The Ocean of Churn: How the Indian Ocean Shaped Human History

by Sanjeev Sanyal

The availability of eastern luxuries transformed Roman tastes but the problem was that the empire ran a persistent trade deficit with India. This deficit had to be paid in gold and silver coins. Roman writer Pliny (AD 23–79) complained bitterly that, ‘Not a year passed in which India did not take fifty million sesterces away from Rome.’ In a world where precious metals were used for minting coins, this was equivalent to severe monetary tightening. The Romans initially tried to solve the problem by curtailing trade but eventually they would resort to debasing their coins (i.e. reducing the content of gold and silver). This would eventually cause distortions and inflation in the Roman empire. Interestingly, the Indians continued to accept the debased coins although they recognized the higher quality of the older, high-content coins which continued to circulate in the Indian Ocean long after the reigns of emperors who had issued them. Notice the similarity with the modern world where China runs a persistent surplus against the United States and accepts dollars in exchange. Everyone accuses the US of printing too many dollars but China keeps accumulating them as reserves. In this way a symbiotic imbalance keeps the world economy going despite the distortions it causes. Indeed, such imbalances have been at the heart of most periods of global economic expansion and can be surprisingly persistent.17