# The Federation Economy ## By Holder of the Keyne's chair of Economic Studies, Milton Hayek of the University of Bizcago ## Basics of the Federation Economy The United Federation of Earths Economic system is based on two parts: the Federation replicator, its properties and requirements, and four economic presuppositions of Federation economics. I will explain these in reverse order. The four presumptions of Federation economics are: 1. When all basic needs are fulfilled, people will strive to find a way to distinguish themselves from others. Through unique symbols of individuality, generally based on things which are more difficult to acquire, or otherwise bespoke. 2. For some people when their basic needs are met, will desire to create for the sake of creating, and as such will produce original works which those seeking to differentiate themselves may wish to acquire, creating a foundation for trade. This could be a unique chair, or shirt, or specialty made birthday cake. 3. People can tell the difference and put greater value on things which are made with the labor of a living creature over that of a replicated item. As such, bespoke one of a kind handmade items may be replicated, but any replicated copy in culturally inferior to a hand made original, or even hand made imitation. 4. While most if not all people may have a replicator in their home or residence, said replicator will not be as easily capable of producing larger items then a replicator of the correct size, the supply of which may be more limited. IE everyone may have a microwave sized replicator, but you'd go down to a specialty replicator to produce a car. So long as those four presuppositions are held true, the Federation economy has reason for inter-galactic and international trade rather than just replicating everything. However, the existence of replicators, and as a byproduct of colonization, as well as non self-sufficent colony worlds or systems (not to be confused with Colonial Dominions) makes trade a necessity based on the following properties of replicators: 1. It takes more energy to transmute matter from one 'type' to another then to transform it from one shape to another. IE to change iron from one shape to another vs converting iron to gold. 2. It takes more energy still to create matter from nothing. IE creating Gold from just energy. 3. The size of what is being replicated, as well as the complexity, influence the amount of energy and time required to replicate. IE replicating something small but complex takes a similar amount of time and energy to replicate something big and simple. Combined the above and opportunity cost appears, as well as a market for energy and raw materials for replicators, all of which form the basis of trade, especially with developing or colonial planets/colonies (they can be new space stations for example). However, all of the above is a ton of economic theory which underpins the Federation, in practice the Federation economy is a mess of massive corporations fighting over the titanic needs of the Middle and Upper classes, while small trades fill more boutique needs while also supplying necessary trade to Rimward parts of the galaxy, and acting as the small, local distribution system for major corporations, among other roles. Planet-wide cities need food imported, and farmers on agri-worlds need voidnet capable TV's, equipment for their farms, resources for themselves, teachers for their children educated on university worlds, etc. ### Universalis Confederation Bank Standing The Universalis Banking system is essentially a central bank for Universalis Confederation, and which practically every nation in the Known Universe Uses. The currency they receive from the UC bank is then 'fractionalized' based on the issuing governments level. For example, a nation may be issued 100 UC credits for their economy, but choose to fractionalize it at a rate of 5 local currency for 1 UC credit, thus inflating the value to 500 local currency. However, in 50 years the country is expected to repay its loan, with interest (which represents the growth the nations economy underwent during those 50 years). However, every 5 years the UC Finance sub-committee meets, and reviews the current economic health of the country, as well as its credit ratings, and sets the countries Variable Interest Rate, which is essentially a measure of the countries overall economic health. Steady or increasing interest rate indicates a healthy growing economy, a rapidly increasing rate may indicate an economy running to hot, and a declining interest rate indicates a slowing economy. Every 15 years the UC Credit Agency meets and reviews the Credit rating for each country, this credit rating is then generalized as a major factor in the Base Interest Rate which is also added to the Total Interest Rate for a national loan, encompassing the overall increase in Universalis Confederation economies as a whole. AS well, an individual countries credit rating adjusts their Variable Interest Rate - worse credit rating, lower the interest rate, less trust in investors getting repaid and thus economic slowdown and possible recession. The Federation economy is struggling. The Imperial Civil War devestasted the Federation economy, especially following the Imperial Stock Market Collapse and subseqent Full Letter Credit Downgrade. When the Federation retook power, they had already had two credit downgrades, and taking on Imperial debts put Further strain on the already struggling economy. Then the Great War came. Industry boomed, people joined the Military and Government. National debt soared, people died, pensions and life insurance had to be paid. The unrecovered Federation economy took a tumble, with the TVI following to its lowest on historical record - 56.4% in the Milky Way, 34.9% Federation wide. By