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The Roman Empire is ironically known for both its greatness and its weaknesses. The Roman economy represents an ancient economy that was large and powerful enough to create an empire that spanned the Mediterranean and lasted several centuries. The Roman economy is also known for its deficiencies which eventually led to the decline and fall of the Roman Empire.
Origins of the Roman Economy
The city of Rome emerged sometime between the 8th and 9 th century BC from a collection of farming communities that had established fortifications near the Tiber River . According to legend, Rome was founded in 753 BC. The city was ruled by kings until 509 BC when the last king was overthrown. After this, Rome became a republic and remained one until 31 BC, after which Augustus Caesar made Rome into a monarchy in 27 BC. This was the beginning of the Roman Empire.
During the early Republican period , the Roman economy was largely based on agriculture. The backbone of this agrarian economy was made up of small-scale farmers. They would raise crops and sell them in the city. These farmers were not only responsible for providing food for the city of Rome, but also for its protection. By the Republican era, Rome had adopted the Greek hoplite style of military organization. The city was defended by a volunteer militia made up of Roman citizen landowners. Roman farmers would till the land in peace time and take up whatever weapons and armor they could afford to fight for the Republic in war time.
As the Roman Empire grew, the Roman economy also developed significant trade and manufacturing sectors. Map of Roman Empire at its greatest extent.
Over time, as Rome began to fight longer and more expensive wars, it became less practical for soldiers to have to constantly come back from war and till their fields. Roman agriculture became increasingly large scale, until most agricultural production was performed by large estates owned by the very wealthy Roman elite which were worked by slaves. As the Roman Empire grew, the Roman economy also developed significant trade and manufacturing sectors. The Roman economy was complex for the ancient world, containing many aspects of a modern market economy. Nonetheless, the Roman economy was still simple and agrarian by modern standards.
Roman Dependence on Trade and Imperial Supply Chains
Agriculture remained central to the Roman economy throughout its history. The primary agricultural products in the Roman Empire included grain, olives, and grapes. The olives for olive oil, the grapes for wine, and the grain for bread were all important for the Roman lifestyle.
Agriculture remained central to the Roman economy throughout its history.
Grain was incredibly important for the Roman economy. One of the reasons that the Roman Empire continued to grow was to gain access to more grain-growing provinces. Two of the major sources of grain in the later Roman Empire were North Africa (modern-day Tunisia) and Egypt. There was also a significant amount of grain produced in Sicily. The distribution of grain in the Roman Empire was very much dependent on trade and imperial supply chains. Grain would be shipped to the Port of Rome, Ostia, where it would then be shipped all over the Empire. Farmers were allowed to submit a portion of grain as a tax to the Roman government instead of a monetary tax amount. This provided a source of free grain which politicians could distribute to gain popularity. According to some historians, however, this provided little incentive for farmers to produce more grain because more grain meant more taxes. Despite the grain production in the Roman Empire, many people were not able to make enough to buy grain for themselves and grain had to be doled out by the government as a result.
Slavery as the Bedrock of the Roman Economy
Slavery was another important aspect of the Roman economy. While agricultural slaves were relatively rare during the early history of Rome, the eventual loss of most independent small farms left much of the agricultural land in the hands of the Roman elites who used large numbers of slaves to tend their fields.
Slavery was an important part of the Roman Economy. (Ashmolean Museum / CC BY-SA 2.0 )
Slaves were also used in urban contexts in workshops of various sorts. Roman bakery slaves are known to have been poorly treated, though many Roman slaves actually lived relatively pleasant lives.
Roman slavery was distinct from the slavery of the early modern period: it was not race-based and it was far easier for slaves to gain their freedom. Eventual freedom was in fact expected for most slaves. Once slaves bought their freedom, these new freedmen often had better opportunities than the freeborn poor because they already had industrial and managerial training that they could use to find work. There is even evidence of poor freeborn Romans selling themselves into slavery to increase their future prospects.
It has been said that slavery held the Roman economy back. For example, it could be argued that technologies utilizing waterpower and horsepower, which could improve agricultural yields, were never developed during the time of the Roman Empire because slaves were considered sufficient to do the work. The same could be said of manufacturing. Ancient historians point out that some, though not all, of the technology necessary for an industrial revolution, such as steam power, was available to the ancient Romans. One possible reason that there was no industrial revolution in ancient Rome might have been that they were too reliant on slaves to consider creating steam-powered engines.
Tunisian mosaic of slaves carrying wine jars. (Pascal Radigue / CC BY 3.0 )
Far Flung Trade Routes of the Roman Empire
Some historians have suggested that at the height of the Roman Empire, the Roman economy allowed for a standard of living similar to 17th or 18th century Europe. If this is true, it was likely due to trade. The Romans were able to establish trade routes throughout Europe, Asia, and Africa. Far flung trade routes allowed them to attain silk from China , gold and silver from Spain, iron and tin from Britain, exotic animals and ivory from Africa , and spices and cotton from India.
Part of the Tabula Peutingeriana, an illustrated ancient Roman road map, showing Dacia, Epirus, Macedonia, Dalmatia, Achaia, Sicily and Cyrenaica.
These trade routes were facilitated by the renowned Roman roads built to mobilize the Roman legions . After the legions built the roads, it was only natural that they would become major trade routes. Trade goods could be transported short distances by oxen or horse-drawn wagons and carriages. Land travel was, however, slow, dangerous and the amount that could be carried was limited by weight considerations. Oxen could carry more than horses, but horses were faster. Goods that only needed to be transported short distances and certain small expensive luxury goods could be transported by land, but most goods were transported by sea.
At its height, in the 1st and 2nd centuries AD, the Roman Empire completely encircled the Mediterranean Sea and part of the Black Sea . The Roman navy had also virtually eliminated piracy, making maritime travel a relatively safe and timely method for transporting goods. Food, precious metals, and stone were mostly transported by sea. Storms, as well as poor navigation equipment and charts, however, still created danger for Mediterranean ships which were relatively primitive compared to later seagoing vessels.
Industry and Manufacturing in the Roman Empire
Mining was one of the most important industries in the Roman Empire. Silver and gold from Spain were used to make coins. Stone quarried from Italy and Greece was used to make the arches and monuments for which Rome is famous, and Britain was an important ancient source of iron for weapons which Rome used to maintain regional dominance.
In addition to coins, weapons and other items important to the Roman state, many towns and cities across the Empire had local industries which produced pottery, glassware, weapons, textiles, and jewelry among other commodities.
Olive oil produced around Cordoba, Spain, was shipped directly to Rome via the River Guadalquivir, known for its famous Roman bridge. ( CC BY-SA 2.0 )
The Roman Market Economy
In the late 20th century, the economist and historian Carl Polanyi suggested that there were three types of economies in the ancient world: economies that were based on reciprocity, redistribution, or exchange. Economies based on reciprocity are common in traditional societies where people distribute goods based on obligations and social traditions. The goal is to distribute goods fairly based on obligations that derive from relationships. In redistributive economies, all the goods produced are collected by a centralized institution and then redistributed.
Exchange economies rely on currency or bartering to distribute goods. Exchange economies are essentially market economies. Ancient Rome appears to have had a functioning market economy based on its labor and capital markets. In contrast, Medieval Europe is believed to have had a primarily reciprocal and redistributive economy with a few isolated cases of market economies around cities.
Fresco from Pompeii, showing everyday life in Roman market.
Modern anthropologists do not necessarily agree with Polanyi’s characterization of ancient economies. Many ancient economies that were not thought to be market economies are now known to have had at least some market elements, including the Assyrian Empire and the Aztec Empire. Nonetheless, historians agree that the Roman economy was a primitive market economy where the exchange of goods was partly governed by the price-fixing of the market.
On the other hand, the Roman political economy was not entirely market oriented. Many industries were essentially organs of the Roman state. Also, the Roman government was required to provide its citizens with rations of grain because many of them were not able to feed themselves, especially in the late Roman Empire, as the Roman state began to decline.
The English painter Thomas Cole painted Destruction to show the fall of the Roman Empire.
The Roman Economy and the Fall of Rome
The explanations for the fall of Rome are innumerable. Part of the reason for the fall of Rome appears to be weaknesses in the Roman economy . One weakness may have been that the Roman Empire simply stopped expanding. The Roman Empire had to continually grow to increase access to grain and natural resources to support its economy. Once the Roman Empire stopped growing, it was probably inevitable that Rome would run out of resources.
Another reason appears to be that the Roman Empire was heavily dependent on long distance trade and supply chains. The majority of the grain produced to feed the population of the Roman Empire was grown either in modern-day Tunisia or Carthage, or in Egypt. Once the western Roman Empire lost control of Carthage to the Vandals in the early 5th century, the city of Rome was not able to feed its population. At one point the city was mostly abandoned due to the lack of food. The same could probably be said of other resources as well.
- Exotic Goods and Foreign Luxuries: The Ancient Roman Marketplace
- The Roman Empire’s Crisis of the Third Century
- A Millennium of Glory: The Rise and Fall of the Byzantine Empire
Once Rome began to lose control of critical provinces, the empire was not able to feed its population or even pay its armies. It could be said that outsourcing, particularly of grain production, made the Roman Empire vulnerable if the supply chains on which it depended ever became disrupted. The disruption of supply chains was not the only factor leading to the fall of Rome, but it definitely contributed to the collapse of an empire already dying due to civil wars, constant invasions, and declining birth rates, among other problems.
Likewise, one of the reasons that the eastern Roman Empire, or the Byzantine Empire, was able to remain intact for almost a thousand years longer was because it was able to keep its economy together. The eastern Roman Empire still had control of Egypt, the other breadbasket of the Roman Empire, so it was able to continue to feed its population. By the time Egypt was conquered by the Arabs in the 7th century, enough local agriculture had developed in Greece and Asia Minor that the Byzantine Empire was able to continue to sustain itself despite the loss of Egypt and most of its eastern lands.
Furthermore, the vast wealth of Rome was not evenly distributed. Most of the luxuries of Roman life were available only to the very wealthy. Most people lived in much poorer conditions. The average Roman apartment lacked plumbing and was overcrowded. Also, the widespread trade networks of Rome did not necessarily benefit the poor who were more vulnerable to the diseases which were also carried by trade.
The fall of the Roman Empire is used as a cautionary tale in many ways, particularly when it comes to the importance of maintaining a strong and balanced economy for the survival of a civilization. How similar is modern civilization’s economic situation to that of Ancient Rome? This may be an important question to consider.
I joined the oil rush to an American boomtown. Guess who got rich?
L ife in a modern boomtown is living on the frontier but with a smartphone. “Capitalism on crack” is the way historian Clay Jenkinson referred to it – everyone taking what they can get, as fast as they can.
I spent nearly a year in an oil boomtown: from summer of 2013 to winter of 2014, I worked in the Bakken oil patch out of Williston, North Dakota. At the time, politicians, geologists, and much of the national media claimed the town would be booming for decades to come. They were all wrong.
