Smaug was a dragon - a fire drake to be exact. After casting out the Dwarves from Erebor, also known as the Lonely Mountain, he made it his home, and kept all the treasure they had mined and forged. Such is Smaug’s fabulous wealth that Forbes listed him in second place in their ‘Fictional 15’, behind Tony Stark.

Smaug’s hoard: how a dragon’s wealth shaped Middle-earth

‘How Much is a Dragon Worth, Revisited’ is where Forbes writer Michael Noer sets out his calculations that helped the magazine arrive at Smaug’s current valuation of £32.5 billion. This valuation includes the Arkenstone, diamonds, weapons and armour in the mountain - we’ll be excluding those items for the purposes of this article.

Noer is off the mark when it comes to Smaug’s length, which is used to work out the amount of treasure the dragon has. Noer uses information from Advanced Dungeons and Dragons and suggests a length of 64 feet, or just under 20m. There is a better source than that though.

Unfortunately there is no exact size mentioned in any of the books, but we do have something else: a drawing by JRR Tolkien himself including both Smaug and Bilbo Baggins the Hobbit.

A Conversation with Smaug (image by JRR Tolkien and owned by the Tolkien Estate)

‍We know from Tolkien’s writings that Hobbits range between 60cm to 120cm, so 100cm seems like a safe bet as to Bilbo’s height. Based on the drawing we can conclude - very roughly - that Smaug is 12m long by comparing the two characters (give or take, there’s 11 Bilbos to one Smaug). This is a much more conservative guess than Noer’s and therefore gives us a much lower valuation of Smaug’s gold and silver.

Our estimate, which also used a more up-to-date gold and silver price, puts his wealth in valuable metals at around £11.6 billion. Those items alone would place Smaug at 95th in the real-world Forbes Billionaires List.

Given what we know about the economy of Middle-earth, what would happen once - spoiler alert - Smaug is killed and the currency re-enters circulation?

Middle-earth's shifting economy

The books already tell us what happens after Smaug is killed and the Dwarves reclaim Erebor. The Dwarves became prosperous again in the mountain but, as before, horded most of their riches, with some trickling out through trade with Men from nearby settlements. That makes for a boring hypothetical, so we’ll be using some artistic license instead.

It’s hard to work out exactly what the gold in Erebor could have bought. The word “money” is used only 8 times in the entirety of The Hobbit, and not a huge many more times in the Lord of the Rings trilogy. The closest we get is a pony being worth 4 silver pennies in Bree, which tells us only about a very small part of Middle-earth while saying nothing of the actual coins themselves.

We do know that the inhabitants of Middle-earth used standard currencies, and that there were some accepted forms of local coinage. For example, Frodo, Samwise, Merry and Pippen all bought beer in the Prancing Pony with cash, while Gondor had its own coins in the form of the Castar and Tharni.

In regards to how the gold and silver would have spread from the mountain, the best comparison would be to gold rushes in our own world. This means that the precious metals would have flowed out at a varying rate rather than every coin being distributed at once or never leaving at all.

Lake-town, or Esgaroth, seems a good place to start being close to the Lonely Mountain and directly affected by Smaug himself.

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Esgaroth’s construction boom

Being so close to Erebor, and the most significant settlement in the area (except for the Elves in Mirkwood), it’s safe to assume Lake-town would have seen an increase in wealth and a possible sharp rise in immigration due to gold-hunters searching for their own fortune.

Any economic progression would have been hampered at first by the destruction wrought by Smaug before he was defeated. This means that the construction industry of Lake-town would have experienced a boom as rebuilding began, just as it did in post-war Britain.

The construction business owners and those they hired would certainly have seen their fortunes improve, but what about everyone else? There might have been some concerns about wealth disparity and distribution. Happily, Esgaroth was a republic allowing those concerns to be voiced in the polls.

It is also entirely possible that Lake-town would have invoked socialist tactics to better control rebuilding, implement town planning and ensure the populace are cared for. There are further parallels with post-war Britain, with the expansion of the welfare state and the nationalisation of industries such as coal, iron and steel to steer the economy forward.

With a strong construction industry and newcomers searching for wealth and work (builders from outside the general populace would be needed at first to quickly rebuild) Esgaroth could have ended up resembling old San Francisco. When the Californian gold rush kicked off in 1848 the town numbered just 200 people - by December 1849 the citizenry had exploded to 25,000.

