As a pre-industrial society, the Roman Empire was not rich by modern standards. British economic historian Angus Maddison estimated that, even in central Italy, more prosperous than the rest of the empire, GDP per head was only around $800 (at 1990 prices). That's barely ahead of contemporary Burundi.
However, it's also roughly the same as medieval England, colonial America or Mao-era China – so, in historic terms, extremely prosperous. This wealth was a result of Rome's famously straight roads and its military dominance, which allowed trade to flow across the Mediterranean.
Pax Romana did not come cheap. About two-thirds of Roman taxes went on the armed forces. By the 300s, the model was coming unstuck as Germanic tribes migrated into the empire in huge numbers. Unable to fight off or bribe Goths, Huns and Vandals, the western empire gave them land. This eroded the tax base further, and when north Africa fell to the Vandals in 435, Rome lost Mediterranean dominance and access to some of its most productive farmland.
Article continues belowTry 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The poverty of the Roman exchequer made the empire untenable. In September 476, the barbarian Odoacer deposed Rome's last emperor, the teenage Romulus Augustulus, capping a state of almost permanent crisis since the sack of Rome in 410. The empire fragmented into kingdoms that could not facilitate long-distance trade. This led to the return of subsistence agriculture, causing urban populations to collapse.
By 550 AD, Rome – once home to more than a million people – had a population of just 30,000.