North Dakota began to boom in the midst of America’s forever wars, when technological advancement in horizontal drilling and hydraulic fracturing made a formerly impenetrable seam of crude oil suddenly recoverable.
Williston, a rural community in an Indian service area with ties to the Turtle Mountain Chippewa, found its population ballooning. Most of those coming to town were men looking for work. Much of the hiring by oilfield companies was pitched toward veterans, but in the wake of the 2008 crash, anyone who could swing a hammer had a shot at landing a job. Williston was swamped by out-of-work carpenters, plumbers and contractors of every stripe.
The author in winter. Photograph: Courtesy of Michael Patrick Flanagan Smith
At the beginning of the boom, many oilfield jobs had provided signing bonuses, housing and per diems to the ever growing migrant workforce – benefits trumpeted by the oil industry, the media and local lawmakers. By the time I arrived, however, the perks had mostly dried up. I wasn’t the only guy late to the party.
The roads were cluttered with clunkers with out-of-state license plates, 18-wheelers, and construction crews. Under the yawning blue of the endless sky and cradled by rambling waves of prairie grass on either side of it, the busted macadam of Route 2 existed as the most visible mundane daily reminder that everything and everyone was a bit overwhelmed.
The Williston job services office estimated at the time that eight new people were arriving in town every day. Williston grew from 12,000 to over 30,000 residents in a few short years, according to some estimates. Most likely those estimates are low. At one point, the town’s mayor claimed Williston was providing services to as many as 60,000 to 70,000 people.
Some of the men I worked with were locals but a great deal were migrant workers like me, general laborers willing to follow the money, or so hard up that “willing” didn’t enter the equation. Migrant workers had come not only from the heartland, but from everywhere. I lived with a group of Jamaicans, and worked with several Congolese immigrants. Several guys I knew had worked the silver mines in Elko, Nevada, then moved to Williston when the price of silver dropped. I imagine many of them drifted down to Texas to work the Permian once Williston went bust. Before I met them, I thought of these kinds of transient workers as a relic of the dust bowl. I didn’t know they still existed. Now I think about them every day.
Why do financial crises happen?
The subject of Bob Swarup's Money Mania: Booms, Panics, and Busts from Ancient Rome to the Great Meltdown is precisely why I started writing about economics and finance.
I had learned about the Wall Street Crash of 1929 and the Great Depression in school, but it was never explained or even implied that these kinds of crises could ever happen again. The U.K.'s Chancellor of the Exchequer (and later, Prime Minister) Gordon Brown famously said in 1997 that the era of "boom and bust" was over.
The financial crisis that began in 2007, culminating in a financial market meltdown in the fall of 2008, smashed those assumptions. It demonstrated, too, in the most blatant way that policy-makers can be pretty clueless — look at former Fed Chair Ben Bernanke's 2005 comments that there was "no housing bubble".
I wanted to know what went wrong, how the bubble had grown so big, and why the financial system was so fragile. Above all, I wanted to know why financial crashes happened, and why so few economists and politicians saw the most recent crisis coming.
These are questions that Bob Swarup — an Indian-born cosmologist who has spent the last decade in the financial industry — attempts to answer in Money Mania.
Swarup's book is a swift tour of the last 2,500 years of history. He looks at the Roman credit crunch of 33 A.D., the Japanese financial crisis of the late 1980s, the Great Depression of the 1930s, the Greek financial crisis of 378 B.C, the Dutch Tulipmania in the early 17th century, and more.
Swarup theorizes that "[r]ises and falls are as natural to the economic condition as breathing is to the human condition." He notes:
"Every country has a crisis to share and every story is different. For every hypothesized commonality, there is an exception. They have occurred in different eras — ancient, medieval, and modern under democracies, dictatorships, and monarchies before we had central banks and after we had them when the world clung to a gold standard and when it sought out paper money instead in complex international systems and in small isolated communities in eras of both laissez-faire capitalism and didactic state commerce and in diverse asset classes from stocks to property to tulips to red mullets." [Money Mania]
Why do financial crises keep occurring? Swarup sees common behavioral threads at the core of all of these events. He says, "We humans are intendedly rational, but in practice what we term rationality is actually bounded on all sides by experience, emotion, and environment. These give us shortcuts that allow us to make quick decisions but also leave us with a host of unconscious behavioral biases."
In other words, reality is complex and difficult. Human beings resort to mental shortcuts — following the crowd, overconfidence, confirmation bias, framing, narrative fallacy, cognitive dissonance — to filter information and save time and effort. Swarup notes that much of the time these shortcuts are worth taking, saying these traits "are virtues that grow economies, pioneer advances, and take the human race forward," while "the excess of information confronting us on a daily basis needs to be carefully filtered if we are not to be overwhelmed and our decision making paralyzed."
However, our shortcuts sometimes lead us to risky ends, like buying into an economic bubble — whether it be technology stocks, tulip bulbs, or Japanese real estate — on gut instinct or the flawed advice of friends and media pundits. They can also lead politicians to make regulatory errors — getting rid of regulations that work, or creating new ones that create or exacerbate bubbles.
Swarup also argues that emotions cloud rational thinking: "We cannot separate thought from emotion. What we define as reason is colored not only by our state of mind at any given moment but also by our beliefs." I would emphasize this even more than Swarup does. The business cycle is very much an emotional cycle, one of excessive greed in the boom and excessive fear in the bust. Investors often simply make up rationalizations to justify their emotional state.
Swarup is adamant that "short of disowning progress and returning to small isolated communities, one cannot remove systemic crises. Even then, we cannot excise the ebb and flow of human emotion that arise from the biases within us".
Crises of complexity are the price we pay for a complex, modern economy. Unfortunately, Swarup does not mention the strongest argument to support this position. As the mid-20th century economist Hyman Minsky put it, stability itself is destabilizing. The lack of financial bubbles encourages financial bubbles.
The most famous example is The Great Moderation. The American economy experienced a period of relative stability from the end of stagflation in the early 1980s until the 2008 financial crash. But how do people react to a stable world? Very often, they become more tolerant of risky behavior.
During the Great Moderation, the financial industry began to make riskier loans at higher leverage ratios, even to individuals with no income and no job or assets (NINJAs). Lenders began hiding the risks by selling the future income from these loans as asset-backed securities.
Meanwhile, financial regulations like Glass-Steagall that separated publicly guaranteed depository banks from investment banks — and that may have been partially responsible for the relative financial stability between the Great Depression and the Great Recession — were repealed. Politicians were convinced by the financial industry, and equally by the long period of relative stability, that such curbs on risk-taking and financial innovation were no longer necessary.
The Great Moderation destabilized the system by making politicians and the financial world more risk-tolerant. Successful regulations became victims of their own success.
Swarup concludes that instead of trying to prevent booms and busts, we should create a financial system and society that can withstand them. He prescribes various measures to ease the cycle of booms and busts — debt restructuring for firms, individuals, and countries unable to pay their debts countercyclical mechanisms, including lenders of last resort, to prevent debt deflation spirals and maximum leverage ratios to prevent bubbles from growing excessively big.
He argues for restoring economic history as an academic discipline, so that policy-makers and financiers do not forget the crises of the past. He rails against GDP as a measure of economic growth, arguing that it does not differentiate between productive and unproductive activities. And he emphasizes the dangers of allowing economic inequalities to become too large, arguing that "crises accentuate inequality in the system, adding a social dimension that is far more destabilizing."
But perhaps the most valuable contribution of this worthy, (mostly) non-ideological survey of economic history is that it reminds us that the era of boom and bust is never over — it's just biding its time.
Bankers and Bolsheviks: International Finance and the Russian Revolution
Following an unprecedented economic boom fed by foreign investment, the Russian Revolution triggered the worst sovereign default in history. Bankers and Bolsheviks tells the dramatic story of this boom and bust, chronicling the forgotten experiences of leading financiers of the age.
Shedding critical new light on the decision making of the powerful personalities who acted as the gatekeepers of international finance, Hassan Malik narrates how they channeled foreign capital into Russia in the late nineteenth and early twentieth centuries. While economists have long relied on quantitative analysis to grapple with questions relating to the drivers of cross-border capital flows, Malik adopts a historical approach, drawing on banking and government archives in four countries. The book provides rare insights into the thinking of influential figures in world finance as they sought to navigate one of the most challenging and lucrative markets of the first modern age of globalization.
Bankers and Bolsheviks reveals how a complex web of factors—from government interventions to competitive dynamics and cultural influences—drove a large inflow of capital during this tumultuous period in world history. This gripping book demonstrates how the realms of finance and politics—of bankers and Bolsheviks—grew increasingly intertwined, and how investing in Russia became a political act with unforeseen repercussions.
“A highly readable tale of one of history’s biggest booms and busts, with valuable perspective for contemporary investors.”—Emmanuel Roman, CEO, PIMCO
“The financial history of the Russian Revolution has been largely neglected for a century, despite the importance of banks and bondholders as targets, and indeed victims, of the Bolshevik Revolution. Hassan Malik’s deeply researched and vividly written study shows the vital importance of foreign capital to the prerevolutionary Tsarist economy, the reluctance of Western bankers to face the seriousness of the threat posed to them by Lenin & Co., and the rationale behind the Bolsheviks’ massive debt default. This is an original and illuminating contribution to a literature that has devoted far more attention to the revolutionaries than to the capitalist system they overthrew.”—Niall Ferguson, Milbank Senior Fellow, Hoover Institution, Stanford
“Russian history in the transition period of the early twentieth century is still in need of unbiased research, and I am convinced that the most interesting and unexpected discoveries lie at the intersection of various disciplines, such as history, political science, and finance. Hassan Malik’s Bankers and Bolsheviks is an expansive, detailed work based on an extensive and painstaking research of a huge volume of materials. Yet, the work is also a fascinating read, offering a path to understanding what forces triggered the unstoppable chain of those tragic yet colossal events.”—Ruben Vardanyan, social entrepreneur, impact investor, and venture philanthropist
“At a time when political risk has surged to the front of investors’ minds, financial history offers valuable perspective. Hassan Malik’s elegantly told story of the largest default in history is a must-read for macro investors navigating today’s challenging global markets.”—Steve Drobny, founder and CEO, Clocktower Group
Scotland is roughly half the size of England and Wales, but has only between a fifth and a sixth of the amount of the arable or good pastoral land, which made marginal pastoral farming and, with its extensive coastline (roughly the same amount of coastline as all of the rest of Great Britain at 4,000 miles), fishing, the key factors in the pre-modern economy.  Only a fifth of Scotland's land is under 60 metres above sea level. Its east Atlantic position means that it has very heavy rainfall: today about 700 cm per year in the east and over 1,000 cm in the west. This encouraged the spread of blanket peat bog, the acidity of which, combined with high level of wind and salt spray, made most of the islands treeless. The existence of hills, mountains, quicksands and marshes made internal communication and conquest extremely difficult. 
