The House of Iron: A Diet of Pepper
During the summer, it was common practice for the Imperial family to remove itself from Constantinople, a habit followed by those wealthy enough to afford country estates. Despite the best efforts of Roman sanitation, during the summer heat the great city with its population inching back up to 350,000 could get a little ripe, even by the standards of a less nasally sensitive age. The White Palace with its sea breezes wasn’t nearly as bad as the heart of Constantinople, but it was still nice to get away. The Sweet Waters of Asia had started as a summer resort before it was turned into a garden complex, although it still functions as both. It is away from the Constantinople air but close enough for easy access to the capital if needed.
However the plans for summer 1638 were supposed to be different. Instead of going to the Sweet Waters Demetrios III is supposed to go to Prousa, to the spa near Mt Olympus. In an effort to ease the Emperor’s pain, he was to undergo a surgical operation to remove kidney stones. This was a dangerous procedure and the conducting surgeon wanted to operate on the Emperor in Prousa so that he could recuperate at the warm baths. He was also supposed to not have to deal with any Imperial business for six weeks afterwards.
But 1638 is one of those years that is not inclined to cooperate. Delegations from the west arrive for negotiations regarding the situation in Italy and these are important and tense enough that it is felt that they should receive a full Imperial audience when they arrive. The negotiations are to be conducted mainly by the Logothete of the Drome with instructions from Demetrios III, but rumors that the Basileus’ instructions are conciliatory cause an uproar amongst the ultra-war hawks, who stir up an uproar of their own in the court in response.
The presence of these large, senior, and irritated Latin delegations also mean that Roman reactions to Ibrahim’s religious actions in Syria-Palestine are muted. There are cries of outrage but no action, as Ibrahim expected. If diplomacy with the Latins fails, war is almost inevitable, and the war hawks are doing their best to ensure that diplomacy fails. Demetrios and the War Room do not want another two-front war, and if they start up the war with the Ottomans early, it will only encourage the Latins to be demanding, increasing drastically the odds of another two-front war.
Demetrios’ relationship with the city of Constantinople is not going so well either. On the annual Day of Victory games celebrated in the Hippodrome on May 29, the extravagant games, with entry and copious concessions free of charge, proceed as usual. However Demetrios III, because of his poor health, is conspicuously not present in the Imperial box. In response, the crowd boo and jeer when his name is mentioned, complaining about his absence.
Demetrios, who is having an especially painful day, is furious when he hears of this. The games, food, and drink they are all enjoying free of charge are because of him, and the people enjoying them are mostly those who have had their taxes lightened thanks to his differential taxation plans. And yet just because he won’t attend the games they find it as just cause to curse his name.
The tale that it takes the combined efforts of the Empress Jahzara, the Lady Athena, and the Lady Maria of Agra to talk him down from sending Odysseus and some of his fellow Twelve Days veterans to “do a Nika” is apocryphal. It was made up by angry sports fans who rioted and started some fires after the games because their team won and were then crushed by the tzaousiosi. Several of the rioters responsible for the arson, after being arrested and convicted, were then executed. Starting an uncontrolled fire in Constantinople is not taken lightly given its potential for mass carnage, but the executions still incurred an angry backlash in public opinion.
It is historical that Demetrios quotes a slight adaption of the tomb inscription of Scipio Africanus: Ungrateful city, you will not even have my bones. Construction of the Sideros family mausoleum, along with the proximate church and monastery (which bring in a good amount of business for the area both from the clerics’ needs and the pilgrim traffic for the icons and relics) and hospital for the poor, begins at the end of summer and is not in Constantinople but in Athyra.
The second financial scandal, the “Zeila Pepper-Kaffos scandal” breaks just two weeks later. To understand that requires taking a closer look at the maritime trade between East and West, and a comparison of the Suez route used by the Romans and the Cape of Storms route used by the Latins.
The Cape Route was a long haul, stressful on both ships and crews. Losses from shipwrecks and storms were a constant hazard, although these can sometimes be exaggerated if one looks solely at famous early expeditions (whose losses were higher out of inexperience) or at particularly bad years. One example is 1629, when three of eight Lotharingian Indiamen heading back to Europe go down somewhere off the east coast of Madagascar. Those bad years happened, but because of the drama attached they draw more attention than their frequency deserves. The main source of loss on these voyages was amongst the crew, from accidents, poor rations, and the dreaded scurvy. [1]
The advantage of the Cape Route was that it was direct. A ship could load up its cargo of pepper, spices, chinaware, silk, tea, or other eastern goods in an eastern harbor. Once cargo and supplies were all aboard, the ship then sailed to Lisbon, Antwerp, London, Hamburg, or the like. Many of the goods would then travel on to other markets in Latin Europe, but from the east to the seaboard of Europe there was no need for transferring or middlemen. This meant that while the route was slow, it was comparatively cheap.
