Star Wars and the Austrian School: Trade Routes (Part 2)

Continued from Part I: The Great Hyperspace War

Part II: The Invasion of Naboo

Star Wars and the Austrian SchoolFor those less-than-diehard Star Wars fans who insist that anything not in the six movies doesn’t count, they can witness this political-economic travesty of protectionism in Episode I: The Phantom Menace.  Because of a dispute over the taxation of trade routes to other star systems, the Trade Federation launches a blockade of the planet Naboo.  When the Jedi knights Qui-Gon Jinn and Obi-Wan Kenobi are sent to negotiate a settlement with the Trade Federation’s Viceroy, their diplomatic mission is simply to settle the issue but not to open the blockade, which, according to the Viceroy, is “perfectly legal.”  The notable Austrian school economist Mark Thornton makes an excellent political-economic analysis of the Trade Federation’s aggression against the Naboo:

Lucas sends a clear message that the Federation agreement with the corrupt Republic is based on the model of British Imperialism by filling the movie with historical imagery. The Federation is British Imperialism in the form of the East India Company, which controlled and taxed the British possession of the Indian sub-continent. Of course, entrepreneurs complained and evaded British taxes and regulations, but the British Empire gave out monopoly rights to control India and other colonial trading rights in return for tax revenue.

Yet the real clincher that the Federation was based on British Imperialism lies in the title of the local leader of the Federation blockade and the one who will rule the planet for the Federation-Republican alliance—Viceroy.

Viceroy is of course the British title for colonial leader. British imperialism was largely based on the “company model” where a company, like the British East India Company would be formed and given exclusive trading privileges. The government would get revenue and their proverbial foot in the door in exchange for the monopoly. Later, Britain would provide troops and other means of support and eventually take over the colony from the company once the profitability had been proven and English-rule had been established.

The main difference between the British  invasion and subjugation of India and the Trade Federation’s blockade and invasion of Naboo (with the end result of forcing Queen Amidala to sign an unbalanced treaty favoring the Federation) is that the former was a move of aggression by an empire against a sovereign people, whereas the latter is an act of aggression by one member entity of the Republic (the Federation has representation in the Galactic Republic Senate) against another Republic member world, Naboo.

Furthermore, the Battle of Naboo was a great victory for the Naboo/Gungan alliance against the Trade Federation invaders and their battle droid army, but the Indian Rebellion of 1857 against the British East India Company’s administration was suppressed, resulting in total domination by the British Crown. (Until the British government assumed full control over India, this once-proud empire and various autonomous states were ruled by a corporation which was merely sanctioned by the government; corporate welfare at its worst!)  The Indian people would not regain independence until a war veteran and Imperial patriot-turned pacifist nationalist by the name of Gandhi led a movement of civil disobedience that culminated in independence and catalyzed the British Empire’s dissolution.

Returning to Star Wars, crony capitalism and corporate welfare were rampant in the Republic, even to the disgusting culmination of the Trade Federation—a commercial venture—having its own representation in the Galactic Senate!  It’s one thing for the senators of certain worlds to represent their planets, which may or may not do business with the Federation, and vote according to the economic interests of their constituents, but it’s a completely different story when corporations have their own Senators.  Can anyone imagine Senators and Representatives from Halliburton and Goldmann Sachs strong-arming their counterparts from the states of Arizona or Iowa and wreaking unchecked havoc on Capitol Hill?  This was certainly the case in Star Wars, and the Trade Federation representatives did everything they could to silence Queen Amidala’s plea to the Senate, to end the blockade and invasion, by proposing “investigative” committees wrapped in miles of bureaucratic red tape.

Some might ask why they would do this.  Why would businesses commit such crimes?  Whether it’s the U.S. Congress heavily taxing imported goods to “protect the American economy,” or the British East India Company and its mercenaries invading and colonizing India, or the Trade Federation launching a blockade of Naboo to resolve the dispute over taxation of trade routes in their own favor, crony capitalism is a disease born from greed and laziness but whose epidemic expansion is catalyzed by government intervention, namely in the form of unbalanced protectionism (as if there’s any other kind!) and regulations (there’s always a loophole that favors the “regulated” industry as long as lobbyists in the capital).

Most people are naturally greedy, but the free market forces them to channel their greed towards production of the best and/or lowest priced consumer goods and services, lest they be forced out of the market.  Even these greedy people are forced to work hard nonstop, always planning, strategizing, and innovating in order to come up with new and better ways to serve consumers and ultimately make life better for society, or else they are rejected by the consumer base and go out of business.

Unfortunately, it’s a lot easier to be lazy and use mafia tactics to drive foreign producers out of the domestic market and slam the door in the face of new entrepreneurs (all of these enabling bad businesses to charge high prices for cheap goods) than it is for producers to gird up their loins for the ceaseless competition of innovation and service that the free market demands.

Despite the “best intentions” of legislators, regulations will always favor some corrupt corporate entity because of all the lobbyists in government, whereas the free market naturally imposes survival of the fittest on the businessman and will eventually punish crooked business practices (case in point: had Wall Street not been bailed out by government, those crooked businesses would have been wiped out and new and honest blood would have stepped in to serve clients).  Therefore, crooked businesses are a mafia, the Federal Reserve being the public loan shark which debases the currency and finances predatory loans, and the government—despite the best of intentions—ultimately acts as the enforcer for the mob and its loan shark.  Pray, if we only had Jedi knights with lightsabers willing to cut their way into the Fed to force an audit!

