[This piece first appeared in the Hillsdale Collegian (3.31.2016)]
Corporate welfare is alive and well, even here in Hillsdale.
The Michigan Economic Development Corporation is the institution responsible for organizing and directing corporate welfare in the state of Michigan. According to their website, the MEDC offers “business assistance services and capital programs for business attraction and acceleration.” In practice, this amounts to allocating tax dollars as direct subsidies to businesses, often coupled with special tax breaks.
The MEDC recently funded two projects in Hillsdale. The first was an $82,865 subsidy to Mar-Vo Mineral Company to purchase the old FW Stock and Sons Mill (“Mar-Vo moves in, ‘breathes life’ into abandoned mill,” September 17, 2015). The second was the heftier $785,000 “community development block grant” for the purposes of renovating an old factory into apartments (“Former fur factory fitted for flats,” March 17, 2016).
Proponents trotted out familiar arguments to justify the taxpayer subsidy of private enterprise, noting that the projects would revitalize downtown Hillsdale, as well as create jobs and housing. While these are certainly benefits, the arguments ignore the costs. For one, similar arguments are made across the state to justify corporate welfare, resulting in almost $600 million doled out in “grants, programs, and projects” in 2015.
Organizations like the MEDC are an affront to the free market, and little more than a vehicle for crony capitalism. Unlike a private investor, the MEDC can only get funds through taxation. So taxpayers from across the state of Michigan, from Houghton to Detroit, are obligated to subsidize businesses to the tune of hundreds of millions of dollars a year. Despite the gross injustice of being forced to subsidize projects that most receive no benefits from, corporate welfare persists. Why?
The answer is simple. Businesses and private individuals realize that, rather than trying to succeed or fail in the market, it is easier to get help from the state. Under the guise of “economic development,” or “jobs,” or “revitalization,” they can earn subsidies from the MEDC, and stick Michigan taxpayers with the bill. The benefits are concentrated to businesses and politically-connected individuals, while the costs are dispersed over millions of Michiganders.
Frederic Bastiat, a 19th-century French political economist, noted that economics involves looking at the seen and the unseen. In terms of corporate welfare, the seen effects are the projects they fund. New apartment buildings, bustling factories, and so on. The unseen is more complicated.
Think of what $600 million could have done in the hands of Michigan residents, rather than in the hands of government bureaucrats funneling the money to special interests. Private individuals, working in the free market, fund projects they think will be profitable, and decline those which seem likely to fail. In this system, businesses only profit by providing what the consumers want, and not by lobbying the government for subsidy. All of these potential opportunities are necessarily unseen, because they never came to be. Instead, taxpayers are stuck with a bill of almost a million dollars to build apartments in a small, out-of-the-way city in southern Michigan.
Students of Hillsdale College, an institution that stands for defending liberty, should oppose this great injustice. The MEDC is nothing more than dressed-up corporate welfare, existing to benefit special interests at the expense of the state as a whole, and the taxpayers that have to foot the bill.
Showing posts with label Public Choice. Show all posts
Showing posts with label Public Choice. Show all posts
Saturday, April 23, 2016
Friday, January 8, 2016
The Economics of Parks and Recreation - Swing Vote
[Heavily conceptually inspired by "The Economics of the Office"]
One such crusade, as seen in the episode "Swing Vote", is to stop the closing of the Pawnee Palms Public Putt-Putt, a government subsidized mini-golf course. Ron Swanson, ever the budget hawk, has moved to cut funding, citing his belief in "cutting useless government projects". Ron notes the course costs taxpayers $9000 a year to fund, and views it as little more than government waste.
The issue will be decided by a City Council vote the next day. A desperate Leslie tries to whip votes to "save" the course, citing how it's "good for families" and "a job creator".
