[SmashMonkey]

So the GTA economy has been in the crapper for a few decades, but how far in the hole are they? 100% GDP debt? 200%?

[WedgeAnt]

Debt per GDP is not necessarily a good measure of the state of the economy. One question is for instance who would hold the debt? The Vasudans? Terran Citizens in the GTVA?

The problem the GTVA economy most likely has (somebody of the writers correct me on this if I'm wrong  ) is the lack of investment in productive capital (physical capital, like machines, etc. as well as human capital, like education, health care etc.). With the whole economy being focussed on producing for the possible case of another Shivan incursion and the Sol-Gate (which would allow for a productive trade environment if not for the war with the UEF) it is unlikely that welfare level of GTVA citizens has significantly improved over the last decades.

The GTVA economy might actually have decent growth rates because they produce military spaceships, fighters as well as the Sol-gate. For the individual citizen it's just not as nice to have an additional fighter built instead of, say, a nice car (or the equivalent in the GTVA). Another problem is that the military equipment itself doesn't help with long term growth.

For comparison: the UEF economy was probably doing much better until the war started, as they never had the strong focus of the GTVA on military build-up.

[rubixcube]

I wonder what their yearly GDP growth was, barely positive perhaps? Or what percentage of GDP they were spending on their military, 15%?

[Galemp]

I'd say the economy was probably doing BETTER than the '30s. War is expensive; churning out warships and personnel to fight on the Vasudan and later Shivan fronts generated a lot of investment, but none of it actually contributed to the welfare of the Terrans.

Later, these threats went away and the wars ended, but all the infrastructure was still in place. Sol would have had a consumer boom period similar to the post-WWII effect in the USA, turning swords into plowshares. Unlike the future GTVA systems which had to rebuild, Sol was never touched by the war AND was home to the primary manufacturing base. In the ~50 years after the Great War I'd expect major advances in telecommunications, healthcare, education, ecology, colonization, terraforming, and other less destructive pursuits.

[General Battuta]

It didn't quite happen like that in Blue Planet. Although Sol did have most of the manufacturing base, its economy was dependent on the war and intrasystem trade, and the ongoing state of emergency had calcified Sol's sociopolitical structures.

Sol's economy ended up just as you say - not just an economic boom but a golden age. That was the foundation of the Ubuntu project. But it went through some pretty tortuous times to get there.

[rubixcube]

It didn't quite happen like that in Blue Planet. Although Sol did have most of the manufacturing base, its economy was dependent on the war and intrasystem trade, and the ongoing state of emergency had calcified Sol's sociopolitical structures.

Sol's economy ended up just as you say - not just an economic boom but a golden age. That was the foundation of the Ubuntu project. But it went through some pretty tortuous times to get there.

Is the uef economy actually larger than the GTVA's?

[General Battuta]

Yes, as is its population.

[SmashMonkey]

So the UEF economy is larger than both the Terran and the Vasudan ones combined?!?

[Luis Dias]

I will never fully agree with the idea that the GTA is in economic shambles due to its focus on defense and the solgate project. It might well have proven itself to be a dump of money, but that is often good economically, for it produces a *lot* of demand, and kickstarts a whole economy (like wars do: the problem in wars is not the huge frenetic economic activity, it is rather the waste, deaths and property destruction that follows the production of tanks and airplanes).

Now, I do understand why, even with Keynesian logic telling us otherwise, this feels wrong, because it seems almost like having a free lunch, but that is the wrong metaphor. The right metaphor is about having a huge investment in the future because it seems it will pay itself tenfold or more. And if sufficient people believe in this (as they should, the solgate would - had the war been unnecessary - bring a huge deluge of wealth into the GTVA fold merely by its existence, by the novelty of new technologies to be traded, etc.), then the economy would be a huge boom, not a bust, for this prospect alone, and never a "depression" (Capella might explain a depression, but then the positive effect of the solgate project could kick in).

This is how "booms and busts" happen. Busts occur when the "booms" were too optimistic and a correction has to happen. By this logic, what would have happened was a huge boost in the GTVA economy the years right before SolGate occurred, not only for the influx of constant demand for the project, but also the prospect of more demand in the next few years. However, given 18 months of non-stop war of a conflict that should be over by now could begin to bust the bubble. IOW, a lot of debt could be about to be deleveraged due to the lack of the very market that many private companies thought they could harness. Emergency measures could be enacted by the governments to keep these companies afloat during the war, but it would stress their finances. Eventually, lending rates could spiral skyward if the general sentiment started getting extremely negative towards the prospects of a peaceful economic exchange with Sol.

Just random thoughts here. One could also think about the urge to get the Jovian system into the GTVA fold as part of an emergency strategy to appease the markets in the outer colonies that "new markets" were indeed beginning to be opened in Sol. Given the dangers of war though, this could backfire, and someone smart enough in UEF could smell a blood crack in here and try to exploit it.

