« Commentary: Why We Need a Financial Transactions Tax | Main | The Trade-offs of Your Trading System »


The Real Road to Serfdom

Click to Print This Page

        The past is never dead. It is not even the past.
                    —William Faulkner (1951), Requiem for a Nun

        History is more or less bunk.
                    —Henry Ford (1916), Interview in Chicago Tribune

In June of this year, I was a presenter, discussant, and session chair at the 18th Conference of the Multinational Finance Society, held in Rome. In his keynote address, Hersh Shefrin, professor of finance at Santa Clara University and a pioneer in behavioral finance, made a desperate plea to restore historical economics to the finance and international business curricula within graduate programs. There are several arguments in favor of educating future finance professors, economic diplomats, and investment bankers in the history of economic processes: 

    • First, many practices and relationships long abandoned by developed nations still flourish in developing markets. 

    • Second, many extant laws and attitudes originated in the distant past. 

    • Finally, setting aside concepts such as quantum finance and “financial hydrogen bombs,” we find   that systemic dislocations in the financial markets have analogs in the past, for greed, fear, and gullibility have always been characteristic of our species. 

Current political discourse abounds with historic and political terms such as socialism and capitalism, which are poorly understood by the general public. Serfdom, another complex concept, usually pertains to the European Middle Ages; in The Road to Serfdom, F.A. Hayek ([1944] 2007) discussed it in relation to modern society. A brief overview of serfdom will demonstrate that it is inadvisable to make simple projections of medieval history onto modern times.


Encomienda_imageThe institution of encomienda, above, is closely related to serfdom. 

The notion of serfdom is surprisingly difficult to define, as noted by historiographer Marc Bloch, a co-founder of the French Annales School. However, most mainstream historians agree that you can recognize serfdom when you see it. 

Part of the difficulty is that the term itself describes a number of related social phenomena, none of which were universal from century to century and place to place. A consensus among contemporary historians is that serfdom was an almost exclusively European phenomenon, although some patterns—in particular, the Spanish-American institution of encomienda—are closely related. 
The origin of the social order of medieval Europe is customarily attributed to the fall of the Roman Empire. While modern historiography generally shies from the explanation of reasons for its demise, the existing narrative touches on a number of common themes. Arthur Boak and William Gurnee Sinningen (1965) and Robert S. Lopez ([1966] 1998) wrote in the 1960s, when medieval economic history outside France was in its infancy and few facts about the Eastern Roman Empire were established at the modern level of historical rigor. Yet, comparing them to Aldo Schiavone’s (2000) mainstream modern treatment, their foresight is even more remarkable. Modern readers of Lopez must keep in mind his orthodox Catholic leanings. 

There seems to be wide agreement among historians that agricultural productivity and, consequently, tax revenues started to decline around the end of the third century CE. The explanation usually centers on several probable and mutually reinforcing causes: changes in global climate, thinning of the agricultural population as a result of epidemics and malnutrition, bankruptcy of peasant landholdings that were unable to maintain profitability in the face of reduction of yields, and inability to compete with large slave-owning agricultural estates. There is little evidence that laws, economic policies, or levels of taxation changed significantly around this time (Garnsey and Saller 1987).

The net result of these processes was an absolute decline in tax revenues, which set in motion a set of related consequences. For instance, limited road maintenance made supply of distant markets prohibitively expensive. Declining commerce further reduced tax revenues, simultaneously increasing the tax burden on landholders. Destitution provided a fertile ground for countryside banditry. Wealthy landowners could escape taxation and the increasing squalor and insecurity of the cities by decamping to their country estates, where they were protected by their own gangs of armed retainers. The exodus of the upper classes from the cities obviated demand for the work and incomes of skilled artisans. This put even more tax pressures on agriculture. Urban professional classes—e.g., lawyers, doctors, architects, and civil engineers—disappeared due to a lack of demand for their services. 

While many of these causal chains are hypothetical—accurate statistics are virtually impossible to glean—the decline in the variety of goods and quality of workmanship is easily seen by the attentive visitor to art and history museums. Also, secular literature of any quality practically vanished, pointing to a decline in general literacy and education. 

The increasing self-sufficiency of the large agricultural estates led to two interrelated developments for the workforce. First, because masses of slaves could not be effectively controlled in view of the general diminution of state powers, manumission of agricultural slaves became more prevalent. During the first centuries of the Roman Empire, most of those who were set were skilled household slaves; in the fourth and fifth centuries, agricultural workers were liberated en masse (Cameron 1993 and Mitchell 2006). 

Second, the rural poor, a population augmented by new exiles from the urban ghettoes, found increasing advantage in turning to local strongmen for protection in exchange for labor dues. In only a few generations, intermarriage on the estates and reinterpretations of the law transformed a heterogeneous group of dependent farmers, who were bound to the land and the family of the landlord by legal obligations or through custom, into a new servile class made up of former agricultural slaves, city exiles, and previously free small tenants. Yet, chattel slavery and serfdom coexisted in many places for centuries. 

Few revisionist accounts (Goldsworthy 2010 and Heather 2007) emphasize lost battles and unfit emperors, but they fail to explain why previously invincible Roman legions started to lose ground to hordes—few if any of which were larger than the male population of a mid-size Roman town—or how these hordes managed to take impregnable fortresses with little or no siege equipment. (My trip to Rome at the end of June elucidated one of these accounts. From my childhood, I’ve heard of the dreadful sacking of Rome by the Goths in the year 410. Yet Goths probably ransacked only a single neighborhood, contemporary Testaccio, which remained dilapidated for two millennia. Only recently has an attempt at gentrification been undertaken by the city administration.)  Furthermore, the decline of imperial power was obvious not only in central Italy and Britain, but also in African and Asian provinces of the Empire, which experienced some economic growth according to archeological data. 