The Suez Route was much faster. Monsoon winds imposed their own schedule that men ignored at their peril, but on average an eastern ware could get to Constantinople twice as fast as to Lisbon or Antwerp. But an eastern good going this route was first loaded on a ship in an eastern port, the ship sailing to the entrance of the Red Sea. There it would be transferred to an oared vessel for the passage up to Suez as the Red Sea was considered too hazardous for ships with only sail-power, particularly if they were carrying valuables. At Suez it would be put on a barge through Marienburg am Nil and then up to Alexandria, where it would go on another vessel for the leg to Constantinople. As a result of all these transfers and middlemen, the cost of shipping on the Suez route was substantially more expensive than on the Cape, which reflected in the cost of the product.
Moderns, used to instant replays, electronic communications, and next-day delivery crave speed and will often pay more to get things faster. People in the early modern did not think the same way. Theirs was a much slower world. There were no timetables since no mode of transportation could be that precise. The fastest a human could go was either by riding a galloping horse or falling from a height until one reached terminal velocity, and neither experience could last long, particularly the latter.
As a result the cheapness of the Cape Route made it the winner. Now it wasn’t a complete rout. Eastern goods would be cheaper in Lisbon or Antwerp than in Constantinople, but as they trickled through the European trade network the shipping cost and thereby their own cost would gradually tick up. An eastern good arriving in Constantinople via Lisbon would have no price advantage over one arriving via Suez. As a result, eastern goods via Suez won out in the Orthodox world and Hungary, a sizeable market, but the rest of Europe went for Cape route goods, a much bigger market.
Roman merchants are aware of this weakness and are trying to minimize it. The most effective way they have found is to ensure that all the shipping, from Island Asia to Constantinople, is owned by the merchants also sending the goods. Using another carrier means paying their rates, designed to generate a profit for their owners. Using their own carrier means just covering the expenses without the profit markup. However owning shipping across such a vast network is out of reach for one individual, so multiple partnerships have developed. [2] The typical setup is a Roman Ship Lord who gets the goods to the Gulf of Aden, an Ethiopian who covers the Red Sea run (and also arranges sale of eastern goods to Ethiopian buyers), and another Roman merchant in the heartland covering the Suez to Constantinople leg.
The war in the east has been a disaster for business, with exports from New Constantinople in 1637 at 14% of their 1635 level. The Roman heartland merchants in these partnerships thus petition the Roman government for tax relief because of these losses. Unlike modern income tax, where the tax is levied as a percentage of the last year’s income, Roman income tax levies operate on a 5-year tax cycle.
At the beginning of a tax cycle, auditors survey the taxpayers’ sources of income over the past 5 years and take an annual average and levy that as the rate for the next tax cycle. For example, if a taxpayer’s average annual income for 1630-1635 is determined to be 60 hyperpyra and the tax rate for their level is 16.67%, they owe 10 hyperpyra in tax every year for the 1636-40 cycle, regardless of whatever their actual annual income for that period was.
The reason for this is that auditing all incomes every year is simply beyond the capability of the Roman bureaucracy. While impressive by 17th century standards, it is still incredibly puny in relation to the size of the population compared to what would be expected from a modern state. Land taxes are based on a valuation of the holdings, with a survey done every 5 years, so income taxes follow the same schedule.
Like with land taxes, in times of disasters taxpayers can appeal for relief as their situation is no longer comparable to when the tax was valuated. The merchants do this, citing the losses to the Spanish. However the amount of estimated lost income they report in their relief claim is surprisingly high compared to their tax rate. To use the above example, it is as if someone who earned 60 hyperpyra and is levied 10 in tax for this cycle reported a lost income for 1637 of 100 hyperpyra and so should get a tax relief of 16.67 hyperpyra rather than 10.
This sort of thing isn’t unexpected by the Roman government; people regularly over-value their losses in an effort to maximize tax relief. That is why all such claims are reviewed by auditors before being accepted. However the claims by the merchants are unusually large compared to their tax rate for this cycle and because of their wealth, the numbers are also large compared to the usual case of a farmer’s field. Thus these claims get special attention.
Leading the investigation is Leo Sideros. While there could be claims of nepotism being involved since he is the nephew of the Emperor, the son of his elder sister the Duchess of Dalmatia and Istria, he has already proven to have a keen eye for finding corruption and shady money dealings. What he finds here is much bigger than even he expected though.
The Roman merchants, it turns out, have been engaged in massive tax fraud for years. After selling eastern goods in the Aegean markets, they’ve been promptly spending most of their profits in the form of Imperial bank certificates to their Ethiopian partners. As a result, they’ve artificially devalued their profits and thus their income tax rates are low. When they want their money back from Ethiopia, the partner sends it in the form of a ‘loan’. Loans are not considered income in terms of tax valuation, except these loans are interest-free and never repaid. When the merchants asked for tax relief though, the lost income had been what they’d actually earned instead of the depressed value presented to the auditors.