[Phantom Hoover]

The war's set to resolve within a week, so I don't think that's likely.

[The E]

I think (and again, pure personal opinion, not BP canon because GB's gonna contradict me immediately yadda yadda yadda) that a lot of the GTVA's economic crisis is due to a massive crisis of confidence in the GTVA. In my headcanon, the GTVA is a supranational organization similar to the EU or NATO, a talking shop to organize things that the individual colonies cannot (like, for example, collective defence).

Capella showed that, while the GTVA works and is able to save a lot of people, it is still utterly powerless compared to the threats it's designed to protect against; after Capella, and after the failure of the biggest GTVA megaproject to date and after all the upheaval caused by having to relocate the Capellans, confidence in the GTVA's ability to continue to protect humanity and their ability to pull off a reunification with Sol would have hit an all-time low.

As a result, I can easily see individual colonies scaling back their contributions in terms of time and resources, concentrating more on making their own part of the node map more hospitable. There were probably lots of pundits in these colonies going on and on about the total drag on their economy the GTVA is, how it's only Delta Serpentis and Beta Aquilae that profit with nothing given back to the rest of the Alliance in return.

So yeah. For BetAq and DeltaS, the TEI and the Sol Gate were huge boosts. For the rest of the colonies, they only got some breadcrumbs off of random TEI projects. So while the actual economy may not be doing so bad, the perception is that everything's ****ed, and as is so often the case in politics, perception has a way to translate into reality.

[General Battuta]

I wouldn't contradict that at all.

[Luis Dias]

I'm a bit disappointed with the idea of a gap between the perception of the economy and the economy itself (even today that doesn't map well), but I get the point of BetAq and DeltaS getting the bulk of the demand, and as such, the bulk of the economy blood in their veins. That could infuse a lot of inter-governmental grievances and currency problems (yeah exactly, I'm thinking about Greece and the EU). I like that idea of an asymmetrical development of the GTVA, for it reinforces the inability of its organization to manage the economies, just like they were incapable of managing the unmanageable, the Shivans. It also looks very human, depressingly.

[General Battuta]

That's always the trick with BP fiction. Bringing in the parts of the story that the core FS games (and most science fiction in general) don't have bandwidth to engage with. Problems of system management and prediction are obviously core to the intellectual thrust of Blue Planet.

[SmashMonkey]

I will never fully agree with the idea that the GTA is in economic shambles due to its focus on defense and the solgate project. It might well have proven itself to be a dump of money, but that is often good economically, for it produces a *lot* of demand, and kickstarts a whole economy (like wars do: the problem in wars is not the huge frenetic economic activity, it is rather the waste, deaths and property destruction that follows the production of tanks and airplanes).

Now, I do understand why, even with Keynesian logic telling us otherwise, this feels wrong, because it seems almost like having a free lunch, but that is the wrong metaphor. The right metaphor is about having a huge investment in the future because it seems it will pay itself tenfold or more. And if sufficient people believe in this (as they should, the solgate would - had the war been unnecessary - bring a huge deluge of wealth into the GTVA fold merely by its existence, by the novelty of new technologies to be traded, etc.), then the economy would be a huge boom, not a bust, for this prospect alone, and never a "depression" (Capella might explain a depression, but then the positive effect of the solgate project could kick in).

This is how "booms and busts" happen. Busts occur when the "booms" were too optimistic and a correction has to happen. By this logic, what would have happened was a huge boost in the GTVA economy the years right before SolGate occurred, not only for the influx of constant demand for the project, but also the prospect of more demand in the next few years. However, given 18 months of non-stop war of a conflict that should be over by now could begin to bust the bubble. IOW, a lot of debt could be about to be deleveraged due to the lack of the very market that many private companies thought they could harness. Emergency measures could be enacted by the governments to keep these companies afloat during the war, but it would stress their finances. Eventually, lending rates could spiral skyward if the general sentiment started getting extremely negative towards the prospects of a peaceful economic exchange with Sol.

Just random thoughts here. One could also think about the urge to get the Jovian system into the GTVA fold as part of an emergency strategy to appease the markets in the outer colonies that "new markets" were indeed beginning to be opened in Sol. Given the dangers of war though, this could backfire, and someone smart enough in UEF could smell a blood crack in here and try to exploit it.

I feel that this bites into the old Keynesian broken window paradox: Breaking all the windows in a neighborhood would generate economic demand and make everyone better off in the long run. This is also the same concept as the "Modest Proposal to Boost the US GDP by $852 Quadrillion By Building a Death Star". Both concepts are intuitively unrealistic because they force individuals to take away capital from productive projects to those less desirable projects. Replacing windows would require homeowners to take away money from repairing their houses. Building a Death Star would require the US to take money away from repairing our crumbling infrastructure. Economic demand can't be artificially created.

