2 – Economic Deterioration
As is the case with all great empires, Rome was founded on a strong economic foundation. By its peak in 117 AD, the empire spanned approximately 1.5 million square kilometers and was inhabited by around 130 million people. Trade was crucial to the growth of the Roman economy and its outstanding transport system allowed a huge variety of goods to be imported across its borders. However, governing the empire was an expensive task with enormous military, administrative and logistical costs. A combination of several factors resulted in hyperinflation, heavy taxes, localization of trade and ultimately, a crippling financial crisis.
The denarius was the main coin used in the first 200+ years of the empire. When it was created, each coin contained 4.5 grams of pure silver and was the equivalent of a day’s wages for the average craftsman/skilled laborer. Once the amount of precious metals entering the empire fell, fewer denarii could be created. This lack of money didn’t prevent greedy emperors from building ridiculous vanity projects, and they decided to reduce the purity of the coinage.
Nero was one of the first emperors to devalue the denarius, and by the time Gallienus took the throne in 253 AD, the coins contained approximately 5% silver and consisted of a bronze core with a thin layer of silver. By 265 AD, the denarius contained 0.5% silver; the result was inflation of up to 1,000% across the empire. By this time, Rome had no more enemies to steal from so taxation was raised. The resulting mess completely paralyzed trade. By the end of the 3rd Century AD, the vast majority of trade was localized with barter methods used instead of the exchange of currency.
To make matters worse, the empire faced an intense labor deficit. For centuries, the empire relied on slaves to work as craftsmen and till the fields. In the latter part of the Republic and the first 150 or so years of the Empire, constant conquest meant there was a steady supply of slaves. By the 2nd Century AD, Roman expansion had practically ground to a halt, so the supply of slaves dried up along with the accompanying plunder. Later on, there was a growing humanitarian sentiment within the empire (when Christianity became the main religion) as Romans began to realize that slavery was wrong. A significant proportion of slaves were freed; this exacerbated the labor problem.