There is a long history of SF novels about interstellar free traders eking out a marginal existence on the fringes of the huge trader corporations, from Andre Norton's Solar Queen novels to the Space Angel series by John Maddox Roberts. Go to The Tough Guide to the Known Galaxy and read the entries "ECONOMY", "FREE TRADERS", "PIRACY", "REPLICATOR", "TRADE" and "TRADE FEDERATION". Don't forget the entry in this website about Cargo Holds
As mentioned below, if you want to play around with interstellar trading, or even try doing a full simulation (to do worldbuilding for creating the background of your new novel), I'd suggest getting a copy of GURPS Traveller: Far Trader. Written with help from a real live economist, this allows one to model interplanetary and interstellar trade with equations and everything. It has detailed analysis of the economics of interstellar trade, and a system of equations to model trade routes and economic demands.
Late breaking news: a programmer who goes by the handle of Makhidkarun has made a Python software library implementing the GURPS Traveller: Far Trader "gravity trade model" to generate trade routes (alas, to use this one has to be proficient in the Python computer programming language). There are some notes here.
Naturally, to make interstellar trade work, you need the cost of interstellar transport to be incredibly low, or the value of the trade item to be incredibly high. Or both.
Raw minerals probably are not valuable enough, it will probably be cheaper to synthesize rare elements instead of shipping them in. As for manufactured goods, why not just send the blueprints by radio or by your Dirac Poweredtm FTL Ansible communicator? In a future where everybody has 3D printers and rapid prototyping machines, the economy would be based upon trading intellectual property.
Since there does not seem to be any real-world trade item worth interstellar trade (unless it is cheaper to ship from another star than it is from another city), you will probably be forced to invent some species of MacGuffinite.
In Larry Niven's PROTECTOR, asteroid miners prospect for magnetic monopoles (which are great for constructing compact motors and generators). Dr. Robert Forward proposed prospecting for Hawking black holes. In the old SPI game StarForce, the only valuable commodity is "telesthetic" women, who are the sine qua non of FTL travel, and who cannot be mass produced by genetic engineering. In Vernor Vinge's A FIRE UPON THE DEEP, some of the main characters are traders contracted to transport part of a huge one-time pad for secure cryptographic transmissions (such a pad cannot be transmitted without compromising security). Sometimes humans and aliens discover that one man's trash is another man's treasure. And in Charles Stross' IRON SUNRISE, the most valuable things are packages of entangled quantum dots, used for FTL communication via Bell's Inequality (with the fascinating twist that the dots must be transported slower than light or they are ruined. They are shipped by Starwisp).
I will note that historically one of the most valuable trade goods was spices. Which cannot be 3D printed unless their resolution is atom-by-atom. Freaking black pepper was so valuable that it was used as collateral for loans, or even currency. In the 1400s the Italian monopoly on black peppercorns was the incentive behind the Portuguese effort to find an alternate route to India. Vasco da Gama managed to reach India by sailing around Africa, which would be a very uneconomical route except for the sky-high value of black pepper.
The main mechanism for trade is what is called "Arbitrage", the practice of taking advantage of a price difference between two or more markets. In this context it boils down to "buy cheap and sell dear", that is, purchase goods that are cheap at Planet A, then transport and sell them at Planet B where the goods are expensive. The money you make selling at Planet B, minus how much you spent purchasing at Planet A yields your gross profit. Subtract from that your transport expenses and other expenses and you'll find your net profit (if any).
There is also the problem of price convergence. The profit is from the price difference between the two markets. The difference tends to shrink over time, which eliminates the profit. Sometimes the market at your destination becomes saturated (as the manufacturers of Beanie Babies found out), sometimes the supply at the origin dries up (like petroleum).
A trader would like a nice simple two-planet set up: where they go to planet Alfa to buy a load of Alfan Aphrodisiac Apples, transports them to planet Bravo to sell them at a fat profit, buys a load of Bravoian Bodacious Beef, transports it to planet Alfa, and sells it at a fat profit. Rinse, lather, repeat.
But all too often one of the planets does not cooperate, such as when planet Bravo desired Alfan Aphrodisiac Apples, but the vegetarian Alfans look upon Bravo's major export with horror.
The key to solving the problem is Ménage à Trade. The trader has to find a third planet, one that wants to import Bravo's export, and which exports something that Alfa wants. Such as planet Charlie, which adores Bravoian Bodacious Beef, and exports Charlean Chicory Coffee without which no Alfan breakfast is complete.
The main historical example often cited is despicable, since one of the "trade items" is slaves. This vile period in history is euphemistically called the "African Diaspora". The term "triangle trade" is to be avoided because of the association.