If anything, the militarized economy of the GTVA would have taken away resources from productive civilian purposes. I imagine that the tax rate would be almost confiscatory, and economic mobility would be impossible. There would be a huge gap in quality and life expectancy between those on the Board of Directors of Morgan Technologies and those that work in its manufacturing department.  Not to mention that military spending is inherently inflationary. A good example might be Japan of late-WW II with significant shortages, inflation, and currency devaluation.

Hence the rage that half of the GTVA population feels about the prosperity in Sol.

[Luis Dias]

I feel that this bites into the old Keynesian broken window paradox: Breaking all the windows in a neighborhood would generate economic demand and make everyone better off in the long run. This is also the same concept as the "Modest Proposal to Boost the US GDP by $852 Quadrillion By Building a Death Star". Both concepts are intuitively unrealistic because they force individuals to take away capital from productive projects to those less desirable projects. Replacing windows would require homeowners to take away money from repairing their houses. Building a Death Star would require the US to take money away from repairing our crumbling infrastructure. Economic demand can't be artificially created.

All of that paragraph is absolutely correct except for that last line, which is absolutely wrong. Economic demand is being "artificially created" every single minute, it's what humans do every single day of their lives. There is something metaphysically suspect in this very word "artificially", and I know where it comes from, it comes from the idea that the "private" investment is "natural", while the "public", governmental investment is "artificial". The public investment is "unnatural" then, a degeneracy, a kind of a corrupted beast that is destroying the paradisiacal and naturally correct private economy. This kind of sleazy language do your ideas no good, because in principle I really agree with what you began saying.

Destroying windows in order to "create an economy of rebuilding them" is indeed irrational, and while Krugman is well known for his flamboyant ridiculous over-the-top examples (convince humans about aliens something something so we can kickstart an economy, etc.), the point that is being missed is not about the waste of the whole exercise (which is obvious and therefore we gain nothing by saying it as if it's a finding), but about the unexpected surplus that comes with that exercise. That is, such "destroying windows to rebuild them" will indeed "artificially create" an economy. It will just completely fail, as you correctly put it afterwards, to be a better substitute than the pre-existing economy, the "GDP" will actually drop if you do this and the whole population will be worse off, for instead of building tvs and computers and all sorts of things we also need, now we need to waste time rebuilding windows.

Now here's the main rub, the main reason why I utterly disagree with you:

If anything, the militarized economy of the GTVA would have taken away resources from productive civilian purposes. I imagine that the tax rate would be almost confiscatory, and economic mobility would be impossible. There would be a huge gap in quality and life expectancy between those on the Board of Directors of Morgan Technologies and those that work in its manufacturing department.  Not to mention that military spending is inherently inflationary. A good example might be Japan of late-WW II with significant shortages, inflation, and currency devaluation.

Why is this wrong? Well, because a Depression, and a big one to boost, I mean, it's not only written as such in the canon, it is also quite the expected result from having a whole system wiped out, millions of businesses destroyed, whole swaths of debt unpaid, huge fallout in every other system, is a very different beast than a functioning economy. The main difference is, there is a huge gap between productive capacity and actual aggregate demand. Demand has dropped sharply. Factories and whole companies are without customers. Investors and entrepeneurs have nothing to do because all of their markets are falling through a black hole of nothingness. Unemployment goes through the roof, behaving like a huge feedback to the decreased lack of demand, destroying even a bigger part of it. Empty factories everywhere, machines resting doing nothing, people at home sitting quietly waiting for the economy to go back up so they can get a new job.

So when you say "taken away resources from productive civilian purposes", you are still thinking in terms of a functioning normal economy, when the one we have in our hands is anything but. Huge keynesian projects do function exactly like a kickstart to an economy precisely because they put all of these unused resources (and work time of an unemployed population is a *huge* resource being wasted in a depression, for example, let alone all the productive capacity being unused) to work, and by doing so, they recreate demand. Another aspect of depressions is the amazingly low rates of borrowing that exist. It's easy to see why: lone investors are shy of investing anything in a depressed economy, and thus demand of debt is at record low. There is just no better time for a government to borrow debt and start investing, for the private economy just doesn't kickstart itself. Once the economy is going (reaching something relatively close to "full employment", etc.), then I absolutely agree with you, the government should lay back and stop investing in keynesian projects (mainly for Hayekian reasons). The problem we have is that at this point, it rarely does so, and we end up with a huge government filled with pet projects and industrial complexes and so on and so on.

