December 5, 2004

Like ancient Rome, we're in a sea of borrowing

Posted in Celtic Tiger · 5 comments ·

Cleopatra was born in September 68 BC. The same year, Pompey (who was eventually to be murdered in Cleopatra’s kingdom of Egypt) finally conquered all of Spain.

The Romans conquered Iberia for its mineral wealth. Within years,100,000 slaves would be toiling away in labyrinthine tunnels extracting enormous quantities of silver.

With Spain vanquished, Pompey the Great turned his attention to Asia. By 63 BC, he was sacking Jerusalem, having conquered all of ancient Syria.

His armies were on the Euphrates in the east, the Black Sea in the north and the Red Sea in the south. The world was his and Rome’s, and this meant that gold – huge quantities of it – flowed into Italy at a rate never seen before.

Naples was ancient Rome’s number one port, dominated by Mount Vesuvius.

The volcano acted as a marker for ancient sailors, who trained their bows on its flat-topped silhouette for guidance.

As the bullion flowed in, it was melted down into gold coins adorned with the letters SPQR (Senatus Populusque Romanus – the Senate and People of Rome).

SPQR reiterated to everyone, citizens and subjects alike � who was in charge – the Senate and the Roman people.

Back then, coins had two functions. As well as money, coins served as a branding exercise for the empire. Money was political.

As gold flowed in, more coins were minted. In Italy, every conquest led to an increase in the money in circulation. The transfer of wealth from the conquered provinces to Italy (and Rome in particular) was staggering.

But all this cash cascading into the country pushed up the price of everything. Despite living in the fastest-growing, richest country in the world, ordinary Romans began to complain about not being able to afford anything.

Cicero tells of stories making their way back to Rome about the good value available in Athens, never mind Jerusalem.

Even Alexandria � the new York City of the ancient world � made Rome look expensive. Fearing unrest, the Senate passed a series of grain laws, making subsidised grain available to the plebeian slum-dwellers of Rome.

Indeed, from about AD 60 onwards, a series of populist senators and tribunes consistently tried to get laws passed that would make grain free in Rome, to curry favour with the masses. (And there was I thinking that the 2004 budget was unique.)

The flip side of the gold bullion boom was very evident in house prices. Property prices soared. Nowhere was this rise more stratospheric than in the swanky resort of Tusculum just outside Naples – the Sandy Lane of its day.

Pompous merchants and returning generals tried to outdo each other by building more and more ostentatious villas. In the years after the fall of Asia to Pompey, house prices in Rome quadrupled. Sound familiar?

All the while, traditionalists in Rome � those who stood for the old Roman values of the gods: virtue, honour and the image of the Roman as an erect citizen of impeccable standards – were aghast.

The decadence, opulence and rampant consumerism could not be good; they contended that all this gold was not making anyone happy.

Even cosmopolitan commentators such as Cicero (who had championed the liberation of empire) began to urge their compatriots to �tiptoe’� back to Rome’s traditional values.

However, nothing more disgusted the traditionalists than the Nigella Lawsons of the day. The most conspicuous character to emerge in boom-time Rome was the celebrity chef. By 60 BC, Rome had become obsessed with cooking, restaurants, exotic delights from the East and the elevation of certain celebrity chefs to instant fame.

The great Roman scribe Livy noted that the chef �began to be prized, and what once had been a mere function came to be regarded as high art’�. In a city with no previous experience of money or big spending, food snobbery took off.

Anyone could have a couple of slaves recently snatched from Spain, Syria or north Africa, but to be really posh, one had to display taste � and what better indicator of taste than food?

All classes of exotic chefs, spices and foods began turning up in Rome. Within months, the millionaires and noted luminaries joined their cooks in the kitchens, sampling and cooking dishes of their own, inventing their own recipes and swapping tips with other foodies.

Among the favoured food fads in Rome at the time were �fatted hares, scallops and the vulvas of sows’�, according to Rubicon: the Triumph and Tragedy of the Roman Republic by Tom Holland.

The oddest fad at the time was for fish.

Rich Romans were enthralled by their fish. Initially, the new rich built massive saltwater fish tanks at home – at enormous expense – so that they could catch their own fish. This made way for �fish collections’, and the rich tried to out-fish each other with increasingly bizarre creatures scooped from the deep and installed in the saltwater fish tanks of Rome’s glitterati – perhaps the Hermes Birkin handbag of its day.

Fast-forward to today and we see broadly similar trends in Ireland. The most important economic publication this week was not the budget, but the publication the day before of our borrowing figures for October.

This is where the real action is, and this is why Ireland is behaving like ancient Rome. Like the Romans, we are drowning in other people’s money.

We are getting into debt six times faster than our EU neighbours. Total borrowing increased by 25 per cent in October.

