State intervention and private economy in Classical Greek city-states

November 6th, 2019

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The article below was originally written in the form of an undergraduate assignment for the Greek Open University in 2005, during a period when the author's academic skills were still under development. Although the quality of this article does not match the quality of later examples of the same author's work, it is written in a thorough manner and contains useful information to nowadays students and other readers with non-specialised knowledge; therefore, it has been proudly included on this website.

The reader needs to be warned that the original assignment, on which this article was based on, was written in Greek and was intended to be read by specialised academics. Despite the author's best intentions to present his essay in the clearest way possible, some points and arguments might still be lost in translation. The author recommends that for any unknown words or specialised vocabulary, the readers should refer to the web for additional information.

The author admits that the bibliography for this article is limited, matching the requirements of an undergraduate assignment of this level. The author did not include any additional bibliography during the translation of his work in English due to time and access limitations. It must also be noted that the original bibliography for this article was studied from translated copies in Greek; therefore, the page numbers suggested in the citations below match the page numbers of the translated copies and not the original volumes.

Introduction

This paper addresses the relationship between private economy and state intervention during the Classical Greek antiquity. The aim of the paper is to discuss the forms of state intervention on private businesses and the degree of state regulation of private economic activities. This paper is divided in two sections. The first section defines the terms ‘state intervention’ and ‘economy’ as these were understood in Classical Greek antiquity and correlates them with the ideas of economy and state intervention as these are understood today. The second section discusses different aspects of state intervention on private economy during the Classical period. The reader needs to bear in mind that such information survives through limited historical sources, while the broader picture is likely to be obscured by the personal views of ancient writers. In this paper, the domains of state intervention are discussed in separate sub-sections and include the control over imports and exports, taxation, social expenditure, property renting and commercial exchanges. The final section of this article compares two characteristic examples of Classical Greek economies, that of Athens and Sparta, and discusses how state intervention affected the economic character of each city-state.

Economy and state intervention in Classical antiquity

Before any discussion on ancient economy, there need to be some clarifications in relation to the economic policies followed by ancient Greek city-states in order to understand the real form of public intervention on private businesses. Any approach based on modern economic theories is problematic as during the Greek Classical antiquity there was no real knowledge and understanding of the complex economic problems encountered by modern nation-states. Furthermore, the economy was not a separate and specialised technical filed of government administration, as this is the case today, but it fell under the broader discipline of politics (πολιτικά) in a rather abstract and philosophical sense (Austin and Vidal-Naquet 1998, 159). For example, the production of a balance sheet to monitor imports and exports had no practical application in Classical Greek city-states (Mossé 1996, 67). During that period, the idea of a national finance policy, its design, principles and execution were probably too basic compared to modern standards. Finally, the production of annual budgets for the monitoring of income and expense by central governments was totally absent (Austin and Vidal-Naquet 1998, 167). As a result, state intervention did not have the consistency that we would imagine today. By contrast, it occurred periodically and was generally disorganised, with Athens being the one and only exception to this rule. As it will be discussed below, Athens possessed a basic taxation system and had the mechanisms and legal means to intervene and control specific aspects of private economic activity (Milios 2000, 78).

State intervention in different areas of private economy

State intervention in Classical antiquity did not have the form of a broad regulated control over interconnected economic activities, as we might think today. By contrast, it primarily targeted specific economic activities, for which the state - or to be precise, the People’s Assembly - felt these would threaten their own interests unless protective measures were applied. The textual sources of the Classical period, which are limited and mostly refer to Athens, identify five basic areas of state intervention in private economy. These are the control over imports and exports, taxation, social expenditure, property renting and commercial exchanges.

Control over imports and exports
In Classical Greek city-states, private individuals controlled the production and circulation of most commodities in the local markets. Such commodities were either agricultural products associated with the exploitation of their own land, or craft products made by their own small industries or workshops. Such private businessmen were also responsible for importing the raw materials they needed to work with, and for exporting their finished products. In general, internal trade and exchange activities took place without any form of state intervention. On the other hand, there used to be a degree of state intervention in relation to the restriction of specific foreign imports, and there was usually no intervention in relation to exports. This attitude related to the state’s obligation to protect its citizens as consumers; however, state intervention was often against its citizens, such as local farmers and other producers (Austin and Vidal-Naquet 1998, 159-60).