Leslie's second argument, that the subsidized course is a "job creator", is one of the most persistently enduring economic fallacies. The city of Pawnee is not "creating" any jobs at all. All they are doing is transferring wealth from one group (the taxpayers) to another (those who are employed by the Public Putt-Putt). While jobs may exist as a result, these aren't "created" in the same sense that someone could create new jobs by opening a new restaurant and employing people there. Jobs of that sort wouldn't exist without providing real, economic value to the patrons of the restaurant, the employer, and so on. Government jobs, like at the Public Putt-Putt, don't face the same constraints. They shall continue to exist as long as they are funded by the government, which they often are.
One Councilman, Jeremy Jamm, holds the swing vote on the issue. Leslie, eager to get his vote, takes him golfing at the Public Putt-Putt, and plies him with copious amounts of snow cones to try to sway his favor. Leslie's actions show the way that many decisions are actually made in government, through trading favors and excessive lobbying. Ostensibly acting for the "public good", Jamm is actually making his vote based on what he personally can get out of it. Individuals still face incentives, even in government, as stated in public choice theory.
Ron Swanson, sensing that Leslie might try to influence Jamm, also arrives at the course. He consistently states the downsides of the course, namely, that "this ridiculous play palace costs the taxpayers thousands of dollars a year". Leslie responds by again noting that "everyone loves it". Some people may in fact enjoy the Public Putt-Putt (at the government subsidized pricing), but all taxpayers might not. Ron is defending those taxpayers (likely including himself) that do not enjoy Putt-Putt, and are yet forced to pay for it through their tax dollars.
Eventually, Jamm is swayed to Ron's side (after Ron beats Leslie in a game of mini-golf). An angry Leslie confronts Ron the next morning, who cites his principles as the reason for his opposition. Jamm later meets Leslie in her office, brazenly offering to switch his vote for the right offer. Leslie seems sickened by his political graft, but Jamm notes that this system of trading favors for political support "is just how people like us [politicians] operate".
Leslie, apparently drawing a line in the sand, refuses to make a deal, and Putt-Putt is defunded. However, she later notes a plan to authorize funding through a ballot proposal, which she believes will pass. Putt-Putt's passing is a classic example of concentrated benefits, dispersed costs. Those who stand to benefit (former employees of the Public Putt-Putt, former patrons) will eagerly vote for its authorization. The apathetic (or indifferent) taxpayers who don't support Putt-Putt will likely not find it worth their time to go vote to save a few cents on taxes per year.
This process is repeated over and over, for all kinds of government projects, and eventually those few cents add up. That is why there is consistent government growth. That is why so many boondoggles, like a publicly subsidized mini-golf course, exist. When economic decision-making is politicized, this is the end result.
Parks and Recreation, a mockumentary style comedy in the vein of The Office, explores the lives of employees at the Parks and Recreation department in the fictional Indiana city of Pawnee. One of the main sources of conflict in the show is between the Director of Parks and Rec, the grizzled anti-government Ron Swanson, and the Deputy Director, the cheery (and pro-government) Leslie Knope. Eventually, Leslie is elected to City Council, and starts a crusade for more and more government involvement in the lives of the citizens of Pawnee.
One such crusade, as seen in the episode "Swing Vote", is to stop the closing of the Pawnee Palms Public Putt-Putt, a government subsidized mini-golf course. Ron Swanson, ever the budget hawk, has moved to cut funding, citing his belief in "cutting useless government projects". Ron notes the course costs taxpayers $9000 a year to fund, and views it as little more than government waste.
The issue will be decided by a City Council vote the next day. A desperate Leslie tries to whip votes to "save" the course, citing how it's "good for families" and "a job creator".
Leslie's second argument, that the subsidized course is a "job creator", is one of the most persistently enduring economic fallacies. The city of Pawnee is not "creating" any jobs at all. All they are doing is transferring wealth from one group (the taxpayers) to another (those who are employed by the Public Putt-Putt). While jobs may exist as a result, these aren't "created" in the same sense that someone could create new jobs by opening a new restaurant and employing people there. Jobs of that sort wouldn't exist without providing real, economic value to the patrons of the restaurant, the employer, and so on. Government jobs, like at the Public Putt-Putt, don't face the same constraints. They shall continue to exist as long as they are funded by the government, which they often are.
