Saturday, April 9, 2016

Byzantine Gold

The Byzantine Empire was mainly comprised of an array of small towns and seaports connected by a developed infrastructure. Production was very high, and there was a notable growth in land ownership. The Byzantines followed a Christian lifestyle which revolved around the home, where women dedicated themselves to the upbringing of their children. There were also various public places where men sought relaxation in their leisure hours.

From A.D. 500 to A.D. 1200, Byzantium was the wealthiest nation in Europe and western Asia. Its standard of living was unrivaled by other nations in Europe, and it led much of the world in art, science, trade, and architecture. We could even say that the “Byzantine Dream” existed long before the American one.

For much of this period, Byzantium maintained good commodity coinage – gold, silver and copper.  To be clear: it was not a free-market disciplined standard – the government maintained the coinage.  The government also maintained a complicated bureaucracy, to the point where byzantine has come to mean:

A term describing any system that has so many labyrinthine internal interconnections that it would be impossible to simplify by separation into loosely coupled or linked components.

The city of Byzantium, later renamed Constantinople and then Istanbul, and the Byzantine Empire were vitiated by a bureaucratic overelaboration bordering on lunacy: quadruple banked agencies, dozens or even scores of superfluous levels and officials with high flown titles unrelated to their actual function, if any.

With this said, the empire maintained good coinage, economy and trade for much of this period – a period of over 700 years.  I have long been curious to understand something of the coinage and economy – it would seem of interest to anyone who considers commodity money as beneficial to economic development.  It goes without saying that trusted money facilitates trade; trade facilitates economic development.

I will not pretend to offer a detailed history or analysis; this is nothing more than an overview.  I have no conclusions to offer.  I may do more on this subject in the future…or not.  I would welcome any sources on the topic. 

To my understanding – and I once checked with someone who would know – there is not a rigorous analysis available of this period from an Austrian perspective.  As will become clear, the authors and sources I cite do not approach the topic from this perspective.

From Byzantine Coinage, by Philip Grierson (PDF) 

The Byzantine Empire considered itself a continuation of Rome.  The coinage of Rome disappeared with the great inflation that corresponded with the collapse of the empire.  Diocletian and Constantine introduced new coinage early in the fourth century; much of this coinage collapsed by the early fifth century:

In order to provide a stable subsidiary coinage, in 498 Anastasius introduced a series of multiples of the nummus, the chief of them being a copper coin worth 40 nummi and known as a follis. This denomination was to be one of the most conspicuous features of Byzantine coinage for the next six centuries, and since only the [gold] solidus and its fractions [the half (semissis) and the third (tremissis)] are earlier in date, it is with the creation of the follis that a history of Byzantine coinage can most conveniently be begun.

From this time until the late eleventh century, Byzantium maintained good coinage in gold, silver and copper.  Subsequently, debased metal was used for a time.  From 1300 to 1453, silver was used – gold was either debased or absent.

The transformation of the coinage thus outlined reflects, and is partly a consequence of, contemporaneous financial and economic conditions in the empire.

The Byzantine Economy

The Byzantine economy was among the most robust economies in the Mediterranean for many centuries. Constantinople was a prime hub in a trading network that at various times extended across nearly all of Eurasia and North Africa. Some scholars argue that, up until the arrival of the Arabs in the 7th century, the Eastern Roman Empire had the most powerful economy in the world. The Arab conquests, however, would represent a substantial reversal of fortunes contributing to a period of decline and stagnation. Constantine V's reforms (c. 765) marked the beginning of a revival that continued until 1204. From the 10th century until the end of the 12th, the Byzantine Empire projected an image of luxury, and the travelers were impressed by the wealth accumulated in the capital.

One of the economic foundations of the empire was trade. The state strictly controlled both the internal and the international trade, and retained the monopoly of issuing coinage. Constantinople remained the single most important commercial centre of Europe for much of the Medieval era…

The state retained the monopoly of issuing coinage, and had the power to intervene in other important sectors of the economy. It exercised formal control over interest rates, and set the parameters for the activity of the guilds and corporations in Constantinople, in which the state has a special interest (e.g. the sale of silk) or whose members exercised a profession that was of importance for trade.

Imports and exports were uniformly taxed at ten percent.

The Economic History of Byzantium: From the Seventh through the Fifteenth Century (PDF)

In the course of the seventh century, the Byzantine Empire found itself in a full-blown crisis, demographic, political, and economic.  The crisis had already begun, on all fronts, in the second half of the sixth century, in great part because of the plague and its devastating effects on the demography.

The empire, which had reached a high level of prosperity during the reign of Justinian I, was a very different state and economy in the middle of the seventh century.

It has been suggested that the military crisis itself was due to the plague, which undermined the possibility of resistance to Slavic, Avar, Persian, and, eventually, Arab attacks.  The crisis was of long duration, lasting until the late eighth century.

The situation, however, was not as grim as other scholars have suggested, nor did the darkest days last as long.

Three salient points may be made here. The first is the importance of the state, whose integrative role in the economy persisted until the eleventh century. In the period of crisis, the state recognized and reinforced the reorganization of the economy around agriculture.

The second point is that, nevertheless, we are not dealing with a state that exercised full administrative control over economic life or, even less, that monopolized economic activity. There was, rather, a combination of state action and individual entrepreneurship in regard to the important commodities—grain and silk—while the rural economy was in the hands of smallholders, and the economy of exchange in the hands of sea captains, sailors, and traders

The third point is that everything became much smaller in the course of these centuries….Cities became small; ports became small, and so did ships.  The trade carried out in them was relatively small-scale, but well regulated by a law code that seems to derive some of its provisions from the experience of the sailors, a hypothesis that would explain its longevity.

