City of Rome: Economic and Financial Crisis in A.D. 33

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In A.D. 33 a major economic and financial crisis struck the City of Rome, capital of the Roman Empire. The crisis must have made a tremendous impression on the world at the time; otherwise, the three great historians of the period- Tacitus, Suetonius, and Dio- would not have highlighted it since ancient writers were not commonly interested in economics. Economic policy had gradually become highly regimented, depriving individuals of the freedom to pursue personal profit in production or trade, crushing them under a heavy burden of oppressive taxation, and forcing workers into vast collectives where they were little better than bees in a great hive. The later Hellenistic period was also one of almost constant warfare, which, together with rampant piracy, closed the seas to trade. The result, predictably, was stagnation. Stagnation bred weakness in the states of the Mediterranean, which partially explains the ease with which Rome was able to steadily expand its reach beginning in the 3rd century B.C. By the first century B.C., Rome was the undisputed master of the Mediterranean. However, peace did not follow Rome's victory, for civil wars sapped its strength.

The victory of Augustus over Antony and Cleopatra resulted in a repulse of tendencies towards State socialism which might have come to fruition had Antony and Cleopatra been victorious. The long years of war, however, had taken a heavy toll on the Roman economy. Steep taxes and requisitions of supplies by the army as well as rampant inflation and the closing of trade routes severely depressed economic growth. However, Government needs for funds and for legions to fight wars were now subsided. Businessmen and traders craved peace and stability in order to rebuild their wealth. Although the establishment of the Roman empire represented a diminution of political freedom, it led to an expansion of economic freedom. Augustus clearly favored private enterprise, private property, and free trade .The burden of taxation was significantly lifted by the abolition of tax farming and the regularization of taxation. Peace brought a revival of trade and commerce, further encouraged by Roman investments in good roads and harbors. Except for modest customs duties, estimated at 5%, free trade ruled throughout the Empire. It was a period of almost complete freedom for trade and of splendid opportunities for private initiative.

Food Subsidies
Egypt, however, retained its socialist economic system and was not allowed to share in the general economic freedom of the Roman Empire is that it was the main source of Rome's grain supply. Maintenance of this supply was critical to Rome's survival, especially due to the policy of distributing free grain to all Rome's citizens which began in 58 B.C. By the time of Augustus, this dole was providing free food for some 200,000 Romans. The emperor paid the cost of this dole out of his own pocket, as well as the cost of games for entertainment, principally from his personal holdings in Egypt. The preservation of uninterrupted grain flows from Egypt to Rome was, therefore, a major task for all Roman emperors and an important base of their power. The purpose of food subsidy earlier was not so much to provide a subsidy as to smooth out the seasonal fluctuations in the price of corn by allowing people to pay the same price throughout the year. In 58 B.C., Clodius abolished the charge and began distributing the grain for free. The result was a sharp increase in the influx of rural poor into Rome, as well as the freeing of many slaves so that they too would qualify for the dole. By the time of Julius Caesar, some 320,000 people were receiving free grain, a number Caesar cut down to about 150,000, probably by being more careful about checking proof of citizenship rather than by restricting traditional eligibility. Under Augustus, the number of people eligible for free grain increased...
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