the end of the war, 72% of Government income regardless of house was spent on interest rate repayments - not even paying down the actual debt. [[D.A.M]] Emily Goodwin was elected in part on a plan of turning the economy around. On this front she has succeeded - selling off large swaths of Federation fleet vessels under the Scout Services program, using the capital to fund debt repayment. Debt restructuring and reallocation with the creation of the new Government structure. The Nationalization of Hyperspace Routing corporations and route discovery/creation, and a general transition off the war economy has seen the Milky Way TVI rise to 83.2%, and the Federation wide TVI rise to 66.5%. However, the Federations first bill since [[D.A.M]] Goodwins election is about to come due, and the last few years have seen credit rating and Variable Interest Rate reductions, crushing hopes of true economic growth while stoking fears of largescale looming recession. ## Trade Trade is the backbone of the Federation. It is used to bring resources and energy to replicators, and to sell bespoke goods, real non-replicated food, and generally to give people purpose in life. Trade in the Federation happens across all levels of society, and getting into the trade business is culturally seen as a great way to make ones fortune. Find a market and exploit it if you really want a chance at getting into the upper class. But if you're content with middle-classdom, then produce the goods the traders seek to buy. Enrich your system, and the nation with your ideas and your culture. ### Trade Volatility Index (TVI) The Trade Volatility Index is a measure used by Universalis Confederation economists in understanding a stellar economies health. In simple terms, it measures how many systems within a given area (fiefdom, province, sovereignty, dominion, or nation) are visited by one trade ship at least once a month (in most interpretations, some use once every week, two weeks, or once every three months). Sum up how many had a trade ship within the given interval period, then divide that by the total number of systems measured, to get the index, multiply by 100 to get the percentage. For example, take the 23 system Barony of Razcar. Lets assume that 15 of the 23 systems are visited by at least one trade ship at least once a month. Thus the TVI of the Barony is: 23 / 15 = 0.65, multiply by 100 to get 65%. Expressed another way, 65% of systems in the Barony of Razcar have been visited at least once in the measured period. Economists use this as a rough estimate for how healthy an economy is. Within the Federation this is especially important. Economies such as Deutschland often design systems with a target TVI in mind, and ensure that is reached, meaning that while they may have a lower overall TVI, the economy is actually healthier overall than a higher TVI equivalent. For an economy such as the Federation's, where trade is the core of the economy, a high TVI is essential. The lower the TVI, the greater danger the economy is in. ## Economic Stratification The Federation is a highly economically stratified society. However, with hard work, and with the assistance of generous government programs, people can climb out of the lowest classes into the middle class. However, if one is entirely unproducive in their life, they will slide into the lower classes. The Upper most class is quite difficult to break into, unless one enters politics, the military, or gets insanely wealthy. The Versian Empire is known for having a more fluid class hierarchy then the Federation, however class plays less of an overall factor for most people in the Federation. The Upper class mostly sticks to itself, and out of the spot light. Leaving that to the massive middle class. The Common class cycle is: - Someone born to Lowest Class parents, works hard to rise out of position to Upper Lower Class, has children - Children grow up in Lower Middle Class, the most of the Hard working will reach the Upper Middle class. - Their children will most likely remain at that level, or go down to Middle Middle class for a more relaxed life, few rise above. - The Children of the Middle Middle class will either aspire and rise a level, or contiune to slack, and fall to Lower Middle Class - Repeat binary choice until cycle restarts. ### Upper Class - - 25% of total Federation Population The Uppermost class encompasses the Lords, aristocracy, most members of Parliament, from Senators to Representatives, as well as the wealthiest people in the Federation, the top civil servants, military personnel, and those who have thrown themselves into such a world. This group is collectively referred to as the Patrician class, though that term is most often taken as a title by the owners of the largest companies - those whos listing on the Federation-Stock-Exchange allow them to be represented in the House of Business representatives. #### Upper Upper Class - 5% These are the Lords, the [[D.A.M]], President, Cabinet members, Grand-Admirals, Eklords, and others with high level connections. Those to whom money and power are but pawns in a zero sum national game. These people don't own things, because money doesn't exist for them. #### Middle Upper Class - 8% This is the majority of the Aristocracy, the majority of Senior Level Civil Servants, members of Parliament, Admirals and wealthy but not the most wealthy reign. These are the people who are able to exercise power, they live a life of lavish, decadent, luxury trying to demonstrate to the others their superiority. The most extreme fashion, the most extreme homes and food, etc. #### Lower Upper Class - 12% These are the courtiers to the above classes, and the richest of the middle classes. The painters and poets, philosophers and friends who know the most elite and through them have a foothold into a world