Mesolithic hunter-gatherer encampments are the first known settlements in the country, and archaeologists have dated an encampment near Biggar to around 8500 BC.  Neolithic farming brought permanent settlements, and the wonderfully well preserved stone house at Knap of Howar on Papa Westray dating from 3500 BC predates by about 500 years the village of similar houses at Skara Brae on West Mainland, Orkney.  From the commencement of the Bronze Age to about 2000 BC the archaeological record shows a decline in the number of large new stone buildings constructed. Pollen analyses suggest that at this time woodland increased at the expense of the area under cultivation. Bronze and Iron Age metalworking was slowly introduced to Scotland from Europe over a lengthy period. Scotland's population grew to perhaps 300,000 in the second millennium BC.  
Following a series of military successes in the south, forces led by Gnaeus Julius Agricola entered Scotland in 79 and later sent a fleet of galleys around the coast as far as the Orkney Islands. The geographer Ptolemy's identified 19 "towns" from intelligence gathered during the Agricolan campaigns. No archaeological evidence of any truly urban places has been found from this time and the names may have indicated hill forts or temporary market and meeting places and most of the names are obscure.  Archaeology and dendrochronology suggests that the occupation of southern Scotland started before the arrival of Agricola. Whatever the exact dating, for the next 300 years Rome had some presence along the southern border.
Early Middle Ages Edit
The early Middle Ages was a period of climate deterioration, with a drop in temperature and an increase in rainfall, resulting in more land becoming unproductive.  Lacking the urban centres created under the Romans in the rest of Britain, the economy of Scotland in the early Middle Ages was overwhelmingly agricultural. With a lack of significant transport links and wider markets, most farms had to produce a self-sufficient diet of meat, dairy products and cereals, supplemented by hunter-gathering. Limited archaeological evidence indicates that throughout Northern Britain farming was based around a single homestead or a small cluster of three or four homes, each probably containing a nuclear family, with relationships likely to be common among neighbouring houses and settlements, reflecting the partition of land through inheritance.  Farming became based around a system that distinguished between the infield around the settlement, where crops were grown every year and the outfield, further away and where crops were grown and then left fallow in different years, in a system that would continue until the 18th century.  The evidence of bones indicates that cattle were by far the most important domesticated animal, followed by pigs, sheep and goats, while domesticated fowl were very rare. Imported goods found in archaeological sites of the period include ceramics and glass, while many sites indicate iron and precious metal working. 
High Middle Ages Edit
Although the Scottish economy of this period was still dominated by agriculture and by short-distance, local trade, there was an increasing amount of foreign trade in the period, as well as exchange gained by means of military plunder. By the end of this period, coins were replacing barter goods, but for most of this period most exchange was done without the use of metal currency. 
Most of Scotland's agricultural wealth in this period came from pastoralism, rather than arable farming. Arable farming grew significantly in the "Norman period", but with geographical differences, low-lying areas being subject to more arable farming than high-lying areas such as the Highlands, Galloway and the Southern Uplands. Galloway, in the words of G.W.S. Barrow, "already famous for its cattle, was so overwhelmingly pastoral, that there is little evidence in that region of land under any permanent cultivation, save along the Solway coast."  The average amount of land used by a husbandman in Scotland might have been around 26 acres.  There is a lot of evidence that the native Scots favoured pastoralism, in that Gaelic lords were happier to give away more land to French and Middle English-speaking settlers, whilst holding on tenaciously to more high-lying regions, perhaps contributing to the Highland/Galloway-Lowland division that emerged in Scotland in the later Middle Ages.  The main unit of land measurement in Scotland was the davoch (i.e. "vat"), called the arachor in Lennox. This unit is also known as the "Scottish ploughgate." In English-speaking Lothian, it was simply ploughgate.  It may have measured about 104 acres (0.42 km 2 ),  divided into 4 raths.  Cattle, pigs and cheeses were among the most produced foodstuffs,  but of course a vast range of foodstuffs were produced, from sheep and fish, rye and barley, to bee wax and honey.
Pre-Davidian Scotland had no known chartered burghs, though most, if not all, of the burghs granted charters by the crown already existed long before the reign of David I. His charters gave them legal status, a new form of recognition. Scotland, outside Lothian, Lanarkshire, Roxburghshire, Berwickshire, Angus, Aberdeenshire and Fife at least, largely was populated by scattered hamlets, and outside that area, lacked the continental style nucleated village. David I established the first chartered burghs in Scotland, copying the burgher charters and Leges Burgorum (rules governing virtually every aspect of life and work in a burgh) almost verbatim from the English customs of Newcastle-Upon-Tyne.  Early burgesses were usually Flemish, English, French and German, rather than Gaelic Scots. The burgh’s vocabulary was composed totally of either Germanic and French terms.  The councils which ran individual burghs were individually known as lie doussane, meaning the dozen. 
Late Middle Ages Edit
In this period, with difficult terrain, poor roads and methods of transport there was little trade between different areas of the country and most settlements depended on what was produced locally, often with very little in reserve in bad years. Most farming was based on the lowland fermtoun or highland baile, settlements of a handful of families that jointly farmed an area notionally suitable for two or three plough teams, allocated in run rigs to tenant farmers. They usually ran downhill so that they included both wet and dry land, helping to offset some of the problems of extreme weather conditions. Most ploughing was done with a heavy wooden plough with an iron coulter, pulled by oxen, which were more effective and cheaper to feed than horses. Obligations to the local lord usually included supplying oxen for ploughing the lord's land on an annual basis and the much resented obligation to grind corn at the lord's mill.  The rural economy appears to have boomed in the 13th century and in the immediate aftermath of the Black Death was still buoyant, but by the 1360s there was a severe falling off incomes that can be seen in clerical benefices, of between a third and half compared with the beginning of the era, to be followed by a slow recovery in the 15th century. 
Most of the burghs were on the east coast, and among them were the largest and wealthiest, including Aberdeen, Perth and Edinburgh, whose growth was facilitated by trade with the continent. Although in the south-west Glasgow was beginning to develop and Ayr and Kirkcudbright had occasional links with Spain and France, sea trade with Ireland was much less profitable. In addition to the major royal burghs this era saw the proliferation of less baronial and ecclesiastical burghs, with 51 being created between 1450 and 1516. Most of these were much smaller than their royal counterparts, excluded from international trade they mainly acted as local markets and centres of craftsmanship.  In general burghs probably carried out far more local trading with their hinterlands, relying on them for food, raw materials. The wool trade was a major export at the beginning of the period, but the introduction of sheep-scab was a serious blow to the trade and it began to decline as an export from the early 15th century and despite a levelling off, there was another drop in exports as the markets collapsed in the early-16th century Low Countries. Unlike in England, this did not prompt the Scots to turn to large-scale cloth production and only poor quality rough cloths seem to have been significant. 
There were relatively few developed crafts in Scotland in this period, although by the later 15th century there were the beginnings of a native iron casting industry, which led to the production of cannon and of the silver and goldsmithing for which the country would later be known. As a result, the most important exports were unprocessed raw materials, including wool, hides, salt, fish, animals and coal, while Scotland remained frequently short of wood, iron and in years of bad harvests grain.  Exports of hides and particularly salmon, where the Scots held a decisive advantage in quality over their rivals, appear to have held up much better than wool, despite the general economic downturn in Europe in the aftermath of the plague.  The growing desire among the court, lords, upper clergy and wealthier merchants for luxury goods that largely had to be imported led to a chronic shortage of bullion. This, and perennial problems in royal finance, led to several debasements of the coinage, with the amount of silver in a penny being cut to almost a fifth between the late 14th century and the late 15th century. The heavily debased "black money" introduced in 1480 had to be withdrawn two years later and may have helped fuel a financial and political crisis. 
Sixteenth century Edit
From the mid-sixteenth century, Scotland experienced a decline in demand for exports of cloth and wool to the continent. Scots responded by selling larger quantities of traditional goods, increasing the output of salt, herring and coal.  The late sixteenth century was an era of economic distress, probably exacerbated by increasing taxation and the devaluation of the currency. In 1582 a pound of silver produced 640 shillings, but in 1601 it was 960 and the exchange rate with England was £6 Scots to £1 sterling in 1565, but by 1601 it had fallen to £12. Wages rose rapidly, by between four or five times between 1560 and the end of the century, but failed to keep pace with inflation. This situation was punctuated by frequent harvest failures, with almost half the years in the second half of the sixteenth century seeing local or national scarcity, necessitating the shipping of large quantities of grain from the Baltic. Distress was also exacerbated by outbreaks of plague, with major epidemics in the periods 1584-8 and 1597-1609.  There were the beginnings of industrial manufacture in this period, often utilising expertise from the continent, which included a failed attempt to use Flemings to teach new techniques in the developing cloth industry in the north-east, but more successful in bringing a Venetian to help develop a native glass blowing industry. George Bruce used German techniques to solve the drainage problems of his coal mine at Culross. In 1596 the Society of Brewer's was established in Edinburgh and the importing of English hops allowed the brewing of Scottish beer. 
Seventeenth century Edit
In the early seventeenth century famine was relatively common, with four periods of famine prices between 1620 and 1625. The invasions of the 1640s had a profound impact on the Scottish economy, with the destruction of crops and the disruption of markets resulting in some of the most rapid price rises of the century.  Under the Commonwealth, the country was relatively highly taxed, but gained access to English markets.  After the Restoration the formal frontier with England was re-established, along with its customs duties. Economic conditions were generally favourable from 1660 to 1688, as land owners promoted better tillage and cattle-raising.  The monopoly of royal burghs over foreign trade was partially ended by and Act of 1672, leaving them with the old luxuries of wines, silk, spices and dyes and opening up trade of increasingly significant salt, coal, corn and hides and imports from the Americas. The English Navigation Acts limited the ability of the Scots to engage in what would have been lucrative trading with England's growing colonies, but these were often circumvented, with Glasgow becoming an increasingly important commercial centre, opening up trade with the American colonies: importing sugar from the West Indies and tobacco from Virginia and Maryland. Exports across the Atlantic included linen, woollen goods, coal and grindstones.  The English protective tariffs on salt and cattle were harder to disregard and probably placed greater limitations on the Scottish economy, despite attempts of the King to have it overturned. However, by the end of the century the drovers roads, stretching down from the Highlands through south-west Scotland to north-east England, had become firmly established.  Scottish attempts to counter this with tariffs of their own, were largely unsuccessful as Scotland had relatively few vital exports to protect. Attempts by the Privy Council to build up luxury industries in cloth mills, soap works, sugar boiling houses, gunpowder and paper works, proved largely unsuccessful. 