In Classical Athens, the strongest control was applied on grain imports, which originated from Egypt, Sicily and the Black Sea. Athens usually accommodated its external affairs in relation to its needs for grain, sometimes with the use of military force, and in other cases through diplomacy (Austin and Vidal-Naquet 1998, 162-3). During the 4th century BC, when the mechanism of grain supply partially collapsed, new laws allowed the state to gather and control all grain resources. Demosthenes (Against Lacritus, 51) records a law which forbade any business loans towards ships (naval loans) that transported grain to any other destination except Athens. Such state control was practised by ten appointed Grain-Guards (Sitophylakes = Σιτοφύλακες) and ten Inspectors of Commerce (Epitheoretes Emporiou = Επιθεωρητές Εμπορίου), who were stationed at Athens' commercial port of Piraeus. This body of public servants was assigned the control of grain prices through the imposition of sale regulations, which protected the consumers. Under such regulations, the Metics (Metoikoi = Μέτοικοι) who traded grain, were not allowed to buy over fifty capacity units, so that they could not monopolise the product, create artificial shortage and control its prices (Austin and Vidal-Naquet 1998, 163-4). According to Aristotle (Athenian Constitution, 51), the Grain-Guards were not only assigned the control of the selling prices of grain, but also the prices of flour and bread. Furthermore, the Inspectors of Commerce guaranteed that trade was conducted in fair practice and made sure that two thirds of the imports were sold in the central market of Athens instead of other regional markets around Attica.

The trade and circulation of supplies, which associated with state defence, were also subject to state control and state intervention. Personal weaponry was manufactured primarily by the Metics, who were mostly craftsmen, and was sold in the private market without any restrictions. Textual sources record that Kephalos, the father of the rhetor Lysias, who was a Metic, owned a workshop that produced shields. The father of rhetor Demosthenes, who was a Metic too, is recorded to have owned a large and well-known knife production business (Mossé 1996, 65). Although private weaponry was manufactured and sold freely in the Athenian market, this was never the case for warships. I fact, the manufacture of the Athenian fleet was under strict government control. The state was responsible for obtaining all necessary timber resources from areas such as Macedonia and Thrace, which was achieved either by direct military intervention, or by diplomatic agreements (Austin and Vidal-Naquet 1998, 165-6). Then, a council, which was appointed by the government, decided on hiring the best-qualified craftsmen for the manufacture of the city’s warships. Such craftsmen ran their own private businesses and were solely responsible for the production and distribution of the final products (Mossé 1996, 65).

As opposed to Athens, Sparta was a society that operated on a totally different economic model. This model was defined by one simple principle: every economic activity that aimed in profit-making was totally forbidden by law. The Spartan city-state never intervened and never controlled imports and exports, simply because these never existed. State expenses were limited and were covered by locally-generated revenue, including military levies. The self-sufficiency of the Spartan economy and the imposition of legal restrictions on most economic activities meant that there was no further need for a state policy on imports and exports (Hodkinson 1998, 261-2).

Taxation
The main income of Classical Greek city-states derived from the taxation of private economic activities. Taxation took place in direct and indirect ways. As a general rule, the direct taxation of the income or wealth of free citizens was avoided as this was perceived to be derogatory; however, indirect taxation of non-citizens was a well-established practice (Austin and Vidal-Naquet 1998, 171-2). The Metics of Athens, who were primarily merchants, craftsmen and financial brokers, were obliged to pay the Metoikion (Μετοίκιον), a regular direct tax, which granted them the right to remain in Athens. The free citizens who possessed land were not directly taxed for it, but the wealthiest of the landlords, often including wealthy Metics, were morally obliged to contribute financially to the state’s Leitourgies (Λειτουργίες = Liturgies/Functions). The Liturgies were sponsorships of public activities or public events focused on religion, culture, sports and defence. The most important Liturgies were the Gymnasiarchia (Γυμνασιαρχία), which focused on athletic events, the Choregia (Χορηγία), which focused on cultural events, and the Trierarchia (Τριηραρχία), which paid for the maintenance and Athens’ navy. Demostenes records a total of sixty Liturgies per year in Athens during the 4th century BC; however, modern researchers suggest the presence of at least ninety-seven Liturgies. Although such Liturgies were not imposed as a form of compulsory taxation, the state had introduced special laws to regulate their duration and their sequence of repetition. Furthermore, there were courts set in case candidates could not pay for the Liturgies appointed to them, and there was the legal process of Antidosis (Αντίδοσις), where a Liturgy was passed on to another candidate (Milios 2000, 79-80).

