May 25th this year was the 40th anniversary of the first Star Wars film. Fans of the franchise may wonder what Luke and Co have to do with economics, but if you study the films and look beyond the quirky creatures and the fantasy storylines, you’ll notice that the Star wars story is underpinned by an economic and political system that mirrors the real world. At its most basic, it is economic problems that lead the Empire into war. That is something we are familiar with.
The galaxy and the global economy
To start with, the Star Wars economy is galactic in scope –a situation similar to the globalised economy—and it is based on the working principles of modern trade. For example, planets trade products and services and the trade routes traverse multiple galaxies. This planets based at major intersections on these trade routes tend to do best, and there are plenty of real world examples that match this. Think of where Hong Kong and Singapore are located in Asia, the position of Dubai in relations to Europe, Africa and Asia, London’s location as a bridge between North America and Europe and the list goes on. It also goes way back in time to trade routes like the Silk Road and the Incense Route of antiquity. Cities along these trade routes grew in prosperity and some of them had a monopoly on specific products.
In Star Wars, Bothawui is poised at the crossroads of four trade routes, This makes it a popular meeting place and a venue for trade negotiations. The intergalactic firms operate across several planetary systems – think Microsoft, Coca Cola and all the global businesses we have today that operate in the same way.
The Corporate sector and free zones
It also has a Corporate Sector, which is really like a free trade zone and it has a simplified tax code compared with other parts of the Empire. To make trade easier they also have trade agreements and consortiums that wield political and economic influence. In the real world, we have the Pacific Trade Agreement, the WTO, the EU and EFTA amongst others that act in the same way. And, there is the Intergalactic Banking Clan – a parallel universe for the IMF, ECB and World Bank?
The German economy of the 1930s
George Lucas, the creator of Star Wars based the Galactic Empire’s economy on that of Nazi Germany. As he pointed out, both emerged on the back of an economic crisis. If you watch the films with that in mind, you’ll see other similarities, including the compulsory military service that made both ‘states’ ready for war. The Death Star station is a war machine and there is a dedication to building military might across the Empire that strongly echoes 1930s Germany.
A Military Industrial Complex
And as in the real world, the planets on the Outer Rim of the system are more oriented towards agriculture, design technology and the further out the planet from the centre, the more primitive its economy. Their distance from the power of a Military Industrial Complex, which results in them having weaker economies reflects the situation in the real world.
If you thought Star Wars was just a bit of fun entertainment, perhaps you’ll watch the whole series again and realise that George Lucas was giving us all a lesson in world economics, in the most entertaining format he could come up with.
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