Athens - Housing the Gods (on borrowed money) [500 - 300 BC]

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From the Archives : Originally published March 01st, 2009
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Category : History of Gold





Ancient Athens eventually became a democracy (albeit one dependent on a large slave class) and showed some of the features of a modern democratic state. It was the cultural birthplace of modern western philosophy, culture and systems of government. It was also the creative powerhouse of Mediterranean antiquity, with change and ideas being embraced all around.

It stood in stark contrast to the overlapping but slightly older civilisation of Sparta. In some ways the two were a forerunner of the confrontation between modern capitalism and communism - with a dynamic and creative culture running in parallel with an austere neighbour with a tendency to collective approaches, unchanging institutions and severe treatment of dissenting individuals.

Athens was developing maritime technologies, and building wealth by trading. Its empire - founded on a mix of trade and coercion - stretched to coastal regions all around the eastern Mediterranean, and militarily it had the best high tech capability of the day, which meant naval power. Sparta had the bigger army.

Athens was further blessed with productive silver mines and a sufficiently progressive government that it was able to extract annual revenues from its empire back to the central Athenian core - ostensibly for defence. Through trade, silver mining and tribute its wealth became phenomenal.

It spent this money in two main ways. The first was squabbling, which tended to boil over into wars - notably with Persia and later Sparta.  As with most disputes it was usual for both sides to end up weaker at the end, and because there were so many competing proto-empires in the region the typical result of any large scale dispute was the relegation of both combatants to second class imperial status. Certainly the costs of wars and defence was one of Athens' regular and major state expenditures.

The other we are lucky enough still to be able to see. The enormous Athenian riches of the 5th century BC were spent in building the great public works of the time. There being no particular political pressure for welfare systems in those days, the surplus money was spent on public architecture. The objective was nothing less than to house the Gods, whose previous shrines and temples had been destroyed by Persians in 480 BC. Thanks to this we have the Parthenon and the other great buildings of the Acropolis.

They were not cheap, and even at the time the degree of extravagance which they entailed encouraged considerable political criticism.

Presiding over this rebuilding was Pericles. He was a second generation politician, being the son of the moderately significant Xanthippus. Pericles was a master of manipulating popular sentiment - what we would call now 'a great communicator' - and was around at the time when this skill could be used in earnest for the first time, to drive newly democratic Athens in particular directions.

Although he found himself unable to include his then ally - Sparta - in his plans, he managed to generate enough popular support within his more immediate Athenian alliances to finance his ambitious building program, although he had to resort to demagoguery and even religious exhortation to do so. Indeed he may even have been operating what amounted to a deliberate economic stimulation package for Athens and was later accused of exactly this by one of the two principal sources of historical information on his life [Plutarch].

At any rate he spent the money, and continued to become involved in occasional military disputes. He had a long and costly campaign to recover Samos, which had been an ally, but revolted in 440 BC. The campaign was eventually successful in its direct aims, but damaging to Athenian strategic alliances. Sparta - generally friendly to that point with Athens - might easily have got involved then on the Samos side, but stayed out.

Pericles general policy "was one of firmness, coupled with careful manipulation of the diplomatic position to keep Athens technically in the right". He detected a looming war with Sparta which might never have happened were it not for his increasing the diplomatic temperature on key trade issues - notably concerning the region of Megara, which was strategically important for food supplies and whose trade was substantially embargoed by Athens.  After military coercion most of Megara was placed under Athenian 'defensive assistance'. This transparent expansionism was not welcomed by Sparta.

Although he saw war as inevitable well before it came, and made financial plans to accomodate it, Pericles underestimated its likely length and cost. The Peloponnesian war finally broke out in 429 BC and lasted for 27 years. He saw very little of it, dying in its second year of a plague which swept through Athens killing large numbers of the population.

The eventual monetary consequences of this war were slow to materialise, because at its start Athens was rich in silver and gold, which circulated as money. These large metallic resources were used to pay garrison soldiers, who were on foreign territory and whose purchases from foreign populations required commodity money rather than any Athenian representative currency with no obvious value in its government guarantee.

By 407 BC the metallic pot was more or less empty and Athenian domestic currency had to be debased - incorporating significant amounts of copper. It was assigned a face value well above the commodity worth of the modest amount of included gold. It was further debased in 405 BC to highly overvalued copper discs which circulated concurrently with the older gold and silver based coinage, because even at this stage the state still held the population's monetary trust.

But a year after this debasement the 27 year war was finally lost. The inability of Athens any longer to pay her occupied populations for supplies with a form of money they would accept, or to offer worthwhile financial incentives to her allies, contributed to this loss. The result was the complete valuelessness of the increasingly copper based currency which had appeared in the final three years of the war - once the real money ran out.

Athenians were now perhaps used to a representative money. In the 50 years following the end of the Peloponnesian war a relatively steady state allowed the re-appearance of copper discs as money, and these were officially redeemable in silver. This was perhaps the finest period of ancient Greek culture - being the time of Demosthenes, Socrates, Plato and Aristotle. For all the appearance of easy wealth which these Greeks must have enjoyed there is no record of the copper money ever being redeemed.

The eventual effect of prolonged war was the impoverishment of the state and after those 50 years of further prosperity - a time of essentially notional but nonetheless trusted money - Athenian political and military dominance of the region ended. A rough and ready people immediately to the north, the Macedonians, were regarded as rather backward by Athens at its height, but their king Philip was militarily and politically shrewd, and he had access to gold mines. This gave him the ability to pay a Macedonian army on the march, so he steadily encroached southwards into Athenian areas, beating them in battle in 338 BC, and subsequently imposing relatively benign terms for peace.

The Greeks rose up from this temporarily but were thoroughly and finally subjugated by Philip's son, Alexander the Great, who went on to conquer half the known world before his death at the age of 32.

The legacy of both Philip's and Alexander's enormous military success was colossal debt. Their imperial achievements were short lived in part because of this. 

Athenian money meanwhile had defined a pattern which was to repeat in other empires which were to follow:- dominance of trade; influx of gold to balance exports; public wealth; liberty; overconfidence; the discovery of loosely managed money as a stimulating solution to stagnation in an economy near its zenith; an ongoing success born of cultural momentum and monetary expansion which was to persist for decades before finally the emptiness of the monetary promise was exposed, leading to rapid national collapse.



Paul Sustain

Director and Founder

Bullionvault.com


Paul Tustain is director and founder of BullionVault - the world's fastest-growing gold ownership service, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.


Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.





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