The woodland realm: Mercenaries and settlers

West of the Lonely Mountain was the forest of Mirkwood, previously known as Greenwood the Great (Eryn Galen in Sindarin Elvish), and was inhabited by Silvan Elves and led by Thranduil. While the populace were hostile to Dwarves (most likely blaming them for Smaug attacking them many years before), they traded with Men and it seems likely that Lake-town would have looked to them for supplies of wood for re-building.

Mirkwood was the only major forest near Lake-town and due to the presence of giant spiders and other evil things, they would need help and protection to get wood. The Elves would have been able to sell logging rights to the Men of Esgaroth, while they could have also hired out protection and guides to help.

The Elvish settlement there would have benefited greatly from the construction boom, but what would their leader, King Thranduil, have done with all that money? We know he loved nature and, in particular, the forest. It would not be surprising if he’d made it his job to try and clear Mirkwood of the darker creatures that had begun to call it their home.

This would have meant moving out beyond their fortifications of the Elvenking’s Halls. More troops would have been needed, and with relations with the Elves further south fairly frosty, they would have most likely looked to Men to help them reclaim Mirkwood.

Lake-town’s population would have been preoccupied with rebuilding, so the Elves would had to have looked elsewhere for mercenaries. If the work was well-paid it would have attracted many people, particularly from the South. Thranduil would not have been willing to share his home with Men though so chances are they would have settled on the banks of the Forest River on the edge of Mirkwood, bringing further population growth and prosperity to the area.

Gondor falls

Being much further south, and a fairly powerful realm, would mean the Stewards and rulers of Gondor would have shown little interest in the events at Erebor past the politics of the Dwarves reclaiming it.

The same can’t be said for the poorer sections of society. Whole families would have attempted the trek north in search of a better life, just as many did during the Californian Gold Rush. This would have increased the populations of both Esgaroth and the Forest River mercenary settlement, while worrying Gondor’s leaders – a smaller population means less economic activity and reduced tax revenue.

If positive news was sent back by those who succeed in the journey it could have threatened to spark a mass exodus of the working class. This could have caused Gondor’s economy to collapse as the workforce disappeared. In this event, the Steward of Gondor could have either paid people to stay or stop them from leaving. The first option would have soon become far too expensive.

There are real-world equivalents here too – the Berlin Wall tactics employed by the Communist East Berlin government after World War 2, and the continuing annexation of North Korea show citizens could be prevented from leaving, with attempting to do so potentially facing the death penalty. A total of 916 people were killed trying to escape East Berlin in search of a more prosperous life, and the number of North Korea defectors is measured in thousands every year.

How Smaug’s death shaped Middle-earth’s fate

By the time Bilbo got back home, Middle-earth would have already been irreversibly changed. The Shire, though, would for the time being stay much the same. By their very nature Hobbits were disinterested in adventuring, and while Bilbo’s newfound riches might have piqued some interest or caused gossip, it wouldn’t have encouraged many.

In Mordor, Sauron would have been watching Gondor with pleasure. His strongest enemy was fighting itself and getting weaker and weaker by the hour. With each passing day the Stewards would have slowly lost their grip on power and on their ability to defend the rest of Middle-earth.

Meanwhile the growing Forest River settlement and Lake-town would either have had to increase cooperation, or come into conflict as resources became increasingly scarce. With the Men of Forest River being financially dependent on the Elves, they would have been wary of making any drastic changes. Tensions would have risen as the two towns argued over valuable hunting and crop territory, just as they have between China and Japan over gas deposits in the South China Sea.

In the end, Smaug’s death and the economic impact of his treasure spreading out across Middle-earth doomed it. The shift of attainable wealth and work to the north caused Gondor to weaken and their use of oppressive tactics would have been their downfall. Sauron would have stoked unrest causing Gondor’s leaders and allies to be distracted.

Under this cover Sauron would have been able to regain his power and armies in secrecy, as would have Saruman. Gandalf would have been too concerned with Gondor politics and the tensions between the Men of Lake-town and Forest River to ever discover Sauron’s return to power.

It would be too late before Sauron’s plans were discovered and, with Gondor weakened by unrest, would have fallen easily to a strong attack. An attempt to destroy the One Ring would still be made, but the odds of success would have been incredibly slim. With the world overrun by Orcs and Easterlings, the path to Mordor would nearly impossible to traverse without capture or death.

Based on the available evidence and real-world comparators, the defeat of Smaug and the economic conditions caused by his treasure had a direct hand in Sauron’s rise, and very almost led to Middle-earth’s destruction

Images via Wikimedia Commons here, here, here, here, Anup Shah, the FT and the Tolkien Estate