Does Democracy incentivise demand side economics?

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Welcome to Finance and Fury, the Furious Friday edition

I have identified a thread through history in the emergence of demand side democratic societies. Where there is a centralized authority, there is a need for ever increasing demand of the mobs and its path towards the downfall.

Rome is a good example:
  • Centralized authority and the need for increasing demand of the mobs lead to the downfall of Rome
  • It was a kingdom, then a democratic republic, and then a dictatorship
  • During Sulla’s rule, there was a civil war, which made him strip Julia Caesar’s family of their influences
  • Caesar was the High Priest of Jupiter and went into hiding to save his life
  • Caesar joined the army and rose through the ranks, he also knew how to gain public support back in Rome
  • Caesar was kidnapped and ransomed for 20 talents
  • He then came back and had the pirates crucified
  • By 60BC Caesar was elected consul however used this position to gain further power
  • To build favour, he redistributed a lot of land to the poor and the soldiers of his wars
  • The downfall of Rome and the Slave economy – remember that slavery was everywhere in the ancient world
  • The import of free labour destabilised the economy
  • Through the conquest of wars and territory, there were a lot of slaves
  • This introduction of free labour replaced those in paid labour positions
  • Caesar needed to keep slavery around but also keep himself popular with the Roman people, hence the land redistribution tactic. This was funded by his very wealthy friends
  • The Senate then sent Caesar to the border of Gaul for a governorship – so he couldn’t get up to much
  • Caesar has 4 legions under his command and ventured into the unconquered Gallic territory
  • Some Gallic allies were defeated in a battle, so Caesar stepped up and hunted down the tribe
  • As a response, some tribes unifying and arming up – Caesar took that as a sign of aggression and invaded without senate authority
  • At one point, Caesar sold 53,000 people captured into slavery
  • The number of senators that didn’t like him was growing, they thought he was a war criminal, but the Roman army loved him and so did the people
  • The Senate wanted his resignation as governor, however, Caesar knew he would be prosecuted without his immunity as governor
  • Caesar then pursued Pompey and ignited a civil war, eventually capturing Pompey
  • Caesar is then appointed as a dictator for approximately 1 year
  • He saw a need to bring the power back into a central authority
  • The revolt of Italian tribes who wanted Roman citizenship, Caesar defeated them and gave the allies access to citizenship to avoid further wars
  • Caesar had now gained supreme power through the mobilisation of the masses
  • A new constitution was established to accomplish 3 goals
  • To gain the right of citizenship you had to ‘live as the Romans did’
  • Caesar needed more money, so he opened the treasury
  • Magistrates were no longer representatives of the people, they were representatives of the dictator
  • The senators were involved in their communities and often held accountable for their actions by the people they represent and other senators
The Economic side:
  • Rome switched from Supply to Demand slowly over 40 years, everything changed from 1AD onwards
  • Citizens were only really taxed during times of war
  • The wealthy ones got citizenship because they were the ones doing the fighting and could afford the weapons, armour, and horses
  • Each province has to pay a certain amount, someone would pay taxes up front and then go to the people to collect it back
  • When Rome went to an Empire, the leaders need more money for increased spending and more men for the army
  • The tax system was transformed into a system of individual income tax
  • This increased spending led to an economic downturn of Rome
  • The emperors made it illegal to leave Rome, and forced people to work
  • Established family occupations
  • This was the birth of feudalism and a monarchy again
  • The ever spending of the state and increase of taxes led to the decline of Rome
Moral of the story?
  • Fueling demand through authoritarian controls never works
  • Indentured servitude is started
  • In the pursuit to stop more civil wars, Caesar ended up creating more
  • They lost what made them great
  • When you have a system that rewards popularity by demand, you fail
  • Supply side isn’t some uncaring process, it gives the people choice
  • The market decides, based around our wants and demands. Until regulation and controls influences come about, then there are unfair competition increases
  • The emperors of Rome couldn’t afford not to spend money, their power was amassed by making the people happy

Thank you for listening today. If you would like to get in contact, you can do so here.

Resources:

https://www.researchgate.net/figure/The-rise-and-fall-of-the-Roman-Empire-in-observed-numbers-The-depletion-of-silver-in_fig59_283440121

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