Most of the taxation in Classical Athens was indirect and affected all its inhabitants, both citizens and non-citizens. For example, there was a 5% tax on all traded goods, which was imposed by law in 413 BC, and aimed in covering some urgent needs during the Peloponnesian War (Austin and Vidal-Naquet 1998, 173-4). In other occasion, there used to be Eisphores (Εισφορές = contributions or levies), which were imposed on the wealthiest citizens. These were contingent taxes on the income from land exploitation or from other productive activities, and aimed in covering special costs associated with warfare and military operations (Milios 2000, 80).

A special case of ‘taxation’ was the Allied Tax (Semmachikos Phoros = Συμμαχικός Φόρος), which was imposed by Athens on its ally city-states. Although this contribution is historically recorded as ‘tax’, in reality it was a form of international fee. It did not target private individuals, but the governments of other city-states, which, in turn, had to tax their own private enterprises to be able to cover the amount. Although such fees were meant to be deposited for the future military needs of the Delian League, a fair amount was spent by the Athenians in order to boost their economic growth and status (Milios 2000, 80).

In relation to commodity taxation, Athens had established a standard one-fiftieth tax (or 2%) on the final value of any merchandise that went through the port of Piraeus, either imported or exported. Another form of state income was generated through the confiscation of private properties or commodities, including the imposition of legal fines for rule violations (Austin and Vidal-Naquet 1998, 174-5).

As with Athens, the direct taxation of free citizens in Sparta was regarded derogatory and was avoided. By contrast, there was direct taxation for the Lacedaemonians who did not have full political rights. Such taxation was paid by the Perioikoi, who were involved in private enterprises as farmers, merchants and artisans. As with the case of other city-states, it is likely that Sparta had a fee and taxation system for commodities that reached its market. The taxation of private property only occurred under extraordinary circumstances. It was calculated according to the total possessions of every Spartan citizen, and according to Aristotle, it was the equivalent of the Athenian Eisphores (contributions or levies). Such contributions were paid by both the Homoioi and the Perioikoi; however, there was no strict mechanism for monitoring their collection (Hodkinson 1998, 262-6). The only institutionalised direct ‘contribution’ paid by the Homoioi to the state was a certain volume of agricultural products, which were meant to cover the needs of the Syssitia (Syssitia), the common meals of the military units they belonged too. This ‘contribution’ was so important that any Spartan who could not accommodate it, would automatically lose his political rights (Hodkinson 1998, 266-70). As opposed to Athens, Sparta demanded no allied fees from the members of the Peloponnesian League (Austin and Vidal-Naquet 1998, 179).

Aristotle records a similar ‘contribution’ system for the needs of the common military meals at the city-states of Crete. This system was regarded fairer to Sparta’s because the amount of the contributed products was not based on standard volume, but was proportional to the agricultural production of each citizen (Hodkinson 1998, 267). For both Sparta and the city-states of Crete, state legislation and intervention aimed in securing enough supplies for the needs of the army. These contributions were paid by the farmers, who were also the land owners, citizens and hoplites of these city-states.

The collection of taxation in other Classical Greek city-states often followed a different system compared to that employed by Athens and Sparta. In his Economics, pseudo-Aristotle mentions the case of Mende in Chalkidike, which was an exceptional case. Mende applied poll taxation on every individual who owned property (Hodkinson 1998, 264), which is a similar system to the poll taxes imposed on any form of property by modern states (or at least the modern Greek state). The same textual source records an unfair taxation system at the city-state of Byzantium, were the government employed various tricks to constantly tax its citizens and cover up a continuous economic crisis. The state ‘taxed’ the acquisition of citizenship, it imposed a 10% value added tax on grain products, and it imposed a ‘fee’ for property ownership rights granted to Metics ([Aristotle], Economics, II, 2-3). It is interesting that although the city-state of Byzantium represented an exceptionally bad example of greedy taxation in Classical antiquity, modern citizens are nowadays accustomed to modern states following the same exact practices.

