State intervention and private economy in Classical Greek city-states

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

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The author admits that the bibliography for this article is limited, as required for an undergraduate assignment of this level. The author did not include any additional bibliography during the translation of his work into 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 the private economy and state intervention during the Classical Greek antiquity. The aim of the paper is to discuss the forms of state intervention in private businesses and the degree of state regulation of private economic activities. This paper is divided into 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 in the 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 subsections, including control over imports and exports, taxation, social expenditure, property rental, 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 discussing the ancient economy, clarification is needed regarding the economic policies followed by ancient Greek city-states to understand the true nature of public intervention in 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 field of government administration, as 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 monitoring income and expenses by central governments was entirely 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 the only exception. As discussed below, Athens possessed a basic taxation system and the mechanisms and legal means to intervene in and control specific aspects of private economic activity (Milios 2000, 78).

State intervention in different areas of the 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, though limited and mostly focused on Athens, identify five basic areas of state intervention in the 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 occurred without state intervention. On the other hand, there was a degree of state intervention in restricting specific foreign imports, and there was usually no intervention in 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 strictest control was applied to grain imports from Egypt, Sicily, and the Black Sea. Athens usually handled its external affairs in relation to its grain needs, sometimes with military force and at other times 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 that forbade any business loans for ships (naval loans) transporting grain to any destination other than 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 control over grain prices through the imposition of sale regulations that protected consumers. Under such regulations, the Metics (Metoikoi = Μέτοικοι) who traded grain were not allowed to buy more than 50 capacity units, so that they could not monopolise the product, create an artificial shortage, or control its prices (Austin and Vidal-Naquet 1998, 163-4). According to Aristotle (Athenian Constitution, 51), the Grain-Guards were not only assigned control over the prices of grain, but also over those of flour and bread. Furthermore, the Inspectors of Commerce ensured that trade was conducted fairly and that two-thirds of the imports were sold in the central market of Athens rather than in other regional markets across Attica.

The trade and circulation of supplies associated with state defence were also subject to state control and 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 the rhetor Demosthenes, who was a Metic too, is recorded as having owned a large and well-known knife-making business (Mossé 1996, 65). Although private weaponry was manufactured and sold freely in the Athenian market, this was never the case for warships. IN 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).

Unlike Athens, Sparta operated on a very different economic model. This model was defined by one simple principle: every economic activity aimed at profit-making was totally forbidden by law. The Spartan city-state never intervened in or controlled imports and exports because they did not exist. State expenses were limited and 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 source of income for Classical Greek city-states was the taxation of private economic activities. Taxation occurred in both 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 as 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 of Athens’ navy. Demosthenes records 60 Liturgies per year in Athens during the 4th century BC; however, modern researchers suggest there were at least 97. Although such Liturgies were not imposed as a form of compulsory taxation, the state introduced special laws to regulate their duration and the sequence of their repetition. Furthermore, courts were established in cases where candidates could not pay for the Liturgies assigned to them, and there was the legal process of Antidosis (Αντίδοσις), in which a Liturgy was transferred 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, imposed by law in 413 BC and intended to cover urgent needs during the Peloponnesian War (Austin and Vidal-Naquet 1998, 173-4). On other occasions, there were Eisphores (Εισφορές = contributions or levies) imposed on the wealthiest citizens. These were contingent taxes on income from land exploitation or other productive activities, intended to cover 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 allied city-states. Although this contribution is historically recorded as ‘tax’, in reality, it was an 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 cover the cost. Although such fees were intended to be deposited for the future military needs of the Delian League, a significant amount was spent by the Athenians 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 as derogatory and was avoided. By contrast, the Lacedaemonians were subject to direct taxation while lacking full political rights. Such taxation was paid by the Perioikoi, who engaged in private enterprises as farmers, merchants, and artisans. As with 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 based on the total possessions of every Spartan citizen and, according to Aristotle, was equivalent to the Athenian Eisphorai (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 to. This ‘contribution’ was so important that any Spartan who could not accommodate it would automatically lose his political rights (Hodkinson 1998, 266-70). Unlike Athens, Sparta demanded no allied fees from members of the Peloponnesian League (Austin and Vidal-Naquet 1998, 179).