Back in medieval times, merchant voyage durations were measured in years and long distance communication was non-existent. The same may hold true with hypothetical interstellar traders. In order to cope with the problems, medieval merchants invented Letters of Credit and Bills of Lading. Interstellar traders in a scifi universe that has FTL communication by courier starship but no FTL radio will need to adopt the medieval solution.
For in depth explanation (with diagrams) of how they worked go here. For a simplistic explanation see below:
Two fundamental questions accompany freight on its journey from origin to destination: “Who owns it?” and “Who is responsible for moving it?” There are three parties involved: the seller (or manufacturer), the shipper (or carrier) and the buyer. The shipping industry has developed a series of standardized acronyms, called terms of shipping, which describe who does what and when in interstellar trade. They define not only who pays for the shipment and handling of freight, but also who assumes risk (liability) for goods in transit and when ownership passes from seller to buyer.
In all cases, the seller bears the risks of loss or damage until he has delivered the goods as specified under the terms agreed upon. Risks (and ownership) are carried by the buyer thereafter. Of course, while the cargo is aboard ship, the captain is also responsible for its safety.
EXW: Ex-Works Buyer accepts the goods at the seller’s premises. This represents the least obligation for the seller and the most for the buyer. Buyer is responsible for all shipping and handling. FAS: Free Alongside Ship Seller delivers the goods alongside the vessel’s berth (or in lighters (cargo container orbit-to-surface shuttles)) at the port of origin. Buyer pays for shipping and handling, and must clear the goods for export. FOB: Free on Board Seller delivers the goods through the ship’s hatch at the port of origin. Seller pays for handling at origin; buyer pays for shipping and for handling at destination, and must clear the goods for export. This is the most common arrangement for ships buying speculative cargo. CIF: Cost, Insurance and Freight Seller pays the costs and freight charges necessary to bring the goods to the port of destination, and must clear the goods for export. The goods are delivered when they pass through the ship’s hatch at the port of origin, but the seller must pay for insurance (0.1% of the goods’ value) against the buyer’s risk of loss of or damage to the goods during carriage. This is the most common arrangement for freight. DES: Delivered Ex-Ship Seller delivers the goods on board the ship and uncleared for importation at the port of destination. Seller pays for shipping and for handling at origin; buyer pays for handling at destination. DEQ: Delivered Ex-Quay Seller delivers the goods to the buyer at the berth (or quay) at the port of destination, cleared for importation. Seller pays for all shipping and handling, and bears all risks and costs (like duties and taxes). This is the most common arrangement for ships selling speculative cargo. DFD: Delivered Free Domicile Seller delivers the goods to a named place on the destination world. The seller bears the risks and costs — including duties, taxes and other charges — of delivering the goods to this point, cleared for importation. Costs and risks after entry are negotiable. DFD shipments are usually accompanied by a bank draft (drawn on the seller’s account at the destination world) to cover the costs of importation and on-planet movement.
These terms are summed up in the following table:
Terms of Shipping Responsible Party ‡ Event EXW FAS FOB CIF DES DEQ DFD Delivered to port B S S S S S S Loaded aboard ship B B S S S S S Carried aboard ship B/C B/C B/C B*/C S/C S/C S/C Discharged to quay B B B B B S S Delivered to named place B B B B B B S
‡ Buyer (B), Carrier (C)(ship), or Seller (S)
* Buyer is insured by seller
Medieval merchants had other innovations that might be useful in an interstellar trading future.
The roads were bad and in poor repair. Ocean routes were treacherous. Brigands and pirates lurked in parts of the trade route far from any help. Distant nations treated merchants with disdain at best and as rich people to rob at worst. And every single landowner along the trade route felt that they had a right to extort whatever tax they could get out of the trade caravan.
To fix these problems the medieval merchants found effective solutions, the most effective being the concept of a Merchant Guild. These were association of of traders. Guilds could invest the member's fees in such things as improving road conditions and suppressing pirates and brigands. Lighthouses were erected at dangerous points, to prevent merchant shipwrecks. The guild would negotiate treaties of commerce with foreign nations, protecting the liberty and security of guild members (sometimes the guild could even get an agreement for foreign troops to travel with a trade caravan). And while a single trader could not do much about landowner's imposed taxes, a huge guild could negotiate from a position of power. Negotiations with a landowner would result in a Merchant Guild charter, where guild members would pay a fixed sum or an annual payment for right of passage.
You can see how these concepts can be re-used in an interstellar trading future, the situations are much the same.
The flip-side of course is that the guild members have to pay their dues to the guild, and obey all the guild regulations. Members cannot engage in any type of trade forbidden by the Guild charter, fines were imposed on members who broke the rules, and guild members had to aid and support fellow guild members in times of trouble. If a guild member was killed, the guild would care for any orphans thus tragically created. Guilds also supplied health insurance, funeral expenses, and doweries for girls who could not afford them.
