When the final Roman Emporer was deposed by the Germanic conquerer Odoacer in 476 AD, it marked the end of an empire that the world at that time had thought would never fall. While many important factors contributed to the demise of the Roman Empire, when comparing the fall of Rome to the failing status of traditional modern Western powers, primarily the Unites States and Great Britain, it is perhaps most interesting to focus on the economic factors that signaled their downfalls in hopes of mitigating such similar effects in our current economies.
Early emporers, it has been noted through historical documents, were generous with the poor and military classes while heavily taxing the senators and others in the ruling aristocracy. Early emoporers such as Nero were lauded by the general public and took measures to fuel demand for coins by debasing the value of existing currency – meaning that coins that held less precious metal in the actual coin were still valued at the amount of total silver or gold originally held in the denomination it once contained.
Since Rome had grown its wealth primarily on the acquisition of new land, as the expanses of the empire were ultimately established, the revenue from newly conquered land dried up and the burden of tying the poor to the land they lived on failed to produce enough income to support the senate and imperial guards. As the expansion of Roman land ceased, so too did the flow of gold into the Roman economy.
This led to inflation, which along with over-taxation of the ruling class and over-enforcement of the imperial guard, let to a need to tax the poor in order to pay the bills of the state. In order to avoid having to pay taxes, many working poor sold themselves into outright slavery, since the value of freedom itself was less desirable than persecution for failure to pay tithes. Gold and silver coins became rare as Romans paid for lavish lifestyles of the elite, which led to further radical inflation – to the point where many people stopped using coins entirely and instead bartered for food and clothing and paid taxes with fruits and vegetables.
Rome sustained a heavy cost in keeping the European barbarians away from its Western borders, and military spending dominated most Roman government spending. As money became ever tighter, the opportunity to establish a lucrative career through military service waned, and soon Rome was forced to hire lower cost soldiers from foreign countries and from amongst the urban unemployed. The army became more expensive and taxes were raised accordingly.
The final straw was dropped when forces guarding the Western front were withdrawn to fight civil uprisings in Italy, and without adequate defensive strength, Germanic hordes were able to advance through Gaul and Greece before ultimately overthrowing the last Western Roman Emporer.
The fall of Rome demonstrates how sustained unteneble economic policies that started with the abandonment of a monetary system based on the real-value of precious metals led to the ultimate demise of one of the greatest empires in recorded history.