Aristotle records a similar ‘contribution’ system for the common military meals in the city-states of Crete. This system was regarded as 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 at securing sufficient supplies for the army. These contributions were paid by the farmers, who were also the landowners, citizens, and hoplites of these city-states.

The collection of taxes in other Classical Greek city-states often followed a different system from that employed by Athens and Sparta. In his Economics, pseudo-Aristotle mentions the case of Mende in Chalcidice, which was exceptional. Mende applied poll taxation to every individual who owned property (Hodkinson 1998, 264), a system similar to the poll taxes imposed by modern states (or at least the modern Greek state) on property owners. The same textual source records an unfair taxation system in the city-state of Byzantium, where the government employed various tricks to continually tax its citizens and cover up a persistent 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 accustomed to states following the same practices.

Social expenditure

State intervention in the ancient economy was not always against private individuals; sometimes, it was there to help and support all members of society, including businesses. Classical Greek city-states favoured the redistribution of the state’s surplus to its 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 established supervision committees that awarded appropriate contracts to private contractors and maintained detailed progress records for the works. The committees were responsible for hiring the architects and the workers for each project, and for agreeing on 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 society, such as the Theorikon for attending theatrical events, the Heliaiastic Salary and the Ecclesiastic Salary for participating in the city-state's judicial and political institutions, 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 direct contributions to the poorest citizens. By contrast, these salaries aimed to increase the participation of the low-income social strata in public institutions, decision-making processes, and the city-state's political functions.

Renting of state property
The collaboration between the state and private businesses in Classical antiquity was associated with the renting of public property. By exploiting land and other resources, city-states generated substantial income and allowed private businesses to profit. 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 of state property in Classical Athens was the silver mines at Laurion, which were leased to Athenian businessmen in exchange for a fixed annual rent. 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 Laurion mines itself, state control over the private parties that did 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 had profited illegally by selling timber intended 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 in commerce is well documented in the cases of Classical Athens and Sparta. As noted earlier, control over trade in Athens was exercised by a body of state officials, the ten Sitophylakes and the ten Inspectors of Commerce, although this form of intervention targeted only the grain trade. At the same time, Aristotle records the presence of ten Market Inspectors (Agoranomoi = Αγoρανόμοι), who were charged with overseeing the quality of certain commodities that were likely to be adulterated with lower-quality additions. Furthermore, Aristotle records the presence of ten Inspectors of Units and Standards (Mertronomoi = Μετρονόμοι), who were responsible for overseeing the proper use of measure units and standards in 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 the event that a ship was deliberately sunk. Furthermore, Athens established a special maritime court, the Nautodikes (Ναυτοδίκες), indicating the importance of regulating maritime activities (Mossé 1996, 80). The presence of a state institution for the regulation of maritime activities can be paralleled by the modern Greek Ministry of Maritime Commerce, though with a different structure and functions than 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 to status display and the 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 exchange rates against foreign currency (issued by other Greek city-states) were not subject to any state intervention. By contrast, monetary exchange was practised by private bankers, who were primarily Metics and former slaves. Such parties regulated currency exchanges without state intervention (Mossé 1996, 81-2). This situation contrasts with modern currency exchanges, which are regulated by central banks. In markets such as Athens and Olbia, private parties were required to use local currency for all monetary transactions within the city-state's borders (Austin and Vidal-Naquet 1998, 177).

State intervention in Sparta was much stricter than in Athens and in any other democratic city-state of the Classical period. Spartan society was, in principle, opposed to any form of commercial or financial activity. Although its economy was based on land ownership and exploitation, there were restrictions on 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 trading in land was permitted by law, there were strict social implications and stigma associated with those who practised it. 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, minted in 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 while also safeguarding its own interests. The Athenian city-state experienced an economic recession in the 4th century BC, due to 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 economic activity for personal profit, leading to stagnation in commerce and finance. Such state intervention can be described as totalitarian. By following this economic model, the Spartan city-state was unable to meet the increasing financial demands 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 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, Constitution of the Athenians, 51
[Aristotle], Economics, 2.2.3
Demosthenes, Against Lacritus, 51.
Xenophon, Constitution of the Lacedaemonians, 7.