How did the reforms of Diocletian and Constantine affect the economy of the empire?

Answer 1

Diocletian reformed the monetary system. He increased the gold content, and therefore the value, of the Aureus. He replaced the silver Denarius with the Argenteus which had a higher value. The gold-silver ratio was fixed at 1:15. This was an attempt to preserve the price of gold and to revive the flagging silver currency by creating a new silver coin with a higher silver content. The value of the silver coins had collapsed because their silver content had become negligible after over a century of debasement. Since this debasement had caused the inflation had plagued the empire in the 3rd century AD, and the economic decline of the empire, it was thought that a stronger silver coin would solve the problem of inflation. The value of the Argenteus was set at a lower level the worth of that of its silver content and was minted at a loss. Therefore, the metals were requisitioned from citizens in exchange for the lower value coins.

Diocletian also introduced the Numnus (a low value copper coin usually called follis by coin experts) which became the most widely used coin, and its subdivisions, the Radiate (bronze with a silver coating) and Laureate (a smaller copper coin).

Within a few years the new system was already in trouble due to a new spell of inflation. Diocletian decreed that debts incurred before September 301 were to be repaid at the old values and those incurred after that date were to be repaid at the new value. This was an attempt to protect the price of gold and preserve the silver coins, but it risked to cause further inflation. Therefore, Diocletian introduced price caps on goods because he thought that inflation was due to the greed of merchants. This was a short-lived measure which failed because Diocletian imposed empire-wide price levels, ignoring regional variations in costs, and because it was resisted. The Argenteus quickly disappeared from the market. It was hoarded. Inflation continued and a black market emerged. Diocletian was soon forced to abandon this measure.

Diocletian introduced an inconsistent and unfair tax system. Since hyperinflation had made the coins virtually worthless, he resorted to requisitions as taxation. When payments could not be paid in gold, private assets were confiscated. He introduced a poll tax (for peasants and urban workers) and a land tax (for owners of landed estates). The systems of valuation for both were inconsistent. Tax collection was entrusted to the decurions, who were the administrator of the cities. They were forced to pay what they failed to collect. Many left the cities to avoid this duty and joined the imperial bureaucracy. This move was made easier by the fact that Diocletian doubled the size of this bureaucracy to improve control over the empire. The administration of the cities suffered because of this. To counter this situation Diocletian made the office of the decurions hereditary. The size of the imperial bureaucracy was also a burden on state expenses.

The standard of living of the population worsened as a result of heavy taxation. Many people abandoned their economic activities because they no longer afforded a sustainable living and chose to become beggars. Diocletian resorted to forcing people to continue their occupation and ended free choice of profession by making jobs hereditary.

Constantine I (or the Great) replaced the Aureus with the Solidus, a god coin of lower value than the previous one. He abandoned the attempt to revive the silver coins and the minting of the Argenteus was stopped in 307. Instead, he concentrated on issuing large quantities of the Solidus (introduced in 312) which was needed, among other things by a scarcity of gold coins. Constantine issued new silver coins in 323. One has been called Siliqua, even though the Romans did not use this name, and the Miliarense, which was worth two Siliqua. The Siliqua coins were minted in greater quantities by Constantius II (reigned 337-361).

The solidus proved to be a stable gold standard. During the Late Empire it retained the same size, weight and purity. Thanks to this stability the chronic problems of inflation was resolved. To amass the precious metals needed for the increase in the minting of coins, Constantine used the gold, silver and bronze of confiscated statues in pagan temples from 331 to 336. He also resorted to other confiscation measures for gold. However, the introduction of the solidus increased the gap between rich and poor. Its stability benefitted only those who could afford gold coins. The masses had to make do with copper token money (the follis). The follis was very vulnerable to inflation. Constantine's sons and successors, Constans and Constantius II, tried to reintroduce a large bronze coin between 320 and 340 because the value of the follis had fallen dramatically. Coin experts have called this coin centenionalis. However, this coin did not last for long.