Neither the United States nor the Galactic Republic enjoy the benefits of a fully free market, and in the face of economically-driven state terrorism, it’s up to citizens clinging to God and their guns to solve problems and fight against the desecration of their Constitution.  The Naboo/Gungan alliance did just that.  Had they failed to liberate their world, the Federation would have ruled their planet and the Viceroy’s one-sided treaty would have been signed by Queen Amidala at gunpoint, making the invasion and subjugation of Naboo legal.  Corporate welfare within the Republic would have evolved to new heights, with the conquest of sovereign worlds by corporations and their private armies becoming the norm.

Let no one forget that corporate welfare is antithetical to the free market and its natural ability to raise the standard of living for all people.  Crony capitalism is phony capitalism.

[Originally published by Young Americans for Liberty]

Images by the author; compiled from various explicitly public domain photos from the Wikimedia Commons.

Star Wars and the Austrian School: Trade Routes (Part 1)

Originally published by Young Americans for Liberty

Part I: The Great Hyperspace War

Star Wars and the Austrian School: Trade Routes Part 1For those knowledgeable nerds who are well-versed in Star Wars expanded universe history (such as your author), they would be familiar with the lore of the Great Hyperspace War.  Originally appearing in the Tales of the Jedi comic book series and being mentioned throughout the Knights of the Old Republic game, this particular conflict is part of ancient Star Wars history, having been fought five thousand years before the time of Luke Skywalker.

This conflict began when some gold diggers waist-deep in debt decided to try their luck at finding new paths for hyperspace travel that could become lucrative trade routes and solve their financial woes.  What originally happened was that, after dialing random coordinates and hoping to get lucky, the traveling pair of get-rich-quick schemers accidentally stumbled upon the Sith planet of Korriban and the entire Sith Empire, previously ignorant of the existence of the Galactic Republic and vice versa.

This immediately led to the Sith using the newly-discovered hyperspace route (and subsequently discovered coordinates) to attack Republic worlds.  For the rest of the war, the Republic and the Sith Empire struggled for domination of the hyperspace routes while trying to conquer each other’s’ worlds for imperial expansion.  The Republic eventually won, resulting in the near-annihilation of the Sith Empire and the exile of the Sith Lord Naga Sadow to the planet Yavin 4, but this would only be one in a series of wars between the Republic with its light-side Jedi and the Sith with their dark Jedi.

These episodes are not unlike ancient history here on earth.  The Punic Wars, fought between the Greek Carthaginians and the Romans between 264 and 146 BC (nearly one hundred and twenty years!) were waged specifically for land holdings, particularly islands in the Mediterranean, and for control of waterways for trade routes.  Furthermore, long before Rome fought Carthage, the Trojan War became the stuff of legends.  While mythology romanticizes the war to have been fought over a beautiful woman, historians and archaeologists today agree that the most likely cause for the war would have been trade routes.

Austrian economists know that all such calamity and bloodshed could have been avoided through economic cooperation rather than isolationism.  Just because countries or empires trade with each other does not guarantee that they don’t adopt isolationist measures.  Whether it’s the Greeks battling the Romans or the British battling the French, it seems impossible for nations to simply share the waterways.  After all, 75% of planet Earth is covered by ocean, and there’s enough water on the well-traveled trade routes for ships not to crash into each other.  Still, with the existence of empires comes the need for as much prestige and as many displays of dominance as possible.  The “chosen” empire must have full control of the trade routes and take the liberty to tax any vessel and cargo, leaving little if any market competition.

Even when not trying to dominate a market competitor militarily, international competitors still try to dominate the market through protectionist laws, tariffs, and other taxes.  Unfortunately, such a travesty is all too common today.  In order to “protect” American industry, big businesses lobby the federal government to set high tariffs and fees on imported goods.  This invariably makes the price of imported goods shoot sky high, since the foreign producers now have to pay the exorbitant tax on top of the cost of shipping their products internationally.  While this maintains the illusion of protecting the American economy, it causes more harm than good.  Because the market has been violated by protectionist interventionism, prices are raised artificially (but the higher cost for goods and services is all too real for the poor consumer whose purchasing power is shrinking).  These high prices naturally serve as false indicators in the market and cause domestic producers to raise their prices as such.

These phony prices in no way indicate the actual cost of producing the goods, the way a free market would allow, and manipulating the prices for protectionist purposes harms consumers by making goods more expensive.  The quality of products also drops because domestic producers no longer have to constantly compete with their foreign competitors.  In the end, the American consumer is paying more money for lower quality goods, not necessarily because of some “greedy capitalist” but because government intervention enabled that greed.  The free market is about competition and survival of the fittest, in order to provide the consumer with the best quality product for the lowest possible price.  Author Kel Kelly writes in his book The Case for Legalizing Capitalism, “Don’t buy American, buy what’s best…”:

Intentionally buying only American goods when one would otherwise choose foreign products keeps American workers employed—temporarily—in jobs where they are producing goods which should be produced by other countries, while their labor would be more beneficial in another line of work. Because of this, there are fewer total goods produced and lower real salaries for both the laborers and the consumers.

 To elaborate on Kelly’s point, consumers tend to buy more expensive and lower quality products far less often.  This leads to an overall decline in revenue for producers, causing them either to go under, or to prevent going under by having to cut their budget through cutting all workers’ hours or by eliminating jobs (in which labor is being wasted when other countries should be producing those items so that local labor can better produce other items).

For those less-than-diehard Star Wars fans who insist that anything not in the six movies doesn’t count, they can witness this political-economic travesty of protectionism in Episode I: The Phantom Menace.

Continued in Part II: The Invasion of Naboo

Image by the author. Background taken from a NASA photo which is in the public domain.