The Contexts of Roman Society, Part 12: Profit and Justice
[1] The importance of the market and market relationships had been growing in Roman society markedly over the past century by 1640. While there was still much that was untouched or only minimally involved, this process had encouraged the production of more and different products, both agricultural and artisanal. The popularity of pizza and the resulting market demand was the spur for tomato production, much to the benefit of peasant gardeners. The blue turbans of Antioch, the most common headgear of Greek Syrians, with dinosaur patterns stitched into them, which are still sold there today, date back sometime in this period.
But all was not roses. Market interactions created winners but also losers, and across the Empire there were growing signs of a concentration of wealth in fewer and fewer hands. And this was still a pre-industrial world with limited ability to improve production, so one person’s gain was usually one person’s loss, and the loss would not be made good by expanded production. There were growing concerns among Roman intellectuals about the justice of the system. Very few wanted to wipe it all away; they wanted their tomatoes and blue turbans. Yet the benefits should not be the fruits of exploitation and injustice. These concerns grew more pressing after the War of the Roman Succession and the depression beginning in the late 1630s. However in their musings about how to balance profit and justice, these Roman intellectuals had precedents.
Roman society, like its Latin neighbors to the west and Muslim neighbors to the east, had grown out of its medieval forebears. Medieval Rhomania, quite unusual for a medieval society west of India, had much less issue with the concept of interest. There were a few brief periods where requiring interest on loans was banned by imperial legislation but in the millennium of the Middle Ages, these added up to a few decades, quite a contrast to the Latin West. (This obviated the need for Jewish moneylenders to get around the usury ban, so Rhomania never developed the Jewish banker stereotype.)
This is not to say there were no issues with the concept of interest; both Roman and Latins were operating out of a shared Christian morality. But Romans were far more comfortable with the idea, provided there were certain restrictions to prevent abuse. Clerics, under no circumstances, were to demand interest on loans. One frequent criticism of monasteries was their effort to get around this restriction through creative bookkeeping and terminology use in manners that would’ve instantly been recognized by Latin merchants trying to work around the Catholic Church’s ban on usury.
Lay people did not have to use such creativity, but a key point was that while interest was allowed, there were certain limitations. Going back to the Code of Justinian, interest-bearing loans were permitted, but under certain restrictions, principally a cap on the rate of interest that could be demanded. Interestingly, the highest rate a dynatos could charge was lower than if the lender was of a lower social class. Interest caps could vary, with maritime loans having the highest cap of 16.67% on the grounds that these were the riskiest type of investment.
The maritime loan provision illustrates a key point; allowance of interest was intimately connected with the presence of risk. No risk, no interest. Interest was effectively a compensation to the lender for the possibility of losing the principal they had loaned. If repayment was guaranteed absolutely no matter what happened, then the charging of interest was not considered socially acceptable. The greater the risk, the greater the interest, but still only to a point so as to avoid exploitation of the borrower.
This picture underlines much of Roman economic theory, much of which dates back to this period of ferment, although drawing heavily on medieval precedent. Interest-bearing loans were viewed as necessary to encourage commerce and development and so were allowed, but they had to be kept within bounds in order to avoid exploitation. Some Saints’ Lives also illustrate this, with honest and hard-working merchants being praised and their profit considered a just reward for their effort, while lazy or dishonest or exploitative merchants were condemned as evildoers.
There is another example of the desire to allow interest-bearing loans while limiting the ability of abuse. Most loans were to pay a certain amount of interest over a set period of time (a year for example) at which time the principal was to be repaid. However if the borrower could not repay the principal at the specified time they could continue the loan by still paying the interest rate. This could be to the advantage of the lender as they got more interest while still being owed the principal and so this was one way to milk the borrower. But Roman law specified that the amount of interest paid could never exceed a sum equal to double the principal. After that point, no further interest could be demanded and any future repayments could only go to paying down the principal.
This ideal was not just restricted to interest-bearing loans. There was also the concept of the just price and the just profit, which were linked. The merchant could make a profit on his transactions, as he provided a useful service moving goods from place to place and making them available and needed an incentive. However there was a limit to how much profit they could reasonably expect; anything more was considered exploitive price-gouging, which was unacceptable. Exactly where the line should be drawn was argued, but the common denominator was a 10% profit being considered the maximum just profit.
The just price oftentimes was just assumed to be the same as the market price, which could and did fluctuate based on supply and demand dynamics. After all, if the price of bread was going up because of a scarcity of flour, this was not the fault of the bakers who could hardly be expected to work at a loss. Note though that this assumed a real scarcity being the cause; an artificial scarcity would not have been treated nearly so lightly. However having said that, a sharp distinction between the two was not always easy to draw. Very often a preexisting real scarcity would be exacerbated by unscrupulous merchants hoarding their wares to further drive up the price.