beyond reality. ### Middle Class - 60 % of total Federation Population The Middle Class makes up the vast majority of the Federations population, while the exact percentages for each class very by area, even in the worst places hte middle class represents 20% of the populous in the Federation, and all live an overall life of great luxary and no real insecurities outside of war. The defining feature of middle class existence is to primarily survive off of the services of the middle class. If you **need** to eat 3 meals a day one day a week, then you are not middle class by the Federation definition. #### Upper Middle Class - 20% The Medium Business Owners, important Governmental people, big celebrities, and other such people who have gotten big within perhaps a Sovereignty, maybe even a few. The highest are on the cusp of courtier status. They may not own multiple systems, but they almost certainly have at least a few celestial bodies under their belt, and a staff to show for it. These are the people who own major companies, for whom the services provided by the Middle and Lower middle class exist to serve. It is from this group that the greatest stories in the Federation have arisen, their dream of getting to the top of the Federation power hierarchy being perfect for consumption by the lowest 20% of Federation society. It is often into this class that the upper-lower class dreams of entering. These people own systems, their families have historians, they have multiple ships and crew for each of them, replicators are a thing these people use, but the luxuries of human made goods are a regular part of their life. These are people who use the services of the other classes daily. #### Middle Middle Class - 20% These are the average Joes and Janes of the Federation. They work the office jobs, crew the trade ships, are the majority of naval officers, small business owners, etc who make up the Federation. They live a happy life, many never leaving their home system or subsector, others travelling across the Federation if they so choose. These people own or work for the companies which provide services to other people or companies of the Federation. They might be lawyers, they might handle star ship licensing, or dealing with laying out books for publication, or how to promote someone or something in the Datafeed. In a Federation where everything can be automated such that what in ancient Rome would be done by slaves is now done by machine, those things which are done by Humans gain an even greater level of prestige and greatness. With tools allowing someone to get the basics of the stuff they don't care about, and to focus on what they do, everyone can focus on what they do best, and hire out their services to others, coming together under those with the capital, the upper-middle or upper classes outright, who can bring htem together for their machinations, and in the process boost the fame and wealth of the middle middle class workers getting their leaders there. These people own homes, maybe even a few, a few vehicles, likely a ship capable of warp or hyperspace travel, and primarily interact with the services economy. They might eat breakfast and dinner at home, often replicated, to save money. But they present this is money-smart thinking, and a result of middle class respectability in the face of upper class decadence. #### Lower Middle Class - 20% These aren't the basic service workers. They might compete with the middle-lower class for basic jobs, but as new and better service jobs come up, the lower-middle class tends ot migrate to those jobs leaving more physical and worse service-oriented jobs to the middle-lower classes. In short, they work at fast food chains, restaurants, stores, at the mall, etc. These are often young adults, who lack the education, connections, or life experience necessary to get a job somewhere deeper within the service industry, which would allowing them to rise out of the lower-middle class. These are also the Non-Commissioned officers of the Federation military, the hard working people who are floor managers, heads of warehouses, and other blue-collar leadership positions. They might command a group of miners who each oversee a small fleet of mining drones. They might manage a factory where those below them each manage an automated production line. Accompanying this is often a lack of 'middle class respectability' leading to a greater interaction with the services economy than the Middle class, but yet these services tend more often to be superfluous than necessary, leading to many at the lower end of this class to be flirting with not meeting the definition of middle class. However, these people are often able to rent an apartment in a major urban center, possibly with a room-mate, or own a house in less expensive areas, they own a vehicle or two, likely own a ship capable of intra-system travel and may own or have easy access to a ship capable of inter-system travel. ### Lower Class - 15% of total Federation Population The lower class is mainly composed of two groups: those born there, and those who chose to birth them there. This is because the Federation offers generous programs, Guaranteed Service within the Government, and the free trip to Earth, to allow one to to leave their home situation if they so choose. As well as many local grants designed to encourage economic mobility into the middle class. #### Upper Lower Class - 3% They often are those who after actually trying, show some initiative. For this they are rewarded with being able to own a condo, larger apartment, or small house, a planetary or maybe local system level vehicle of their own, and can spend a couple of nights a week enjoying the services of the area in which they live. #### Middle Lower Class - 4% These are the people who have pulled themselves