One Councilman, Jeremy Jamm, holds the swing vote on the issue. Leslie, eager to get his vote, takes him golfing at the Public Putt-Putt, and plies him with copious amounts of snow cones to try to sway his favor. Leslie's actions show the way that many decisions are actually made in government, through trading favors and excessive lobbying. Ostensibly acting for the "public good", Jamm is actually making his vote based on what he personally can get out of it. Individuals still face incentives, even in government, as stated in public choice theory.
Ron Swanson, sensing that Leslie might try to influence Jamm, also arrives at the course. He consistently states the downsides of the course, namely, that "this ridiculous play palace costs the taxpayers thousands of dollars a year". Leslie responds by again noting that "everyone loves it". Some people may in fact enjoy the Public Putt-Putt (at the government subsidized pricing), but all taxpayers might not. Ron is defending those taxpayers (likely including himself) that do not enjoy Putt-Putt, and are yet forced to pay for it through their tax dollars.
Eventually, Jamm is swayed to Ron's side (after Ron beats Leslie in a game of mini-golf). An angry Leslie confronts Ron the next morning, who cites his principles as the reason for his opposition. Jamm later meets Leslie in her office, brazenly offering to switch his vote for the right offer. Leslie seems sickened by his political graft, but Jamm notes that this system of trading favors for political support "is just how people like us [politicians] operate".
Leslie, apparently drawing a line in the sand, refuses to make a deal, and Putt-Putt is defunded. However, she later notes a plan to authorize funding through a ballot proposal, which she believes will pass. Putt-Putt's passing is a classic example of concentrated benefits, dispersed costs. Those who stand to benefit (former employees of the Public Putt-Putt, former patrons) will eagerly vote for its authorization. The apathetic (or indifferent) taxpayers who don't support Putt-Putt will likely not find it worth their time to go vote to save a few cents on taxes per year.
This process is repeated over and over, for all kinds of government projects, and eventually those few cents add up. That is why there is consistent government growth. That is why so many boondoggles, like a publicly subsidized mini-golf course, exist. When economic decision-making is politicized, this is the end result.
Monday, January 4, 2016
The Economics of Politics in Star Wars - Revenge of the Sith
In the concluding film of the prequel trilogy, Revenge of the Sith, Palpatine's ambitions are finally realized. Three years after the events of Attack of the Clones, and thirteen years after he manipulated his way to the Chancellorship in The Phantom Menace, Palpatine remains in power. As the film opens, the Jedi (and the Republic at large) are still unaware of his sinister plans as the puppetmaster behind both sides of a galactic war, the so called "Clone Wars".
The film opens with Palpatine engineering his own kidnapping by the Separatists. Interestingly, he is held on board a flagship dubbed Invisible Hand. In economics, the "invisible hand" of course refers to the famous use of the phrase by Adam Smith. According to Smith, individuals acting in their own self interest unconsciously promoted some social good, as if their actions were guided by an "invisible hand". Broadly speaking, Smith showed that individuals acting in a free market, pursuing their own self-interest, were able to unconsciously build a better and more prosperous society for all. As Adam Ferguson famously put it, the economy (and other societal institutions) developed "the result of human action, but not the execution of any human design".
Palpatine is "rescued" by Anakin Skywalker and Obi-Wan Kenobi, with the former killing Count Dooku in the process, and crash-land the Invisible Hand into the planet below. It is fitting that the movie which shows the culmination of Palpatine's plot for the concentration of power into the state, and away from free individuals, also shows the collapse and destruction of the Invisible Hand. Palpatine is no friend to free enterprise, as will be demonstrated in his yet-unrealized role as Emperor.
In fact, the Separatist Movement is largely built on the idea of self-governance, and a rejection of the excessive taxation and control of the Galactic Republic. Though the movement was doomed at the start (as Palpatine never intended for their victory), the Separatists represent a last-stand against more and more centralized power.