Social expenditure
State intervention in ancient economy was not always against private individuals; sometimes, it was there to help and support all members of the society, including businesses. Classical Greek city-states favouritised the redistribution of the state’s surplus to their citizens, as the popular belief was that the city’s wealth belonged to its people. The most characteristic case of an ancient economy operating through the redistribution of public money was 5th century BC Athens. During that period, Athens’ private economy was boosted through the spending of the Delian League’s fees on public infrastructure works (buildings, monuments, temples, etc.). This way, the state funded new jobs and paid for the services of private individuals, who traded skills and material resources. During public works, the state formed supervision committees, which produced the right contracts for the private contractors and kept a detailed progress record for the works. The committees were responsible for hiring the architects and the workers for each project, and for agreeing their wages and other fees (Mossé 1996, 60-1).

Part of the state’s surplus was also redistributed in the form of social welfare. Athens had established a series of social benefits for the poorest strata of the society, such as the Theorikon for attending theatrical events, the Heliaiastic Salary and the Ecclesiastic Salary, for participating in the judicial and political institutions of the city-state respectively. Furthermore, there was material support through the distribution of grain and meat (Austin and Vidal-Naquet 1998, 168-9). It must be noted that the Heliaiastic and the Ecclesiastic Salaries were not paid as forms of direct contribution to the poorest citizens. By contrast, these salaries aimed in increasing the participation of the low-income social strata in public institutions, decision-making processes and political functions of the city-state.

Renting of state property
The collaboration between the state and private businesses in Classical antiquity associated with the renting of public property. Through the exploitation of land and other resources, city-states generated substantial income and allowed private businesses to profit in exchange. In Classical Athens, a significant proportion of the generated revenue derived from the renting of land, buildings and mines (Milios 2000, 78).

The best-known example or state property in Classical Athens were the silver mines at the area of Laurion, which were rented to Athenian businessmen in exchange of a fixed annual rate. As recorded in contemporary 4th century BC textual sources, the private parties who rented the mines were able to generate fortunes from the exploitation of silver ores (Austin and Vidal-Naquet 1998, 170-1). Although the state showed no intention of exploiting the mines on its own, state control over the private parties who exploited the Laurion mines was systematic. There is at least one recorded case, that of Diphilos during the 4th century BC, who had his property confiscated after it was revealed that he profited illegally by selling timber that was meant to be used for supporting the mining shafts. Furthermore, the existence of a ‘Metal Court’ in Classical Athens suggests thorough state control over the exploitation of mining activities (Mossé 1996, 63-4). Unfortunately, there are no other surviving records of state property-renting from other city-states.

Commercial exchanges
State intervention on commerce is well-recorded for the cases of Classical Athens and Sparta. As noted earlier, the control over trade in Athens was imposed by a body of state officials, the ten Sitophylakes and the ten Inspectors of Commerce, although this form of intervention targeted the grain trade only. At the same time, Aristotle records the presence of ten Market Inspectors (Agoranomoi = Αγoρανόμοι), who were charged with overseeing the quality of certain commodities, which were likely to be distorted with lower quality additions. Furthermore, Aristotle records the presence of ten Inspectors of Units and Standards (Mertronomoi = Μετρονόμοι), who were responsible for overseeing the use of the correct measure units and standards during commercial transactions (Aristotle, Athenian Constitution, 51).

Maritime trade was regulated by the city-state through maritime legislation. Such legislation protected the creditors of maritime loans in case a ship was purposely sank. Furthermore, Athens had established a special jury for maritime disputes, the Nautodikes (Ναυτοδίκες), which reveals the importance of regulating maritime activities (Mossé 1996, 80). The presence of a state institution for the regulation of maritime activities can be paralleled with the presence of a Ministry of Maritime Commerce in modern Greece, though with different structure and functions compared to the ancient Athenian maritime courts.

