The Fall of Rome (
http://www.cato.org/pubs/journal/cjv14n2-7.html)(Bruce Bartlett)
Constantine (308-37 A.D.) continued Diocletian's policies of regimenting the economy, by tying workers and their descendants even more tightly to the land or their place of employment (Jones 1958). For example, in 332 he issued the following order:
Any person in whose possession a tenant that belongs to another is found not only shall restore the aforesaid tenant to his place of origin but also shall assume the capitation tax for this man for the time that he was with him. Tenants also who meditate flight may be bound with chains and reduced to a servile condition, so that by virtue of a servile condemnation they shall be compelled to fulfill the duties that befit free men [Jones 1970: 312].
Despite such efforts, land continued to be abandoned and trade, for the most part, ceased (Rostovtzeff 1926). Industry moved to the provinces, basically leaving Rome as an economic empty shell; still in receipt of taxes, grain and other goods produced in the provinces, but producing nothing itself. The mob of Rome and the palace favorites produced nothing, yet continually demanded more, leading to an intolerable tax burden on the productive classes. [13]
In the fifty years after Diocletian the Roman tax burden roughly doubled, making it impossible for small farmers to live on their production (Bernardi 1970: 55). [14] This is what led to the final breakdown of the economy (Jones 1959). As Lactantius (1984: 13) put it:
The number of recipients began to exceed the number of contributors by so much that, with farmers' resources exhausted by the enormous size of the requisitions, fields became deserted and cultivated land was turned into forest.
Although Constantine made an effort to restore the currency, subsequent emperors resumed the debasement, resulting in renewed price inflation (West 1951). Apparently, Emperor Julian (360-63 A.D.) also refused to believe that the inflation was due to debasement, but rather was caused by merchants hoarding their stores. To prove his point, he sent his own grain reserves into the market at Antioch. According to Gibbon (1932: 801),
The consequences might have been foreseen, and were soon felt. The Imperial wheat was purchased by the rich merchants; the proprietors of land or of corn withheld from the city the accustomed supply; and the small quantities that appeared in the market were secretly sold at an advanced and illegal price.
Although he had been warned that his policies would not lower prices, but rather would exacerbate the shortage, Julian nevertheless continued to believe that his policy worked, and blamed complaints of its failure on the ingratitude of the people (Downey 1951).
In other respects, however, Julian was more enlightened. In the area of tax policy, he showed sensitivity and perception. He understood that the main reason for the state's fiscal problem was the excessive burden of taxation, which fell unequally on the population. The wealthy effectively were able to evade taxation through legal and illegal measures, such as bribery. By contrast, the ordinary citizen was helpless against the demands of the increasingly brutal tax collectors.
Previous measures to ease the tax burden, however, were ineffective because they only relieved the wealthy. Constantine, for example, had sought to ease the burden by reducing the number of tax units--caputs--for which a given district was responsible. In practice, this meant that only the wealthy had any reduction in their taxes. Julian, however, by cutting the tax rate, ensured that his tax reduction was realized by all the people. He also sought to broaden the tax base by abolishing some of the tax exemptions which many groups, especially the wealthy, had been granted by previous emperors (Bernardi 1970: 59, 66).
Nevertheless, the revenues of the state remained inadequate to maintain the national defense. This led to further tax increases, such as the increase in the sales tax from 1 percent to 4.5 percent in 444 A.D. (Bernardi 1970: 75). However, state revenues continued to shrink, as taxpayers invested increasing amounts of time, effort and money in tax evasion schemes. Thus even as tax rates rose, tax revenues fell, hastening the decline of the Roman state (Bernardi 1970: 81-3).
In short, taxpayers evaded taxation by withdrawing from society altogether. Large, powerful landowners, able to avoid taxation through legal or illegal means, began to organize small communities around them. Small landowners, crushed into bankruptcy by the heavy burden of taxation, threw themselves at the mercy of the large landowners, signing on as tenants or even as slaves. (Slaves, of course, paid no taxes.) The latter phenomenon was so widespread and so injurious to the state's revenues, in fact, that in 368 A.D. Emperor Valens declared it illegal to renounce one's liberty in order to place oneself under the protection of a great landlord (Bernardi 1970: 49).
In the end, there was no money left to pay the army, build forts or ships, or protect the frontier. The barbarian invasions, which were the final blow to the Roman state in the fifth century, were simply the culmination of three centuries of deterioration in the fiscal capacity of the state to defend itself. Indeed, many Romans welcomed the barbarians as saviors from the onerous tax burden. [15]
Although the fall of Rome appears as a cataclysmic event in history, for the bulk of Roman citizens it had little impact on their way of life. As Henri Pirenne (1939: 33-62) has pointed out, once the invaders effectively had displaced the Roman government they settled into governing themselves. At this point, they no longer had any incentive to pillage, but rather sought to provide peace and stability in the areas they controlled. After all, the wealthier their subjects the greater their taxpaying capacity.
In conclusion, the fall of Rome was fundamentally due to economic deterioration resulting from excessive taxation, inflation, and over-regulation. Higher and higher taxes failed to raise additional revenues because wealthier taxpayers could evade such taxes while the middle class--and its taxpaying capacity--were exterminated. Although the final demise of the Roman Empire in the West (its Eastern half continued on as the Byzantine Empire) was an event of great historical importance, for most Romans it was a relief.