Later, once the Jedi realize that Palpatine is Darth Sidious, a Sith Lord and mastermind behind the Clone Wars, they attempt to arrest him. Mace Windu, leader of the arrest, later dubs Palpatine "too dangerous to be left alive", as he controls the Galactic Senate and the court system. In other words, Palpatine has so effectively centralized power that he cannot be stopped within the political system, as is often true of tyrants and dictators. The only move left is extra-legal force.
Fortunately for Palpatine, Anakin abruptly switches his allegiance from Jedi to Sith, and saves Palpatine from the attack. He does so because Palpatine, throughout the film, has been hinting at the Sith ability to stop death. Anakin fears the death of his wife, Padme (who remains a Senator) in childbirth, due to visions he's been having.
So, he joins Palpatine, citing the great "power" that he can gain from doing so. Though the emphasis in the film is on the power of the force, Palpatine's soon to be formed Empire will also hold a tremendous amount of political and coercive power as well, and Anakin would receive a portion.
Newly dubbed "Darth Vader", Anakin proceeds to slaughter the Jedi, and later, the Separatist Leaders. Meanwhile, in a session of the Senate, Palpatine claims the Jedi were attempting a coup. Using the alleged attack as justification for assuming even greater power, Palpatine declares the Republic over, and the Empire begun.
"In order to ensure our security and continuing stability, the Republic will be reorganized into the first Galactic Empire, for a safe and secure society which I assure you will last for ten thousand years."
Notice that Palpatine justifies the transition as all tyrants do, for "security and stability". Many are willing to sacrifice freedom in exchange for safety, especially in the face of a crisis. All of the plot of the prequel trilogy has led to this. A galactic war, the creation of massive armies, and an elaborate conspiracy to end the Jedi Order, all for the sake of complete political domination of the galaxy.
Padme, sitting in session, notes that "...this is how liberty dies. With thunderous applause." Though some Senators, who would later go on to form the Alliance to Restore the Republic, oppose the move, most of the Senate accepts it without hesitation. She later comments on the decay in the Republic that led to Palpatine's rise to power.
"What if the democracy we thought we were serving no longer exists, and the Republic has become the very evil we have been fighting to destroy?"
While the political maneuvering of the newly crowned Emperor was necessary to end the Republic, the system had become politically corrupted long before. The Senate was not truly a place of "democracy", but narrow-minded Senators pursuing their own self interest, rather than a common good. This was not a problem solely with the quality of Senators, but with the political incentive structure set in place. This flaw is hardly exclusive to the fictional Galactic Republic.
Political corruption and decay leads to inefficiency in government action and a growth of bureaucracy (as seen in The Phantom Menace). The growing dissatisfaction with the status quo leads to appeals for a strong leader who can "get things done". The process is helped with some crisis or another, usually a war (such as the Clone Wars), which concentrates power more and more into a charismatic leader. Eventually, the trappings of democracy (or political process) are abandoned, and a new Empire stands.
The fall of the Republic, as seen in Star Wars, beautifully captures similar situations in reality. The fall of republic and the rise of empire under the political influence of a strongman can be seen in all of human history, from Caesar's Rome to Hitler's Third Reich. For all the faults of this part of the Star Wars saga, the strength of the political plot shines through.
(Analysis continued for A New Hope HERE.)
The film opens with Palpatine engineering his own kidnapping by the Separatists. Interestingly, he is held on board a flagship dubbed Invisible Hand. In economics, the "invisible hand" of course refers to the famous use of the phrase by Adam Smith. According to Smith, individuals acting in their own self interest unconsciously promoted some social good, as if their actions were guided by an "invisible hand". Broadly speaking, Smith showed that individuals acting in a free market, pursuing their own self-interest, were able to unconsciously build a better and more prosperous society for all. As Adam Ferguson famously put it, the economy (and other societal institutions) developed "the result of human action, but not the execution of any human design".
