Some comments on the economics of the series

Hello all, i've been a long time fan of the series (actually i've read most of the books that the author has written, along with many of his contemporaries in the genre such as Eric Flint etc) and i'm just wondering as to some of the economic details of the series.

I'm in foreign policy, but i've read the series since before i started my current role and its interesting to see the role that trade and economics play in the series. I can see clear distinctions that Manticore is akin to the former British Empire, whereby trade is the lifeblood of the economy and where the home country is always strapped for manpower.

But it's always bothered me something that major combatants (Manticore, Haven, Grayson etc) always seemed to have fantastic sources of capital to spend on the wars and the military.

To give a clearer description, we have;

(1) Grayson that seems to be struggling to lift itself out of what can only be described as a technologically challenged society and into a more modern age. At the beginning of the series, they struggled to defeat their arch-enemy, Masada and yet by the latest books, their economy is so developed that they've managed to produce the third largest fleet in the Grand Alliance. Does any readers want to comment on where they are possibly getting the money to fund the fleet given that they're a single system polity?

(2) Haven had been literally bankrupt for most of the series and yet seemed to be able to fund a larger fleet than Manticore. Where are they getting this money from? I think they're squeezing their own population dry for the funds (read dolists) but surely there's a limit to the amount of money that can be found in such a moribound and inefficient economy? Not to mention the vast amount of tax dodging and the vast funds internal policing takes that must be going on from the forcibly annexed planets in the Republic?

It seems that in the latest books, Haven is trying to reform its economy but at the same time further expanding its military to compete vis-a-vis Manticore...is the government literally printing money?

(3) Manticore seems to have an inexhaustible pool of reserves, which seems fantastic but it could be explained by control of the largest and probably most profitable wormhole junction in known space. The amount of taxation that can be levied on it and the associated industries probably play a part. As mentioned in the series, Manticoran merchants carry most of the trade within known space due mostly to the government's control of the Junction. (By the way wouldn't this mean that the junction is a major conduit between the core world and the "outer polities" where most trade goes to?)

The amount of wholesale destruction of fleets, infrastructure etc that goes on in the series seemed to me to be so wanton that huge sums must be needed to rebuild said infrastructure and fleets. Physical infrastructure in our current millennium is mostly the product of more a year's GDP, in fact it is more or less the sum of accumulated GDPs of the history of the nation.

So tldr; where is all the money coming from?

Extracurricular trade of any planet has to go through Manticore. Not only do they control the junctions but they have the biggest and busiest trade fleet available. No planet or business does anything without Manticore receiving royalties. Talk about royalties on steroids. Talk about cornering the trade market. Manticore is the Ma Bell of trade...no competition. They make money, Manticore makes money. They lose money, Manticore makes money. And Manticore doesn't have so many planets in which to spread that loot.

As far as Grayson, Manticore can afford Grayson all by itself. There's only the one planet.

But screw the junction and its fees. Revenues from the junction pale in comparison to the gouging Manticore does to Hauptman. Taxation and donations from Hauptman can fuel a separate system. Legal skimming off the top.

foreignpolicyhack wrote:<<SNIP>>
To give a clearer description, we have;

(1) Grayson that seems to be struggling to lift itself out of what can only be described as a technologically challenged society and into a more modern age. At the beginning of the series, they struggled to defeat their arch-enemy, Masada and yet by the latest books, their economy is so developed that they've managed to produce the third largest fleet in the Grand Alliance. Does any readers want to comment on where they are possibly getting the money to fund the fleet given that they're a single system polity?

<<SNIP>>
So tldr; where is all the money coming from?

While Grayson is not up-to-snuff technologically, there is no real evidence that it is a poor planet. After all, they did have a huge off planet infrastructure that included the orbital farms, resource extraction in the asteroid belt and some military ship construction. All using fairly inefficient technics at high costs. As the tech transfers from Manticore increased efficiency, those costs dropped dramatically.

