I am a student of history, so I like to look to previous eras for clues about how modern timelines might end up replicating sequences that have already happened. Historian and author Niall Ferguson does a similar thing (though much better than me). He recently wrote about how he expects the modern era to slip back into a repeat of the patterns seen during the reformation era.
I am not a reformation expert, thus I give way to Niall’s far superior knowledge on the topic. I can definitely see the logic of his argument and the parallels. My ancient history bias, however, still convinces me that what we are seeing is closer to the unwinding of the Roman empire around the time of Diocletian.
I have previously written about Diocletian (242-312 AD) in the context of the disastrous maximum price edit he imposed in 301 AD to stifle inflation. This never worked. The reason it didn’t work is because the Roman Empire, like the West today, was not facing a monetary crisis but rather a structural overreach constraint that could only be overcome with a technological paradigm shift involving some sort energy-intensifying innovation.
The issue at hand was that Rome had overstretched herself relative to her ability to govern herself. That meant the heart of the empire, Rome, soon began to lose control of the periphery. Roman officials sent to the outer regions rather than exporting Roman traditions, methods and mechanisms, began to be influenced the other way round. This led to a crisis of the Roman identity and the abandonment of intrinsic Roman values.
Had Rome made the great leap forward towards industrialisation — thanks perhaps to the discovery of fossil fuel — many scholars agree things could have worked out differently. The Roman Empire might never have fallen.
But since it failed to innovate itself out of the problem, the Roman system instead came under three key pressures: those of partition (so as to reduce the scope and scale of the jurisdiction it had to govern), those of demonetisation and those of over-bureacratisation.
The following quote from the sacker of Rome, Ataulf (a.k.a “the Noble Wolf”) — which I picked up in Norman Davies’ Vanished Kingdoms — often comes to my mind when I think about that latter point:
I once aspired [he said] . . . to obliterate the name of Rome; to erect on its ruins the dominion of the Goths; and to acquire, like Augustus, the immortal fame of the founder of a new empire. By repeated experiments [however,] I was gradually convinced that laws are essentially necessary . . . and that the fierce untractable humour of the Goths was incapable of bearing the salutary yoke of . . . civil government . . . it is now my sincere wish that the gratitude of future ages should acknowledge the merit of a stranger, who employed the sword of the Goths, not to subvert, but to restore and maintain, the prosperity of the Roman empire.
Romans were excellent bureaucrats. And by the end of Diocletian’s reign they had also become technocrats thanks to the “capitatio-Iugatio” tax collection system they had been forced to adopt to help transition the Roman Empire from the point of inflationary collapse to a slower partition-related unwinding.
Why is “capitatio-Iugatio” important?
Diocletian’s disastrous monetary reforms were followed by the implementation of a draconian tax system — capitatio iugatio — in a bid to bring order back to the empire (if but temporarily). What the system brought in stability, however, it took away in terms of civil freedoms. Some argue the demonetisation it encouraged across the Roman empire created the pathway to tying peasants to the land in the medieval ages.
Capitatio-iugatio worked by linking tax requirements — mostly out of necessity — to direct agricultural yield targets (iugatio) relative to available manpower (capitatio). The targets were set from the top down, meaning they represented a type of planned economy.
As Edward Luttwak explained in his Grand Strategy of the Byzantine Empire:
It was a uniquely sophisticated and very effective system of collection, which was indeed the central advantage of the Roman and Byzantine empire over all other contemporary powers. It did mean, however, that the taxpayer had to pay a precalculated amount regardless of good or bad harvests, droughts or floods, destructive foreign raids, or even outright invasions. An especially dramatic disaster that attracted much attention might persuade the imperial authorities to reduce the revenue obligation of the affected province, but no allowance could be made for ordinary harvest or market fluctuations, because there was no way of offsetting lost revenues: the concept of the public debt and its sale in the form of interest-bearing bonds had not yet been invented.
Recent CBDC and social credit developments suggest those living in the sphere of influence of Russia or China are already on a pathway towards a capitatio-iugatio turning point. The bigger concern I have is that the West may not be far behind them — not least because some officials think it as impossible to win a war against two totalitarian states without temporarily going a bit totalitarian yourself (you know, for the war effort!).
Is a Gosplan 2.0 system really that bad?
Thanks to artificial intelligence developments and big data, a modern Gosplan would in theory be more adjustable than the capitatio-iugatio system. If crops failed or supplies became constrained, rather than imposing target-focused deliveries no matter what (at the cost and stability of agricultural workers) it might have the capacity — thanks to big data — to manipulate the demand point instead. So say there was a banana shortage, the AI might seek to divert demand away from bananas to apples by using sophisticated algorithms to make consumers think they didn’t want bananas in the first place.
As the FT’s John Thornhill noted in 2017(my emphasis):
Last year, Jack Ma, founder of Alibaba, the online platform with some 500m users, argued new technologies provided the means to gather and process data on a near-unimaginable scale.
Applying artificial intelligence to those data sets was deepening our real-time understanding of the world. “As such, Big Data will make the market smarter and make it possible to plan and predict market forces so as to allow us to finally achieve a planned economy,” he told an economic conference.
Some Chinese economists have gone further. In a recent paper Binbin Wang and Xiaoyan Li argue that a hybrid economy could be built on a “market-based, plan-driven” model.
The freer flow of data could counter many of the ills that disfigured planned economies: excessive concentration of power, rent-seeking corruption, and irrational decision-making. The granular detail provided by masses of data could also enable planners to offer consumers more personalised choice.
Thornhill continued (and this is the key bit):
The authors argue that the online platform monopolies resemble central planning institutions. It would be more “legitimate and rational” for the state to become a “super-monopoly” platform.
Such state-owned platforms could operate like an airport directing market-driven traffic. The airport manages capacity, sets aviation standards, balances the demands of safety, the environment and the movement of goods, and serves the needs of operators, passengers and retailers.
I had clocked that these monopolistic retail platforms were going this way as far back as 2014. This was especially obvious with the rise of Alibaba, and its growing reliance on Alipay and its associated Yuebao money market fund, which seemed an obvious pathway to the creation of totally demonetised clearing system for goods and services.
But as Thornill noted in his piece, those advocating the system seemed to be missing a clear and obvious risk: any system (AI-powered or not) that becomes solely concerned with analysing the past to figure out the future, is likely to become trapped in its own retrospective processes. That means it will never be able to innovate its way out of current challenges.
“It is hard for consumers to signal a data demand for a product that does not yet exist. In some respects, it would be like trying to drive into the future by staring into the rear-view mirror,” Thornhill wrote.
I wholeheartedly agree. This sort of rear-view bias creates the mother of all blind spots.
Sadly, it’s unlikely that pointing this is out will dissuade modern technocrats from having a go regardless.
Indeed, in Russia, the makings of a fledgling direct-tax “clearing system” are already in operation due to the way corporations are taxed. As an informed source told me:
They have operated centralised control over business now for many years through the accounting system 1s (1C in Cryllic). In other words, businesses for decades have been filing accounts that are also tax returns. It is one of the reasons why Western accounting systems have never really taken off in Russia. It is because you have to operate the general ledger at the transaction level in order to comply with the tax regulations.
Those not familiar with my Gosplan/gosplanifcation work might want to take a look at the below presentation I did at Goldsmiths Art School in 2016. This was before CBDCs were really a thing, so it’s a primer rather than a comprehensive take on the situation today. Things have moved on substantially.