Naturally the guilds became quite powerful. Independent traders would find it difficult to compete. In a village, local craftsmen also found it difficult to compete with the Merchant guilds, which lead to the rise of Craft guilds in self-defense. Eventually the merchant guild members delegated all the actual traveling and trading jobs in their profession to employees, and instead sat comfortably at home while their factors did all the hard work.
In Andre Norton's novels the "Free Traders" are independent interstellar merchants owning little more than their starship. Often they are victimized by the megacorporation trading companies, who are too big for an individual free trader to fight. In the novel Moon Of Three Rings apparently the free traders have formed a Merchant guild called the "Legion", which collectively is powerful enough to defend the members from the megacorps.
In other novels, there are sometimes nomad clans who live on their huge starships. These often support themselves by interstellar trading.
A trading post or "factory" is where a merchant (or the merchant's factor) carries on the merchant's business on a remote miserable foreign planet. The trading post exchanges imported trade items for valuable local goods. In some cases a trading post and a couple of warehouses can grow into an actual colony. The trading post merchant or factor is responsible for the local goods logistics (proper storage and shipping), assesing and packaging for spacecraft transport. The factor is the representative for the merchant in all matters, reporting everything to the merchant headquarters. The longer the communication time delay between trading post and headquarters, the more trustworthy the factor has to be. Factors may work with native contract suppliers, called a comprador
While a trading post can be on a remote planet at the frontier of a long space route, a Transport Nexus will probably be more centrally located. A trading post planet might be the only source of some valuable luxury good (exotic gem stones, unique liquor, native artworks, luxurious furs, etc.) so it can be located on Planet Sticks in the Boondocks Cluster. By way of contrast, transport nexuses are centers of commerce and will be "strategically" located at the cross-roads of major trading routes.
Poul Anderson's David Falkayn and Nicholas Van Rijn series of stories have a well thought-out background universe for interstellar traders. You may find it illuminating. The job descriptions below are a mix of real-world and Poul Anderson inventions.
For more details see the quote below
An important difference between a factor and a merchant is that the factor sells goods that they have on hand (or have a bill of lading for), on consignment. Merchants, on the other hand, sells goods not in their possession on the basis of samples, on commission.
Also interesting is how the rise of the 17th century Dutch seaborne empire was due in part to their superior utilization of wind energy in the form of their breakthrough cargo transport, the Fluyt ship. Unlike other cargo ships of the time, the Fluyt was not designed to be easily converted into a warship. It was pure merchant vessel. This means it was cheaper to build, carried twice the cargo, and needed a smaller crew. Specialized shipyards optimised for Fluyt production brought the construction price down to a mere 50% of a cost of a conventional ship. It could also operate in much shallower water than a conventional ship, allowing it to get cargo in and out of ports other ships could not reach. By using a Fluyt, cargo transport costs were only 70% to 50% of the transport cost with a conventional ship. The only trade route Fluyts could not be used on were long haul voyages to the East Indies and the New World, because Fluyts were unarmed.
If you are a science fiction writer or game creator, these ideas should start the wheels turning in your mind. It may be instructive to read a couple of history textbooks on the topic of Merchant Guilds, and look over the David Falkayn and Nicholas van Rijn stories of Poul Anderson.
New interstellar colonies go through stages. They start out as wilderness planets seeded with groups of dirt-poor settlers in futuristic covered wagons, the goal is to grow the planet into a wealthy industrialized urban world.
But how? What does the new colony have to offer?
They cannot manufacture consumer goods. They have no industrialization infrastructure. The point of this exercise is to obtain some.
Food is probably not going to be worth much (unless the colony is next to Trantor and has cargo starships). Interstellar transport charges will make even soybeans unreasonably expensive, unless starship transport is unreasonably cheap. If the colony is growing common foodstuffs their produce will be just like the food from zillions of other dirt-poor colony planets: a glut on the market.
If the planet has some rare and valuable mineral resources, the mining megacorporations would have found out beforehand, and probably prevented colonization efforts until they had finished strip-mining the planet. So the colonists would inherit a world minus any gold or uranium mines. Even if the megacorporation missed something valuable, chances are the mines would just turn into a Resource Curse, making the government leaders wealthy but giving the colonists nothing but poverty, open-pit mines, mountains of toxic tailings, and future superfund sites.
And a colony trying to export their work force for off-world money, they will quickly discover that uneducated manual labor hires are a deci-credit a dozen. Technical universities would help, but with what money will the colony pay the professors?
What are the colonists going to do?
If the new colony really wants to make money hand-over-fist, they need to find something unique to their planet. If you want more money and are willing to have more risk, you want something where fashion rules (fashionable goods initially make more money, but abruptly make zero money when the fashion changes).
