| Transportation cost |
The Ricardian model describes the world
economy from the first century AD until the end of WWII, which
was based on specialization.
Alexander (Bronze age, BC 330)
Pre-Industrial Revolution (iron age)
55 BC: Caesar invaded Britain with two legions
122 AD: Hadrian's four legions invaded Britain)
476 - 221 BC (Warring States period, China: Qin conquered 7 states, unifying China)
Specialization was facilitated by the declining transportation
costs at the beginning of the Roman Empire. (e.g., via Appia, 312 BC) |
Greek world (323 - 146 BC)
Alexander's medallion
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Alexander the Great unwittingly created
a large empire with a common language and expanded trade in the Mediterranean
world.
The Silkroad was opened by the beginning of the first century BC
.
Persepolis was the capital of the Achaemenid Emire (550-330 BC).
©
(In
331 BC, 120,000 talents of gold and silver were taken from the treasury
of Persepolis. Total loot from Susa, Babylon, Persepolis and Ecbatana exceeded 200,000 talents of silver, which were used to mint Greek drachmas. 1 talent of gold
= about $1 million today. 1 talent of silver = about $10,000 - 18,000. 200,000 talents
of silver = about $2 billion today. This was the source of economic growth of the Greek world. Alexander had looted 3000 talents of gold from Darius' throne tent.
Susa: 50k talents, Persepolis: 120k talents, Ecbatana: 26k.
Alexander also curbed pirates in the Mediterranean. Alexander and a Pirate (St. Augustine)
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| Western Europe |
Julius Caesar began his conquest of Gaul in 59 BC
. Six
million people lived in Gaul at the time. After six years of campaign, about one million
had been killed (1,192,000, Pliny the Elder), and Caesar brought one million Gallic (French) slaves to Rome when he
left Gallia in 50 BC.
(Rome's population was already about 1 million, 1/3 of which were slaves). A best guess/estimate of Roman Italy's population in the first century was about 1 million. (Comparable population centers in the first century AD were Alexandria, Jerusalem, Chang An) Most of these slaves
were sold to aristocrats to farm the land, effectively driving the Roman farmers
out of agriculture.
Rich aristocrats served as
the role model for the emerging middle class. Pratically all land in Italy
(south of Florence) was owned by 30 patrician families who used the slave
labor.
Emergence of the middle class
. Free men were not able to compete with slaves in farming (they worked in farms, mines and mills),
and were forced to engage in trade and other businesses, thus forming
the emerging middle class in the first century AD. Their system demonstrated
that hard work and shrewd business can produce wealth and the rich can
acquire social status. Smart slaves were often able to buy freedom with
the money they earned in business.
After the collapse of the Roman Empire, traveling once
again became hazardous for several centuries. Even after the First Crusade
in 1099, many pilgrims were sluaghtered by the bandits. Knights Templar
(created in 1119) stationed
at Al Aqsa Mosque (the location of Solomon's Temple) in Jerusalem began to recruit knights to ensure the safety of pilgrims. (Knights Hospitaller created in 1023 provided care for pilgrims in Jerusalem, also became a military order, and later moved its HQ to Rhodes.)
The middle class began to take jobs in other occupations,
thereby producing a variety of goods and trading with others. (shopowners,
taverns, and worked in construction, trading, transportation sectors.) The number or variety of goods increased.
Roman citizens mostly consumed porridge before. Meat was rarely consumed
unless one was desperate. Now they began to consume a variety of new foods,
fruits and grains from other regions (grains from Egypt), and other luxuries
(glass from Syria and oysters from England). (Trade increases varieties
of goods. About 200,000 Roman citizens were recipients of the free grain dole.)
Emergence of the middle class
⇒ trade volume
increased.
How rich was Caesar? His will stated every Roman citizen will receive 75 Attic drachma. One drachma = daily wage = almost a denarius (1 denarius = 1.13 drachma). 75 drachma (300 seterces) = $7500. |
Roman Empire was a free trade area.
