George Maher: what we can learn from the fall of the Roman Empire

In the latest MoneyWeek Podcast, Merryn talks to actuary and author George Maher about the economy of the Roman Empire and what eventually led to its downfall – and the parallels with today.

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Merryn Somerset Webb: Hello and welcome to the MoneyWeek magazine podcast. I am Merryn Somerset Webb, editor-in-chief of the magazine. Today I have a very interesting guest. We spend a lot of time on this podcast talking about what’s happening in markets today. Talking about what’s happening in economies right now.

But what we don’t do, and maybe we should do more of, is look to the past. And in today’s podcast we’re going to look to the very distant past, 2000 years ago. To ask what has been done right in the past, and what has been done wrong in the past. What are the consequences, and what can we learn from them today?

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So with me today, I have Dr George Maher, who is the author of Pugnare, Economic Success and Failure. Which is a look at the Roman Empire from a practical business perspective. Now George is exactly the person to talk to us about this.

Not only has he written a book, but he has a PhD in economy of the Roman Empire from Kings College London. First class Honours, BA and MA with PhD in Classics from at the University of London. And a lot of other things beside. But he is also it is important for what we are talking about today. He is an Actuary.

George welcome.

George Maher: Thank you for having me.

Merryn: Now one of the things, again we’re right back at the very beginning of your book. One of the things you say, this is the first history of the Roman Empire, written from a practical business perspective. Although we’re going to try and look it from a slightly more macro-economic perspective.

But you say it’s also about people. Because business is about people. So the first part of your thesis I guess, is that people 2000 years ago, were basically identical to people to day.

George: I think that’s absolutely right. Human nature hasn’t changed in 2000 years. I mean 2000 years isn’t a very long time in the grand scheme of things. People have been around for hundreds of thousands of years. And what motivates people, what matters to people, hasn’t really changed in that length of time.

Merryn: Yes, so their behaviour, their biases, their incentives are really identical.

George: Yes.

Merryn: But of course the people before the Romans were also the same kind of people. So what was it about the Roman Empire that changed everything? What were the keys behind their successes?

George: That is fascinating and that is a fascinating comparison to make. Because what we’re essentially comparing, when we compare the Romans to the people around them, are the people that were there before them. Is we’re comparing an urbanised people, with a tribal people.

So if you think of what Britain was like before the Romans came, there was no London. There were no straight roads connecting urban settlements. There were tribes waring against each other. Trading odd bits and pieces. Whereas when the Romans come, they establish towns. They have a money economy.

People become traders. They are getting stuff form the hinterland of London. They’re shipping it out to distant parts of their empire. And it’s a money, urban, highly productive world of private property. Not the communal group ownership in tribal times.

It’s almost like comparing parts of England now, with large parts of Afghanistan now. It’s comparing an urbanised to a tribal world.

Merryn: Like you say, it’s basically it’s a huge organisational feat.

George: Absolutely. And organisation is actually a key part of it. Because what shines through, as you look at their achievements, is they knew how to organise themselves. And how to organise people. So things would work. What the right incentives were.

Merryn: But the glue to that organisation, would have been the money system?

George: The money system is what allows it all to happen together. I mean, just like our system, it’s based on trust and confidence. And it allows specialisation for example. So they were a very, very highly, at their height, a very highly specialised society.

And they were very, very proud of the work they did. You look at the memorials that they were putting up on the roads going into their cities and towns. And you will see people, who value the nobility of work. And people are saying what they were.

You might have someone saying I was a maker of eyes for statues. And that’s very highly specialised. Because that’s one part of the artefact that you’re making. And you need an awful lot of statues to actually make money out of that. But also it’s just fascinating to go down through the list of occupations.

You have someone who in life was a folder of clothes. And his descendants proclaim that on his memorial. Presumably he worked in one of the large bath houses. It’s almost like, if someone was to come back and look, in 2000 years look at London now and find people memorialising their parents.

By saying he cleaned the streets. He made coffee for us.