In the spirit of "Everything Old Is New Again" a science fiction author would be well advised to use the trade secret of science fiction and examine real-world history. Unsurprisingly this futuristic colony problem has happened before.
The economic powerhouse that helped jump start a few scattered English colonies in North America and transform them into what would become the United States was The North America Fur Trade. The beaver pelts were an abundant in North America (since the Eurasian Beaver had almost been hunted to extinction), they made very warm coats to combat the frigid return trips to Europe, and the pelts were easily converted into superior fur felt. Best of all, the superior felt created a fashion trend for beaver hats.
The United States and Canada profited from the beaver pelts for about three hundred freaking years, until the animals became endangered and European fashion switched from beaver fur felt hats to silk hats in the mid-1800's. Yes, the value of beaver pelts abruptly fell off a cliff, but three hundred years at a premium price is an acceptable jump start.
So you, the science fiction author, will have to invent some zany product that the colonist can use to claw their way out of an agrarian economy. Exotic gemstone, unique spice, unsynthesizable narcotic, fashionable pet, use your imagination. Bonus points if it is a product that is not transplantable. You don't want the colony's monopoly evaporating because some slimeball smuggled a breeding pair of hyper-minks off-world to make a rival hyper-mink ranch. In Isaac Asimov's THE CURRENTS OF SPACE the planet Florina grows a silky fluorescent fiber called Kyrt which for some reason won't grow properly on any other world. The monopoly is safe. As it turns out the reason kyrt won't grow elsewhere is an important plot point with further ramifications.
Further grist for the science-fiction author's mill is that any such valuable zany product is going to attract poachers and smugglers. Since the product is the colony's only ticket out of poverty, they will institute draconian anti-poaching and anti-smuggling efforts. Probably part of the local military, and probably with summary execution on the spot.
Note that the planet's trade item exploitation might pre-date the colony. The North American fur trade came years before the British colonies. A merchant or merchant conglomerate may have a trading post manned by a lonesome factor who trades for the item from the futuristic equivalent of human fur-trappers or with the indigenous alien sophonts. There may be some friction as the colonists start competing with the factor.
Also note that if the colonists are using indigenous aliens to help "fur trapping", the results can be an ecological nightmare. It certainly decimated the beaver population in North America. For the Native Americans, beavers transformed from a common food animal into a vital trade item for White Man's sophisticated knives and other coveted items. The beavers were quickly over-hunted.
Rob Garitta's Planet Zaonia is sort of like the Duchy of Grand Fenwick in space. It is a tiny interstellar colony with backwards technology which manages to become a galactic trade powerhouse by innovative use of "obsolete" tech.
Careful study of Zaonia will give you all sorts of idea along these lines.
Trade is such a source of power and control that quite a few groups want to restrict trade for fun and profit.
If you are an undeveloped colony or base and own no trader spacecraft, you are at the mercy of the off-planet traders. If the various trade ships collude in their pricing; you either pay it, hope for a trader willing to undercut the colluders, or do without. And if a trader has a monopoly on your planet, you are shafted. About the only thing that can be done is for the colony to build or otherwise obtain their very own trade ship (or make a plea to an off-planet government, good luck with that).
In some science fictional universes, a powerful group manages to obtain a monopoly on all spacecraft and starships. This is called a Thalassocracy. A good example is the Spacing Guild in the DUNE novels.
Predictably, as soon as a merchant tries to move his imported goods out of the spaceport, the tax and tariff officer shows up. As Terry Pratchett said, there exists Death and Taxes, and taxes is worse since at least death doesn't happen every time you try to cross the customs border.
If some trade goods landing at the spaceport are destined for another port, they are unloaded into a spaceport bonded warehouse, and later loaded into another merchant spacecraft. The point is the goods are just passing through, so the local customs agents can do nothing. However, if the spaceport is at the market for the trade goods, the port will probably be inside a sovereign nation, and the sovereign nation wants their taxes. The nation will have its customs and immigration agents controlling the flow of goods and people into and out of the spaceport, enforcing the nation's customs and immigration laws. The magic line is called the customs border. Goods land at the spaceport inside the customs border. The instant the goods are shipped across the border they have to be cleared by the customs agents, and the relevant duties, tariffs, and taxes paid. And some goods are contraband, which are restricted or prohibited from crossing the customs border. Depending upon the law, contraband items are refused entry or confiscated.
If the nation's list of contraband includes lucrative items, or if the tariffs are too high, there will be a strong fence around the customs border patrolled by customs agents on the lookout for smugglers.
The spaceport area inside the customs border is usually a free trade zone. In this zone, goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities. The agents cannot interfere at all with goods that are transshipped through the port. Trade goods inside the free trade zone are stored in bonded warehouses.