In fact, at one point it is mentioned that Grayson could build an old style SD for 60% of what it cost Manticore. Grayson then sold those SDs to Manticore for 80% of what Manticore would have paid their own builders. So for every 3 SDs they built for Manticore, they made enough profit to build one for themselves. At the same time, wages were going up, increasing tax revenues. While the money was coming in, they were also building up their infrastructure to increase the rate the money was coming in.

With the increase in infrastructure, they began taking orders from other systems for merchant vessels and building those, too. Each ship built for an out-system customer gave the in-system economy a shot in the arm. There is no evidence that this practice did not continue between the wars.

Then there was the foundation of a new Steading with a rich Steadholder who introduced new technologies and created a whole bunch of new, high paying jobs.

All of these, plus all the other new jobs and opportunities were continuously raising the tax base.

Keep in mind that the single system polities of the "Old" SKM and Grayson had populations of about three to five billion people.

This is about 50 to 100 times the population of UK, Germany or Japan.

IIRC, the US currently has a GDP of about $14 trillion (smaller than the national debt and shrinking, again) or about $50,000 per capita.

Now extrapolate this to a system population of say four billion.

You get a GSP of about $200 Trillion.

Assume military spending of about 20% of GDP and you get $40 Trillion.

Assuming that SD(P)s cost say $10 Billion plus another $10 Billion for initial missile and pod load out or $20 Billion each.

The RMN has the budget to theoretically build 2,000 SDPs per year!

Now think about the foreign exchange that the SKM gets from the HWJ and trade.

In earlier threads it was speculated that about 10% of the GDPs of the human race's thousands of settled planets with an aggregate population of two trillion people is in trade.

Assume that the average GSP per capita is only $20,000.

2eex12 people x $2eex4 per person equals $4ee16 or 40,000 Trillion dollars.

If ten per cent of this GDP is trade then galactic trade is $4,000 Trillion.

Much of this trade travels through the MWJ. If Manticore extorts, (excuse me, "charges a reasonable fee" of only 1%, then hard currency $40 Trillion per year.

Grayson had been poor only because their limited technology base limited productivity per person, their acute environmental problems inflated the cost of survival, and their social system limited the workforce participation rate of 3/4 of the adult population.

Technological assistance from the SKM (remember those freighters that Honor Harrington was escorting in HotQ?) drastically improved Grayson's technology base and productivity. The social reforms also increase the workforce participation rate of women. Keep in mind that the workforce participation rate of Grayson women was actually quite high but their effective productivity was limited by sexist customs. They went from may be $5,000 per capita to $10,000
per capita. Technological and medical assistance from the SKM decreased the percentage of GDP devoted to basic survival (orbital farms) so the effective surplus GDP that might be spent on the military increased by perhaps 90%.

Haven is backward but Haven is huge. Total population might be 40 billion. Even if the GDP per capita is only 1/4 of Manticore, the economy is huge.

In fact, at one point it is mentioned that Grayson could build an old style SD for 60% of what it cost Manticore. Grayson then sold those SDs to Manticore for 80% of what Manticore would have paid their own builders.

That was actually for civilian ships, although the RMN did show a 15% savings in military components (not ships) they bought from Grayson.

Some useful infodumps for the OP:

http://infodump.thefifthimperium.com/en ... gton/294/1
http://infodump.thefifthimperium.com/en ... gton/234/1
http://infodump.thefifthimperium.com/en ... ngton/65/1

Money has been a non-issue since the invention of the printing press.

The only significant issue is limitations on the industrial capacity and the manpower supplies. Given automation, the latter is likely not a major issue.

phillies wrote:Money has been a non-issue since the invention of the printing press.

The only significant issue is limitations on the industrial capacity and the manpower supplies. Given automation, the latter is likely not a major issue.

"The printing press" can be abused to inflate the portion of the GDP that can be spent by government without raising tax revenue. However; unless an economy is constrainedly a shortage of currency (as can happen when precious metals are the currency) simply printing more money can not increase the size of the economy that produces the goods and services that the government wishes to buy. As the Spainish learned when they conquered the New World, a surplus of Gold simply drove up prices.