The most natural explanation of the military decline is that local populations became ambivalent about the “barbarian” depredations, preferring concrete guarantees by a barbarian military chieftain or a powerful local lord over nebulous protection by imperial laws and edicts. Moreover, taxes, which were spent mostly on the military force and brought no accruing social benefits, began to be regarded as armed extortion, whether imposed by a local warlord or a distant imperial authority. Debasement of the legal system and the decline in general literacy made rules more dependent on tradition and custom. Litigation started to be replaced by vendettas, judicial combat, and other long-forgotten tribal practices. Romeo and Juliet is a very late exposition of the bloody family feud that lasted through generations. The fact that Shakespeare’s spectators could understand its logic testifies to the resilience of the practice that had been proscribed since early antiquity (see Euripides’ Medea, for example).


The treatment of serfs varied widely and was highly dependent on the security enjoyed by the ruling classes as well as the relative difficulty to exercise control caused by impassable lands and lack of roads. The real road to serfdom had a number of common themes: extreme weakening of the centralized state, assumption of quasi-governmental functions by the local warlords and landowners, and the benefit most people found in coming under the protection of the local magnates in exchange for labor dues and taxes in kind. Concomitant processes were the general decline of trade and monetary economics in favor of barter and in-kind remissions. 

Money was of little practical use in the disorganized world of the Early Middle Ages, given the limited commerce and widespread violence. It made sense for the lord of the manor to distribute monetary gains among his retainers to ensure his safety in this world, and to the church to secure his salvation in the next, rather than use them as currency. The only safe forms of investment were land and holy relics, which were of little use to nomadic raiders. The restoration of monetary economics, trade, and movement of labor went hand in hand with the decline of serfdom-based feudal society (Duby 1974).

Even from this brief outline, we can see how different medieval serfdom was from mass (or even total) labor conscription practiced by 20th-century totalitarian states. There was no uniformity to serfdom; the rights and obligations of the serfs were determined by custom and traditions as much as by law or fiat. Village communities were largely self-governed. The lord of the manor and the church intervened to prevent superstition and monstrous abuses—polygamy, ritual rape, lynching, and human sacrifices among them—more often than they did to extort money. 

It is always dangerous to draw modern parallels to the unique conditions of the past. But through learning history we can better protect ourselves from political demagoguery that employs poorly understood terms and their dubious modern meanings. 


Boak, Arthur Edward Romilly, and William Gurnee Sinnigen.1965. A History of Rome to A.D. 56..5th ed. New York, NY: Macmillan Co. 

Cameron, Averil. 1993. The Later Roman Empire. Cambridge, MA: Harvard University Press. 

Duby, Georges, 1974. The Early Growth of the European Economy: Warriors and Peasants from the Seventh to the Twelfth Century. Translated by Howard B. Clarke. Worthing, England: Littlehampton Book Services Ltd. 

Garnsey, Peter, and Richard Saller. 1987. Roman Empire: Economy, Society and Culture. London, England: Duckworth.

Goldsworthy, Adrian, 2010. How Rome Fell: Death of a Superpower. New Haven, CT: Yale University Press.  

Hayek, F.A. (1944) 2007. The Road to Serfdom: Text and Documents—The Definitive Edition. Vol. 2 of The Collected Works of F. A. Hayek. Chicago, IL: University of Chicago Press.

Heather, Peter. 2007. The Fall of the Roman Empire: A New History of Rome and the Barbarians. New York, NY: Oxford University Press.

Lopez, Robert S., (1966) 1998. The Birth of Europe. New York, NY: M. Evans and Co.

Mitchell, Stephen. 2006. A History of the Later Roman Empire, AD 284-641: The Transformation of the Ancient World. Hoboken, NJ: Wiley-Blackwell, 2006. 

Schiavone, Aldo. 2000. The End of the Past: Ancient Rome and the Modern West. Translated by Margery J. Schneider. Cambridge, MA: Harvard University Press.

Peter Lerner, PhD, MBA is a semi-retired financial researcher who lives in Ithaca, NY. Currently, he teaches international financial management at Rollins College, FL.


Related Posts Plugin for WordPress, Blogger...


Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Comments are moderated, and will not appear until the author has approved them.


NYSSA Job Center Search Results

To sign up for the jobs feed, click here.


NYSSA Market Forecast™: Investing In Turbulent Times
January 7, 2016

Join NYSSA to enjoy free member events and other benefits. You don't need to be a CFA charterholder to join!


CFA® Level I 4-Day Boot Camp

Thursday November 12, 2015
Instructor: O. Nathan Ronen, CFA

CFA® Level II Weekly Review - Session A Monday

Monday January 11, 2016
Instructor: O. Nathan Ronen, CFA

CFA® Level III Weekly Review - Session A Wednesday

Wednesday January 13, 2016
Instructor: O. Nathan Ronen, CFA

CFA® Level III Weekly Review - Session B Thursday
Thursday January 21, 2016
Instructor: O. Nathan Ronen, CFA

CFA® Level II Weekly Review - Session B Tuesday
Thursday January 26, 2016
Instructor: O. Nathan Ronen, CFA