Galactic Economic Collapse: The Real Cost of the Rebel Victory in Star Wars

With the release of Star Wars the Force Awakens last year Star Wars fans got to see that the galaxy was not restored to balance after Return of the Jedi.  The Rebel Alliance was turned into the New Republic, but they were unable to ward off and eliminate the last Imperial holdouts, leading to the rise of the First Order.  How though, after two crushing defeats could the Empire still survive in the face of a new galactic government? The answer is a complete economic crash across the galaxy which the New Republic was not set up to handle.

The Star Wars economy is actually shown to be very much like our own world economy, just on a much larger scale. Rather than countries or states, the Star Wars galaxy has planets that general specialize in various products and industry. Amongst these are multi-planetary firms, which can even be broken into sectors throughout the galaxy for manufacturing, finance, corporate, or agricultural needs. Even further we can see the role the government plays in the galactic market in The Phantom Menace when the senate is debating over taxations of trade routes.  In the rise up to the Empire and during the reign of the Empire we see the Galaxy in a war economy. Economists have drawn the common link to this time period with the U.S. in World War Two. During these times in fact the economy likely grew tremendously due to the large amounts of government spending. One of the biggest being the Death Star.

 

By using the cost of steel used in battle ships economists estimated that the Death Star would cost approximately $193 Quintillion (U.S. 2012) spread over twenty years. The estimated Gross Galactic Product per year was $4.6 sextillion (U.S. 2012) or $92 sextillion over the twenty years. When the Rebels destroy this first Death Star it would likely cause economic panic. The financial markets would drop and consumer confidence would most likely drop across the Galaxy, risking spiraling the Empire into a long term recession.  The Emperor rather than allow this to happen though utilized effective fiscal policy and choice to raise government spending, even in the face of debt, in order to raise AD and bring the economy back to equilibrium. This increase in spending was done by the decision to build the Death Star 2. An effective choice due to the war economy they were placed in that allowed them to access unlimited resources and quick startups. As well having already done the research and construction on one, this second one could be built much faster, in only five years, increasing the rate at which the expansionary policy was fed into the galactic market. The Death Star 2 was also significantly larger meaning it cost $419 quintillion (U.S. 2012). This increased spending would certainly help to stabilize the economy after the destruction of the first Death Star, but in the wake of its destruction there was no way for the New Republic to prevent a complete economic collapse.

When the Rebellion destroyed the second Death Star along with the Empire they forced the Galactic Economy to collapse. Similar to the destruction of the first Death Star markets and consumer confidence would have collapsed. On top of it this time though the ruling government would have been eradicated, meaning the debt they owed would either be defaulted on or passed on to the New Republic. The defaults are estimated to be around $512 quintillion (U.S. 2012) under a best case scenario and would like lead to bank failures across the galaxy. If there had been an Imperial version of deposit insurance it would not matter now as the Empire was gone and would have no way to pay it. The bailout that the New Republic would be required to pay to stabilize the Galactic Gross Product to avoid a catastrophic economic collapse would be 15%-20% of the GGP. These are funds that a brand new democratic government entity likely don’t have and will not be able to raise fast enough to prevent collapse. Taking on these hard economic pressure the New Republic would be scrambling to do what it could to stabilize the economy while still establishing itself as the new government. It would not have the resources or capabilities to hunt down the remaining Imperial holdouts. As well, these dire economic conditions would create a perfect environment for such holdouts to establish there own anti-Republic movements that would eventually culminate in the First Order, similar to the rise of the Nazi party in Germany after World War I. So while the Battle on Endor was a military victory for the Rebellion, for the galaxy it was a guarantee of years of economic hardship and more war to come.

 

Taking on the economics of Star Wars: Destroying the Death Star would trigger a huge financial crisis

http://theweek.com/articles/559143/economics-professor-explains-how-empire-built-death-star

http://www.investopedia.com/articles/investing/120815/star-wars-economics-galactic-empire.asp

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