This is a phenomenal figure. Bathing in a sea of other people’s money, like the Romans, we are spending it on increasingly faddish and meaningless stuff.

This spending and the related cravings will be evident in the next three weeks as the annual Christmas splurge begins.

Faced with rising prices, a soaring cost of living and restless voters, the government – like the Roman Senate giving away grain – introduced a budget last week to give the impression that it cares.

But this doesn’t cut the mustard, because the root cause of the voters’ anxiety is the rising cost of living, which is being driven by excessive borrowing.

The Central Bank pointed out that the last time borrowing was this high was back in 2000,when the economy was growing at 10 per cent. By alluding to this, the Central Bank was posing the simple question: where is all the money going?

How come an economy can be growing by only 4 per cent while our borrowing is up by 25 per cent? More importantly, when wages are rising at around 4 per cent, how could we pay all these debts if interest rates were to rise?

In Roman times, wars caused rates to rise, allowing Caesar to buy assets in 50 BC for half nothing. Wars might not necessarily be Ireland’s greatest fear, but shocks do occur in the modern world.

In the meantime, we’ll be content to borrow, eat, swap recipes and sit back and watch Nigella’s Christmas special, which promises to be absolutely fabulous, darling.

  1. Johnny Waldron

    Great article. I found the comparison with ancient Rome
    very entertaining. Short of an external shock and a
    consequent ECB interest rate increase the asset boom will

    I can see the headlines in the property supplements should
    such an increase come to pass: Free SUV and Hermes handbag
    with every buy to let apartment!

  2. Eco

    Broadly speaking, the Industrial Revolution spawned a move
    away from agrarian lifestyles to lifestyles based on
    machine production driven by the energy stored in fossil
    fuels. Over a period of two and a quarter centuries the
    changes spawned by this Machine Age have radically altered
    the way that people live and the way in which Planet Earth
    sustains itself.

    One of the crucial changes wrought by the Machine Age was
    the way in which people sheltered themselves.
    Traditionally, shelter was self-built and a modicum of
    self-sufficiency in food production was the norm. With the
    ushering in of the Machine Age paid work was favoured as
    the way in which to provide these basic necessities.
    Specialisation became the norm – instead of being involved
    in a wide range of ‘survival activities’ such as
    sheltermaking, food production, craft and animal
    husbandry, one specialised in a particular job and with
    the proceeds from that one purchased whatever one needed.
    So, the modern industrialised economy was born.

    Now, more than two centuries on, the weakness of
    industrialised economies are plain to see. This is not to
    dismiss the gains. Rather, it is necessary to understand
    what has gone wrong and develop ways to moderate the
    negative effects while retaining the positive ones. No-one
    is quite sure how to do this and Sustainable Development
    is the closest that anyone has come to proposing a viable
    way of achieving it. The need for this is quite obvious –
    global warming; food contamination; waste mountains and an
    energy crisis are all contributing to an erosion of the
    Quality of Life that we have been led to expect from
    industrialised economies. This is not supposed to be the
    case – we are so well off!

    If this explains why there is a need for Sustainable
    Development, explaining what it actually means is a
    different matter! Industry & Government are adept at
    explaining Sustainable Development in their own terms –
    Sustaining Progress or Sustaining Growth. This translates
    as ‘Business As Usual’! For those concerned with ‘living
    sustainably’ however their understandings have an urgency
    that recognises the momentum of Planet Earth’s response to
    pollution and the reckless exploitation of its natural

  3. laura

    I agree with this but part of the reason why Ireland’s
    borrowing is changing so rapidly is because traditionally
    Ireland had much lower levels of debt. When you remove
    mortgage debt Ireland still has lower debt levels. Also I
    think the UK is fast approaching debt saturation levels and
    attention is moving to the Irish market by desperate

    Lastly many Irish lenders are extremely irresponsible. I
    know of a case of a lender, who basically raised a
    customers credit limit on a credit card to 3400 within less
    than 12 months of sending her current account overdraft to
    a debt collector (it was paid in full, but before the last
    payments were made the Bank was already hiking up the
    credit limit). The lending practices are getting
    increasingly desperate and we are starting to see the
    growth of the “sub-prime” market – a sure indictator of
    desperate lending.

  4. Paul Goggin

    Thats crazy laura. I have another crazy story about a
    bank. Who gave a 600€ OD to a person who had only been
    with them one month and had never made any transactions in
    that account. This person also got a CCard one week
    earlier through the same account. Desprite lending or is
    a case of throwing the fish line anywhere and holding on
    till they can get as much profit as they can. Id like to
    know is this a common practice in banks? anyone like to

  5. Bertie

    for more facts and discussion about ireland check out

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