Even when the just and market price were considered to be the same, there were laws against excessive demands, mostly focused on land purchases. In times of extreme need, an unlucky person might be forced to sell their land for far less than it was really worth. In the event that a sale price of land was half or less than the just price (assumed to be the regular market price), the buyer was obliged to return what he had bought and would also forfeit what he had paid. However given how repeated these types of legislation appeared throughout the Middle Ages, clearly enforcement was questionable. And even so, that still allowed substantial leeway for taking advantage of someone in extremity; a land purchase at 51% of the just/market price would’ve been legal under these laws.
As that example shows, while laws might exist, enforcement was not guaranteed. Some of this was simply practical. Roman authorities did not have the ability or desire to make sure that the grandmother selling eggs at a town market stall was making no more than a 10% profit. It was too small of a scale, and in cases like this the need for social support from one’s local community was a good brake on exploitation. After all, if one gouges one’s neighbor on the price of eggs and cheese, they were likely to not be too quick to help you when your barley crop failed.
The Roman government’s involvement mainly focuses on three specific areas, large scale transactions, essential foodstuffs, and Constantinople specifically. The reason to focus on large scale transactions is obvious. To maintain civic order, ensuring a good and cheap supply of basic foodstuffs was necessary. To maintain a just price, the Roman government would set a price cap on certain goods, such as cheaper types of bread, fish, and wine. But these would be determined daily in consultation between the Eparch (or his official) and the leaders of the appropriate merchants, and would fluctuate based on supply and demand, and were supposed to allow for the just profit, but no more. The government would subsidize these prices at certain times, primarily when scarcity drove the cost of supply up.
Because of the especially strong need to maintain order in Constantinople, the Roman government was more involved here. As early as the 9th century, the Eparch’s Code specified that if a just wage was not being paid to construction workers in the city, the contract was invalidated. While restricted and vague on the details, this is commonly cited as the precedent for all future Roman minimum wage legislation.
Thus when Romans in the 1600s were looking for ways to balance the desire for profit and the desire for justice, they had precedents going back centuries from which they could draw. But many of these precedents had been weakened since they were created. Especially with the arrival of Italian merchants en masse in Rhomania in the 1100s, the tendency had been to simply let market forces and completely free negotiation dictate the price, without much in the way of efforts to ensure a concept of a just price and just profit prevailed.
Personal relations could keep a damper on exploitation, as cheating the neighbors would usually backfire in the end. But the market expanded in importance in the century after 1550, and the relationships forged there were often impersonal, increasing opportunities and incentives for exploitation. The economic fluctuations of the 1630s were, in Roman eyes, the scene of an unprecedented level of exploitation and greed. Demetrios III’s insistence on honoring war debts that fell to small-scale Roman government bond holders first was an important part in temporarily calming serious public agitation on the matter.
However that insistence had not pleased everyone. The larger-scale merchants and financiers who loaned the Roman government money had not been happy, and they could make the historically correct claim that their money services had been much more significant in financing the Roman war effort.
This dispute helps illustrate the debate going on in Roman society in the middle of the 1600s. Some argued that the government was too involved. The economic crash had been the direct result of a massive public loss of trust in the Roman credit system, but that loss of trust had come about because the determined maximum ratio of paper IBCs to gold had been breached. But the system had managed to function above the determined ratio, so the argument went that if the maximum ratio had never existed in the first place, the loss of trust never would’ve arisen in the first place.
But there were others who disagreed. They wanted these old precedents of the just price and the just profit and just interest to be revived, strengthened, and expanded. Most Romans accepted a degree of economic inequality, even a relatively stark one. But the level of inequality, the disparity between the ultra-rich and the ultra-poor, in Constantinople and to a lesser extent in the other big cities, shocked and dismayed many of those same Romans. This was not a model they wanted to encourage and broaden. And they felt if the state intervened less, it would only strengthen the advantage of the powerful against the weak.
And if justice limited the amount of profit, of the amount of accumulation, so be it. Constantinople in 1203-04 had been a fantastically wealthy city, but it had not been able to use that wealth to defend itself properly, and the results had been devastating, and very very nearly fatal. Gain alone could not be the only metric.
Andronikos Hadjipapandreou, a Syrian Greek priest of the age, said the following. “It is the duty of the Emperor and his officials to provide justice, and justice to all, and justice everywhere. The market stall is not an exception. A highway robber who steals is punished with the full force of law, but a banker who robs with exorbitant interest suffers nothing. This is wrong. This is a failure to provide justice, and for those who have failed in their duty, the truth is simple; their meat is false.”
[1] Sources for this section are:
Demetrios Gofas, “The Byzantine Law of Interest”, in
The Economic History of Byzantium: From the Seventh to the Fifteenth Century, pgs. 1095-1104.
Olga Maridaki-Karatza, “Legal Aspects of the Financing of Trade,” in
The Economic History of Byzantium: From the Seventh to the Fifteenth Century, pgs. 1105-20.
Angeliki E. Laiou, “Economic Thought and Ideology”, in
The Economic History of Byzantium: From the Seventh to the Fifteenth Century, pgs. 1123-44.
