In honor of the recent opening of Star Wars Episode VII: The Force Awakens, I thought it would be fun to examine some of the economics behind the Galactic Empire from the original trilogy.
First up is the question of building the Death Star, namely how the Death Star II could be built in so much less time than the first iteration. On one hand, this could just be a simple case of “movie magic” (Jedi powers?) creating a convenient plot line. However, building the Death Star II in much less time actually makes very good economic sense. For one thing, the autocratic regime of the Galactic Empire meant that all possible goods and services needed to be directed towards military spending would be made available for this project, completely removing any political squabbles that would precede another massive undertaking. Additionally, all the vertically integrated components that went into creating the first Death Star – architectural plans, mines, factories, spaceships, laborers – still existed, and could now operate in economies of scale. In other words, more efficient production and well-established production pathways made the second Death Star a relatively easier project to implement. Even if people weren’t forced into labor for this project, it seems logical that the Galactic Empire could have used the rebellion’s assault on the first Death Star to push through a massive military spending budget, offering wages that were as or more competitive than any other potential job.
A second, and rather interesting, question to ponder is why the Empire fell. There are several obvious answers to choose from, including the destruction of the second Death Star, the removal of a power structure with the deaths of Darth Vader and the Emperor, and the Rebellion’s overall efforts throughout the galaxy. What, however, motivated the rebels to form the Rebellion in the first place? In effect, I argue that the Emperor’s failure to understand economics led to the Empire’s fall.
Hear me out; if the Empire had enough money to funnel towards building a gigantic laser-moon, then surely it could have put funds towards modernization of infrastructure and betterment of its civilians. The Keynesian view of economics posits that government spending on these projects boosts economies, and it certainly would encourage citizens to be more wary of anyone attempting to overthrow the government that’s helping them so much. Maybe if Darth Vader had gotten a pork-barrel fund for his home planet of Tatooine, Luke Skywalker would have been able to participate in a more exciting job in the local workforce, or even have a strong loyalty towards the Empire, instead of taking down the regime.
Investment in the general welfare of citizens is a rational way to build loyalty, but dictators rarely have that foresight. Instead, fear tends to cloud their judgement, leading to expenditures focused on military and defense (ostensibly for the entire population, but usually focused more on protecting the dictator). It just goes to show how ignoring economically sound advice can backfire in the long run.