Markets in the ancient world

romeI met one of our ASI associates, the excellent Andrew Selkirk, at a lecture last week by the equally excellent Professor James Tooley. Andrew is editor in chief of Current Archaeology, which circulates mostly to interested amateurs like me. He passed on to me a copy of another magazine I had not seen, Ad Familiares, published by Friends of Classics. Not something I thought might be a right riveting read. But it was.

Two articles in the current issue are particularly interesting to modern free-market thinkers. One is Andrew Selkirk's own article on Ancient and Modern Market Economy. His thesis is that what produced the enormous dynamism of the ancient Athenian and Roman worlds is that they discovered money and the market economy. That made them hugely more efficient than earlier, barter economies. And through the market economy they discovered the free society. By contrast, the Spartans (whom Xenophon, says Selkirk, thought were 'jolly good chaps') rejected money and the market economy, turned their backs on civilisation and the open society, and because disciplined militarists. But disciplined militarism only carries you so far.

As for the Romans, we are told they were always fighting wars too; but Selkirk believes that the various rights enjoyed by Roman citizens – including the right to trade peacefully, actually made it quite an open society and contributed more to its success. It only started to unravel when emperors started debasing the currency to pay for all that bread and all those circuses, and the market economy could not function any more.

Which brings us to Philip Kay's article on the Financial Meltdown in the Roman Republic. In 2008 the world financial system took quite a knock from the US sub-prime mortgage market. When the boom ended and the music stopped, a lot of banks in the UK and other countries found themselves holding loans that were never going to be repaid – and, basically, ran out of cash. It was no different in 88 BC says Kay. When Mithridates VI, King of Pontus, invaded the Roman province of Asia (part of modern Turkey), people there lost large fortunes. So large, indeed, that Cicero reported that the bankers in the Roman Forum found themselves running out of cash just like their modern counterparts. An ancient credit crunch. The shock was made even worse by the fact that until then, in much of the previous century, Rome had enjoyed a boom thanks to military conquests bringing in vast quantities of gold and silver. And on the back of that cash avalanche, Roman financiers lent extensively to places like Asia.

A worrying parallel, perhaps, with modern governments, who also unleashed an international credit boom on the back of money that they had created in large quantities over a long time.