The road behind!

The early part of the century witnessed a high level of economic prosperity, made possible by exceptionally favorable conditions. Its liberal economic policy, which guaranteed freedom of action and an organic growth on the lines of  “laissez faire” lead to growth, employment and prosperity.

Later day populist policies which included distributing free food to all citizens, free  entertainment, free medicines and a host of other measures put a strain on the state’s finances. This led to higher taxes and the misallocation of capital from job creating investments to extravagant consumption.

In the face of social agitation towards higher taxes, it was easier for the State to instead debase the currency. Started at just 5%, it continued till the cumulative debasement added to more than 75%. Although, in the initial stages it spurred economic growth, leading to more social infrastructure projects and generally gave the impression of prosperity, the debasement ultimately led to poverty and severely reduced the government’s real revenue.

In face of falling revenues, the governments tried to debase the currency even more. This lead to rampant inflation and spiraling prices. In face of rising prices and civil unrest, the government put in price controls on food and other supplies deemed essential. This led to hoarding and scarcity of goods.

If the story so far sounds familiar, it is because history repeats itself. Over and over!

Still, the mob in power and the palace favorites while producing nothing, yet continually demanded more, leading to an intolerable tax burden on the productive classes. In the end, there was no money left to pay the army, build infrastructure, or protect the frontier. The barbarian invasions, finally led to the fall of Rome.