STAR WARS and the Austrian School: Trade Routes (Part 1)

Originally published by Young Americans For Liberty

Part I: The Great Hyperspace War

For 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-annhilation 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.