Merryn: This is a fascinating thing. One of the things I always say to people. When they say to me, all the jobs are going to disappear and robots are going to take over all the jobs. And artificial intelligence will destroy the labour marked. Think about all the jobs that exist now that 20 years ago you couldn’t possibly have ever imagined would exist.

Work and trade and specialisation expands to fill the free time gap.

George: There is that. But the other thing also is that we need work. We need work for money. But even if you have money you still need work. Because it gives a sense of achievement. If you’re an Actuary and you’ve been trained for example, and you’ve been trained in the actuary of craft.

You know you are going through your apprenticeship. After a while it’s a joy to do the thing. And there’s a sense of fulfilment when you’ve completed a project. And the other thing that we need to work for, as you will know, the third thing beside achievement and money, is the social thing.

And if you had all those robots around doing all of the stuff, after a while I think you’d want to break some of them up so you can make the coffee yourself.

Merryn: I would have thought so, and that’s something that people are learning during the pandemic, how important the social side of work is.

George: Absolutely.

Merryn: But right, let’s go back to money. Because I feel that you’re a bit like me, we could go off on so many tangents that we’ve missed what we’re trying to talk about.

George: Absolutely.

Merryn: We’re probably a terrible podcast combo.

George: I don’t think so.

Merryn: Well we’ll see what the readers think.

George: We will find out.

Merryn: So the Roman monetary system, basically they established the first global fear currency right? How did that begin? And there were many money systems before the Romans. What made theirs different and so successful? It was partly to do with militarisation right? Having to pay soldiers all over the world.

George: Sure.

Merryn: So how did they do it? Where did it come from and how did it spread?

George: If you look at the Athenian money system, it’s basically a silver coin.

And then you’ll have a coin which is twice as big as that, silver coin and it’s worth twice as much. So it’s basically the same metal, multiplied up. And that becomes extremely cumbersome. Because if you want to spend a large amount of money, you need a very, very large silver bar.

The Chinese did the same sort of thing. But they did it with copper coins. So you end up with a string of copper coins on a string around your neck. What the Romans did, was they decided that we will have this little gold coin, and this little silver coin.

And each of those gold coins will be worth 25 of those silver coins. And let the price of gold go up, or down, that is the ratio that will apply.

Merryn: So the price silver is always pegged to the price of gold?

George: For these coins. IN their money system. It’s like if you take a five pence piece and you aside it a pound coin. 20 of those five pence pieces are worth one of those pound coins. And they made that ratio, in their case, 25 apply throughout their empire.

And they made it apply for well over 200 years. Even though the price of gold and silver were going up and down.

Merryn: And they had a very high level of price stability right? So that ratio remained the same, but the purchasing power of the gold also remain the same?

George: The purchasing power of those coins remained the same for about 200 years. There was great price stability. One year the price of wheat might go up because the harvests were poor. The weather was bad. Another year the price of wheat might go down. But the average price at the time of that and other commodities, is stable until towards the end of the second century.

Merryn: What an absolutely extraordinary feeling it must be to know that your money will always be worth the same.

George: Absolutely. And actually I think also what happens with that, is you can only worry about so many things. And if that is taken off the worry list, there is mental power freed up for other things. As well as the reduction in anxiety.

Merryn: It’s interesting. Imagine how much less anxious we would all be, if we knew that the money we’re saving for our pensions will be worth exactly the same in 200 years. Not that we’re going to live for 200 years, say 30 years. As it is now.

George: Sure.

Merryn: It would be incredibly relaxing. But one thing that we’re told here, all our central banks have as their inflation target 2%. We’re told that we need inflation for growth. We need inflation to improve productivity, etcetera, etcetera. And to improve our living standards.

But that’s clearly not true.

George: No.

Merryn: Because the Romans presided over an explosion in productivity and an explosion in economic growth, while keeping the value of their currency stable.

George: Absolutely. I completely agree with you.

Merryn: OK. So let’s talk then about the productivity and the amazing trading economy that this money system created. Because we saw a huge explosion in trading. That was the first global economy. And we say this very sharp rise in productivity right?