Palpatine is "rescued" by Anakin Skywalker and Obi-Wan Kenobi, with the former killing Count Dooku in the process, and crash-land the Invisible Hand into the planet below. It is fitting that the movie which shows the culmination of Palpatine's plot for the concentration of power into the state, and away from free individuals, also shows the collapse and destruction of the Invisible Hand. Palpatine is no friend to free enterprise, as will be demonstrated in his yet-unrealized role as Emperor.
In fact, the Separatist Movement is largely built on the idea of self-governance, and a rejection of the excessive taxation and control of the Galactic Republic. Though the movement was doomed at the start (as Palpatine never intended for their victory), the Separatists represent a last-stand against more and more centralized power.
Later, once the Jedi realize that Palpatine is Darth Sidious, a Sith Lord and mastermind behind the Clone Wars, they attempt to arrest him. Mace Windu, leader of the arrest, later dubs Palpatine "too dangerous to be left alive", as he controls the Galactic Senate and the court system. In other words, Palpatine has so effectively centralized power that he cannot be stopped within the political system, as is often true of tyrants and dictators. The only move left is extra-legal force.
Fortunately for Palpatine, Anakin abruptly switches his allegiance from Jedi to Sith, and saves Palpatine from the attack. He does so because Palpatine, throughout the film, has been hinting at the Sith ability to stop death. Anakin fears the death of his wife, Padme (who remains a Senator) in childbirth, due to visions he's been having.
So, he joins Palpatine, citing the great "power" that he can gain from doing so. Though the emphasis in the film is on the power of the force, Palpatine's soon to be formed Empire will also hold a tremendous amount of political and coercive power as well, and Anakin would receive a portion.
Newly dubbed "Darth Vader", Anakin proceeds to slaughter the Jedi, and later, the Separatist Leaders. Meanwhile, in a session of the Senate, Palpatine claims the Jedi were attempting a coup. Using the alleged attack as justification for assuming even greater power, Palpatine declares the Republic over, and the Empire begun.
"In order to ensure our security and continuing stability, the Republic will be reorganized into the first Galactic Empire, for a safe and secure society which I assure you will last for ten thousand years."
Notice that Palpatine justifies the transition as all tyrants do, for "security and stability". Many are willing to sacrifice freedom in exchange for safety, especially in the face of a crisis. All of the plot of the prequel trilogy has led to this. A galactic war, the creation of massive armies, and an elaborate conspiracy to end the Jedi Order, all for the sake of complete political domination of the galaxy.
"What if the democracy we thought we were serving no longer exists, and the Republic has become the very evil we have been fighting to destroy?"
While the political maneuvering of the newly crowned Emperor was necessary to end the Republic, the system had become politically corrupted long before. The Senate was not truly a place of "democracy", but narrow-minded Senators pursuing their own self interest, rather than a common good. This was not a problem solely with the quality of Senators, but with the political incentive structure set in place. This flaw is hardly exclusive to the fictional Galactic Republic.
Political corruption and decay leads to inefficiency in government action and a growth of bureaucracy (as seen in The Phantom Menace). The growing dissatisfaction with the status quo leads to appeals for a strong leader who can "get things done". The process is helped with some crisis or another, usually a war (such as the Clone Wars), which concentrates power more and more into a charismatic leader. Eventually, the trappings of democracy (or political process) are abandoned, and a new Empire stands.
The fall of the Republic, as seen in Star Wars, beautifully captures similar situations in reality. The fall of republic and the rise of empire under the political influence of a strongman can be seen in all of human history, from Caesar's Rome to Hitler's Third Reich. For all the faults of this part of the Star Wars saga, the strength of the political plot shines through.
(Analysis continued for A New Hope HERE.)
Sunday, January 3, 2016
The Economics of Politics in Star Wars - Attack of the Clones
In the second film of the prequel trilogy, Attack of the Clones, Palpatine's plot to manipulate the Galactic Senate and amass power continues. Though the inception of the coming civil war was seen in The Phantom Menace, it begins fully here.