The last great outbreak of the plague was in 747.  Visible signs of the turnaround were apparent around the end of the eighth century and beginning of the ninth.  Monetary circulation and trade improved; the cities revived. 

…the economic and fiscal restructuring was successful and resulted in the beginnings of a virtuous cycle, in economics as in politics.

The Byzantine economy entered its expansionary phase much earlier than western Europe….The increase of population, the rising proportion of urban dwellers, the increase of production, and the contribution of the state in the form of greater security all stimulated trade, which was active in the ninth and tenth centuries, again following an upward curve that was to continue in the subsequent period.

Constantinople functioned as a great entrepôt of international trade, without losing its importance as a regional and interregional center. Because of the wealth concentrated within its walls, and the effects of the fiscal system, it played the role of integrating the economy of the state.

Important commodities, namely, grain and imperial silks, were subject to imperial interference, and the production of imperial silks took place in imperial workshops, for the most part.

Collecting the tax in gold, the state also paid out in gold the salaries of a large and well-functioning bureaucracy, as well as its other expenditures. Thus it controlled not only the minting of money but also the process of putting in circulation a very considerable proportion of the coin. Money changers were instrumental in making the move from copper to silver to gold.

…this system, which promoted social stability and favored measured expansion, also placed impediments in the way of rapid growth.

Rapid growth came in the eleventh and twelfth centuries, and “the Byzantine economy responded with remarkable flexibility.”  The time was marked by military defeats, increased economic activity and a debasement of the coinage.

Most sectors of the Byzantine economy experienced accelerated growth in the course of the eleventh and twelfth centuries. The period is characterized by a continuous growth of population, greater urbanization, increased production in all sectors, and the emergence in numerous urban centers of the production of manufactured goods, both luxury products and items of consumption for a middle-level market as well as for mass consumption….This is also a period in which free market mechanisms play a much greater role than before.

In terms of trade, apart from the increase in activity, certain other salient traits should be mentioned. The first is that the activities of the merchant took place in a climate where the mechanisms of the market were allowed to operate to a much greater degree than before…. Second, the merchants and bankers of the eleventh and twelfth centuries were a large, rich, and powerful group, certainly in Constantinople….Third, their activities increasingly took place within a larger context and in conjunction and eventually in competition with the activities of Italian merchants on Byzantine soil.

All was not well:

There was a crisis in this period in the monetary system. It came in the late eleventh century and was in part the result of the military and political disasters of this unstable period, increased thesaurization, and the reduction in monetary stocks.  Both the monetary and the fiscal system were reformed by Alexios I.  The great expenses necessitated by the grandiose foreign policy of Manuel I and the disastrous one of the Angeloi, in combination with a fiscal system that reduced the proportion of the surplus appropriated by the state, led to another crisis in state revenues in the late twelfth century.

Apparently, detailed price information is not available for this period – beneficial to understand the impact to prices of the debasement and militarization.

Hereafter, the Crusades and the growth of Italian centers of commerce reduced the relative importance of Constantinople. 

Generally speaking, it seems that a number of cities entered a phase, which would continue in the fourteenth century, of either a decline in their manufacturing activities or an integration of these activities into the progressively Italian-dominated trade system.

There was some recovery after 1261 and continuing until the middle of the fourteenth century; however, Italian merchants retained the stronger position.

In the 1340s, a conjunction of factors had catastrophic effects on the population, the agriculture, and the economy of exchange.  A combination of endemic wars, the previous expansion into marginal lands, the impoverishment of the peasantry, the plague that struck all of Europe, the Ottoman expansion, and the subsequent long restructuring of the trade of the eastern Mediterranean resulted in steep decline

The decline was present throughout Europe; plague and war took its toll.  In 1453, Constantinople was taken by Moslem invaders.

For Byzantinists, it is of interest to note that modern economists recognize not only a positive role to government and the market both, but also the limitations of both.

Through the period of slow growth, the state supported those institutions that promoted stability, stability acquiring economic importance in a fragile system: the small producer, the just profit, the just rewards to labor. The period of more rapid growth is concomitant with the infusion of cash into the economy, the engagement of capital through the increase of the interest rates, the liberalization of price formation, and the acceptance (always with some strictures) of the formation of profits through the functioning of the market.

If sustained economic growth consists of the long-run per capita rise in income, it is obvious that no European economy achieved it until the sixteenth or seventeenth century.  Neither did the Byzantine economy. The question is whether there were specific reasons that made it lose its coherence. The answer lies in a combination of political and economic factors. In the twelfth century, the state retained a large part of the resources and the power to distribute them, as well as the surplus.

As noted, I offer no conclusion.  Here is an example in history of long-term usage of commodity money.  One task certainly called for is a timeline, capturing economic, political, health, and military developments – this I might consider starting.  The economic matters are worth a review and analysis from a free market / Austrian perspective.


  1. Always fun following Bionic's intellectual journeys. I've also always been a timeline freak. It's such a great way to observe contemporaneous events. It's like a drone's eye view of civilization: military here, economic there, political there, all time synchronized. Lovely.

  2. Armstrong just wrote an article referencing the Byzantium coinage:
    "Normandy was rising as Byzantium was falling. The real shock came during the Great Monetary Crisis of 1092. The debasement of the Byzantine gold coinage took on a real momentum as finances went into deficit starting around 1066. Former money changer/forger of coins Michael IV the Paphlagonian (1034–41) assumed the throne of Byzantium in 1034 after the Empress Zoe fell in love with him. It was this money changer who began the slow process of debasing both the gold coinage known as the tetarteron nomisma and the histamenon nomisma."

    This story has vikings in it!