Inflation in Rome, Weimar Germany and Soviet Russia with Mark Koyama
Episode 12 of of the Works in Progress podcast is about how inflation undermines state capacity.
In the latest episode of the Works in Progress podcast, hosts Ben and Pieter delve into the destructive impact of inflation on state capacity, drawing on the insights of economic historian Mark Koyama. The episode, titled "Inflation in Rome, Weimar Germany and Soviet Russia," explores how hyperinflation erodes public trust in governments, leading to social unrest and political instability.
The discussion begins with the Roman Empire, where rampant inflation during the third century CE severely weakened the state. As the empire's currency debased, the value of coins plummeted, causing widespread economic chaos. This period of hyperinflation, known as the "Crisis of the Third Century," left the Roman state struggling to maintain its administrative and military functions. The inability to collect taxes effectively and provide public services further exacerbated the crisis, ultimately contributing to the empire's decline.
Moving forward in time, the podcast examines the economic turmoil experienced by Weimar Germany in the 1920s. The Treaty of Versailles imposed heavy reparations on Germany, leading to a severe shortage of foreign currency. To finance these payments, the German government resorted to printing money, causing hyperinflation to spiral out of control. By 1923, the value of the German mark plummeted, with prices doubling every few days. This economic collapse not only devastated the middle class but also eroded public confidence in the Weimar Republic, paving the way for the rise of extremist parties like the Nazis.
The episode also explores the Soviet Union's experience with inflation during the New Economic Policy (NEP) in the early 1920s. Lenin introduced the NEP as a temporary measure to revive the Soviet economy after years of civil war and wartime hyperinflation. However, the reintroduction of a partial market economy inadvertently led to inflation, as the state printed money to fund its operations. This inflationary period, combined with other economic challenges, ultimately forced Lenin to abandon the NEP and re-establish a centrally planned economy.
Throughout the conversation, Ben reveals his hidden libertarian "Gold Bug" tendencies, advocating for a return to a gold standard as a way to stabilize economies and prevent inflation. Pieter and Koyama counter this argument, pointing out that a gold standard can be inflexible and may not address the root causes of inflation, such as excessive government spending or economic shocks.
The Works in Progress podcast's exploration of historical inflation crises highlights the complex relationship between economic instability and political stability. Inflation not only undermines the state's ability to function but also erodes public trust, making it more difficult for governments to implement necessary reforms. As the conversation between Ben, Pieter, and Mark Koyama unfolds, listeners are left to ponder the lessons of history and the challenges facing modern economies in the face of inflation.
The episode is available for streaming on Spotify, Apple Podcasts, and YouTube, offering a compelling insight into the economic and political ramifications of inflation. By examining the experiences of the Roman Empire, Weimar Germany, and the Soviet Union, the podcast provides a timeless perspective on the enduring impact of economic instability on society.