George: Sure exactly. I guess the trading question is the first interesting question there. And trade depends on a lot of things. But one of the things that it depends on is infrastructure. And from the middle of the first century, they went hell for leather in terms of building infrastructure.

So massively expanding the port capacity around Rome. So massive increase in the wharf space for ships to dock at. Massive increase in the warehouse capacity. And as they start doing that at Rome, there are opportunities coming to people in North Africa. Because they can see, if we in our municipality were to build port infrastructure, taking in bigger ships, we can send them to Rome.


So once it starts, it’s happening all over the place. And once that happens, then the farmers in North Africa have got easy access to markets all over the Mediterranean basin. So the farms become bigger, more productive. And you see a shift around in where the work is being done.

So around Rome there is very little grain production. It becomes more fruit and vegetables and things like that.

Merryn: So because everything becomes very specialised.

George: Absolutely.

Merryn: Comparative advantage really takes root.

George: And there’s an analogy with nowadays. Insofar as most of our international trade still is maritime. And most of their trade is across the Mediterranean.

Merryn: And were these ports and the infrastructure, publically financed? From tax revenues, or a mixture of private and public?

George: It’s a mixture of private and public, but the way in which their public infrastructure construction works, is as follows. And this had been going on for centuries. So this is exactly what they were doing in 200BC. Is their senate, so their parliament, which controls the budget. The revenue goes to the senate.

They will decide that this is the type of project that we want done. In their debates and all the rest. And this is how much we are going to spend on it. And then they put it out to tender. And the tender goes out to the private sector. And the private sector then bids.

Contracts are formed. Contracts are supervised. If contracts need to be modified, because there’s a project overrun, there is scope for that. And what that means is there is profit out in the private sector. It’s a very, very small state sector. And it brings in lots of other things.

In brings in career opportunities. It brings in opportunities for prestige, which matters. Actuaries will often tell you, I was involved with this project or that project. So it wasn’t just the fees, it was well actually that was a fascinating thing to have done.

So you can imagine people at that time saying it was my grandfather who built that part of the port or whatever. And that was how it worked. And I was saying at the beginning, that they were geniuses at understanding how to organise themselves, how people are best organised.

And you see that in that private public partnership. And there’s absolutely no reason to think that human nature has changed to such an extent that we can’t learn from that.

Merryn: Well I mean we have our infrastructure in exactly the same way today right? HS2 and Edinburgh’s trams and all this kind of thing, are supposed to work. It just doesn’t seem to work very well. I can’t imagine us being able to build the kind of infrastructure they did.

George: Well you are exactly right. Maybe they would have been much, much, much better at HS2 than whoever is in charge of it today.

Merryn: I bet the Romans would have finished Edinburgh’s trams by now. It’s been 15 years or something.

George: Yes, well exactly. A lot of it comes down to incentives. And also, backbone. I mean being able to stand up to some people and saying, well yes I understand what you’re saying, but that’s not on.

Merryn: OK, so let’s say that I bring my ship into one of these ports in Rome and I go off to another great port somewhere else, designed and built by the Romans. How am I moving my money around? Am I just lugging a great pile of gold and silver coins behind me?

George: No. absolutely not. You’re doing it through their banking system. And a very interesting fact is, a lot of shipwrecks have been found in the Mediterranean. And shipwrecks which date to before 250AD, have close to no coins on them. Shipwrecks found after 250AD have industrial quantities of coins found on them.

Merryn: OK, so there’s a money transfer system working?

George: There is a money transfer system all over the place. This is a system built no private property. It’s not like the Pharaohs in Egypt. You own a large farm somewhere of maybe 200 acres of whatever it is. I want to buy it. You’re not going to be shipping up to me, wheelbarrows full of gold coins that I don’t actually need.

We do it through a banking system. We do it through bills of exchange. We do it through promissory notes and the like. If you look at a £20 note. It says on it, I promise to pay the bearer on demand the sum of £20. That is a transferable promissory note payable on demand.

