Economic conditions

The administrative and military reforms of the late third and early fourth centuries greatly increased state expenditure, and the immediate problem that confronted the government was how to raise the revenues needed to finance the ever growing bureaucracy and military establishment.

Faced with the complete disorganisation of public finances caused by inflation and economic decline, Diocletian revised drastically the system of taxation. Realising the inadequacy of the taxes which the government collected in cash, he resorted to the regularisation and expansion of the taxes in kind (annona) which had been introduced, as extraordinary taxes, during the late Principate period. The new system of taxation avoided the vicissitudes of monetary debasement and price fluctuations, as now government officials and the troops were paid largely in agrarian products and other commodities. At the same time it enabled the government to formulate a regular budget based on the agricultural produce of the empire, and some check was placed on the extraordinary requisitions which had become such a burden during the third century. The assessment of the land tax (indictio) was carried out at first every five years and, after 312 AD, every fifteen years, and was based on a division of productive land into units called iugera (hence the tax paid on landed property was referred to as iugatio terrena). The iugatio terrena was distinguished from the capitatio humana, a sort of poll-tax paid by agricultural workers,^[1127] and the capitatio animalium, a tax paid per head of cattle. The capitatio was assessed on the basis of the caput, a unit of human labour equivalent to the iugum. The total tax was based on both the iugatio and the capitatio and, as was said before, was paid in kind {in natura). Besides the levies in kind there were other taxes which were collected in cash. Thus traders and craftsmen who were exempted from the annona paid a tax called chrysargyrum. A tax known as aurum oblaticium was paid by members of the senatorial order.

The economic policies of Diocletian and Constantine ultimately failed to restore balance in the economy: price regulation and currency reform were ineffective in stimulating production and in curbing inflation; tax collection remained unsatisfactory owing to continuing corruption; trade and industry declined, as the state, once the biggest customer, now became a large producer itself. The heavy burden of taxation imposed upon the peasantry, the backbone of the empire's economic system, forced farmers to abandon their lands or to become tenants of senatorial landlords. The urban middle class, weighed down by the financial demands imposed on it, was in distress and, as towns declined, the country villas became centres of economic life, especially in the western provinces. Generally speaking, economic conditions throughout the empire grew steadily worse, especially from the latter part of the fourth century. But it would be a mistake to regard the Dominate as a period of uninterrupted and universal economic decline, as there were important differences in the levels of prosperity maintained in various provinces. Thus, while the West was sinking into primitive conditions, in the Greek-speaking eastern provinces the system of state-controlled economy achieved a measure of success and private enterprise continued to flourish in spheres in which the state was uninterested. In many eastern cities, such as Constantinople, Alexandria and Antioch, manufactured goods were produced on a large scale, and Egyptian agriculture showed signs of recovery. At the same time trade within or between provinces was resumed or became more active and commerce with Persia, India and the Far East continued. The political division of the empire into a western and an eastern part at the end of the fourth century reflected the new economic reality which determined the destinies of the two halves of the empire during the closing years of this period and in the centuries that followed.