Augustus |
Decline of Trade Costs
(i) common language: Greek
Because of huge price differences between regions, international
trade has enabled traders to accumulate wealth. The Romans conquered the
Mediterranean world and built the roads, connecting all the nations they
controlled, and unwittingly ensured the safety of travelers and merchants.[This
means a decline in travel risk and transportation costs, the most significant
trade barrier in the ancient world.] They accumulated wealth through trade
and the Roman soldiers were well paid for their service. Free bread was
distributed to spectators at gladiator games.
Trade contributed to slavery and income inequality, especially
in the early stages of world civilization. (Medical doctors and learned
Greek teachers were mostly slaves.) However, the conquered nations also benefitted from it. (income inequality also stimulates
profit motives and economic growth.) For instance, before Roman occupation, Britain was occupied by various Celtic tribes. The invasion raised the racial consciouness of the Celtic tribes, who began to compete with the conquerers. Without the Roman invasion, the Celts would have been dormant for a few more centuries.
(ii) Infrastructure investment (
via Appia
, via Egnatia, via Latina, etc. ⇒ Julius Caesar founded the city of Londinium in AD 43. Road construction
of 53,000 miles throughout the Empire reduced crimes, thereby lowering
transportation costs. (Compare this to 46,000 miles of US highways built
during the Eisenhower administration.)
mile = from mille (thousand) = 1000 double paces (one
step each foot.)
During the time of Augustus, for the first time it was
relatively safe for people to travel. People enjoyed traveling, much
as Americans began to enjoy traveling after the middle class were able to acquire
auomobiles. As a result, trade expanded throughout the Mediterranean world.
The missionary journeys of Apostle Paul, a tentmaker, are a good testimony demonstrating that
the middle class traveled widely throughout the Roman Empire. There were
many bandits and pirates in the Mediterranean, but it was much safer than
before. Without safe transportation it was difficult for countries to
ship goods to other parts of the Empire.
Octavian received the title of Augustus in 27 BC and became
the first Emperor. He and Livia did not have their own children. Livia's
son from her previous marriage, Tiberius, became the next emperor, but
Augustus and Tiberius were joint rulers for 2 years (AD 12 - 14). Tiberius
became the emperor on August 19, 14 AD when Augustus died.
(iii) Pompey eliminated the pirates in the Mediterranean
Sea.
Development of conquered regions
. (ii) + (iii): transportation costs gradually declined. As a result, merchants
prospered. Rome used taxes to build roads. For example, Julius Caesar founded the city of Londinium, but this initial settlement gradually turned into a trade center by 50 AD. Romans also built the road to Lutetia (Paris).
It goes without saying that people of the conquered regions suffered untold hardship and misery. Emotional suffering associated with slavery and subjugation aside, economically, it would be a cold comfort to recognize that the rank and file (common people) received some benefits from the conquered nations,
because even the slaves could buy freedom, and Romans reinvested and built infrastructure in these provinces.
Jewish revolt resulted in the destruction of the Temple in Jerusalem in
AD 68.
Unconquered regions (e.g., Russia, Ukraine, Arabia) remained barbaric
for many centuries. (British Isles were occupied by Britons and Scots (Celts).
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| Rome's trade deficit |
Ricardo's model is relevant to such economies. Rome exported blue glass produced in Syria to China, and imported silk, pottery, and tea from China, but Rome did not export much to pay for imports. Accordingly,
Rome had a huge trade deficit
, which was paid by gold and silver. Silver coins after Tiberius have been found in China, Vietnam, and Japan. In his Natural History (77-79 AD), Pliny the Elder observed:
...we have come now to see... journeys made to Seres [China] to obtain cloth, the abysses of the Red Sea explored for pearls, and the depths of the earth scoured for emeralds... at the lowest computation, India and Seres and the [Arabian] Peninsula together drain our empire of one hundred million sesterces every year. That is the price that our luxuries and our womankind cost us.
one denarius = 4 sestertii/sesterces ($50 -100 today)
100 million sestertii = roughly, $5 - 10 billion.
A Roman soldiers' salary was 225 denarii (roughly $12,000) per year in the first century AD. The average annual income per person was about $570. Because of the huge trade deficit of the Empire, Rome gradually cut military expense, which was partly responsible for the collapse of the Empire.
Septimus Severus (193-211 AD), the fineness was around 50%.
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