Alexander III Conquest

Scholarship regarding the economic effects of Alexander III’s conquest mostly agrees that because Alexander minted such large quantities of coinage in such a short period of time, he effectively inflated prices across the entire Mediterranean. This idea is supported by the Quantity Theory of Money, which states that an increase in the money supply will create a proportional increase in the price level, as the velocity and real value of transactions remain constant. Despite the fact that this theory was developed for the fully-integrated economies of the modern age, it has been directly applied to an ancient economy that existed from 330-290 BC. Yet, many other elements of ancient economies, which were by no means fully-integrated, may also
have influenced overall price levels. Understanding which factors defined the impact of the money supply is imperative for understanding the characteristics of ancient economies.
While the supply of coinage in the market did increase substantially over the course of Alexander the Great’s conquest, the concurrent economic growth and transformation of the ancient economy, along with the timeline over which new coinage was introduced, served to temper the effects of inflation at the end of the 4th Century BC.
In Asia Minor, Alexander gained access to stupefying amounts of gold and silver that was eventually minted as his new coinage, fueling the argument for the period’s heavy inflation. Though the literary evidence presents contradictory figures, Alexander seized an estimated 180,000 talents from the Persian Kings in gold and silver (Reger 471). This figure is nearly twenty times the 9,700 talents Athens accumulated in the early 440s (Davies 80). This wealth arose through
different victories. Alexander’s acquisition of Susa gained him an estimated 40,000/50,000 attic talents while Persepolis provided c. 120,000 (de Callatay RHC 178). Damascus provided 2,600 talents and other smaller mints brought slightly smaller amounts. Upon Darius’ capture in 330 BC, Alexander gained a further 7,000 talents (Davies Glyn 83). Some, if not most, of this metal was later coined: scholars estimate that the Macedonians struck the drachma equivalent of over one billion coins between 330-290 (Reger 471). F. de Callatay shows that the number of Alexander Drachm and Tetradrachm dies between 332-290 BC are several orders of magnitude above other coins (average 385.7 and 78.6 dies/year respectively) (de Callatay QSHC pg 87). On average, this influx of coinage represents roughly the equivalent of adding 25 million drachmas per year to the money supply, which, unless balanced by equivalent productivity gains, could create inflation. Yet, the impact of Alexander’s plunder on prices is hard to read in the sources (Reger 471-472). While this large increase in the money supply certainly transformed the ancient economy, the specifics of when and for what purposes the Persian treasuries were coined determine whether it fueled proportional inflation.
In order to determine whether price levels increased as a result of the new coins, an analysis of the way they entered the money supply is necessary.
Namely, these coins entered the Mediterranean economy through royal expenses. In Macedon alone, government spending was substantial. First, the Macedonian government, like any other, had inevitable expenses: its servants’ salaries, construction and maintenance of government buildings, organization of the great religious ceremonies, etc. (Le Rider 27). Antipater, Alexander’s appointed caretaker of the homeland, was also responsible for maintaining the king’s authority and sending reinforcements abroad. In the eleven years from April 334 to June 323, he protected the Greco-Macedonian Coastline from Persian offensives, repressed Memnon’s attacks in the Aegean Sea, and put down a revolt by the Spartan King Agis III, feats which required substantial military spending (Le Rider 45-46). He was also responsible for training, equipping, and supporting the mercenary reinforcements sent east (Le Rider 49). In the rest of the empire, the establishment of over 70 towns also required financing (Davies Glyn 83-84). Using coinage already circulating in Egypt, Cleomenes spent considerable resources and money building Alexandria (Le Rider 200). Money also flowed out of the royal treasury as gifts to important officials in new territories (Reger 464). In turn, these new towns were filled with young families likely receiving military incomes,
meaning high spending and stimulated local economies (Davies Glyn 84). In order to finance these expenses, Alexander sent back substantial funds: in 332 BC alone, Antipater received 3,000 talents; another 3,000 were sent to Menes, who deputized for him after he left Syria (Davies Glyn 83). Based on the expenses Macedon incurred, new coinage entered the economy by financing the empire’s maintenance and its new urban foundations.
While Macedon’s expenses were no doubt considerable, the largest source of government spending was Alexander’s growing army. Ancient literary sources, though not contemporary, provide some information regarding its size. According to Arrian, the army that crossed the Hellespont in the spring of 334 BC had an infantry of 30,000 men and a cavalry of more than 5,000 (Le Rider 28-29). In Macedon, Alexander also left 12,000 infantrymen and 1,500 cavalry, and continued to maintain his navy of 44,000 in the Aegean (Le Rider 29). Based on an estimated average salary, the payroll for some 89,000 men would have come out to about 89,000 drachms, or about 15 talents, a day (Le Rider 76). Though it makes many simplifying assumptions, this estimate is useful for gauging the scale of Alexander’s military expenses. Overall, Alexander’s army was well fed, expensively trained, and highly paid. They were also paid in cash (Davies Glyn 82). Since the newly minted coins providing the means of payment after the Battle of Issus, these coins entered the money supply as military salaries. While some scholars like M. Thompson argue that army men had no need for practical money, many argue that soldiers may have had to supplement the mess with their own food purchases. At the very least, many soldiers had wives and children to feed, along with debts to pay (Le Rider 62). Moreover, orders placed abroad for provisions and materials, along with mercenary and foreign expert salaries, were also paid in coin (Le Rider 32). Alexander’s reported annual income of 30,000 talents suggest that the proportions of the annual gross national product that passed through the government’s hand was significant, around 40% (Davies 81) Thus, Alexander’s army spending was a significant way through which new coinage entered the economy.