Another point: I don't agree with your japanese analogy. Japan was losing a war, fast. Every part of the economy was being funneled in an emergency state to the war. They were losing territory and income. Look instead to the US. They invested much more than Japan and there was a giant boost to their economy, which proved not to be a bubble because they inherited a bright future for themselves: to be the predominant economy of the world.

And another final point: Instead of "broken windows", think about Bridges. The Solgate is a bridge. Bridges are public investments, and they are definitely great investments. This particular Solgate investment would bring about the access to a system that has an incredible wealthy market, incredible new technologies and an amazing morality boost to a sharp demand of such in the Colonies. If I were a Tev, I would be a huge apologist of this project.

[General Battuta]

Some people surely made that exact argument - but it's an argument with no payoff until the bridge is complete.

Until then, I think you can think of the Sol gate as being analogous to, uh, the F35 project. It does employ some people, and it does eat up a lot of money, but those people are in very specialized sectors. And there are thorny questions about the routes and velocity of money in the GTVA. If Subach-Innes decides to take all the money it gets from building the Sol Gate and spend it on a new hull foundry built by automated labor, who benefits? Is that Keynesian?

(This is an interesting conversation.)

[Luis Dias]

I don't think that is correct, because you are subtracting a very important factor in all of these investment questions which is the payoff. Now, I know, you think that the "payoff", by definition, can only come in the future. The thing is that the future is a very interesting psychological phenomenon. The key word here is "expectations".

If the population expects from a particular project a kind of airplane that doesn't work under thunderstorms, or that it is too fragile or too slow or too cumbersome for some reason, if the expectation is that this kind of ship will ultimately fail to live to all of the promises that were made, and you still see the number of dollars rising orders of magnitude faster than any "reasonable" limit would entail, then the whole ordeal will obviously be looked down upon. Keynes doesn't really enter here, for the judgement is one of quality, of corruption, etc., and this project wasn't greenlit in the middle of a depression, nor was it thought to be a solution for it.

When I talk of "payoff" we can just assume mere market expectancy of the future. The people know that such a bridge will bring incredible wealth to their land (more akin to the collapse of the Berlin wall, though the hammers that pulled that off were quite cheap), and thus there's never a sentiment of waste here. The mere fact that the market agents (the people, the companies) know this, this will automatically enter their calculations of the future and what to expect. There is very little to "expect" from the wider market POV around the building of a F35.

The market is not just a snapshot of the present, it's also a huge predictor of the future (for instance, a bust happens when sufficient people predict the bust itself, thus making it true. It's this self-referential, but it's always inherently about the future). If the expectation is a 30 year stagnation or "Austerity", the markets (and whole populations) will behave in a certain manner. If the expectation is, we are taking all these unemployed people, a huge pile of cash, and we'll build something that will get us all access into a treasure island, the whole sentiment is different. Never underestimate "hype".

Regarding "Keynesianism", we shouid never forget that this only applies in Depression conditions. Again, if the economy is more or less working as intended without these huge wastes of resources abounding everywhere, any given governmental "keynesian" investment is indeed something that is weakening the economy by taking out private resources that could be deployed to build iWatches or whatever. But there's a huge batsignal that the markets themselves give to governments to point when they should go full Keynes: low borrowing rates. Right now, in Portugal, for instance, borrowing rates are negative. Do you understand what this means? It means that the government wins money by borrowing. They are given this rate because all the cash is being hoarded by capitalists who are individualistically afraid to invest anywhere, and thus afraid to borrow anything (it's more complicated than this, but still, the principle stands). The only party here who is big enough to make a change in the market and infuse confidence into it is the government, it's the one who should borrow and invest.


e: I knew there was something I was missing, the inflation argument. This is just an incredibly failed argument by empiricism alone, that I am actually surprised that people still use it in 2015. Depressions are marked by deflation, and thus if government investment creates inflation (it does, obviously, for it increases demand for goods and increases the price of debt) this is actually a good thing, not a bad thing. The accusation was though, that we were in for "hyperinflation" (the number of economists and pseudo-economists that predicted this after the mild investments post 2008 was depressing in its own sake), that this government debt would spiral the whole currency to hyperinflation. Never happened. And this prediction failed so hard that this idea should be put to death so it never comes back.

[General Battuta]

The people have entirely lost confidence in the future as a stable, welcoming place that can be mastered by government action. That's part of the psychological shock of Capella.

[Luis Dias]

I agree with that sentiment. However, the bridge project would have a net positive effect on top of that whole depressing psychoiogical landscape, not a negative. I mean, I see what you mean here, that there's just a profound despair and a lack of outlook in life, but between having this project and doing "business as usual" fleet building and so on and so forth, I don't think there's a real choice here.

My point is, with all the grimdark all around, that project is probably the one spark that keeps billions of spirits afloat in the alliance.