Like it or not, destroying the Empire’s superweapon would likely cause a recession of astronomical proportions. Could emerging planets come to the rescue?
Not long ago someone came back from a place much, much further away than the homeland of Santa Claus. He had a longer beard and looked a bit more spaced out than when many first met him – but his fans, who may well be more numerous than Father Christmas', had long been expecting him. It'd been more than 30 years since they'd last heard of him (just about a lifetime, if you ask me).
Unless you've been on another planet since November, it won't escape you that our returning hero is Luke Skywalker, the fledging yet providential crusader of the original Star Wars trilogy. The scenario of Episode VI, the latest of the series, gives us a clue as to why he was gone all this time: he'd been on a self-imposed exile, after his efforts to rebuild a Jedi order in the wake of the Empire's demise went horribly wrong (all this is explained in the first few seconds of the movie – so no, I'm not spoiling it).
But some inquisitive viewers out there have another theory. They reckon Skywalker may have decided to disappear after his successful attempt at destroying the second Death Star - a man-made, fire-blazing moon that explodes at the end of Episode VI – triggered an economic and financial crisis of a scale such as to bring down the entire galaxy.
Consider this. The Empire, keen to use the Death Star as its battle station and superweapon, endeavours to build two versions in about four years (the second to replace the first, already the victim of Rebel missiles at the end of Episode IV). Given their sheer scale and sophistication, that certainly didn't come cheap. It must have required the Empire to raise astronomical amounts of debt.
Zach Feinstein, an academic at Washington University, actually crunched the numbers. He first took cue from the US government's response to a 2012 petition to build a Death Star, in which officials estimated the cost of buying the steel needed for a battle station at $852 quadrillions. He then assumed the cost of all other components to be in line with that of the USS Gerard Ford, the US Navy's latest aircraft carrier. The first Death Star's total bill came up at $193 quintillions (that's $193,000,000,000,000,000,000).
He then used a similar method to budget the second Death Star (a much bigger one, at a cost of $419 quintillions) and went on to calibrate the size of the galactic economy. This he achieved by assuming that the cost of building the first Death Star was comparable, proportionally to the entire economy, to what the US spent on the Manhattan Project (about 0.21 percent of GDP per year).
Following the blow-up of the second Death Star, he conjectured a default on Imperial debt, a drop in asset valuations on a par with what followed 9/11 and a potential for cascading defaults across the financial sector. He noted that the fallout would be made worse by the absence of serious regulation across the financial system. Neither would the victorious Rebel Alliance initially help much to cushion the blow, choosing to repudiate imperial debt on both Death Stars and lacking a thought-through economic plan to sort out the mess.
Bottom-line: a drop of nearly 8.5 percent of Gross Galactic Product (GGP) and a wrecked financial system, according to Feinstein. The gravity of the crisis would be such that a bailout of 20 percent of the entire galactic economy would be necessary simply to limit the fallout to something comparable to the 2009 recession. Not a happy ending.
The question Feinstein doesn't address, however, is whether such a bailout is realistic and where the money could come from. The Empire probably doesn't form part of a supragalactic ensemble capable of coughing up the cash – like today's European Union – and neither would its successor regime, at least in the short term. It's also hard to imagine the Empire being very bothered with setting up a galactic equivalent to the IMF, obsessed as it was by its sole military expansion.
Quite naturally for Weetabrics, here's therefore a category of potential saviours I propose we consider: emerging planets. During the Great Recession of the last decade, the dynamism of fast-growing nations like China and Brazil helped pull the world economy forward. They'd also accumulated vast amounts of currency reserves on the back of strong commodity demand and booming global trade, some of which was used to oil the wheels of recovery. Could the firepower of their galactic counterparts do much to prevent a collapse of the economy?
As they would have to contend with a broken financial system, it's fair to assume emerging planets could only lend the galactic regime the cash and gold their central banks already possess (instead of borrowing some of the cash elsewhere). Emerging market reserves, back in the real world, totalled about $4 trillion on the eve of the financial crisis – about 5.5 percent of GWP. If we assume emerging planets to be as rich as emerging markets were in 2007, then it seems we're lightyears away from being able to stave off a galactic bankcruptcy.
You may object that they could disburse their bailout money in tranches, allowing them to draw from their reserves not in one go but over a period of time. Let's then assume a bailout duration of five years, during which reserves would continue to grow at a rate similar to what happened during the Great Recession. Then by the end of the period the total bail out money available from emerging planets would stand at about 11 percent of GGP pre-crisis – a leap forward, but still short of target. Even with clever structuring, these would thus probably be unable to pull the galaxy out of the black hole alone.
Episode VII is the first to be released since Lucasfilm, the studio producing Star Wars, was bought by Disney in 2012. While defeating the Empire looks easy on a screen, however, our analysis suggests dealing with the consequences would be no Mickey Mouse job.