The closing decade of the seventeenth century saw the generally favourable economic conditions that had dominated since the Restoration come to an end. There was a slump in trade with the Baltic and France from 1689 to 1691, caused by French protectionism and changes in the Scottish cattle trade, followed by four years of failed harvests (1695, 1696 and 1698-9), known as the "seven ill years".  The result was severe famine and depopulation, particularly in the north.  The famines of the 1690s were seem as particularly severe partly because famine had become relatively rare in the second half of the seventeenth century, with only one year of dearth (in 1674) and the shortages of the 1690s would be the last of their kind.  The Parliament of Scotland of 1695 enacted proposals that might help the desperate economic situation, including setting up the Bank of Scotland. The "Company of Scotland Trading to Africa and the Indies" received a charter to raise capital through public subscription.  The "Company of Scotland" invested in the Darien scheme, an ambitious plan devised by William Paterson, the Scottish founder of the Bank of England, to build a colony on the Isthmus of Panama in the hope of establishing trade with the Far East.  Since the capital resources of the Edinburgh merchants and landholder elite were insufficient, the company appealed to middling social ranks, who responded with patriotic fervour to the call for money the lower orders volunteered as colonists.  The project proved a disaster, with only one ship and 1,000 colonists returning home. The cost of £150,000 put a severe strain on the Scottish commercial system. 
By the start of the 18th century, a political union between Scotland and England became politically and economically attractive, promising to open up the much larger markets of England, as well as those of the growing British Empire. The Scottish parliament voted on 6 January 1707, by 110 to 69 to adopt the Treaty of Union. It was a full economic union indeed, most of its 25 articles dealt with economic arrangements for the new state known as "Great Britain." It added 45 Scots to the 513 members of the House of Commons and 16 Scots to the 190 members of the House of Lords, and ended the Scottish parliament. It also replaced the Scottish systems of currency, taxation and laws regulating trade with laws made in London. England had about five times the population of Scotland at the time, and about 36 times as much wealth. 
Contacts with England led to a conscious attempt to improve agriculture among the gentry and nobility. Turnips and cabbages were introduced, lands enclosed and marshes drained, lime was put down, roads built and woods planted. Drilling and sowing and crop rotation were introduced. The introduction of the potato to Scotland in 1739 greatly improved the diet of the peasantry. Enclosures began to displace the runrig system and free pasture. The Society of Improvers was founded in 1723, including in its 300 members dukes, earls, lairds and landlords. 
Scottish proprietors had greater legal powers to direct agrarian improvements than their English counterparts. For example, they could evict tenants at the end of leases, allowing greater freedom to consolidate land and determine the composition of their tenantry. Further, landowners were able to insert improvement clauses into lease contracts and ensure tenants complied through the Sherriff Courts. 
The Lothians became a major centre of grain, Ayrshire of cattle breeding and the borders of sheep. However, although some estate holders improved the quality of life of their displaced workers, enclosures led to unemployment and forced migrations to the burghs or abroad. 
The economic benefits of union were very slow to appear, primarily because Scotland was too poor to exploit the opportunities of the greatly expanded free market. Some progress was visible by 1750, such as the sales of linen and cattle to England, the cash flows from military service, and the tobacco trade that was dominated by Glasgow after 1740. However, Glasgow immediately re-exported nearly all the tobacco, so it did not stimulate local business, and that port exported few Scottish products. The tobacco trade collapsed during the American Revolution, when it sources were cut off by the British blockade of American ports. An important new trade to develop with the West Indies that made up for the loss of the tobacco business.  The Scottish Enlightenment was indeed a remarkable intellectual event, but it had few direct benefits for the economy at large. Scotland in 1700 was a poor rural, agricultural society with a population of 1.3 million. Its transformation into a rich leader of modern industry came suddenly and unexpectedly. 
In Glasgow, merchants who profited from the American trade in the 1730-1790 era began investing in leather, textiles, iron, coal, sugar, rope, sailcloth, glassworks, breweries, and soapworks, setting the foundations for the city's emergence as a leading industrial centre after 1815.  Initially relying on hired ships, by 1736 it had 67 of its own, a third of which were trading with the New World. Glasgow emerged as the focus of the tobacco trade, re-exporting particularly to France. The merchants dealing in this lucrative business became the wealthy tobacco lords, who dominated the city for most of the century. 
By 1790 the expanded and prosperous trade with the West Indies reflected the extensive growth of the cotton industry, the British sweet tooth, and the demand in the West Indies for herring and linen goods. During 1750-1815, 78 Glasgow merchants not only specialized in the importation of sugar, cotton, and rum from the West Indies, but diversified their interests by purchasing West Indian plantations, Scottish estates, or cotton mills. They were not to be self-perpetuating due to the hazards of the trade, the incident of bankruptcy, and the changing complexity of Glasgow's economy. 
Other burghs also benefited. Greenock enlarged its port in 1710 and sent its first ship to the Americas in 1719, but was soon playing a major part in importing sugar and rum. 
The linen industry was Scotland's premier industry in the 18th century and formed the basis for the later cotton, jute,  and woollen industries as well.  The Scottish members of parliament managed to see off an attempt to impose an export duty on linen and from 1727 it received subsidies of £2,750 a year for six years, resulting in a considerable expansion of the trade. Paisley adopted Dutch methods and became a major centre of production. Glasgow manufactured for the export trade, which doubled between 1725 and 1738. 
Scottish industrial policy was made by the Board of Trustees for Fisheries and Manufactures in Scotland, which sought to build an economy complementary, not competitive, with England. Since England had woollens, this meant linen. Encouraged and subsidized by the Board of Trustees so it could compete with German products, merchant entrepreneurs became dominant in all stages of linen manufacturing and built up the market share of Scottish linens, especially in the American colonial market. 
Scotland grew steadily in the 19th century, from 1,608,000 in the census of 1801 to 2,889,000 in 1851 and 4,472,000 in 1901.  The economy, long based on agriculture,  began to industrialize after 1790. At first the leading industry, based in the west, was the spinning and weaving of cotton. In 1861 the American Civil War suddenly cut off the supplies of raw cotton and the industry never recovered. Thanks to its many entrepreneurs and engineers, and its large stock of easily mined coal, Scotland became a world centre for engineering, shipbuilding, and locomotive construction, with steel replacing iron after 1870. 
Liberalism emerged from urban Scotland, the free-trade sentiments and strong individualism of entrepreneurs merging with the radical emphasis on education and self-reliance as a means of community betterment. Despite political challenges, especially by the 1900s, these distinctive liberal values remained strong. 
The first Scottish banks, Bank of Scotland (Edinburgh, 1695) the Royal Bank of Scotland (Edinburgh, 1727) are still in operation.  By the early 19th century Glasgow had strong banks as well and Scotland had a flourishing financial system. There were over 400 branches, amounting to one office per 7000 people, double the level in England. The banks were more lightly regulated than those in England. Historians often emphasize that the flexibility and dynamism of the Scottish banking system contributed significantly to the rapid development of the economy in the 19th century.  
The British Linen Company, established in 1746, was the largest firm in the Scottish linen industry in the 18th century, exporting linen to England and America. As a joint-stock company, it had the right to raise funds through the issue of promissory notes or bonds. With its bonds functioning as bank notes, the company gradually moved into the business of lending and discounting to other linen manufacturers, and in the early 1770s banking became its main activity. Renamed British Linen Bank in 1906, it was one of Scotland's premier banks until it was bought out by the Bank of Scotland in 1969. 
Even with the growth of industry there never were enough good jobs, so during the 1841-1931 era, about 2 million Scots emigrated to North America and Australia, and another 750,000 relocated to England. By the 21st century, there were about as many people of Scottish descent in both Canada (see Scotch Canadians) and the U.S. (see Scottish American) as the 5 million remaining in Scotland. 
The Industrial Revolution Edit
During the Industrial Revolution, Scotland became one of the commercial, intellectual and industrial powerhouses of the British Empire.  Beginning about 1790 the most important industry in the west of Scotland became textiles, especially the spinning and weaving of cotton, which flourished until the American Civil War in 1861 cut off the supplies of raw cotton the industry never recovered. However, by that time Scotland had developed heavy industries based on its coal and iron resources. The invention of the hot blast for smelting iron (1828) had revolutionized the Scottish iron industry, and Scotland became a centre for engineering, shipbuilding, and locomotive construction. Toward the end of the 19th century steel production largely replaced iron production. Emigrant Andrew Carnegie built the American steel industry, and spent much of his time and philanthropy in Scotland.
As the 19th century wore on, Lowland Scotland turned more and more towards heavy industry. Glasgow and the River Clyde became a major shipbuilding centre. Glasgow became one of the largest cities in the world, and known as "the Second City of the Empire" after London.
The industrial developments, while they brought work and wealth, were so rapid that housing, town-planning, and provision for public health did not keep pace with them, and for a time living conditions in some of the towns and cities were notoriously bad, with overcrowding, high infant mortality, and growing rates of tuberculosis. 
Dundee upgraded its harbour and established itself as an industrial and trading centre. Dundee's industrial heritage was based on "the three Js": jute, jam and journalism. East-central Scotland became too heavily dependent on linens, hemp, and jute. Despite the cyclical nature of the trade which periodically ruined weaker companies, profits held up well in the 19th century. Typical firms were family affairs, even after the introduction of limited liability in the 1890s. The profits helped make the city an important source of overseas investment, especially in North America. However, the profits were seldom invested locally, apart from the linen trade. The reasons were that low wages limited local consumption, and because there were no important natural resources thus the Dundee region offered little opportunity for profitable industrial diversification. 
Coal mining became a major industry, and continue to grow into the 20th century producing the fuel to heat homes factories and drive steam engines locomotives and steamships. By 1914 there were 1,000,000 coal miners in Scotland. The stereotype emerged early on of Scottish colliers as brutish, non-religious and socially isolated serfs  that was an exaggeration, for their life style resembled coal miners everywhere, with a strong emphasis on masculinity, egalitarianism, group solidarity, and support for radical labour movements. 
Britain was the world leader in the construction of railways, and their use to expand trade and coal supplies. The first line opened in 1831. Not only was good passenger service established by the late 1840s, but an excellent network of freight lines reduce the cost of shipping coal, and made products manufactured in Scotland competitive throughout Britain. For example, railways open the London market to Scottish beef and milk. They enabled the Aberdeen Angus to become a cattle breed of worldwide reputation.  
Shipbuilding on Clydeside (the river Clyde through Glasgow and other points) reached its peak in the years in the 1900-1918 era, with an output of 370 ships completed in 1913, and even more during the First World War. The total output from some 300 firms (that is, 30-40 at any one time) exceeded 25,000 ships. 
The first small yards were opened in 1712 at the Scott family's shipyard at Greenock. After 1860 the Clydeside shipyards specialized in steamships made of iron (after 1870, made of steel), which rapidly replaced the wooden sailing vessels of both the merchant fleets and the battle fleets of the world. It became the world's pre-eminent shipbuilding centre. Clydebuilt became an industry benchmark of quality, and the river's shipyards were given contracts for warships, as well as prestigious liners such as the Queen Mary.