The amount of tax revenue lost is unknown, although stated to be enough to more than pay for the Trebizond Yard scandal. The merchants responsible are arrested and once convicted are punished with being sent as forced labor for life at monasteries in some of the more unpleasant parts of the Empire; the marshes of the Danube delta or the more rugged sections of the Taurus Mountains are the most popular choices. There are five monasteries that are used to ‘entertaining’ such lay workers.
All of their assets are forfeited to the state, although the dowries and wedding gifts, being legally the properties of their wives even if administered by the husband, revert to the wife. However while in this sense the matter is treated as if the husband is dead so the wife can get her property back, otherwise the circumstances do not meet the Orthodox Church’s criteria for granting a divorce. The wives, even though they’ll never see or hear from their husbands again, cannot remarry without incurring a charge of bigamy.
That is not the concern of the Roman tax collectors. The confiscation of the merchants’ property comes as a welcome boon considering the recent extra expenses but much of that is in the form of land, buildings, furniture, furnishings, and art, items that are not particularly liquid, which is what the exchequer really wants. Furthermore, all those profits sent off to and still being held by the Ethiopian partners are out of reach. The false loans already in Rhomania are seized. But those bank certificates still in Ethiopia, having been officially received and notarized by the Ethiopian partner, are legally their property and thus the confiscation of the convicted merchants’ assets gives the Roman government no claim.
That is not the end of the matter, because while this particular incident has been wrapped up the Roman government very much wants to make sure such a thing doesn’t happen again. Yet on the other hand, they know the flow of capital is needed to finance foreign trade and they want to bolster the eastern trade.
The incarceration of these merchants has wrecked many of the three-part partnerships that facilitated the eastern trade which right now is really not looking good because of the battles with Spain. Lack of eastern imports has driven up the prices of the few that make it to Constantinople and as a result Lotharingian traders, despite sailing all the way around Africa and having to pay customs dues, can furnish eastern goods on the Constantinople market at rates comparable to those shipped via Suez, and in greater quantity. Now once eastern goods start flowing again this issue should go away, but it is a warning of how things could go wrong from the Roman perspective.
The White Palace encourages other merchant firms to take the place of the convicted merchants, but with little success. With the news from the east (the heartland is only aware of events in the east up to the end of 1637) and the very effective Lotharingian competition, investing in importing eastern goods does not look at the moment. This does not improve much when the news of 1638 in the east finally arrives at the Queen of Cities (and by that point anyway the Roman economy is reeling from the fallout of the third scandal which absolutely and utterly dwarfs those of the first two combined). The fall of Malacca is impressive, but from a commercial standpoint the massive losses of Roman shipping are extremely worrisome. The Spanish-Roman fighting and destruction of merchantmen has left a massive commercial vacuum and the Lotharingians, who in Island Asia have utterly smashed the Triune presence, are rushing to fill that with all speed and much success.
New laws passed restrict the export of Imperial bank certificates outside Roman domains (Despotates are included in the Roman domain category). It is still allowed, but the exporter must declare the transaction, the amount, and the reason. Failure to do so or violation of the terms is met with massive punitive fines. The setup is practically identical to the laws limiting the export of bullion, with the issue that a bank certificate, being a piece of paper, is much easier to smuggle than a gold bar.
Furthermore more laws also sharply limit the ability of Roman citizens to export their assets outside of Roman domains as well. Another common tax fraud is to purchase a villa on the Georgian coast of the Black Sea, spend a bunch of money on furnishings for said villa, and thereby hide that income from Roman tax collectors since it is off in Georgia where they cannot audit. The White Palace wants this ended.
Some economists have pointed out that these laws make it substantially harder for Roman capital to flow outside of the Empire and thus makes foreign trade harder. The Roman government would acknowledge such a point but question its relevance. From that perspective, an economic activity that cannot be taxed is an economic activity that is useless. The lesson drawn from 1204 is that a wealthy society, as Rhomania was in 1204, is useless if the state is poor, as the Roman state was in 1204. If nothing else, the state will lack the strength to guard the society against the aggression that its wealth will inevitably invite. To quote Theodoros IV Komnenos, “The pig should be as fat as possible. However better a smaller pig that can be slaughtered at the proper season than a larger one that escapes into the forest never to be seen again.” [3]
[1] Pereira had stumbled upon the cure for scurvy largely by luck, so his expedition suffered lightly from the deficiency. But with everyone’s focus on the military events after he returned to eastern waters, this was entirely unnoticed. The official discovery of the cause and cure for scurvy would not come for many years, and after many deaths.
[2] There have been some discussions over setting up a joint-stock monopolistic corporation to cover trade with the east, as is being proposed in several Latin states. However the powerful Ship Lords are resistant as they see it as a threat to their independence. Meanwhile the White Palace and the Katepanoi are very suspicious, viewing such a corporation as a serious threat to the Katepanoi’s power.
[3] If you’re wondering, of course Theodoros IV charges you for your enlightenment. And there is a late invoice fee. And if you weren’t expecting a consulting fee from Theodoros IV, then you also get the ‘not paying attention’ surcharge as well.