You find those all over the place. There is a beautiful, in the Bloomberg Building there is a beautiful temple called the Temple of Mithras. And it’s two floors down on the old ground level. But as you go in, there’s a beautiful cabinet case full of, a shoe that was found. A ring. Part of a door.

And there is a small wooden object, which is essentially a private bank note. A transferable payable on demand promissory note. And that’s how trade was financed. And the law governing these notes is the same throughout the empire. From London to Syria.

Merryn: It’s amazing. So we have this extraordinary system. We’ve got a global empire. We’ve got a global currency. We’ve got incredibly stable money. We’ve got a fantastic transfer system. A reasonably responsible small stakes fiscal environment. And an incredibly long lived and healthy population.

One of the stats in your book about a newborn child placed in the hands of a well to do in the Roman Empire lived longer than in medieval Europe did well into the 18th century. For those lifespans to equalise, absolutely extraordinary.

George: Yes it is.

Merryn: So we can obviously learn a lot from this Roman method of organisation. But what then went wrong. I mean I’m tempted, because you know I’m always looking at money systems, to assume it was all about the money system, and about the devaluation of the currency.

Is that the key to the whole thing?

George: What did it for them was the collapse of their money system. What allowed them to let that most precious part of their system to unravel, is really the crucial question in some ways. I think that what really happened, was they had it so good for so long that they assumed that that was just the natural state of events.

And that it didn’t need to be protected. That a complacency came in. Institutions which were crucial to the maintenance of this stability, were mocked.

Merryn: Were mocked?

George: Were mocked. So Commodus became Emperor. And mocked the senators in the amphitheatre. And they tittered and they didn’t respond as they should have done. So in front of the population, their authority is being diminished.

And the complacency that came in, the lack of respect for institutions which had been so important to them for many centuries, allowed decisions to be made which destroyed them. And destroyed their system.

Merryn: OK.

George: And so what they started to do, was they started to increase the pay of the army. And if they had had a stronger senate the senate would have resisted. And said you can’t do that.

Because if you increase the pay of the army today, which we can just about afford, we will have to pay it next year, the year after that, the year after that, the year after that. And we can’t afford that.

Merryn: And why did they need to increase the pay of the army in the first place? Given the stability of the currency?

George: They didn’t need to. But Commodus, for whatever reason, felt that he would like to buy the support of the army, and he was allowed to do it.

Merryn: Then they didn’t have quite the amount of silver and gold they needed.

George: Exactly.

Merryn: To create the currency to pay the wages. So they thought to themselves, as people always do, well you don’t need that much gold. So put a little bit of copper in there.

George: So they started to debase the silver coinage. Which was their equivalent of quantitate easing. And because they needed to continue doing that, the currency got worse and worse. And got to the point where this relationship between the gold coin and silver coin was broken.

And at that stage, the currency was gone.

Merryn: And so all the trust that was embedded throughout this trading economy, the trust and the faith that makes a currency survive and makes a trading economy around it survive. That all basically dribbled away over a matter of decades.

George: That dribbled away, but also what’s happened is, is something else. Because this instability is coming into the system, the political authorities are becoming chaotic. And law is no longer stable. It’s no longer predictable. There’s the whim of the powerful coming in.

And you can’t run a banking system in such an environment. Because why should I give £100 over to a banker, and I’m not sure that I will get it back. Or why should a banker lend £100 to someone else and the contract might not be unforceful. And a massive amount of their money supply was in the banking system, just as most of our money is made by the private banks.

And once they start to contract the thing disappears. As could happen now.

Merryn: And slightly did begin to happen post financial crisis, right? Our banking system started to contract, pull inwards.

George: And one of the very, very amazing things of that period, when the world system was at the edge of a cliff, was how central bankers and bankers pulled it right back.

It was a massive and hugely important rescue operation.

Merryn: Yes, let’s hope they don’t have to run again.

George: Perhaps it shouldn’t be based on hope. Perhaps it should be based on, we know why we came to the cliff edge. We know where the dangers are in our system. So we know what to do when we’re standing by a busy road. You know when the truck is far away off so we can cross the road.