Major firms included Denny of Dumbarton, Scotts Shipbuilding & Engineering Company of Greenock, Lithgows of Port Glasgow, Simon and Lobnitz of Renfrew, Alexander Stephen & Sons of Linthouse, Fairfield of Govan, Inglis of Pointhouse, Barclay Curle of Whiteinch, Connell and Yarrow of Scotstoun. Equally important were the engineering firms that supplied the machinery to drive these vessels, the boilers and pumps and steering gear - Rankin & Blackmore, Hastie's and Kincaid's of Greenock, Rowan's of Finnieston, Weir's of Cathcart, Howden's of Tradeston and Babcock & Wilcox of Renfrew.  The biggest customer was Sir William Mackinnon, who ran five shipping companies in the 19th century from his base in Glasgow. 
A representative entrepreneur in Glasgow was William Lithgow (1854–1908), who at the age of 16 inherited £1,000 and at his death left a fortune of £1.75 million. Starting with partners whom he later bought out, he employed innovative designs and concepts such as interchangeable components, helped finance his customers by purchasing shares in their ships, and continuously expanded his shipyard. When rivals went bankrupt during the depression years of the 1880s and 1890s, Lithgows survived. His children and grandchildren built the company into the world's largest private shipbuilding firm by 1950, but the family sold the yards to the government in 1977 and diversified their holdings into other industries. 
The companies attracted rural workers, as well as immigrants from Catholic Ireland, by inexpensive company housing that was a dramatic move upward from the inner-city slums. This paternalistic policy led many owners to endorse government sponsored housing programs as well as self-help projects among the respectable working class. 
Rural life Edit
A handful of powerful families, typified by the dukes of Argyll, Atholl, Buccleuch, and Sutherland, owned an enormous quantity of land and, until 1885, had great influence on political affairs. The concentration of land ownership is illustrated by, in 1878, 68 persons owning nearly half of Scotland and 580 people owning over three quarters. 
Agriculture in the Lowlands was steadily upgraded after 1700, and standards remained high.  However, after the repeal of the Corn Laws in 1846, when Britain adopted a free trade policy, grain imports from America undermined the profitability of crop production. The result was a continuous exodus from the land—to the cities, or further afield to England, Canada, America or Australia. [ citation needed ]
The traditional landed interests held their own politically in the face of the rapidly growing urban middle classes, for the electoral reforms of mid-century were less far-reaching in Scotland than in England. The landed interests managed to ensure that the political weight of numbers was skewed disproportionately in their favour.
The Highlands meanwhile were very poor and traditional, with few connections to the uplift of the Scottish Enlightenment and little role in the Industrial Revolution.  The 100 or so wealthiest landlords needed cash to maintain their position in London society, and had less need of soldiers now that warfare had abated. Therefore, they turned to money rents, displaced farmers to raise sheep, and downplayed the traditional patriarchal relationship that had historically sustained the clans. A new group appeared, the crofters, emerging for the first time in the late 18th and early 19th centuries. They were poor families living on "crofts" or very small rented farms used to raise potatoes, with kelping,  fishing, and spinning of linen, and military service, as important sources of revenue. 
The era of the Napoleonic wars, 1790–1815, brought prosperity, optimism, and economic growth to the Highlands. The economy grew thanks to wages paid by kelping industry (where men burned kelp for the ashes), fisheries, and weaving, as well as large-scale infrastructure spending such as the Caledonian Canal project. On the East Coast, farmlands were improved, and high prices for cattle brought money to the community. Service in the Army was also attractive to young men from Highlands, who sent pay home and retired there with their army pensions.  [ page needed ] The prosperity ended after 1815, and long-run negative factors began to undermine the economic position of the poor tenant farmers or "crofters," as they were called. The adoption by the landowners of a market orientation in the century after 1750 dissolved the traditional social and economic structure of the north-west Highlands and Hebrides Islands, causing great disruption for the crofters. The Highland Clearances and the end of the township system followed changes in land ownership and tenancy and the replacement of cattle by sheep.
Trade unions Edit
Scottish workers played a major role in the nationwide industrial upheavals of 1910-14. The National Sailors' and Firemen's Union Directed strike activities in many port cities across Britain, while activists in the Glasgow Trades Council took the lead locally. The strongly local character of the strike movement and its leadership in Glasgow shaped both the strikes themselves - which were more unified and coherent in Glasgow than in some other centers - and the subsequent development of waterfront organization on the Clyde, marked as it was by the emergence of independent locally based unions among both dockers and seamen. 
Clydeside shipyards before the 1914 had been the busiest in the world, turning out more than a third of the entire British output. They expanded dramatically during the war, primarily to produce transports of the sort that German submarines were busy sinking. Confident of postwar expansion, the companies borrowed heavily to expand their facilities. But after the war, employment tumbled as the yards proved too big, too expensive, and too inefficient in any case world demand was down. The most skilled craftsmen were especially hard hit, because there were few alternative uses for their specialized skills.  A serious weakness on the engineering side was a lag in developing the new technology of turbine engines, diesel engines, and welding techniques. The yards went into a long period of decline, interrupted only by the Second World War's temporary expansion. In the 21st century, only a handful of ship yards remain active. 
The years before the First World War were the golden age of the inshore fisheries. The main port was Aberdeen. Landings reached new heights, and Scottish catches dominated Europe's herring trade, accounting for a third of the British catch. The boats employed 34,000 men in 1911, with another 50,000 women on shore employed part-time in processing. High productivity came about thanks to the transition to more productive steam-powered boats, while the rest of Europe's fishing fleets were slower because they were still powered by sails. Scotland's fishermen had acquired nearly one thousand steam drifters by 1914, valued over two million pounds. However, the escalating level of capital expenditure necessitated new sources of capital it came principally from merchants and fish salesmen. The fishermen now had to share their profits, and became entangled in informal contracts, tie-in sales and fast-accumulating debts. The shared cultural background facilitated mutual trust. The option of state intervention and government money was debated and rejected. 
Deindustrialization took place rapidly in the 1970s and 1980s, as most of the traditional industries drastically shrank or were completely closed down. A new service-oriented economy emerged to replace traditional heavy industries.  
Since the Second World War, the economy has been fully integrated into the overall British economy, with the most distinctive feature being the discovery of oil offshore in the North Sea. The oil brought new wealth and new people to the most isolated areas.
The discovery of the giant Forties oilfield in October 1970 was an initial sign that Scotland was about to become a major oil producing nation, a view confirmed when Shell Expro discovered the giant Brent oilfield in the northern North Sea east of Shetland the following year. Oil production started from the Argyll field (now Ardmore) in June 1975  followed by Forties in November of that year. 
John Brown & Company's shipyard at Clydebank transformed itself from a traditional shipbuilding business to a factor in the high technology offshore oil and gas drilling industry. After 1972 the firm has been owned by three multinational corporations, and its adaptation to drilling has been affected by the complexities of fluctuating international markets and changing technologies. Employment in the yard is far lower. 
Following the Boom and Bust of the Roman Economy - History
The Politics of Boom and Bust
The Republican "Old Guard" Returns
Warren G. Harding was inaugurated in 1921. He was unable to detect corruption in his own staff. He was a very soft guy in that he hated to say "no," hurting peoples' feelings.
Charles Evans Hughes was the secretary of state. Andrew W. Mellon, Pittsburgh's multimillionaire aluminium king, was the secretary of the Treasury. Herbert Hoover was the secretary of commerce.
Harding's brightest and most capable officials (above) were offset by two of the worst: Senator Albert B. Fall, an anti-conservationist who was the secretary of the interior, and Harry M. Daugherty, a crook who was the attorney general.
GOP Reaction at the Throttle
Industrialists wanted the government to stop legislating business and to actually help businesses make profits.
In the first years of the 1920s, the Supreme Court struck down progressive legislation. The Supreme Court ruled in Adkins v. Children's Hospital(1923) that women did not deserve special protection in the workplace. They said that the 19 th Amendment made women the legal equals of men.
Corporations under President Harding could expand without worries of antitrust laws.
The Interstate Commerce Commission was led by men who were sympathetic to the managers of the railroads.
Industrialists convinced the government to release control that it had installed on the economy during WWI. The Esch-Cummins Transportation Act of 1920 returned the railroads to private management. It pledged the Interstate Commerce Commission to guarantee their profitability.
The Merchant Marine Act of 1920 authorized the government to sell its wartime fleet of 1500 vessels at extremely low prices.
The La Follette Seaman's Act of 1915 improved working conditions for sailors but it economically hurt the American shipping industry because they now had a hard time competing with foreigners, who did not treat their crews very well.
Labor struggled without friendly government support there were a lot of strikes and wage cuts.
In 1921, Congress created the Veterans Bureau to operate hospitals and provide vocational rehabilitation for the disabled. The American Legion was created in 1919 by Colonel Theodore Roosevelt, Jr. It was a support/social group for veterans. The legion convinced Congress in 1924 to pass the Adjusted Compensation Act, which gave every former soldier a sum of money, depending on their years of service.
America Seeks Benefits Without Burdens
Because the Treaty of Versailles was rejected, the United States had technically been at war with Germany, Austria, and Hungary for 3 years after the armistice. Congress passed a joint resolution in July 1921 that officially declared the war over.
Isolationism was prominent in Washington. President Harding hated the League of Nations and at first, he refused to support the League's world health program.
Secretary Hughes secured the rights for American oil companies to share oil lands in the Middle East with Britain.
Several world powers met at the Washington "Disarmament" Conference in 1921-1922 to discuss disarmament of their respective navies. Secretary Hughes led the American delegation. The Five-Power Naval Treaty of 1922 limited the construction of certain types of large naval ships, and it applied ratio limits to the number of ships a country could build (ex: Japan could build 3/5 as many ships as America). Submarines and destroyers were not restricted. It also stated that the British and Americans would refrain from fortifying their Far Eastern possessions, including the Philippines. The Japanese were not subjected to such restraints in their possessions.
A Four-Power Treaty between Britain, Japan, France and the United States replaced the 20-year old Anglo-Japanese Treaty and preserved the status quo in the Pacific.
In the late 1920s, Americans called for the "outlaw of war." Calvin Coolidge's secretary of state Frank. B. Kellogg signed with the French foreign minister in 1928 the Kellogg-Briand Pact. Known as the Pact of Paris, it was ratified by 62 nations. It tried to outlaw war, but it had a big exception: defensive wars were still permitted.
Hiking the Tariff Higher
Because businessmen did not want Europe flooding American markets with cheap goods after the war, Congress passed the Fordney-McCumber Tariff Law in 1922, raising the tariff from 27% to 35%.
Presidents Harding and Coolidge were much more prone to increasing tariffs than decreasing them this presented a problem: Europe needed to sell goods to the U.S. to get the money to pay back its war debts. Europeans responded by also increasing tariffs.
