The Economics of Politics in Star Wars - Return of the Jedi

The final film of the original trilogy, Return of the Jedi, concludes in the downfall of Emperor Palpatine. Until now, the entire Star Wars saga detailed Palpatine's rise to power, from political manipulation to engineering a galactic war, and his gradual expansion of that power through military might.

After spending forty years tightening his grip over thousands of systems across an entire galaxy, Palpatine faces the threat of defeat from the increasingly powerful Rebel Alliance.

Desperate to keep a firm grip on any wavering planets, Palpatine orders the construction of a second Death Star, more powerful than the first. The Rebel Alliance plans to strike a shield generator on the forest moon of Endor, in order to weaken the defenses of the Death Star enough to attack the core. Though the strike team (led by Leia and Han) is ultimately successful, the Alliance is forced into a pitched battle above Endor.

Rebel intelligence suggested the second Death Star was lightly guarded  and inoperative, both leis deliberately planted by Imperial intelligence officers. Here, one can again the importance of the control of information in maintaining control of empire.

During the battle, Luke Skywalker fights against Darth Vader (his father, the former Anakin Skywalker) on board the Death Star. Palpatine, hoping to repeat the downfall of Anakin as seen in Revenge of the Sith, tries to sway Luke with promises of ultimate power. When he refuses the give in, the Emperor moves to kill him. Darth Vader, when faced with the chance to save his son or let him die, opts to betray the Emperor and throw him deep into core of the Death Star.

Though the Imperial military would survive for another year (before their defeat at the Battle of Jakku), the apparatus of empire has been permanently damaged. The logical successor to the Emperor, his apprentice Darth Vader, was his killer, and soon dies from injuries regardless. Part of the trouble of concentrating supreme power into one individual (or one office) is the chaos that can result on the death of that person. The Empire post-Palpatine was the collapse of his bureaucratic system of government. With no clear strongman holding the disparate Empire together, it began to fracture, and fall apart.

Ultimately, the Emperor failed due to his own hubris. Upon hearing that Anakin Skywalker was the alleged Chosen One who would bring balance to the Force, Palpatine set about grooming the young and powerful Jedi for his eventual fall to the dark side, if only to spite the Jedi Order by corrupting the supposed Chosen One. Vader's eventual rejection of Palpatine, and the dark side, led directly to Palpatine's downfall, fulfilling his alleged prophecy.

All that said, the Rebel Alliance was still successful in their attack on the Death Star. For all of Palpatine's political genius, he was unable to detect the hints of Rebellion already stirring in the first days of Empire. The courageous few Senators dedicated to restoring the Republic, including Bail Organa, Mon Mothma, and Garm Bel Iblis, secretly funded and began the Rebel Alliance, all while publicly supporting Empire.

Palpatine was always convinced of his ultimate power, especially after the fall of the Republic. Though he had indeed amassed massive control over the galaxy, he was unable to fully control everything. The Rebellion grew in the shadows, remnants of the Jedi Order (like Obi-Wan Kenobi) survived in seclusion, and his death came at the hands of his most trusted subordinate. Empire cannot last in perpetuity, and the power of any individual can never be ultimate.

The Economics of Politics in Star Wars - The Empire Strikes Back

The Empire Strikes Back, chronologically the fifth Star Wars film, entails the Imperial counterattack against the Rebel Alliance, following the destruction of the Death Star in A New Hope. Though the crown jewel of the Emperor's military complex is gone, most of the massive armada remains. The Rebellion has fled to the far reaches of the galaxy, on the ice planet Hoth, to avoid the grasp of Empire.

Darth Vader, desperate to find the Rebels, orders thousands of probe droids sent throughout the galaxy. When an empire has reached a critical mass of military buildup, the next logical step is surveillance. In order for The Emperor's ultimate quest, absolute power, to be attained, he must necessarily control the information of the galaxy and monitor the activities of its citizens.

Though this may be the first use of these droids, and they're used solely for rooting out "enemies of the Empire", it's not a stretch to assume that the data-gathering capabilities of the probe droids may be used on peaceful citizens in the future.

Thanks to the droid, the Empire discovers the Rebel base and attacks, forcing an evacuation. Han Solo and a Rebel leader, Princess Leia, escape aboard his ship the Millennium Falcon. Eluding Vader, he is forced to call in a team of bounty hunters to search for them. This move shows the limitations of the Empire, powerful as it may be. Individuals operating outside of its control, the bounty hunters, are better equipped to do the job the military can't do. They are free to innovate, to experiment, and to operate independently.

Eventually, the Falcon lands on Cloud City. Cloud City is a small gas mining colony, run by Lando Calrissian. A former smuggler, and friend of Solo, he has decided to take up a more "legitimate" entrepreneurial business, undergoing the risks of starting a new firm. By bearing the risk, Lando stands to succeed or fail based on his own effort. This is the sort of free economic activity the Empire seeks to control.

"We're a small outpost, and not very self sufficient. I've had supply problems of every kind, I've had labor difficulties..."

Lando operates outside of prohibitive Imperial supervision and regulation, allowing him to more easily innovate and turn a profit. Furthermore, he has evaded the industry's own regulator, the Mining Guild. Industrial self regulators, like the Mining Guild, seek to limit entry into a market and artificially prop up prices and restrict competition. Competition like the upstart Cloud City.


Lando: "So you see, because we're a small operation, we don't fall under the jurisdiction of the Empire."

