- "The galactic economy is a hypercomplex system, full of unexpected movements and ill-discerned effects, where the flutter of a pigeon on Trantor may create a typhoon on Bal'demnic. It is a mathematical organism with enough dependent variables to make the most devout Givin theoretician throw up his hands in defeat. This has by no means prevented attempts to harness it for political ends."
- ―The Golden Emperor of Prekaz
The galactic economy was the macroeconomic combination of sector, system and planetary production, consumption, and trade. It could be broken down and represented in various ways, but it was inseparable from the astrography and ecological make up of the galaxy. It is important to note that economic differences between major galactic eras were negligible.
At the heart of the galactic economy was planetary trade. Interplanetary trade could support a local economy, but, in many cases, the high levels of economic interaction and the massive scale of exchange required for an advanced society could only be funded by interplanetary exports. While some planets maintained their own shipping fleets, most relied on large freight firms, such as Xizor Transport Systems, or independent freight haulers to carry their goods along major hyperlanes.
Around 350 BBY, major transport and merchant concerns united under the Trade Federation to increase efficiencies, lobby for trade-favorable legislation and control prices. The influence of the Trade Federation on the galactic economy was sufficient enough to damage or otherwise affect a number of planetary economies following its embarrassment at Naboo.
While the Imperial era saw dramatic increases in state control and centralization of economic procedures, it had little effect on the galactic economy, as witnessed in the virtual non-existence of inflation.
Ostensibly, the collapse of the Trade Federation and absorption of its assets by the Galactic Empire created a void filled by smugglers to address strong demand for shipping created by the Federation and then Imperial controls. Smugglers flourished in the Imperial era as independent operators or as part of larger organizations like those of Jorj Car'das, Quelev Tapper, Talon Karrde or Booster Terrik. After the rise of the New Republic, many smugglers joined the Smuggler's Alliance, which sought to coordinate smuggler and hauler operations.
Role of hyperdriveEdit
Hyperdrive technology allowed for a galactic economy to take shape, fueled by standardized currency and the Core language of Basic. Prior to the invention of hyperdrives, trading (and exploration) were often limited to local star systems, due simply to the fact that most star systems were many light-years apart. Because of the need for self-reliance, few planets ever developed any sort of specialization prior to the formation of the galactic economy.
Role of droids and slavesEdit
Droids were an integral part of the Galactic economy and programmed for a number of uses, including construction, excavation, repair, piloting, maintenance, mining and other labor. The advantages of using such droids were that they could work in inaccessible and dangerous environments that most sentient species could not, as well as not needing pay or other perks biological sentients would.
Despite being outlawed by the Republic under the Galactic Constitution, slavery was still practiced in lawless areas such as the Outer Rim and even clandestinely in areas closer to the more civilized Core. One example of this is the Republic controlled Telos IV Citadel Station, upon which a Twi'lek dancing girl was kept as an indentured worker due to the gambling debt of another. Slavery was apparently abolished, or at least greatly frowned upon, in the Republic by the time of the Battle of Naboo, as evidenced by Padmé Amidala's shock at Anakin Skywalker's slavery.
To compete in the galactic economy, many planets chose to focus their economy at a planetary level. Planets with a valuable natural resource would focus on its export, while other less fortunate planets would achieve success through economies of planetary scale. Entire planetary surfaces often were devoted to grain fields, droid factories, or mineral mining, greatly affecting planetary climates. These were especially common in the Corporate Sector.
Other planets, however, (at least in earlier times) voluntarily chose what might be described as deliberate non-specialization. Small-time farming was the ideal. Herding and hunting also took place. Concentrating not on mass export but rather on providing for themselves, they were largely dependent on imports to sustain their non-agricultural needs. In some ways these worlds could be thought to rank alongside the more poverty stricken but in reality they served as the perpetual customers for which more developed systems existed to supply.
While millions of firms participated in commercial exchanges, only a small number of major galactic conglomerates possessed impressive influence over the galactic economy. Some galactic firms employed millions of beings across thousands of worlds with trillions of consumers. In the last millennia of the Galactic Republic, commercial interests began to form guilds to increase their influence on relevant legislation and achieve greater efficiency. While most of these guilds, like the Techno Union and the Commerce Guild, collapsed after the Clone Wars, a number of surviving members flocked to the Corporate Sector Authority.
Many planets maintained stock exchanges and banks, but it was uncommon for these institutions' influence to extend beyond their local star system. Many of those banking institutions that served clients beyond their local area stored their collateral on Aargau or Muunilinst. Major interstellar banking institutions included the Bank of the Core, the InterGalactic Banking Clan, the Galactic Banking Network and the InterGalactic Bank of Kuat.
Thousands of currencies were used across the galaxy. It was not uncommon for a planetary economy to operate on a number of currencies, including planetary credits, credits of a major power in the sector, or credits of a galactic government.
Many major governments produced credit chits, but credit chips were commonly used as well. These debit based systems could be used for electronic sales through interchip exchanges. Metal coins were commonly used for local currency, although galactic governments were known to produce commemorative metal coins, like the Victory Tax Credit or Decicred.
The Galactic Republic's dataries were perhaps the most widespread form of currency. Because of the Republic's exceptional membership, dataries were accepted on all but the most remote planets. Galactic Empire and Rebel Alliance each supported credits that were accepted across member worlds, and occasionally on non-member worlds. The constant ebb and flow of power between these governments and the range of support for them made the value of their currency fluctuate wildly from system to system. The establishment of the New Republic presumably stabilized the galactic economy. The economy practically collapsed during the Yuuzhan Vong War. So immediately after the war, the Alliance began massive reconstruction efforts throughout the galaxy, in the form of the Reconstruction Authority. The Authority was tasked with such things as re-terraforming Coruscant and finding a new homeworld for the Ithorians and other species that lost their homes to the Vong and more.
Under Republic law, all wage-earning beings were required to pay income tax. This tax was collected by the Republic Tax Collection Agency. When the Trade Federation complained about piracy in the outlying star systems, the Republic Senate passed a tariff on those formerly free trade zones. This action justifiably upset the Trade Federation Viceroy, prompting him to blockade and invade the small planet of Naboo. Right before the Clone Wars, a fifteen percent transit tax was levied on all tickets sold in an effort to raise emergency funds for the government. After the Galactic Republic changed to the Galactic Empire, tax laws were consolidated into the Imperial Revenue Codes and placed under control of the Imperial Taxation Bureau.