The Stench of Scandal
In 1923, Colonel Charles R. Forbes, head of the Veterans Bureau, was caught stealing $200 million from the government, chiefly in connection with the building of veterans' hospitals.
In the Teapot Dome scandal (1921), the secretary of the interior, Albert B. Fall, convinced the secretary of the navy to transfer valuable oil-laden land to the Interior Department (the land was owned by the navy). Fall was then bribed with $100,000 to leased the lands to oilmen Harry F. Sinclair and Edward L. Doheny.
Attorney General Daugherty was accused of illegal selling pardons and liquor permits.
President Harding died in San Francisco on August 2, 1923 of pneumonia and thrombosis.
Vice President Calvin Coolidge took over the presidency following Harding's death. He was extremely shy and delivered very boring speeches.
Coolidge did not change the business-friendly policies that Harding had created.
After the end of WWI, farms struggled because the Federal government stopped guaranteeing high prices and other nations started to grow more crops. Machines also enabled farmers to grow more crops, but this created crop surpluses, which decreased prices.
The Capper-Volstead Act exempted farmers' marketing cooperatives from anti-trust prosecution.
The McNary-Haugen Bill sought to keep agricultural prices high by authorizing the government to buy crop surpluses and sell them abroad. President Coolidge vetoed the bill because the bill would've cost the government money.
A Three-Way Race for the White House in 1924
Preceding the election of 1924, the Democratic party was split into many different factions. They eventually chose John W. Davis to compete against Calvin Coolidge (Republican) and La Follette (Progressive) for the presidency.
Senator La Follette from Wisconsin led the new liberal Progressive party. He was endorsed by the American Federation of Labor and by farmers. The Progressives called for government ownership of railroads and relief for farmers, opposed monopolies and antilabor injunctions, and supported a constitutional amendment to limit the Supreme Court's power to invalidate laws passed by Congress.
Calvin Coolidge won the election of 1924.
Isolationism continued in Coolidge's second term. Exception to this were in the Caribbean and Central America, where Americans participated in a few armed conflicts in Haiti and Nicaragua.
In 1926, the Mexican government declared control over its oil resources. Despite American oil companies support for war, Coolidge resolved the situation diplomatically.
After WWI, America became a creditor to the world, loaning money to various countries.
The United States demanded to be repaid for the $10 billion that it had loaned to the Allies in WWI. The Allies protested the debt, pointing out that they had lost many troops and that America should just write off the loans as war costs. America's postwar tariffs also made it difficult for the European Allies to make money to pay their debts.
Unraveling the Debt Knot
America's demand for repayment from France and Britain caused these countries to demand war reparations from Germany. The Allies hoped to pay their American debts with the money received from Germany.
Negotiated by Charles Dawes, the Dawes Plan of 1924 addressed the debt repayment issue. It set up German reparations and allowed for Americans to make private loans to Germany. The Germans used these loans to pay the reparations, which the Allies used to pay the war debts to the Americans.
A downturn in the global economy disrupted the flow of money, and because of this, the United States never fully received its war repayments from Europe.
The Triumph of Herbert Hoover, 1928
When Calvin Coolidge decided not to run for re-election in 1928, the Republicans chose Herbert Hoover. Hoover supported isolationism, individualism, free enterprise, and small government. He was a good leader. Other strengths were his integrity, humanitarianism, passion for assembling the facts, efficiency, talents for administration, and ability to inspire loyalty in close associates.
The Democrats nominated Alfred E. Smith. He was a Roman Catholic in an overwhelmingly Protestant country.
For the first time, the radio was widely used in election campaigns. It mostly helped Hoover's campaign.
Smith was unable to win the South due to a combination of his Catholicism, opposition to prohibition, and liberal ideals. Herbert Hoover won the election of 1928 in a landslide, becoming the first Republican candidate in 52 years (except for Harding's Tennessee victory), to win a state that had seceded.
President Hoover's First Moves
The disorganized wage earners and the disorganized farmers were not getting rich in the growing economy.
The Agricultural Marketing Act, passed in 1929, was designed to help the farmers by setting up the Federal Farm Board. The Board purchased agricultural surpluses, hoping to stabilize agriculture prices. The Board created the Grain Stabilization Corporation and the Cotton Stabilization Corporation, which also purchased surpluses. The corporations failed after farmers produced too much surplus, exceeding the budget of the Board.
The Hawley-Smoot Tariff of 1930 was intended to be a mild tariff, but Congress tacked on several amendments, turning it into a bill that raised the tariff to 60%. This was the nation's highest protective tariff during peacetime. The tariff deepened the depression that had already begun in America and other nations, and it increased international financial chaos.
The Great Crash Ends the Golden Twenties
The stock market crashed in October 1929. It was partially triggered by the British, who raised their interest rates in an effort to bring back capital lured abroad by American investments. The British needed money, and they were unable to trade with the United States due the high tariffs.
On "Black Tuesday" of October 29, 1929, millions of stocks were sold in a panic. By the end of 1929, two months after the initial crash, stockholders had lost $40 billion.
As a result of the crash, millions lost their jobs and thousands of banks closed. The United States was the hardest industrialized nation to be hit.
This crash led to the Great Depression.
Hooked on the Horn of Plenty
One of the main causes of the Great Depression was overproduction by farms and factories. The nation's ability to produce goods had outrun its capacity to consume or pay for them. All of the money was being invested in factories and other agencies of production not enough money was going into salaries and wages. Over-expansion of credit also contributed to the depression.
The Great Depression worsened the economic state in Europe, which had not yet fully recovered from WWI.
In the 1930s, a drought scorched the Mississippi Valley, causing thousands of farms to be sold.
Hoovervilles: a nickname for tin-and-paper shantytowns.
Rugged Times for Rugged Individuals
In the beginning of the Great Depression, President Hoover believed that industry and self-reliance had made America great and that the government should play no role in the welfare of the people. He soon realized, however, that the welfare of the people in a nationwide catastrophe was a direct concern of the government.
Hoover developed a plan in which the government would help the railroads, banks, and rural credit corporations in the hope that if financial health was restored at the top of the economic pyramid, then unemployment would be relieved as the prosperity trickled down. Hoover's efforts were criticized because he gave government money to the big bankers who had allegedly started the depression.
Hoover Battles the Great Depression
President Hoover convinced Congress to allocate $2.25 billion for useful public works. (ex: the Hoover Dam)
Hoover opposed any projects that he viewed as "socialistic." Ex: He vetoed the Muscle Shoals Bill, which was designed to dam the Tennessee River and sell government-produced electricity in competition with citizens in private companies.
In 1932, Congress created the Reconstruction Finance Corporation (RFC), which lent money to insurance companies, banks, agricultural organizations, railroads, and state and local governments.
Congress passed the Norris-La Guardia Anti-Injunction Act in 1932, which outlawed antiunion contracts and barred federal courts from stopping strikes, boycotts, and peaceful picketing.
Routing the Bonus Army in Washington
Veterans of WWI were hit hard by the Great Depression. The "Bonus Expeditionary Force" (BEF) converged on the Capitol in the summer of 1932. They demanded that Congress fully pay the deferred bonus that Congress had passed in 1924 (the payment was supposed to be paid in 1945).
After the BEF refused to leave the Capitol, President Hoover sent in the army to evacuate the group. The ensuing riots and incidents brought additional public disdain for Hoover.
Japanese Militarists Attack China
In September 1931, Japanese imperialists, seeing that the West was bogged down in the Great Depression, invaded the Chinese province of Manchuria. Although a direct violation of the League of Nations, the League was unable to do anything because it lacked America's support.
In 1932, Secretary of State Henry L. Stimson decided to only diplomatically attack the Japanese. He issued the Stimson doctrine, which declared that the United States would not recognize any territory acquired by force. Japan ignored the doctrine and moved onto Shanghai in 1932. The violence continued without the League of Nation's intervention.
Hoover Pioneers the Good Neighbor Policy
President Hoover sought to improve relations with Latin America. He withdrew American troops from Haiti and Nicaragua.
Hoover's actions laid the groundwork for future President Roosevelt's "Good Neighbor" policy.
The boom and bust economy of the Greenland Norse walrus ivory trade
The Norse settlements on Greenland was founded by Erik the Red around 985 and lasted almost 500 years. New research show that the settlers hunted walrus and traded tusks and ivory across Europe during the Middle Ages, but the hunt became so intense that it may have led to the collapse of Norse Greenland.
In August 2018, a transdisciplinary team of Norwegian and British researchers found genetic evidence for the importance of walrus ivory trade as a driver for both the success and the decline of the Norse colony in Greenland. The Norse settlements were established by emigrants from Norway and Iceland in the 980s and lasted almost 500 years, until they finally disappeared between 1450 and 1500.
In 2018, the researchers had analysed ancient DNA (aDNA) from up to 1100 years old walrus ivory and skull fragments (originally left attached to traded tusks) found in European museums and collections. In medieval Europe, skulls served as packaging for the walrus ivory used for many art objects.
The same team has now included additional lines of evidence to reveal the intensity of this trade during the Middle Ages. With this evidence, the researchers are able to tell a comprehensive story about globalized trade and the way Norse settlers in Greenland depleted walrus populations.
Valuable ivory from walrus
The Lewis chessmen are a famous example of how walrus ivory could be used to make wonderful art objects and artefacts. The chessmen were probably made in Trondheim shortly before 1200 CE and discovered in the 1830s on the Isle of Lewis in the Outer Hebrides of Scotland.
Ivory from walrus tusks has been viewed as a less desirable substitute for elephant ivory in the Middle Ages, but the new study argues that its fashionability simply changed through time.
“Walrus ivory was very popular and valuable especially early in the Middle ages, particularly for use in Romanesque art. But later, in the 1200s, there was a shift in popularity from walrus to elephant tusks around the time when Gothic art developed”, explains the archaeologist Dr. James H. Barrett from the University of Cambridge.
Three roads to the full story
“We have used a combination of three separate methods in our efforts to uncover a detailed story about the trade in walrus products in medieval Europe. We combined archaeological analysis where we treated the skull portions as artefacts with analysis of aDNA extracted from the skulls. We also looked at stable isotopes of carbon, nitrogen, sulphur and hydrogen from defatted and purified bone collagen”, explains Dr. Barrett.
Before the project started, the researchers had reason to believe that walrus products could have come from different regions in the Arctic. An eastern source, from the Barents Sea region, was documented as early as the late 9th century CE, when the chieftain Ohthere (Ottar) of Hålogaland visited the court of King Alfred of Wessex in England.
“When we presented our last study in August 2018, we did not have the confidence to claim that Greenland was almost the sole source of walrus products for the European market. The reason is that the aDNA told us that some of the walrus products came from the western coast of Greenland, but we were not able to pinpoint where the rest came from”, explains researcher Sanne Boessenkool from the University of Oslo.