Yeah, increasing the monetary reserve is a balance sheet trick. What the Fed does is loan money, generating extra dollars by also generating a negative balance on the accounts. This can help when the problem is liquidity (nobody is lending money), as in 1930 and 2007. It's also how we've kept inflation down the last 30 years...growing the money supply at the same rate as the overall economy, or close to it.

When they talk about the fed setting interest rates lower, they're talking about this balance sheet (the rate has been zero the last few years, which is a problem with only using monetary controls...it has a floor). Stagflation was broken in the 70s primarily by raising the interest rate on the money supply, which had ripple effects elsewhere...it's easier when the problem can be solved by increasing the rate than decreasing it.

If you don't grow the money supply at the same rate as the economy, all sorts of secondary effects occur. The reason nobody's on the gold standard anymore is that the supply of gold can't be tuned to the economy (a problem that was no big deal when the economy only had a growth rate of .2%, as it was through most of recorded history prior to the 18th century although as noted something like the New World gold and silver mines which affect supply of the "standard" tossed a monkey wrench into that idea)

In any event, I'd say the demonstrated Manticoran merchant marine is sufficient excuse for how they have an economy big enough to also support a large military machine. As opposed to Haven, which is one of the biggest multistar systems in the galaxy, and manages with sheer population what Manticore does with its trading empire, fees and whatnot.

I suspect though that the rest of the answer is that Manticore and Haven just borrowed money, as every major power has done in an "existential threat" war throughout history. War Bonds. Once the situation with the Sollies ends, there might be a strong temptation to juice inflation to shrink those debts (there certainly was after WWI. WWII postwar tended to more confiscatory ideas, high tax rates and such)

Well, economy isn't actually based on money - money is just a convenient method to facilitate and represent exchanges. Economy is actually based on man-hours available and production per man-hour for a given commodity. Let's see how this applies to the Graysons, Peeps and Manties;



Graysons:
The planet was two centuries behind in overall technology and productivity per man-hour. That's a lot. Let's say, for the ease of calculation, that this technological jump the Manties gave them about tripled overall productivity per man-hour. This allowed the Protector to shift, say, half the workforce working on the military and leaving the other half on anything else. With the tripling of productivity, even though man-hours spent on civilian economy were about halved, the civilian economy was still boosted by 50% so nobody was going to complain. And the military production now had a huge percentage of the population on it, with hugely increased capabilities, which didn't demand anywhere near Manty-level wages because their civilian economic standard was so far behind the average that a relatively tiny wage would still be huge to them.


Peeps;
Those guys had over a hundred star systems and a huge total population. That's a huge workforce total - which the totalitarian government effectively controlled outright. Even with technology decades behind the Manties, they should have steamrollered them in only a few years. That didn't happen for one reason; their economy was crippled by the social welfare programs (which included the Dole).
Basically, the greater the amount of the production that goes towards welfare, the less there remains to actually promote the economy with. And the greater the percentage of the adult population that relies on social welfare instead of personal profit for their living, the smaller the percentage of actual workers contributing to the economy and the greater the percentage of leeches subtracting from it.
So, let's say they got unemployment (Dole) levels of 25%, people legitimately incapable of work due to age/infirmity of another 20%, and children too young to work of another 30%. This meant that only 25% of the population actually worked - with the vast majority of their work being expended supporting everyone else. In fact, it's pretty close to the point where your economy can't support itself at all.
And this is where the new totalitarian regimes come; by starting the war and providing an external enemy, they force the unemployed off their collective asses and into the usable (if hugely inexperienced) workforce. The economy is no longer insolvent any more and there is actual production. Of course, that new production goes all into the war effort.

Just think of a modern nation with 15-20% unemployment and a population of 200 million. Whether they are working or not, the unemployed people still eat, live and consume in general - generally through social welfare or the help of family. If a law suddenly was enforced that everyone supported by social welfare had to work for the government in order to claim said social welfare, the government would have 10 million workers on its hands. That's a lot.