If however the customs border is drawn around the entire planet at orbital height, or even around an entire solar system or interstellar empire, then the job belongs to the space-based branch of the customs agency.
Sometimes the entity controlling the flow of trade is a hostile fleet from an invading foreign power. If they cannot conquer the planet (or are unwilling to pay the military cost) they will invest the planet and try to starve it out.
The enemy fleet is constantly on the lookout for blockade runners trying to sneak stuff in.
Things get really messy if there are several colonies on the planet that belong to different star nations, so the investing fleet is only trying to stop trade to Colony X, but allowing it to Colony Y and Colony Z.
Trade wants to be free. The invisible hand will not be denied. If a government forbids the import of a trade good, it becomes a seller's market and the price to purchase said good rises. This creates a financial incentive on the traders and importers. The definition of traders and importers trying to avoid the government restriction is "smuggling". Some define smuggling as "international trade through an unauthorized route." The lesser reason to smuggle is if the item is not actually contraband, but there is an expensive import tax.
Smuggling rapidly becomes an arms race between the custom inspectors and the traders, as the smugglers think of new and creative ways to sneak their contraband in right under the nose of customs. Or an arms race between the border patrol and the traders. Naturally if the bootlegger is trying to avoid going through customs at all, they do not have bother with putting up the charade that they are really honest merchants. On the other hand, custom-hood-winkers do not have to deal with boarder patrol spacecraft crewed with trigger-happy agents with no sense of humor.
It doesn't really matter whether the forbidden item is drugs (drug-runners), firearms (gun-runners), alcohol (rum-runners), stolen property, fugitives, rebels, illegal immigrants, items to avoid paying taxes or tariffs on, or cheap imported commercial goods competing with the local economy (avoiding a trade embargo); market forces will have their say. Smuggling became a recognized problem in the 13th century, a few minutes after England created the first national customs collection system. The English smuggling problem only lessened after the tariff laws were liberalized under pressure from the free trade movement.
This is why Han Solo had that hidden compartment below the deck plates of the Millennium Falcon, and Malcom Reynolds had that concealed cubby hole in the side of the Serenity. Not to mention Northwest Smith, Esmar Tuek, Stella Star and Jenna Stannis.
Note that custom duties are border taxes paid on goods being imported, such duties are being avoided by smugglers. Excise taxes on the other hand are "inland" taxes paid on goods being moved internally in a nation, and are normally of no concern to interplanetary smugglers.
In the 1700's along the English coast, the high custom duties imposed on tea, wine, and distilled spirits made smuggling very profitable. So much that impoverished fishermen and seafarers found it to be so lucrative that for many communities smuggling was more economically significant than legal activities such as farming and fishing. In Robert Louis Stevenson's Kidnapped it is said the most common name for a bar on the coast was The Smuggler's Inn. This can be adapted to a science fiction background if you can figure out some sort of poverty-stricken profession that requires regular travel between the planet's surface and low orbit. Keep in mind that "poverty" is relative.
Naturally a smuggler can make their life so much simpler if they can bribe or otherwise corrupt a government official to look the other way. This not only applies to giving a rustling handshake to a customs inspector, but also to large under-the-table sweetheart deals with the Parliamentary Off-Planet Trade Minister. The only difference is the size of the bribe and the size of the operation.
Occasionally the contraband item is being smuggled off planet instead of being smuggled into the planet. Illegal emigration, fugitives from justice, spies, stolen items, espionaged secret or confidential information, dangerous native animals, and so on. It matters not if the controlling government is trying to control import or export, they are creating an opportunity for a smuggler to make some money.
The government forbidding the import of goods might not be the government of the planet. The planet may be invested by a hostile fleet, under siege by an external enemy trying to starve them out. In this case the trader is not so much a smuggler as they are a blockade-runner. The runner might be a noble patriot working for free, an amoral mercenary being paid by the interdicted planet, or a slimy opportunist trying to make a killing by importing luxury items at inflated prices. The stakes are higher with blockade-running as compared with smuggling, since enemy combat spacecraft are probably armed quite a bit better than a little putt-putt customs border patrol boat.
A Transport Nexus is a crossroad spaceport for passengers, a port of entry, an orbital warehouses where valuable minerals from asteroid mines are stored and trade goods transshipped, or a "trade-town". Will include related services, such as bonded warehouses, trading posts, hotels and longshoremen.
A trading post planet might be the only source of some valuable luxury good (exotic gem stones, unique liquor, native artworks) so it can be located on Planet Sticks in the Boondocks Cluster. By way of contrast, transport nexuses are centers of commerce and will be "strategically" located. If one is talking about science fictional faster-than-light starship trade, they will be at important junctures and cross-roads. If one is talking about real-science Solar system trade, there ain't no such junctures, so strategic will probably mean on or in orbit around planets that are important markets for interplanetary trade goods. You cannot have permanent junctures when the destination planets are constantly changing their position relative to each other.