“That’s why we needed the extra information from analysing stable isotopes. The isotope signatures relate to the diet of the animals, and to their environment. So, if you have walruses living in the same place and eating the same food, they will have the same isotopic signature”, Barrett explains.
When the researchers added the results from the isotope analysis to the results from the other methods, they found that all but one of 19 medieval European finds of walrus skulls – analysed using both aDNA and isotopes – came from Greenland. A single skull, from the collections at the University Museum of Bergen, must have come from somewhere else.
A clear picture emerged
The combined results from the new study reveal fascinating insights into the hunting and trade of walrus by the Greenland Norse.
“We found that specific urban nodes redistributed the walrus ivory originally transported with the skulls. The earliest of these would appear to have been Dublin, Trondheim and Schleswig”, Barrett explains.
The backdrop for this story is the population of Iceland in the second half of the ninth century, whenNorsesettlers migrated across the North Atlantic from Scandinavia. Later, as most Norwegian and Icelandic schoolchildren have learnt, explorers led by Erik the Red set out from Iceland and reached the southwest coast of Greenland in the 980s. The ensuing Norse settlements on Greenland lasted almost 500 years and consisted of emigrants from Norway and Iceland.
Hunting moves from Iceland to Greenland
“Our story starts where the Icelandic story ends. In Iceland, there are walrus finds in early Viking age sites. But later, they are described as a rarity. Previous research shows that the population of walruses in Iceland was hunted to depletion quite quickly after the Viking settlement”, Barrett explains.
When the Vikings could not hunt walrus on Iceland anymore, Greenland emerged as the new hunting ground.
“We had earlier discovered a genetic change, suggesting a major geographical shift from where walruses were obtained. The eureka moment for us came when we discovered that this genetic change coincided with a chronological sequence in the walrus skulls from Greenland – from male to female, and from large to smaller animals” says Researcher Bastiaan Star from the University of Oslo.
“Together, these findings suggest serial depletion as animals with smaller tusks, from sources further north along the western Greenlandic coast, had to be harvested to maintain the medieval trade in walrus ivory”, Barrett adds.
The researchers did not rely only on ancient DNA and isotope analyses, because a trained archaeologist can uncover a lot of information just by looking at the artefacts. In this case, James Barrett was able to identify a surprisingly consistent way of removing the valuable rostrum or snout, that holds the tusks, from the rest of the skull.
“In most of the cases, the cutmarks are all from the same angle. They tell us that the hunter each time stood over a dead walrus laying on its left side and chopped off the rostrum with an axe or a large knife. Later, the tusks were modified and decorated. We found that almost all the skulls had been prepared in the same way, and the likely explanation is that the work was done by people living in the same settlements”, Barrett says.
The driving forces
There are many theories as to why the Norse settlements in Greenland collapsed after surviving for some 450–500 years. One theory says that the Norse settlements were undermined because there was no longer a demand for walrus ivory. Other theories for collapse of the colonies have included climate change – the “Little Ice Age”, a sustained period of lower temperatures, began in the 14th century – as well as unsustainable farming methods, conflict with the Inuit and even the Black Death.
The hypothesis about disappearing demand for walrus ivory appears inconsistent with the new evidence presented by British and Norwegian researchers.
“Instead, we are seeing an increased harvesting and depletion of the walrus population as time passes. The Norse Greenlanders still wanted to trade with Europe because they needed iron and wood and so on, so they had to continue hunting walrus in order to have something to trade with. However, the value of ivory from Greenland decreased both because of the competition from elephant ivory, and because of the reduced size of the animals they hunted in Greenland. If the unit price is lower, you need to produce more of it”, Barrett explains.
The conclusion is that the hunting of walruses increased because of lowered unit prices per tusk, instead of being reduced because nobody wanted walrus ivory anymore.
What does this tell us about the collapse of the Norse settlements in Greenland? Historians have told us that there were two Norse settlements in Greenland, and the western settlement – closest to the hunting grounds – disappeared as early as in the 1300s. The result was that the distance from the remaining settlement to the hunting grounds became larger, and increasingly larger when the hunters had to travel further and further to the north in order to find walruses.
“Imagine what a huge investment it must have been to row and sail in their small boats each summer, all the way from the Norse settlements, which were in south-west Greenland, to the hunting grounds. Discoveries of Norse artefacts in Inuit settlements show that the Norse settlers travelled as far as Ellesmere Island, which is very far to the north. I think it must have become pretty untenable to continue in this way. It is possible that this huge effort finally undermined the resilience of the Norse settlements in Greenland”, Barrett says.
Researcher Bastiaan Star finds it very striking that every observation the researchers have done during the investigation points toward the same story, which is described in detail in their new scientific paper.
“I was also struck by the fact that a lot of the stuff we make from plastics today, like small gaming pieces, dice, belt buckles and so on, could be made from ivory back then. The artisans in the Middle Ages were also able to make both beautiful pieces of high art and delightful folk art. Among my favourite examples are small figurines of Arctic animals that are carved from walrus teeth and are anatomically correct. One example from medieval Trondheim is of a walrus itself, complete with flippers and tusks. The interesting thing is that the carving could only have been done by someone who had seen a real walrus”, Star says.
A transdisciplinary project
In 2014, the Research Council of Norway funded an Oslo-led project named Tracking Viking-assisted Dispersal of Biodiversity using Ancient DNA. At approximately the same time, the Leverhulme Trust in the UK funded a Cambridge-led archaeology project on medieval Arctic trade called Northern Journeys. These projects later combined forces and have used aDNA to uncover new stories about the Viking Age.
In the new study, archaeologist James H. Barrett studied the skulls of walruses from museums. He also worked on the archaeological and stable isotope interpretations. The researchers Sanne Boessenkool and Bastiaan Star at the University of Oslo focused on sequencing and analysing the ancient DNA. The study of stable isotopes in the laboratory was performed by Catherine J. Kneale and Tamsin C. O’Connell at the University of Cambridge.
Header Image – A modified and decorated walrus skull from medieval Bergen. Photo: James H. Barrett
US Housing Market Forecast Video
Supply & Demand Determine Home Value Change
The first thing to remember when somebody is throwing a bunch of "facts" at you is that supply and demand is the dynamic that determines the direction of home values. Nothing else matters.
So when you are told that every home purchased in 2021 will be foreclosed upon, then you have to ask yourself "how will this impact the supply and demand for homes in my market area." When you hear that the Secretary of HUD has been abducted by aliens, again, consider how that will impact the supply and demand for homes in your market area. No matter what the talking heads say, you simply have to take it in, determine if it is believable, and then consider its impact on the supply and demand for homes in your area.
Now, not everything being spouted on YouTube about real estate is crazy. There are a lot of people out there who share solid facts, it's just the quick conclusions they reach that warrant a deeper dive into the data. I will attempt to take each point that impacts the supply and demand for homes at the national level and critique it based upon information that is available today. If you feel that I have left an important issue out of my report, please comment below or call, text, or email me so that I can improve this report.
Unlike my normal reports, I'm going to NOT drill-down to my local market in Tallahassee, rather I am going to keep the focus on the entire US housing market. I have always claimed that Tallahassee is a great bellwether for the overall US market, and today's report will demonstrate the truth of this claim.
The concept of periodic crises within capitalism dates back to the works of the Utopian socialists Charles Fourier and Robert Owen and the Swiss economist Léonard de Sismondi.   Karl Marx considered his crisis theory to be his most substantial theoretical achievement.    He presents it in its most developed form as Law of Tendency for the Rate of Profit to Fall combined with a discussion of various counter tendencies, which may slow or modify its impact." Roman Rosdolsky observed that "Marx concludes by saying that the law of the tendency of the rate of profit to fall is in every respect the most important law of modern political economy . despite its simplicity, it has never before been grasped and even less consciously articulated . It is from the historical standpoint the most important law."   A key characteristic of these theoretical factors is that none of them are natural or accidental in origin but instead arise from systemic elements of capitalism as a mode of production and basic social order. In Marx's words, "The real barrier of capitalist production is capital itself". 
The law of the falling rate of profit, the unexpected consequence of the profit motive, is described by Marx as a "two-faced law with the same causes for a decrease in the rate of profits and a simultaneous increase of the mass of profits",  "In short, the same development of the social productivity of labour expresses itself in the course of capitalist development on the one hand in a tendency to a progressive fall of the rate of profit, and on the other hand in a progressive increase of the absolute mass of the appropriated surplus value, or profit so that on the whole a relative decrease of variable capital and profit is accompanied by an absolute increase of both."  
In 1929 the Communist Academy in Moscow published "The Capitalist Cycle: An Essay on the Marxist Theory of the Cycle", a 1927 report by Bolshevik theoretician Pavel Maksakovsky to the seminar on the theory of reproduction at the Institute of Red Professors of the Communist Academy. This work explains the connection between crises and regular business cycles based on the cyclical dynamic disequilibrium of the reproduction schemes in volume 2 of "Capital". This work rejects the various theories elaborated by "Marxian" academics. In particular it explains that the collapse in profits following a boom and crisis is not the result of any long term tendency but is rather a cyclical phenomenon. The recovery following a depression is based on replacement of labor-intensive techniques that have become uneconomic at the low prices and profit margins following the crash. This new investment in less labor-intensive technology takes market share from competitors by producing at lower cost while also lowering the average rate of profit and thus explains the actual mechanism for both economic growth with improved technology and a long run tendency for the rate of profit to fall. The recovery eventually leads to another boom because the lag for gestation of fixed capital investment results in prices that continue such investment until eventually the completed projects deliver overproduction and a crash. 
There is a long history of interpreting Crisis theory, rather as a theory of cycles than of crisis. An example in 2013 by Peter D. Thomas and Geert Reuten, "Crisis and the Rate of Profit in Marx's Laboratory" suggests controversially that even Marx's own critical analysis can be claimed to have transitioned from the former toward the latter. 
There are several elements in Marx's presentation which attest to his familiarity with Mill's formulations, notably Mill's treatment of what Marx would subsequently call counteracting tendencies: destruction of capital through commercial revulsions §5, improvements in production §6, importation of cheap necessaries and instruments §7, and emigration of capital §8.   
"In Marx's system, as in Mill's the falling rate of profit is a long-run tendency precisely because of the "counteracting influences at work which thwart and annul the effects of this general law, leaving to it merely the character of a tendency."  These counteracting forces are as follows:  (1) An increase in the intensity of exploitation (via intensification of labor or the extension of the working day) (2) Depression of wages below their value . (3) Cheapening of the elements of constant capital (via increased productivity) (4) Relative overproduction (which keeps many workers employed in relatively backward industries, such as luxury goods, where the organic composition of capital is low) (5) Foreign trade (which offers cheaper commodities and more profitable channels of investment) and (6) The increase of "stock capital" (interest bearing capital, whose low rate of return is not averaged with others).