out of the lowest of the lower classes. They might have mountains of debt behind them, they might be on the run from a crime, or they might just be disgusted with feeling their brain slip away from spending all their time in the hedonistic unreality of net-life. These people tend to work the most unglamorous jobs. Often these people are pulled into the military or some other branch of the Government, as the government will protect its own people, pay off debts, and offer other benefits while helping its members to become organized and contributing members of society, with skills and contacts developed if they choose to leave their branch of service. If they don't join the government, they often join a major corporation at the lowest rungs - they might work mining jobs, factory jobs, warehouse jobs, etc. Often acting as the major human overseeing a group of automated workers. These people can afford an apartment, some furniture, a replicator, and spending a night a week out enjoying the services of their town or city. #### Lower Lower Class - 8% These are almost entirely people who choose to do no labor, and not try to rise above their station. They live a happy life doing little of anything but existing. And the Federation is happy to subsidize that with free replicator credits, an apartment, and local-net connection. They live in a small apartment, in a bed which ties them into the net 24/7. They sell their brain and spare neural-net processing power to big companies in exchange for enough credits to keep their net-addiction going. These people are effectively 'paid' to watch TV or other mindless activity. Their off time is spent in a virtual reality world. They may never leave their apartment, nor even the their neural-bed. They can find love in the virtual world, and can pay to have a child grown in a vat, and while it grows its implanted with memories produced while the parents and their 'child' (which they got to design before its basic genetic code was downloaded into the baby-vat) in a few days. Once fully developed, the 'child' is placed unconscious, taken from the vat while the virtual mom undergoes virtual labor, and then the 'child' now a fully developed adult, is placed into their own apartment & bed, and brough onto the net now 'born' as an adult. Most of the time debt eventually catches these people and they sell their minds into blank processing-slavery for several thousand years at a time, but at least they will never die. However, after the first sale into processing-slavery, these people loose their Federation citizen status, as the processing is often so intense and long lasting that complex though necessary to actually exercise citizenship rights is no longer possible. ## Economic Schools Due to the current economic chaos and subsequent moves to reign in the Federation economy, there has been a great deal of interest in different economic schools of thought. As such, four have presently developed. Each is favored by different regions of the Federation for different reasons. ### Organized Chaos - Saldor, Maldeth, Takara Founded by Paul Maudies on Caladar in the Colonial Dominion of Saldor, Organized Chaos theory advocates for a form of localized quotas, with free reign for the region to fill said quota. The intention being that the Governnment is able to use this "organized chaos" to plan the overall economy, while interally markets sort out how to best allocate local goods to facilliate this. It is inspired by an old Lawgarian-Capitalist/Germushian school of economic thought based on the writings in the Codex Otar 2 known as the Varmiltar School. ### Single Unit Economics - Tahara, Dependent Dominions Based on a different interpretation of Otar 2's economic system, Mark Engli in Prusar, a system in the Colonial Dominion of Tahara. Single Unit Economics (SUE) adapts the core idea of Otar 2's agrarian district system - the core idea being that an economy should be organized around creating single self sustaining agrarian based units; each regions economy should be optimized for producing enough food for the inhabitants of said region - but focus on overall economic health instead of just agrarian health. To do this each Sovereignty, and sub-sovereign entity should be made self sufficient, and with a controlled excess of a certain type to provide for the super-structure of the next economic level. This system would see the introduction of a currency akin to the Germushian Defra - a labor based currency - to allow for the focusing of production. ### Distributive Functionalism - Terra Nova, Earth This is the 'traditional' school of Federation economics, it posits the use of a government incentivized and supported industries in an overall free market system. Wherein each Sovereignty and system is free to produce whatever it best can so as to contribute to the overall Federation economy. On top of this, it encourages businesses, trying to foster a healthy middle and small business environment to allow for induvial regions to have their own corporations. However, under present economic conditions, the requirements put on the state would require either fractionalizing the currency to increase the monetary supply and allow for printing of more money, or austerity on the Government budget to focus on debt repayment. Both of which hurt the average citizen, encouraging people to look into other economic ideas. ### Free Function - Utopia, Colonial Holdings Free Function was coined by Adama Smite of Utopian Birth, based on the classical economic texts of Earth, such as a Wealth of Nations. It encourages little government intervention in the market at all, encouraging local economies to develop to theri maximum or die off if unsuccessul, and generally push support for business growth and economic success at the cost of economic failure at all costs.