“Reflect on history, with its shifting empires that rose and fell, and you can anticipate the future too.” – Marcus Aurelius
The Decline of the Roman Republic
The Roman Republic began its decline long before Marcus Aurelius ascended to the throne in AD 161. The power and representation of the consuls were overshadowed by the rise of the Caesars around BC 27. Despite this, the Roman Empire managed to function relatively well for a time.
From AD 98 to Aurelius’ death in AD 180, Rome experienced a period of prosperity. However, following his passing, this marked the pinnacle of Roman civilization. Over the next three centuries, the empire’s fortunes gradually diminished, ultimately culminating in its collapse on September 4, 476, when Romulus Augustus, the last Emperor of the Western Roman Empire, was deposed by the Germanic soldier Odoacer.
“It is hardly conceivable that contemporaries could detect in public prosperity the hidden seeds of decay and corruption,” remarked 18th-century historian Edward Gibbon in The Decline and Fall of the Roman Empire. “This prolonged peace and the consistent governance of the Romans insidiously introduced a slow poison into the empire’s very core—dulling the minds of men, stifling creativity, and evaporating even the military spirit.”
Today, near the remnants of the Colosseum, we witness a similar erosion of intellect. Recently, Rome, the heart of Italy, plunged into an electoral deadlock, with government spending at the center of contention. Supporters of Silvio Berlusconi and Beppe Grillo are calling for increased expenditures.
The market quickly reacted with a significant selloff: Italian stocks plummeted 4.9 percent, while the yields on Italy’s 10-year bonds surged 41 basis points to 4.89 percent. The election of anti-austerity candidates threatens to reignite the eurozone crisis.
“The elections convey a subtle message,” noted Dario Perkins, an economist at Lombard Research. “If Europe ignores this, it could spell disaster for the euro in the long run. This was a backlash against austerity.”
Reassessing Financial Structures
Essentially, Italy’s election has the potential to unravel the centralization of financial power that was established with the euro’s introduction in 1999. For many years, Italy experienced favorable borrowing conditions nearly equivalent to those in Germany. Instead of adopting the frugality of the Germans, they opted for the spendthrift habits of Greeks.
However, that era has now concluded. Yet, the aspiration for a centrally managed economy promising security and abundance will persist. Brilliant minds will contemplate this idea for eternity. For instance, a visionary Italian once theorized a pure form of socialist economy to make this dream a reality.
In 1908, Italian economist Enrico Barone, momentarily distracted from his plate of meatballs and marinara, looked into the vastness of space. To his astonishment, he perceived something extraordinary in the abyss—light amidst the darkness.
This light represented a socialist utopia, achieved through the “scientific management” of the economy, overseen by the Ministry of Production. He envisioned that, with a team of scholars determining optimal prices for all goods and services, it would be possible to create an economy devoid of poverty and unemployment.
The Illusion of Economic Management
Yet, with numerous analysts crafting proposals for the ideal prices of everything from toothpaste to pizza, they fail to consider unforeseen changes. For instance, how would a spring heat wave that diminishes the wheat harvest affect their pre-set price for bread?
By the time they could adjust the price based on new conditions, the shelves would be bare due to governmental restrictions that prevented prices from rising naturally. This would lead to artificial scarcities and disruptions, such as mandated shortages.
Such notions may seem far-fetched, yet this is precisely why socialist advocates embraced them—they offered a means for them to control society, reshaping the world according to their vision.
Barone’s concepts, an extension of Marxist theory, spread through Eastern Europe in the early 20th century, resembling a medieval plague. In the West, however, these ideas were slower to gain traction until Keynesian fiscal strategies merged with Chicago school monetary policies. Eventually, the academic community accepted the notion that manipulating the price of money could influence prices across the economy.
We acknowledge Barone’s pioneering ideas that cast the light of scientific management as a pathway to achieving “maximum collective welfare.” However, the reality is that models based on such principles consistently lead to negative outcomes. Today’s experiments with centrally planned economies, propelled by rigid central bank interventions, will ultimately yield similar disappointments.
Sincerely,
MN Gordon
for Economic Prism