The Problem of the Shipwrecked Sailor: When Money Becomes Useless

The Covid crisis highlighted an already existing problem: that money is useless if you can’t buy anything useful with it. It is the problem of the shipwrecked sailor on a deserted island. (image from Wikimedia): money won’t help him survive. So, lockdowns and restrictions gave us a taste of a future where money may be worth nothing simply because there is nothing you can buy with it. It is a problem ultimately connected with the unavoidable depletion of the fossil fuels that form the basis of our economy: with less energy, we cannot keep making the stuff that makes it possible to indulge in conspicuous consumption. So, after the Covid, society will never be the same. Taking into account that history never repeats itself, but it does rhyme, here I examine the situation starting with a parallel with the history of the Roman Empire.

The Roman Crisis: When Money Couldn’t buy Anything

Imagine living in Rome at some moment during the 1st century AD (the time of Lucius Annaeus Seneca). It was a glorious time for the Roman Empire. Rome, with perhaps one million inhabitants, was the largest city in the world and probably the largest emporium ever seen in history. Through the Silk Road that went from one side of Eurasia to the other, one caravan after the other was bringing to Rome all sorts of goods. Spices, pepper, cardamom, cloves, cinnamon, sandalwood, pearls, rubies, diamonds, and emeralds. And then ivory, silk, glassware, perfumes, jewels, unguents, and much more: exotic birds, special food, slaves to be used as workers and as sex objects. And there was the entertainment: in Rome, you had theaters, chariot races, gladiator games, fights among exotic animals, and all sorts of performers with their magic tricks, their songs, and their spectacles.

You could enjoy all that if you had money. And the Romans had money: they minted it. They had control over the richest precious metal mines of the ancient world, in the northern region of Hispania. There, tens of thousands of slaves, perhaps hundreds of thousands, were engaged in a work that Pliny the Elder described as “the ruin of the mountains” (ruina montium), the process of crushing rock into sand to extract the tiny specks of gold and silver it contained.

With the gold and the silver they mined, the Romans paid their legions. Then, the legions would invade regions outside the Empire and capture slaves that would mine more gold to pay more legions. With that gold, the Romans also paid for the luxury goods they imported and that kept the economic machine of the empire working. For an empire to exist, money is everything.

Of course, then as now, not everyone had the same amount of money. In Rome, the rich took most of it, but some money trickled down to the artisans, the performers, the employees; everyone from cooks to prostitutes would get a share, maybe a small one, but still something. Even the slaves, destitute by definition, could own a little money. It is possible that, occasionally, their masters would give them a few coppers to buy a cup of Falerno wine or admission to the chariot races.

But the rich Romans were truly rich. And their lifestyle was all based on showing off their wealth. Read this excerpt from Cassius Dio about a wealthy Roman patrician, Vedius Pollio.

. . . he kept in reservoirs huge lampreys that had been trained to eat men, and he was accustomed to throw to them such of his slaves as he desired to put to death. Once, when he was entertaining Augustus, his cup-bearer broke a crystal goblet, and without regard for his guest, Pollio ordered the fellow to be thrown to the lampreys. Hereupon the slave fell on his knees before Augustus and supplicated him, and Augustus at first tried to persuade Pollio not to commit so monstrous a deed. Then, when Pollio paid no heed to him, the emperor said, ‘Bring all the rest of the drinking vessels which are of like sort or any others of value that you possess, in order that I may use them,’ and when they were brought, he ordered them to be broken. (Roman History (LIV.23))

This story must have been well known since is reported also by Seneca. Plinius and Tertullianus. That makes me suspect that it was false, or at least exaggerated. Apart from the “lampreys” that were probably “morays,” it may well have been a fabrication by Octavianus, aka Augustus, who was truly an expert in self-promotion. But it doesn’t matter whether the story is true or not. The ancient Romans found it believable, so it gives us a hint of their way of thinking.

Probably, the Romans didn’t see the moral of the story in the same way we see it nowadays. For them, it was perfectly normal that slaves could be put to death by their owners at any moment, for any reason. What they saw in the story was, rather, someone who had overstepped the limits of his status. Pollio had tried to impress the emperor first with his wealth, his precious glassware, and then with his power, ordering the death of a slave for a trifle. Then, he was justly humbled by Emperor Augustus who restored the correct hierarchical order.

The point of this story is that it shows that the Romans were practicing what we call today “conspicuous consumption.” Pollio was filthy rich, and he loved to show off his wealth. Surely, he was not the only one: there are other examples of rich Romans displaying their wealth with sumptuous villas, lavish entertainment, fashionable clothes, jewels, and entourages of slaves and hangers-on. Then, the Emperor was the richest person in Rome and it was traditional that he would show his wealth and power by distributing food for the poor and entertaining citizens with extravagant games and spectacles.