In a rocketpunk universe, a transport nexus would be in a space station. Now, the thing about space stations is that they are basically a spacecraft without an engine. Which means if you add an engine you suddenly have a mobile transport nexus.
Now, let me take a moment to mention James Blish's classic Cities in Flight series. In it, they invent paragravity machines called Dillon-Wagoner Graviton Polarity Generators (commonly called "Spindizzies"). These can lift spacecraft into orbit, move them around the solar system, and land them. They are also a FTL drive.
The amusing point is that the efficiency of a spindizzy goes up with the mass of the spacecraft. This means spacecraft were big. Huge, even. Finally entire cities were uprooted and turned into starships. The latter novels center around the adventures of New York, basically Manhattan island. The "Okie" cities became migrant laborers of the galaxy, traveling between planetary colonies. Upon arrival they can land the entire city on the planet under spindizzy power (lacking hand-waving paragravity, it makes more sense for mobile space stations to merely park into a convenient orbit and use surface to orbit shuttles).
Much like Flying Castles, actually.
If you optimize your mobile space station less towards "transport nexus" and more towards "military force projection", and have the resources of a galactic empire behind you, the result is more like the Death Star from Star Wars.
In the classic novel Gulliver's Travels, part III has our hero encountering the flying island of Laputa. It flies by virtue of magnetic levitation, controlled by the Laputans. The tyrant king controls the land of Balnibarbi, coincidentally the area Laputa can fly over. Rebel regions are brought to heel by either:
- Laputa hovers over the rebel region for a while. Region is deprived of sunlight and rain, thus causing crop failure
- Laputa conducts aerial bombardment, dumping large bolders on rebel cities
- In extreme cases, Laputa lowers itself on the rebel city, crushing it
The crush option is a last resort. While Laputa has a bottom plate of adamant 200 yards thick, crushing a rebel city could possibly damage the plate.
The city of Lindalino is the only successful rebel. They constructed large towers at the four corners of the city. On the top they placed loadstones (natural magnets). Since Laputa flies and moves by magnetic levitation, the towers are a defense. If Laputa got too close, the towers would either cause Laputa to crash or be pinned in place forever.
Free Traders live and work on a starship, traveling to little-known planets to find exotic goods to trade. The crews generally own little more than their own starship, have no home except onboard, and experience a hand-to-mouth existence. The opposite is the traders who work for the huge megacorporation trading companies, living as drab little cogs in a drab corporate machine. The corporations have all the choice trade worlds to themselves, while the free traders have to fight over the scraps or do dangerous and financially risky explorations into unknown space. The corporations are also fond of perpetrating criminal acts on free traders including trade poaching, bankrupting free traders through loss leading, piracy, and out-and-out murder. An individual free trader ship can do little to defend itself from a megacorporation more powerful than most nations.
Sadly, there are real world reasons why free traders won't be able to compete with the big corporations. As John Reiher puts it: "The big trade houses have all the lucrative deals tied up in contracts and connections". Tramp traders can compete, but they are not very romantic. Tramps are more like the truckers of the trading world, not the Marco Polos. It seems to me that free traders can only compete if there is a Marco Polo situation, where there is a vast unexplored frontier region. It won't work within a small star empire where all the planets are explored and civilized.
Term "Free Trader" was invented by Andre Norton.
As I previously mentioned there is a long history of SF novels about interstellar free traders eking out a marginal existence on the fringes of the huge trader corporations, from Andre Norton's Solar Queen novels to the Space Angel series by John Maddox Roberts.
A closely related concept is the interplanetary peddler, hopping from tiny settlement to tiny settlement like futuristic Yankee traders. They will supply vital equipment and little luxuries to people living in planetary pioneer colonies, space habitats, and Ma-and-Pa asteroid mines. Examples include Tinker by Jerry Pournelle and The Rolling Stones by Robert Heinlein.
Never lose sight of the fact that a Free Trader starship is not making any money while it is sitting on a planet or space station. The money comes by transporting cargo. Therefore the longer the ship sits on its butt while the cargo-master frantically tries to scrounge some cargo, the more money is being wasted. Even worse, spaceports charge berthing fees by the day.
Free Traders make money by two methods: Speculative Trade and Cargo Transport.
Speculative Trade is an attempt to make money from arbitrage, that is buying a cargo where it is inexpensive, transporting it to a planet where the cargo is expensive, selling it, and pocketing the profits. It is a big help if the Free Trader has a monopoly on a cargo, such as exclusive rights to the highly prized Zoran gemstones of the planet Lorgal. If the Free Trader guesses wrong, and the cargo is worthless on the destination planet, the traders have to absorb the financial loss themselves.