The establishment of standard Athenian coinage for all commercial transactions, both inside and outside Athenian territories, was also the product of state intervention in relation to the establishment of homogeneous units and standards for monetary transactions across the Delian League. This form of Athenian intervention was not due to financial or commercial necessity, but because of status display and a need to demonstrate Athenian dominion over the less powerful city-state members of the Delian League (Austin and Vidal-Naquet 1998, 177).

Although the Athenian city-state regulated the standards and weights of Athenian coinage, its commercial circulation and its exchange rates against foreign currency (produced by other Greek city-states) was not subject to any form of state intervention. By contrast, monetary exchange was practised by private bankers, who were primarily Metics and former slaves. Such parties regulated currency exchanges without any intervention from the state (Mossé 1996, 81-2). This situation contrasts with modern currency exchanges, which are regulated by the Central Banks. For markets such as Athens and Olbia, private parties were only obligated to use local currency for any form of monetary transaction taking place within the boarders of the city-state (Austin and Vidal-Naquet 1998, 177).

State intervention is Sparta was a lot stricter compared to Athens and to any other democratic city-state of the Classical period. Spartan society was by principle against any form of commercial and financial activity. Although its economy was based on land ownership and exploitation, there were restrictions to the quantities of agricultural products a private landlord could produce. Any form of wealth accumulation was forbidden and so was the possession of foreign currency. Although the trading of land was permitted by law, there were strict social implications and social stigma to those who practised such activity. Furthermore, in Sparta most means of profiting that were acceptable in other Classical Greek city-states, were totally forbidden (Hodkinson 1998, 261). Xenophon records that the laws against profit-making were so strict, that the state had established a low-value coinage for all transactions, which was made of iron. Furthermore, there were severe penalties to those who were involved in any form of private enterprise, including those who possessed golden and silver coins (Xenophon, Constitution of the Lacedaemonians, 7).

Conclusions

A comparison of the forms of state intervention between Classical Athens and Sparta suggests two different economic models. In Classical Athens, there was an interactive relationship between the state and private enterprises. The state offered opportunities for profit and economic growth to private parties, but also safeguarded its own interests. The Athenian city-state went though a period of economic recession during the 4th century BC, which was due to the the Peloponnesian War. During this period, the level of state intervention in the economy increased as the state demanded more revenue to access military supplies for the war and to support the circulation of sufficient grain in the market. On the other hand, Classical Sparta forbade any form of economic activity aiming at personal profit, which resulted to a commercial and financial stagnation. Such state intervention can be described as totalitarian. By following this economic model, the Spartan city-state was unable respond to the increasing financial needs of the Peloponnesian War during the 4th century BC. It promoted a series of unorganised and spasmodic strategies to increase its revenue, which led to the dissolution of Sparta’s social structure. Although not directly comparable, the differences between the relatively liberal economy of Athens and the self-sufficient yet totalitarian economy of Sparta, are likely to resemble the economic models and the forms of state intervention encountered in capitalist and communist economies of the 20th century.

Bibliography

Austin, M.M. and Vidal-Naquet, P., 1998, Economy and Society in Ancient Greece, translated by T. Koukoulios, Athens: Daedalos – Zacharopoulos.
Hodkinson, S., 1998, Property and Wealth in Classical Sparta, translated by I. Kralli, Athens: Patakis.
Milios, A., 2000, 'The concept of a free civilian', in Vasilou-Papageorgiou, V. (ed.) Public and Private Life in Greece, Part 1, From the Antiquity until the Post-Byzantine Period, Volume 1, Public and Private Life in Ancient Greece, Patra: Greek Open University, 23-114.
Mossé, C., 1996, 'The Greek and the economy', in Vernant, P. (ed.) The Greek Man, translated by C. Tassakos, Athens: Ellinika Grammata, 60-82.

Ancient sources

Aristotle, Athenian Constitution , 51
[Aristotle], Economics, 2.2.3
Demosthenes, Against Lacritus, 51.
Xenophon, Constitution of the Lacedaemonians, 7.