Today, May 25th, 2017, is the 40th anniversary of the first Star Wars movie — Star Wars: Episode IV - A New Hope — and in honor of Luke and co., Investopedia will deliver a first class analysis of the economics of Star Wars. (See Also: Why Is The Star Wars Franchise So Valuable?)

With its themes of intergalactic travel, colorful sets, and quirky creatures, the fantasy series might seem far-fetched to people who are not familiar with it. In fact, the Star Wars story is underpinned by an economic and political system inspired by and derived from the real world. On the face of it, Star Wars may be an action film; but it is economic strife and imperatives that precede the physical act of war.

The Similarities Between The Galactic Empire And The Modern Global Economy

The scope of the Star Wars economy is galactic and governed by the precepts of modern trade. In this system, planets exchange products and services with each other. Trade routes traverse multiple galaxies and planetary systems. Not surprisingly, planets located at intersection of major trade routes benefit from their location.

For example, Bothawui, a planet located in the mid rim of the galaxy and referenced in the Star Wars: The Clone Wars animated series, is located at the intersection of four major trade routes. It is known for its trade in technology and, because of its location, is a popular venue for trade negotiations.

Much like multinational corporations, whose operations span multiple economies and geographies, intergalactic firms operate across several planetary systems and sectors. But their manufacturing operations are primarily based in the Corporate Sector, which functions as a free trade zone of sorts. Located in the Outer Rim, the Corporate Sector was established to free industry from the political wranglings and machinations of the Senate. The Corporate Sector's tax code is a simplified version of individual planet tax codes. Companies with operations in the sector paid a single tax to the Republic and, subsequently, the Empire. In fact, under Emperor Palantine, who established the Empire, the corporate sector's operations expanded to include 30,000 planetary systems and a Corporate Sector authority was established to administrate the sector.

To make trading easy, several organizations inked trade agreements and consortiums to maximize profit and wield important political and economic influence within the Senate. The Commerce Guild, which pursues trader and business interests, is the most powerful such guild. Two of its most powerful members are the Trade Federation and the InterGalactic Banking Clan. As its name implies, the Trade Federation is a consortium of businesses and traders and the InterGalactic Banking Clan is a bank system that controls finances in major parts of the Republic. The latter played a prominent part in the Confederacy of Independent Systems (otherwise known as the Separatist Alliance) that broke away from the Republic during the Clone Wars. Together, both organizations were responsible for propelling Darth Sidious to the top.

How The Economic Blockade Of Naboo Transformed The Republic Into The Empire

In response to taxation of trade routes, the Trade Federation blockaded the planet of Naboo with a fleet of battleships. The exact reason for the blockade is unclear but there are several theories regarding this.

In his novel Darth Plageuis, James Luceno outlined a possible reason for the Naboo invasion: plasma energy. According to Luceno, Naboo was rich in plasma and had a major mining and refining facility financed with a loan from the InterGalatic Banking Clan. The planet sold plasma energy to the Trade Federation at fixed prices who, in turn, marked up the prices for a substantial profit. Remember, Naboo was situated in the Outer Rim of the galaxy and, probably, had little to no taxation. Taxation of trade routes would have increased transportation costs for members of the Trade Federation and cut into their profits.

That said, the economic pretext for the blockade was simply an excuse for the Trade Federation, which was under the influence of the Dark Lord, Darth Sidious, to invade Naboo. The invasion set off a chain of events that led to Palantine (who was the original Darth Sidious) being crowned Emperor and heralded the end of the Republic and start of the Empire. For example, Palantine used the opportunity to crown himself chancellor and, subsequently, control events using the dark side of the force.

The Star Wars Economy And Nazi Germany

Star Wars creator George Lucas once said that he incorporated esthetic and thematic elements from Nazi Germany into his vision of the Galactic Empire. That comparison is interesting because both – the Galactic Empire and Nazi Germany – came into being on the back of an economic crisis.

In fact, there are several economic and political similarities between Nazi Germany and the Galactic Empire. For example, Nazi Germany was characterized by a readiness for war and its military might. The National Labor Service mandated that each German male would have to complete, at least, 6 months compulsory training at the organization. Typical tasks during the tenure included planting forests, digging ditches on farms and building a network of motorways (the Autobahn was constructed during this time). During this time, the size of the German army increased from 100,000 to 300,000. Even as that number ballooned, the country's other industries, such as energy and agriculture, suffered. Trade unions were also banned during this time and everyone was required to enroll a central labor organizations controlled by Nazi chieftains.

The Galactic Empire had a similar economy that was ready for a state of war. The Death Star, which was a space station that doubled up as a war machine, is the perfect example of this. It consisted of state-of-the-art weapons systems and artillery. In addition, entire planetary systems within the mid and outer rims are dedicated to the construction of clones and war machines. Whilst the Star Wars prequels make numerous mentions of trade unions in the Republic, such references are absent in the later editions. As such, it is probable that they were banned by the Galactic Empire. In fact, the production process for machines machines was not labor intensive. Instead, it is a process dominated by machines themselves. As an example, Star Wars Episode 2: Attack Of The Clones provides a glimpse of humanity's machine-dominated future in a scene during which Queen Padme Amidala, Anakin Skywalker, C3PO and R2D2 fall down a machine shaft.

Interestingly, as one moves away from the inner planetary systems, the economies became less oriented towards machines. In the Outer Rim planets, other industries, such as energy and agriculture, dominate. This is reflected in the differences between their architecture. For example, Coruscant, which is located in the Inner Rim, is a fairly modern society with skyscrapers and flying cars set amidst floating clouds. Outer Rim-located Tatooine is a fairly primitive society in comparison with structures made of sand and an economy dominated by agriculture. The difference in their fortunes is testament to the economic power of a Military Industrial complex, one which relies on constant production of machines and systems to prevent

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