"It's been my experience that Senators are only focused on pleasing those who fund their campaigns...and they are more than willing to forget the niceties of democracy to get those funds".
The Secessionist Movement, a confederation of dissatisfied star systems (and other organizations like including the Trade Federation), declares independence from the Republic. Nominally led by Count Dooku (who is in fact in league with Palpatine), they have begun preparing a droid army. In response, the Galactic Senate is set to vote on the creation of their own army, The Grand Army of the Republic.
The former Queen of Naboo Padme Amidala, turned Senator, plans to oppose the bill. She has also fallen under the threat of assassination, leaving Obi-Wan Kenobi and his young apprentice Anakin Skywalker to guard her. Anakin, smitten by the Senator, is cautioned by Obi-Wan from proceeding, as politicians are "not to be trusted".
The former Queen of Naboo Padme Amidala, turned Senator, plans to oppose the bill. She has also fallen under the threat of assassination, leaving Obi-Wan Kenobi and his young apprentice Anakin Skywalker to guard her. Anakin, smitten by the Senator, is cautioned by Obi-Wan from proceeding, as politicians are "not to be trusted".
Anakin stubbornly defends Padme, claiming that she's "not like the others in the Senate". His arguments echo those who decry the corruption in politics in general, but insist that their chosen partisan is "one of the good ones".
The wiser, and perhaps more cynical, Obi-Wan responds with a quip that could easily be taken straight out of a public choice lecture.
The wiser, and perhaps more cynical, Obi-Wan responds with a quip that could easily be taken straight out of a public choice lecture.
"It's been my experience that Senators are only focused on pleasing those who fund their campaigns...and they are more than willing to forget the niceties of democracy to get those funds".
Throughout the prequel trilogy, characters often pay lip service to "democracy", ostensibly enshrined in the Galactic Senate. However, Obi-Wan recognizes the incentives the Senators face. In order to get elected to the galactic government, a prospective Senator needs money. In order to stay in office, they need to please their backers, otherwise the money will flow to a more pliable puppet. So, in practice, the Galactic Senate is a hotbed of corruption, special interest maneuvering, and political waste.
In response, an exasperated Anakin whines "Not another lecture, Master...not on the economics of politics." The dialogue then transitions to the dominant political figure of the day, a man much admired by Anakin, Chancellor Palpatine. Anakin remarks that the Chancellor "doesn't appear to be corrupt". This further demonstrates the ability of politicians with sufficient emotional appeal and charisma to remain part of a broken system and yet seem "better" than the system itself. This is also why the system remains in place, because most voters associate one party (or at least a few chosen politicians) with a perceived purity. He goes on to note the Chancellor is "a good man" according to his own "instincts".
In response, an exasperated Anakin whines "Not another lecture, Master...not on the economics of politics." The dialogue then transitions to the dominant political figure of the day, a man much admired by Anakin, Chancellor Palpatine. Anakin remarks that the Chancellor "doesn't appear to be corrupt". This further demonstrates the ability of politicians with sufficient emotional appeal and charisma to remain part of a broken system and yet seem "better" than the system itself. This is also why the system remains in place, because most voters associate one party (or at least a few chosen politicians) with a perceived purity. He goes on to note the Chancellor is "a good man" according to his own "instincts".
Obi-Wan, ever the cynical observer, fires back.
"Palpatine's a politician. I've observed that he is very clever at following the passions and prejudices of the Senators..."
"Palpatine's a politician. I've observed that he is very clever at following the passions and prejudices of the Senators..."
Here is one of the few direct references to Palpatine's political genius. First, he manipulates some given situation (be it the Naboo Crisis or the entire Separatist Conflict) in order that he may incite some specific passion in the Senators. Then, he can ride the wave of popular sentiment to get what he wants, in this case, power. Through this, he has managed to maintain the Chancellorship past the term limits, having been granted an extended administration to guide the Republic through the Separatist Crisis. That he engineered.
