silver mines. The mines must have been depleted when the Romans left in 275 AD. All wars against the Persians were costly and netted no tax income.

Part of Trajan's Column celebrating his Victory over the Dracians (from National Geographic)

In a nutshell, Rome was unable to expand its tax base after Augustus. We now can move to the question as to how the Empire could run out of money 400 years later. What changed the balance between income and expenditures? Did tax revenue dip? Did the Empire’s expenditures significantly increase? The answer is probably a blend of many factors:

  • Only the Western Part of the Roman Empire run out of money. The eastern part became Byzantium with an intact tax base. After the Empire formally split in 395 AD, the Western Emperors lost access to eastern tax revenue. But there was still plenty. When Emperor Justinian came to power in 527 AD, his treasure chest was full. The last Western Roman Emperor, Romulus Augustulus, had only abdicated 50 years before, in 476 AD . Justinian's funds allowed him to reconquer Italy, North Africa and Spain, build the Hagia Sophia and codify Roman Law.

  • Roman tax revenue was lumpy and concentrated. By the end of the 2nd century, the Antonine Plague (probably measles) hit the Roman Empire. It spread quickly and killed 5 million Romans (10% of population). Roman Legions were severely hit – so was the maritime infrastructure. Sailors, captains, port officials were the first to succumb. Trade must have come to a standstill. Since custom duties accounted for 25% of total tax revenue, this must have been felt.

The Antonine Plague ravaged Port Cities and Towns with garrisoned Legions

  • The Empire’s expenditures went up. Roman Emperors doubled soldiers' pay from Augustus in 14 AD from 225 denarii to 750 denarii under Caracala in 217 AD (450 inflation adjusted). The Legions' loyalty was their power was base. Pay was further increased towards the 4rd century. It is difficult to have reliable numbers. The size of the Roman army also increased from 220'000 men to 500’000 - albeit the fighting force shrunk to 100’000 men. With flat revenue, this was definitely a problem.

Tax Farmers (wealthy Roman Citizens) collected the Taxes for Rome

  • The end of the Roman Climate Optimum may also have played a role. Britannia, northern Gaul, Germania and northern Africa became less fertile. There is plenty of evidence of deserted lands in Roman documents. Farmers fled to the towns. Fewer farmers = less poll tax and less wealth tax on land, homes and animals (1-3% p.a.)

Despite the unpopular Census by Roman Civil Servants,

the Quality of People's Tax Assessments did not improve

  • Last but not least, the yield in many mines seems to have dropped. Mining profit was one of Rome’s important incomes. Operated by slaves, these mines were low-cost. The yield from silver mines in Spain and gold mines in Egypt and Dacia decreased. Not enough new mines were opened.

The structural unbalance (structural deficit) in Rome’s finance is visible to anybody with an understanding of monetary policy. The Roman Emperors continuously debased the currency. In the 4th century, a sesterces had no silver left and was a pure copper coin. No wonder the German mercenaries insisted that they get paid in gold.

Silver content of a Sestertius during the Time of the Roman Empire

The arrival of the Vandals, a German tribe that settled in Spain and North Africa around 425 was the last nail in the coffin. No silver, no grain, no taxes reached Rome any longer. The Western Empire run out of funds. Everywhere the Gothic mercenaries helped themselves. The unfunded Roman bureaucracy dissolved. The unpaid mercenaries had to step in and organise community life – they became the Knights, Lords, Dukes and Kings that we still recognise today. For over 300 years, they would not formally challenge the existence of a Roman Emperor – the position was just vacant. In 800 AD though, for reasons I explained in a previous blog, the Pope crowned Charlemagne as Emperor of the Holy Roman Empire of German Nations. The Western Roman Empire went from broke to extinct.

The Western Roman Empire fractured but formally continued to exist with a vacant Emperor


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