Cargo Transport makes money the same way as an 18-wheeler trucker. The free trader does not buy a cargo. Instead a client hires the trader to transport the client's cargo to a specified destination by a certain time, with the cargo intact. Traders who violate any part of the contract will not be paid. Free traders generally operate on the spot market. The big megacorporation trader ships instead operate as cargo lines.
FREE TRADER NEEDS
- Prosperous traders will own a trading post or factory with exclusive rights to some valuable trade good on a planet.
- Slighly less prosperous traders will just have the rights to the planet, and will have an arrangement with the natives to visit according to a schedule.
- Even less prosperous traders will just have right to visit somebody else's trading post and pay through the nose for their valuable trade good.
- Even lower are traders who scrounge around at a spaceport to find odd cargos they can trade or purchase, crumbs left over from the trade ships belonging to megacorporations.
- And at the bottom are the traders who depend upon investors or ship brokers to hire the Free Trader to be a mere blue-collar cargo hauling service.
But if the free traders can't be talked out of it: they will need whatever they can beg, borrow, or steal in the way of used and second-rate exploration gear.
Sometimes space nomads live as free traders, families and communities living in large "clan-ships", developing a "trader culture." Each ship is a world, carrying the entire clan. These may evolve into full-fledged Macrolife.
Clan ships tend to be faster-than-light starships, ones that are slower-than-light are more likely to be classified as generation ships. Clan ships are liable to be quite large, but if they are outrageously huge they are usually classified as World Ships.
Sometimes these nomad trader cultures become powerful enough to become nomad empires. Even more powerful is a Thalassocracy, where the nomad empire horde has an actual monopoly on trade since they control all access to space. If people living on planets want to engage in interstellar trade, they have to go through the thalassocrats. The leader of the thalassocrats is of course called the thalassiarch.
Examples include CITIZEN OF THE GALAXY by Robert Heinlein, STAR WAYS aka THE PEREGRINE by Poul Anderson, the Cities in Flight novels of James Blish, MERCHANTER'S LUCK and FINITY'S END by C. J. Cherryh, RITE OF PASSAGE by Alexi Panshin, A DEEPNESS IN THE SKY by Vernor Vinge, the rag-tag fugitive fleet from the destroyed 12 colonies of BATTLESTAR GALACTICA.
Corporations are large companies that legally considered to be a person. In science fiction a megacorporation is a corporation so huge it has more power than your average nation, or even an entire planet.
(ed note: You really should read the entire thing. And take notes.
The article traces the rise and fall of the East India Company, with historical trends and power structures that a science fiction author can easily transpose into their future histories.
Corporation Types Smithian
Mercantilism Schumpeterism Control of Land Control of Mindshare Space Time Zero-Sum Non-Zero-Sum Marketing Innovation
The first point is that the corporate form was born in the era of Mercantilism, the economic ideology that (zero-sum) control of land is the foundation of all economic power (ed note: the idea that business should be organized around Space).
In politics, Mercantilism led to balance-of-power models. In business, once the Age of Exploration (the 16th century) opened up the world, it led to mercantilist corporations focused on trade (if land is the source of all economic power, the only way to grow value faster than your land holdings permit, is to trade on advantageous terms).
The forces of radical technological change — the Industrial Revolution — did not seriously kick in until after nearly 200 years of corporate evolution (1600-1800) in a mercantilist mold. Mercantilist models of economic growth map to what Joel Mokyr calls Smithian Growth, after Adam Smith…
…Smith was both the prophet of doom for the Mercantilist corporation, and the herald of what came to replace it: the Schumpeterian corporation. Mokyr characterizes the growth created by the latter as Schumpeterian growth…
The corporate form therefore spent almost 200 years — nearly half of its life to date — being shaped by Mercantilist thinking, a fundamentally zero-sum way of viewing the world…
…In fact, in terms of the two functions that Drucker considered the only essential ones in business, marketing and innovation, the Mercantilist corporation lacked one. The archetypal Mercantilist corporation, the EIC, understood marketing intimately and managed demand and supply with extraordinary accuracy. But it did not innovate.
Innovation was the function grafted onto the corporate form by the possibility of Schumpeterian growth, but it would take nearly an entire additional century for the function to be properly absorbed into corporations. It was not until after the American Civil War and the Gilded Age that businesses fundamentally reorganized around (as we will see) time instead of space, which led, as we will see, to a central role for ideas and therefore the innovation function.
The Black Hills Gold Rush of the 1870s, the focus of the Deadwood saga, was in a way the last hurrah of Mercantilist thinking. William Randolph Hearst, the son of gold mining mogul George Hearst who took over Deadwood in the 1870s, made his name with newspapers. The baton had formally been passed from mercantilists to schumpeterians.