Leia: "So, you're part of the Mining Guild then."

Lando: "No, not actually. Our operation is small enough not to be noticed. Which is advantageous for everybody, as our customers are anxious to avoid attracting attention to themselves."

Han: "Aren't you afraid the Empire's gonna find out about this little operation, shut you down?"

Lando: "It's always been a danger, but it looms like a shadow over everything we've built here...I've just made a deal that will keep the Empire out of here forever."

Lando, desperate to keep the Empire from crushing his business, betrays Han and Leia and surrenders them to Darth Vader. Knowing that he operates outside of Imperial control, the threat of Imperialization "looms like a shadow" over the operation. When the chance came along seemingly guaranteeing independence, he had no choice but to take it.

Though he eventually has a change of heart and joins the Rebellion, Lando's gambit demonstrates the prosperity and freedom that can emerge for all, if the government merely gets out of the way. The Emperor, not content controlling the government and the galaxy with a mighty military force, is intent on economic control as well.

The Empire Strikes Back is often lauded as the best of the Star Wars films. It shows an Empire yearning for complete domination of the galaxy. The beginnings of a surveillance state (justified by the threat of attack, of course) are seen, as is the threat of economic Imperialization over a thriving free enterprise.

(Analysis continued for The Return of the Jedi HERE.)

The Economics of Politics in Star Wars - A New Hope

The first Star Wars film release, A New Hope, takes place approximately nineteen years after the events of Revenge of the Sith. Luke Skywalker, the son of Anakin Skywalker aka Darth Vader, has grown up in a galaxy ruled by the iron fist of the Empire.

In a first of a series of deleted scenes, Luke watches the famous opening of A New Hope from Tatooine, as an Imperial Star Destroyer chases down and captures Tantive IV, controlled by the fledgling Alliance to Restore the Republic (also called the Rebel Alliance). The Rebel Alliance has grown since its inception, primarily through the efforts of dissatisfied Senators in the new Imperial Senate. Unable to limit the Emperor's absolute power in any official capacity, they have slowly begun gathering forces to oppose the Empire.

Later (in another deleted scene), Luke meets up with an old friend, Biggs Darklighter, who has returned from the Imperial Academy while training to be a pilot. He plans to "drop ship" as soon as possible and join the Rebellion instead. Trying to convince Luke, who hates the Empire, to join, Biggs notes the steady growth Imperial involvement in economic affairs.

"You know they're starting to nationalize commerce in the central systems...it won't be long before your uncle is merely a tenant, slaving for the greater glory of the Empire."

Luke's uncle, a small-time moisture farmer, may soon face the threat of directly working for the Empire. The nationalization of key industries, and greater government regulation and control, is a staple for budding totalitarian regimes. The Emperor had already begun nationalization (or, as it sometimes referred to, "Imperialization") immediately following his rise to power, absorbing the commercial apparatus of the former Separatists.

Emperor Palpatine recognizes the importance of economic affairs to the galaxy. In his constant quest for more and more power and control, he has begun to stifle the free economic activity of individuals throughout the galaxy, except those whom he rewards with special favors and contracts.

The Imperial Economy is a classic example of crony capitalism or cronyism, where the market allegedly functions freely, but is in fact heavily influenced and controlled by the government. In this case, the Empire might Imperialize competition, so that one politically favored firm should have an advantage.

Luke eventually does join the Rebellion, flying off Tatooine with the assistance of a famed smuggler, Han Solo. Smugglers like Solo have been on the rise in the Age of Empire, as many seek to engage in economic activity outside of the control of the Imperial bureaucracy in black markets.

In addition to economic controls, growing bureaucracy, and centralization, the new Empire has also channeled immense resources into military buildup. Most famously, as seen in A New Hope, they have constructed a superweapon capable of destroying an entire planet, the Death Star. The Death Star, and the previous military buildup, are the deliberate designs of the Emperor, hell-bent on complete control of the galaxy.

Grand Moff Tarkin, commander of the Death Star, elaborates on the Emperor's plan.

"The Imperial Senate will no longer be of any concern to us. I have just received word that the Emperor has dissolved the council permanently. The last remnants of the Old Republic have been swept away forever....The regional governors now have direct control over their territories. Fear will keep the local systems in line. Fear of this battle station."

As enough time (nineteen years) passes, even the trappings of the Old Republic are swept away. The Emperor, confident in his power, no longer keeps up the pretense of a republican government. Though written well before the prequel trilogies, the Imperial government in A New Hope fits in well with the standard pattern of totalitarian empire.

Furthermore, the Emperor plans to rule the galaxy through fear. The massive military buildup, the Death Star, the constant threat of Imperialization of commerce. All of it serves to further Palpatine's power and control. Though lauded in his early political career as a great man, one strong enough to "get things done", his creation of Galactic Empire is a perfect illustration of where "greatness" in politicians often leads. The cliche, but true, quote of Lord Acton sums it up.

"Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."

Throughout A New Hope, the dangers of nationalization and government control of an economy, along with the the military buildup and continually increasing power of a totalitarian empire, are well illustrated. Formed under the guise of peace and stability, the Empire has become an instrument of fear and destruction. As with the prequel trilogies, these issues are not necessarily the main focus of the film, but serve as a necessary backdrop in order for the action of the film to take place.

(Analysis continued for The Empire Strikes Back HERE.)

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 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.

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".

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. 

"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". 

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..."

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!"

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.)

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.)