[It should be noted that all of this dialogue takes place during an attempted assassination of Padme, and is not at all the focus of the scene.]
Finally, towards the end of the movie, Palpatine is granted further emergency powers, using the same tricks he used ten years earlier to get elected Chancellor. He feigns reluctance as he accepts the office. "It is with great reluctance that I have agreed to this calling. I love democracy. I love the Republic. Once this crisis has abated, I will lay down the powers you have given me!"
[It should be noted that all of this dialogue takes place during an attempted assassination of Padme, and is not at all the focus of the scene.]
Finally, towards the end of the movie, Palpatine is granted further emergency powers, using the same tricks he used ten years earlier to get elected Chancellor. He feigns reluctance as he accepts the office. "It is with great reluctance that I have agreed to this calling. I love democracy. I love the Republic. Once this crisis has abated, I will lay down the powers you have given me!"
Like all who are granted great powers in the face of crisis, Palpatine promises to lay them down as soon as the crisis ends. Immediately after this, Palpatine authorizes the creation of the Grand Army of the Republic. Turns out, he didn't need the Senate after all. Not anymore, at least.
Attack of the Clones is arguably the weakest film of the prequel trilogy, at least, in terms of what the moviegoers tend to focus on. The battle scenes are weak, the romantic sub-plot between Anakin and Padme is laughably bad, and most characters continue to act irrationally for the sake of advancing the plot. That said, the underlying story thread of political manipulation, including a lecture from Obi-Wan Kenobi on "the economics of politics" is perhaps richer here than in any other film in the trilogy.
(Analysis continued for Revenge of the Sith HERE.)
Attack of the Clones is arguably the weakest film of the prequel trilogy, at least, in terms of what the moviegoers tend to focus on. The battle scenes are weak, the romantic sub-plot between Anakin and Padme is laughably bad, and most characters continue to act irrationally for the sake of advancing the plot. That said, the underlying story thread of political manipulation, including a lecture from Obi-Wan Kenobi on "the economics of politics" is perhaps richer here than in any other film in the trilogy.
(Analysis continued for Revenge of the Sith HERE.)
Saturday, January 2, 2016
The Economics of Politics in Star Wars - The Phantom Menace
The infamous Star Wars prequel trilogy (Episodes I, II, and III) is widely panned for bad writing, weak characters, and weaker dialogue. Brief moments of glory, including (at-the-time) cutting-edge special effects and improved lightsaber fight choreography do little to distract from the glaring flaws.
One aspect of the trilogy, however, presents an interesting insight into the economic analysis of politics and institutions. Many mocked The Phantom Menace for focusing on the mundane topics taxation and trade routes, while getting mired down in the muddled bureaucracy of the Galactic Senate.
To disregard the political intrigue inherent in the prequels because they lack action and flash is to ignore the dominant story thread of the trilogy. Every aspect of the three movies, from the Naboo Crisis to the Clone Wars, serves to further the goals of future Emperor through political means.
Senator Sheev Palpatine (also known as Darth Sidious and, later, the Emperor), drives the plot of movies forward through political maneuvering. Though the process is gradual, Palpatine manages to control both sides of a civil war and overthrow the government of the Republic, forming a Galactic Empire with him at its head.
In Episode I: The Phantom Menace, the plot revolves around the Naboo Crisis. The Trade Federation, a megacorporation and commerce guild, blockades the planet of Naboo in response to the Republic's taxation of trade routes previously marked as Free Trade Zones. It should be noted that the Trade Federation was under the influence of Palpatine, though cloaked in his role of Darth Sidious. Following the blockade, the Trade Federation invades Naboo. In other words, a trade war led to military conflict. French economist Frédéric Bastiat is alleged to have said:
"When goods don’t cross borders, Soldiers will."
Palpatine was also the Senator representing Naboo in the Galactic Senate. By engineering a political crisis on his home planet, Palpatine planned to thrust himself into the political spotlight, taking advantage of the crisis to grow his power.