In short, Imperial Rome was not unlike our age: the rich were enormously rich, but something of their wealth trickled down to the rest of the people. Surely, on all the steps of the social ladder, people played the consumption game in order to keep up with the Joneses. It was always the same story. Money is a tool for commerce, of course, but also a way to establish the social hierarchy.

Then, things started going wrong, as they always do. For the Empire, controlling a territory that stretched from Britannia to Cappadocia required an enormously expensive military apparatus and it was becoming more and more difficult to find enough money for the task. We have no records of the output of the precious metal mines in Roman times, but from the archeological data, it seems that depletion was already biting during the early centuries of the Empire. It is typical of mining: you don’t run out of anything all of a sudden, but the cost of extraction keeps increasing.

Surely, enormous efforts were made to try to stave off the decline of the mines. But the Seneca Cliff is unavoidable when you deal with non-renewable resources. The cliff started approximately at the beginning of the 2nd century AD. One century later, the imperial mines had ceased producing anything. They would never recover.  (image from McDonnell et al.)

No gold, no empire. The mining collapse nearly brought the empire to its end during the 3rd century. It was a series of reciprocally reinforcing effects. Less gold meant fewer troops, which meant fewer slaves, and that, in turn, meant even less gold. The result was a series of civil wars, foreign invasions, general turmoil, and decline.

The Roman Empire could have disappeared by the end of the 3rd century. In practice, it managed to survive for a couple of centuries more in a much poorer version. For one thing, the Romans couldn’t afford anymore the luxuries that they once would pay with the gold they mined. As you would expect, the poor were the first to be hit, while the rich tended to maintain their extravagant lifestyle as long as they could. But the whole society was affected. Already with Augustus, the first emperor, we see a legal trend that aimed at limiting the excesses of wealth that the Romans could display. It was a gradual process that was completed only with the diffusion of Christianity in Europe and Islam in North Africa and the Middle East.

For the late Roman Empire, the problem was not just that the system had run out of gold. Surely the rich Romans still had some gold. See this gold solidus coin minted at the time of emperor Constantine the Great, in mid 4th century AD.

But what could you buy with these beautiful coins? At that time, all the Western Roman Empire could produce were legions and tax collectors and, without imports from abroad, Rome had become a grim military outpost, not anymore the greatest emporium of the world. Those who still had gold found themselves in the position of a shipwrecked sailor on a deserted island. Coconuts aplenty, perhaps, but no way to play the game of conspicuous consumption.

So, in these late Roman times, gold had lost much of its luster. Those who still had it started burying it underground, with the idea of keeping it for better times. Modern archaeologists are still finding gold buried at that time. That was the probable origins of our legends about dragons living in caves and sitting on hoards of gold: already in Medieval times people knew that plenty of gold had been buried, unfortunately for them, they lacked the metal detectors we have today! In any case, that was the end of the Roman Empire. As I said, no gold, no money, no empire.

Creative money: the relics of Middle Ages

When the Roman Empire faded, it was replaced in Europe by the era we call the Middle Ages. Then, people found themselves with a big problem: how to keep society together without the precious metals needed to mint money? And, even worse, without much that money could be spent on? The Middle Ages were a period of fragmented petty kingdoms and scattered villages, but there still was a need for a commercial system that would move goods around. But how to create it without metal money?

Our Medieval ancestors creatively solved the problem with a completely new kind of money. It was based on relics. Yes, the bones of holy men, meticulously collected, authenticated, and issued by the authority of the time, the Christian Church. Not only relics were rare and sought after, but they could also provide a service that not even the Roman gold could provide when it was abundant: health in the form of divine interventions. (In the figure, 18th-century relics owned by the author. They look like coins, they feel like coins, they are shaped like coins — they are coins!)

These relics were a form of virtual money but, after all, all money is virtual. Even a gold coin promises something (wealth) that in itself cannot guarantee unless there is a market where you can spend it. And the fact that money can be spent depends on people believing it to be “real” money, mostly an act of faith. In the same way, a relic is a virtual object that has no value in itself. It promises something (health) that can be delivered if you believe in it. It was, again, an act of faith based on the belief that the little chunks of bone that the relics contained were actually coming from the body of a holy man of the past.

The beauty of the relic-based monetary system was that relics were not “spent” in markets. You could own relics, but you could grant their health benefits to others and still keep the relics. In other words, you could spend your money (eat your cake) and still have it!. Relic-money was managed mainly by public institutions such as monasteries and churches. They owned the most prized relics and were the places where pilgrims flocked to be healed by the powerful holy aura that these relics emanated.

The commercial system of the Middle Ages evolved in large part around relics. Travel was encouraged in the form of pilgrimages to the holy sites, and that would create an exchange economy based on charity. Conspicuous consumption was simply not possible in the relatively poor economy of the Middle Ages. Consequently, the Christian philosophy de-emphasized consumption and condemned social inequality. The highest virtue for a Medieval person was to get rid of all their material possessions and live an austere life of privation. Of course, that was more theoretical than practical, but some people were putting this idea into practice: just think of St. Francis.