And when we should just stand back.

Merryn: OK. So the collapse of the monetary system, gradual collapse at first, slowly then faster as usual was the main driver here. But there is something else that is interesting that you write about a bit. Which is agricultural productivity.

George: Yes.

Merryn: And the soil exhaustion after so many years of increasing productivity. Was that part of it as well?

George: The agricultural productivity at the time of the Roman Empire, and indeed the late republic, was about three times what agricultural productivity was in medieval Europe. And it wasn’t until the 18th century that agricultural productivity got back to the level it was in Roman times.

Merryn: That’s extraordinary.

George: It is extraordinary. But if you’re a farmer, and particularly a farmer who might know what life was like before machines, you’ll know how hard it is to do that work. And you’ll also know that that hard work is not going to be put in if there aren’t incentives.

That’s one of the things. And Roman times was private property. Medieval times, it’s almost like a communist state. It’s feudal. Land belongs to the state. That makes a difference. And 18th century England in terms of ownership rights, has returned to the state of affairs in the height of the Roman Empire.

The other thing you’ll know if you are a farmer, is you are not going to put in all that work if there isn’t a market for your product. And the thing about the Roman Empire is the trading structure is there. The traders have their incentives. So if I produce, if I’m in North Africa, if I’m in New Carthage, and I produce a massive surplus of grain.

There’s going to be somewhere around the Mediterranean basin that there’ll be a market for that. Information is flowing back and forth on the ships. There are lots of traders who are just looking for some place to buy cheap and some place to buy high.

So I would just produce the surplus. And the market will get that surplus to where it’s needed. And that didn’t exist in medieval times.

Merryn: OK so the productivity collapsed in agriculture, came after the fall of the Roman Empire. It wasn’t part of the cause?

George: No, no, no, no, no.

Merryn: OK, interesting. OK so looking at this. We’ve talked a bit about how brilliant the Romans were and then how it all went so horribly wrong. If you’re looking at the thing in the round and saying to us today, if people behave now the same way as they did 2000 years ago.

What are the big lessons that modern economists and modern business people should take from what happened to the Roman Empire?

George: Well I’ll tell you what the big lesson is, that this Actuary says. And what this Actuary says, is to economists and people in business is, you don’t start with a number. What I think made a difference to them, and you see it, what happens in that great transformation.

When Augustus and the people around him rescue a society from civil war. From tearing itself apart. I think the great thing about them was what they believed about themselves. And the wonderful poetry written at the time of Augustus. Unrivalled, some of the most beautiful stuff ever produced.

The values that are in that. Values of inclusivity. I mean there is a story where Anise is on his way from the destroyed city of Troy and he’s on his ship. And the storms are threatening to sink it. And his fellow sailors are afraid.

And he says forsan haec meminisse iuvabit – perhaps one day it will be a joy to remember these things. You know that’s a world outlook that takes you through difficulties. Essentially I think what fundamentally you learn about them, is as well as how they organise themselves. Is what they believed about themselves.

And if you look at companies which are successful, that is also what differentiates them from those that aren’t. So that would be one of the first things I would actually say.

Merryn: Interesting. That and don’t debase your currency.

George: Don’t debase your currency. Understand what your life depends on. And look after it. And don’t be flippant with the important things.

Merryn: Perfect, George thank you so much for joining us today. And just to repeat, you can, and you should, go out and buy George’s book Pugnare, Economic Success and Failure. It is really very, very good. And absolutely fascinating. George, thank you so much for joining us today.

George: Thank you very much, it’s been an absolute pleasure. Thank you.

Merryn: Thank you. If you’d like more from MoneyWeek, you know where to go –, where you can sign up for our daily newsletter as well. Money Morning written by the brilliant John Stepek. You can follow us on social media @MoneyWeek.

You can follow me on Twitter @MerrynSW. And John on Twitter @John_Stepek. And if you’ve enjoyed the podcast, please do review it on your podcast provider of choice. Thank you very much.