Again, like Mill, Marx indicates the post-crisis waste of capital which restores profitability, but this is not mentioned specifically as a counter-tendency until the cyclical nature of the system is demonstrated. On the other hand, Mill does not refer to depression of wages below their value, relative overpopulation, or the increase in "stock capital". But on the most important counter-tendencies, that is, the effects of increasing productivity at home in cheapening commodities and of foreign trade in providing both cheaper goods and greater profits, Marx and Mill are in accord." 
It is a tenet of many Marxist groupings that crises are inevitable and will be increasingly severe until the contradictions inherent in the mismatch between the relations of production and the development of productive forces reach the final point of failure, determined by the quality of their leadership, the development of the consciousness of the various social classes, and other "subjective factors".
Thus, according to this theory, the degree of "tuning" necessary for intervention in otherwise "perfect" market mechanisms will become more and more extreme as the time in which the capitalist order is a progressive factor in the development of productive forces recedes further and further into the past. But the subjective factors are the explanation for why purely objective factors such as the severity of a crisis, the rate of exploitation, etc., do not alone determine the revolutionary upsurge. A common example is the contrast of the oppression of the working classes in France in centuries prior to 1789 which although greater did not lead to social revolution as it did once the complete correlation of forces  appeared. [ failed verification ]
Kuruma in his 1929 Introduction to the Study of Crisis ends by noting ". my use of the term "theory of crisis" is not limited to the theory of economic crisis. This term naturally also encompasses the study of the necessity of imperialist world war as the explosion of the contradictions peculiar to modern capitalism. Imperialist world war itself is precisely crisis in its highest form. Thus, the theory of imperialism must be an extension of the theory of crisis." 
David Yaffe, in his application of the theory in the conditions of the end of the Post War Boom in the early 1970s, made an influential link to the expanding role of the state's interventions into economic relations as a politically critical element in attempts by capital to counteract the tendency and find new ways to make the working class pay for the crisis.
Crisis theory is central to Marx's writings it helps underpin Marxists' understanding of a need for systemic change. It is controversial Roman Rosdolsky said "The assertion that Marx did not propose a 'breakdown theory' is primarily attributable to the revisionist interpretation of Marx before and after the First World War. Rosa Luxemburg,  Henryk Grossman [and Samezō Kuruma]   rendered inestimable theoretical services by insisting, as against the revisionists, on the breakdown theory."  More recently David Yaffe 1972,1978 and Tony Allen et al. 1978,1981 in using the theory to explain the conditions at the end of the post-war boom of the 1970s and 1980s re-introduced the theory to a new generation and gained new readers for Grossman's 1929 presentation of Marx's Crisis theory.
Rosa Luxemburg lectured on the 'History of Theories of Economic Crises' at the SPD's Party School in Berlin (possibly in 1911, since the typescript includes a reference to statistics from 1911). 
Henryk Grossman's re-presentation of both the central importance of the theory for Marx and the working out of its elements in a partially mathematical form was published in 1929. Central to the argument is the claim that, within a given business cycle, the accumulation of surplus from year to year leads to a kind of top-heaviness, in which a relatively fixed number of workers have to add profit to an ever-larger lump of investment capital. This observation leads to what is known as Marx's law of the tendency of the rate of profit to fall. Unless certain countervailing possibilities are available, the growth of capital out-paces the growth of labour, so the profits of economic activity have to be shared out more thinly among capitals, i.e., at a lower profit rate. When countervailing tendencies are unavailable or exhausted, the system requires the destruction of capital values in order to return to profitability. Hence creating the underlying preconditions for post-war boom.
Paul Mattick's Economic Crisis and Crisis Theory (published by Merlin Press in 1981) is an accessible introduction and discussion derived from Grossman's work. François Chesnais's (1984, chapter Marx's Crisis Theory Today, in Christopher Freeman ed. Design, Innovation and Long Cycles in Economic Development Frances Pinter, London), discussed the continuing relevance of the theory.
Andrew Kliman has made major new contributions    with a thorough and trenchant philosophical and logical defence of the consistency of the theory in Marx's work, against a number of the criticisms proposed against important aspects of Marx's theory since the 'seventies. 
Francois Chesnais has provided an important exploration of the 'fictitious capital' or 'Finance Capital' aspects of the theory in a review of both historical and contemporary empirical research. 
Guglielmo Carchedi & Michael Roberts in their edited collection World in Crisis  provide a valuable review of the empirical analyses that support and defend the thesis, with contributions from authors in the UK, Greece, Spain, Argentina, Mexico, Brazil, Australia and Japan. 
Keynesian Economics which attempts a "middle way" between laissez-faire, unadulterated capitalism and state guidance and partial control of economic activity, such as in the French dirigisme or the policies of the Golden Age of Capitalism attempts to address such crises with the policy of having the state actively supplying the deficiencies of unaltered markets.
Marx and Keynesians approach and apply the concept of economic crisis in distinct and opposite ways.  The Keynesian approach attempts to stay strictly within the economic sphere and describes 'boom' and 'bust' cycles that balance out. Marx observed and theorised economic crisis as necessarily developing out of the contradictions arising from the dynamics of capitalist production relations. 
"Where Marx differs from Keynes is precisely on the question of the falling rate of profit. It is not the propensity to consume or subjective expectations about future profitability that is crucial for Marx. It is the rate of exploitation and the social productivity of labour that are the key considerations and these in relation to the existing capital stock. While for Keynes the low marginal productivity of capital has its cause in an over-abundance of capital in relation to profit expectations,  and therefore to a 'potential' over-production of commodities (the capitalist will not invest). For Marx the overproduction of capital is only relative to the social productivity of labour and the existing exploitation conditions. It represents an insufficient mass of surplus-value in relation to total capital. So that for Marx the crisis is, and can only be, resolved by expanding profitable production and accumulation, while for Keynes, it can supposedly be remedied by increasing 'effective demand' and this allows for government induced-production."  Yaffe noted in 1972 that ". passages in Volume III referring to the underconsumption of the masses in no way can be interpreted as an underconsumptionist theory of crisis. The citation usually given in support of an 'underconsumptionist theory of crisis' is Marx's statement that "The last cause of all real crises always remains the poverty and restricted consumption of the masses as compared to the tendency of capitalist production to develop the productive forces in such a way, that only the absolute power of consumption of the entire society would be their limit"   The above passage contains within it no more than a description or a restatement of the capitalist relations of production. Marx called it a tautology to explain the crisis by lack of effective consumption .   "
Other explanations have been formulated, and much debated,  including:
As EU leaders prepare for a summit on 25-26 March, at which they plan to discuss Russia, many of them are convinced Russia is a declining power. Since the collapse of the Soviet Union, much of American and European policy on Russia has been predicated on the idea that Russia is in decline and one needs to smoothly manage, or even wait out, the current phase of Russian foreign policy activism, regardless of how disruptive it is for the interests of the European Union and the United States. This approach is sometimes called ‘strategic patience’ – but there is nothing strategic about basing one’s policy on determinism. Given that it is an open question whether Russia will decline, such expectations are short-sighted. It is time for the EU to deal with Russia of today, not with that of 2050 or 2070.
When predicting Russian decline, many American and European thinkers and policymakers – from Joseph Nye to Barack Obama – like to point to Russia’s diminishing share of the global economy, the size of its GDP (which is comparable to those of Spain and Portugal combined), and demographic trends. They also cite Russia’s dependence on raw materials and inability to fight back against corruption, as well as many other chronic ills of its state and economy. Such thinking leads to a policy of trying to wait until Moscow accepts the inevitability of Russian decline, at which point the West can have a reasonable conversation with it about their future interactions.
There are several reasons why predicating the US and EU approaches to Russia on this idea of inevitable decline is a policy dead end. To begin with, GDP and other socio-economic indicators are just one measurement of power. The link between GDP and geopolitical influence is never linear. Of course, it helps to have a large economy. But history is full of cases in which states – or even proto-states – with less than impressive economies have dominated or destroyed richer and more technologically advanced neighbours. The fall of the Roman Empire is one such example. The Mongols overran China several times. Iran is not the richest country in the Middle East but, for decades, it has increased its geopolitical influence relative to countries with higher GDPs. And Russia itself was poorer than much of Europe when its troops crossed the Alps in 1799 and when Cossacks taught Parisian waiters the word ‘bistro’ after defeating Napoleon in 1815.
Russia’s history of reversing declines shapes its current foreign policy – and could continue to do so for a couple of decades at least
Today, Turkey and Switzerland have similar GDPs, while Ireland has a higher GDP than Egypt. But Ireland and Switzerland are not in the same league as Turkey and Egypt when it comes to their influence on global and regional affairs. So, one should not invoke Russia’s GDP as a predictor of its eventual geopolitical downfall.
The other problem with basing Russia policy on the idea that Russian geopolitical power will decline is that, even if it does, several decades could pass before this started to affect Russian foreign policy. In the past decade, Russia has engaged in an increasing number of hostile actions against the EU and countries in the bloc’s neighbourhood, the Middle East, and Africa – such as Serbia, Bosnia, Montenegro, Libya, Syria, and even the Central African Republic. Russia has pursued a strategy designed to maximise its geopolitical power, often directly challenging the EU’s standing, interests, and influence. It would be highly irresponsible for any power to just watch as the process unfolded for another, say, 20 or 30 years, in the hope that decline would force Russia to change course.
Russian declinism is also a fallacy because it projects the history of most European empires onto Russia. Most European empires had a somewhat linear history of rise, decline, and fall, followed by the acceptance of a comfortable existence as a small or medium-sized state. Austria, Britain, Belgium, Hungary, Lithuania, Poland, Portugal, Spain, and Sweden have all gone through this linear boom-and-bust imperial history. But such development is not necessarily the norm. Plenty of states have cycled through phases of rise and fall. Chinese, Iranian, and Russian power has expanded, contracted, and then expanded again for centuries – even millennia. In the past millennium, Russian imperial power ballooned and then collapsed several times.
This historical memory has concrete foreign policy implications for EU-Russia interactions today. Where the EU sees irreversible Russian decline, Russia sees one of several temporary slumps it has experienced over the centuries. Russian leaders believe that they can reverse such decline just as their predecessors did following the contraction of the Russian state after the 1917 revolution. In 1918 Russia lost control of huge swathes of territory (including Finland, Poland, the Baltic states, and what is today Moldova). But, within less than three decades, it had recovered parts of those lost territories and expanded its control to Berlin, Warsaw, Prague, and Tirana. Russia’s history of reversing declines shapes its current foreign policy – and could continue to do so for a couple of decades at least.
The truth is that no one knows whether Russia will decline or recover. Russia might well muddle through for decades, inflicting serious damage on EU interests in the process. Many of the challenges Russia poses to the EU – especially those related to the bloc’s influence in the Balkans, the Middle East, and eastern Europe – will not go away by themselves. The EU will need to address such challenges through actions that increase its strength relative to Russia and the bloc’s own neighbours – not through strategic patience, which is a polite term for strategic inaction.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of its individual authors.