The ruler of Naboo, Queen Amidala, escapes the blockade and eventually makes her way to the Galactic Senate, to plea for assistance against the invasion. She is blocked at every turn, with the corrupt Senate bureaucracy moving too slowly to act, and many Senators denying an invasion ever took place.
The current Chancellor, an unremarkable figurehead, is deposed by a vote of no-confidence. Palpatine, as the Senator from Naboo, is widely seen as the logical replacement to fill the seat, and is elected by a wide margin.
Here, one can see one of the biggest lessons in political incentives, as widely taught by economists and political theorists. Crisis, political or otherwise, tends to guide support towards strong-men who promise action and strength. Palpatine engineered the Naboo Crisis, and positioned himself to take advantage of it.
In The Phantom Menace, one can see crucial economic lessons play out. The folly of oppressive taxation and opposing free trade is apparent, as this led directly to a military conflict. In addition, the incentives of collective decision making, where the government grows and centralizes in the face of crisis, is used by Palpatine to further his rise to Chancellor.
While much of The Phantom Menace focuses on mindless action, irrational characters, and something about Jedi, the backdrop of political intrigue and corruption shows a depth and complexity seen nowhere else in the prequel trilogy.
(Analysis continued for Attack of the Clones HERE.)
One aspect of the trilogy, however, presents an interesting insight into the economic analysis of politics and institutions. Many mocked The Phantom Menace for focusing on the mundane topics taxation and trade routes, while getting mired down in the muddled bureaucracy of the Galactic Senate.
To disregard the political intrigue inherent in the prequels because they lack action and flash is to ignore the dominant story thread of the trilogy. Every aspect of the three movies, from the Naboo Crisis to the Clone Wars, serves to further the goals of future Emperor through political means.
Senator Sheev Palpatine (also known as Darth Sidious and, later, the Emperor), drives the plot of movies forward through political maneuvering. Though the process is gradual, Palpatine manages to control both sides of a civil war and overthrow the government of the Republic, forming a Galactic Empire with him at its head.
In Episode I: The Phantom Menace, the plot revolves around the Naboo Crisis. The Trade Federation, a megacorporation and commerce guild, blockades the planet of Naboo in response to the Republic's taxation of trade routes previously marked as Free Trade Zones. It should be noted that the Trade Federation was under the influence of Palpatine, though cloaked in his role of Darth Sidious. Following the blockade, the Trade Federation invades Naboo. In other words, a trade war led to military conflict. French economist Frédéric Bastiat is alleged to have said:
"When goods don’t cross borders, Soldiers will."
Palpatine was also the Senator representing Naboo in the Galactic Senate. By engineering a political crisis on his home planet, Palpatine planned to thrust himself into the political spotlight, taking advantage of the crisis to grow his power.
The ruler of Naboo, Queen Amidala, escapes the blockade and eventually makes her way to the Galactic Senate, to plea for assistance against the invasion. She is blocked at every turn, with the corrupt Senate bureaucracy moving too slowly to act, and many Senators denying an invasion ever took place.
The current Chancellor, an unremarkable figurehead, is deposed by a vote of no-confidence. Palpatine, as the Senator from Naboo, is widely seen as the logical replacement to fill the seat, and is elected by a wide margin.
Here, one can see one of the biggest lessons in political incentives, as widely taught by economists and political theorists. Crisis, political or otherwise, tends to guide support towards strong-men who promise action and strength. Palpatine engineered the Naboo Crisis, and positioned himself to take advantage of it.
In The Phantom Menace, one can see crucial economic lessons play out. The folly of oppressive taxation and opposing free trade is apparent, as this led directly to a military conflict. In addition, the incentives of collective decision making, where the government grows and centralizes in the face of crisis, is used by Palpatine to further his rise to Chancellor.
While much of The Phantom Menace focuses on mindless action, irrational characters, and something about Jedi, the backdrop of political intrigue and corruption shows a depth and complexity seen nowhere else in the prequel trilogy.
(Analysis continued for Attack of the Clones HERE.)
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