This divide between the two models can be placed at around 1800, the nominal start date of the Industrial Revolution, as the ideas of Renaissance Science met the energy of coal to create a cocktail that would allow corporations to colonize time…
I: Smithian Growth and the Mercantilist Economy (1600 – 1800)
It is difficult for us in 2011, with Walmart and Facebook as examples of corporations that significantly control our lives, to understand the sheer power the East India Company exercised during its heyday. Power that makes even the most out-of-control of today’s corporations seem tame by comparison. To a large extent, the history of the first 200 years of corporate evolution is the history of the East India Company. And despite its name and nation of origin, to think of it as a corporation that helped Britain rule India is to entirely misunderstand the nature of the beast.
Two images hint at its actual globe-straddling, 10x-Walmart influence: the image of the Boston Tea Partiers dumping crates of tea into the sea during the American struggle for independence, and the image of smoky opium dens in China. One image symbolizes the rise of a new empire. The other marks the decline of an old one.
The East India Company supplied both the tea and the opium.
At a broader level, the EIC managed to balance an unbalanced trade equation between Europe and Asia whose solution had eluded even the Roman empire. Massive flows of gold and silver from Europe to Asia via the Silk and Spice routes had been a given in world trade for several thousand years. Asia simply had far more to sell than it wanted to buy. Until the EIC came along
A very rough sketch of how the EIC solved the equation reveals the structure of value-addition in the mercantilist world economy.
The EIC started out by buying textiles from Bengal and tea from China in exchange for gold and silver.
Then it realized it was playing the same sucker game that had trapped and helped bankrupt Rome.
Next, it figured out that it could take control of the opium industry in Bengal, trade opium for tea in China with a significant surplus, and use the money to buy the textiles it needed in Bengal. Guns would be needed.
As a bonus, along with its partners, it participated in yet another clever trade: textiles for slaves along the coast of Africa, who could be sold in America for gold and silver.
For this scheme to work, three foreground things and one background thing had to happen: the corporation had to effectively take over Bengal (and eventually all of India), Hong Kong (and eventually, all of China, indirectly) and England. Robert Clive achieved the first goal by 1757. An employee of the EIC, William Jardine, founded what is today Jardine Matheson, the spinoff corporation most associated with Hong Kong and the historic opium trade. It was, during in its early history, what we would call today a narco-terrorist corporation; the Taliban today are kindergarteners in that game by comparison. And while the corporation never actually took control of the British Crown, it came close several times, by financing the government during its many troubles.
The background development was simpler. England had to take over the oceans and ensure the safe operations of the EIC.
Just how comprehensively did the EIC control the affairs of states? Bengal is an excellent example. In the 1600s and the first half of the 1700s, before the Industrial Revolution, Bengali textiles were the dominant note in the giant sucking sound drawing away European wealth (which was flowing from the mines and farms of the Americas). The European market, once the EIC had shoved the Dutch VOC aside, constantly demanded more and more of an increasing variety of textiles, ignoring the complaining of its own weavers. Initially, the company did no more than battle the Dutch and Portuguese on water, and negotiate agreements to set up trading posts on land. For a while, it played by the rules of the Mughal empire and its intricate system of economic control based on various imperial decrees and permissions. The Mughal system kept the business world firmly subservient to the political class, and ensured a level playing field for all traders. Bengal in the 17th and 18th centuries was a cheerful drama of Turks, Arabs, Armenians, Indians, Chinese and Europeans. Trade in the key commodities, textiles, opium, saltpeter and betel nuts, was carefully managed to keep the empire on top.
But eventually, as the threat from the Dutch was tamed, it became clear that the company actually had more firepower at its disposal than most of the nation-states it was dealing with. The realization led to the first big domino falling, in the corporate colonization of India, at the battle of Plassey. Robert Clive along with Indian co-conspirators managed to take over Bengal, appoint a puppet Nawab, and get himself appointed as the Mughal diwan (finance minister/treasurer) of the province of Bengal, charged with tax collection and economic administration on behalf of the weakened Mughals, who were busy destroying their empire. Even people who are familiar enough with world history to recognize the name Robert Clive rarely understand the extent to which this was the act of a single sociopath within a dangerously unregulated corporation, rather than the country it was nominally subservient to (England).
This history doesn’t really stand out in sharp relief until you contrast it with the behavior of modern corporations. Today, we listen with shock to rumors about the backroom influence of corporations like Halliburton or BP, and politicians being in bed with the business leaders in the Too-Big-to-Fail companies they are supposed to regulate.
The EIC was the original too-big-to-fail corporation. The EIC was the beneficiary of the original Big Bailout. Before there was TARP, there was the Tea Act of 1773 and the Pitt India Act of 1783. The former was a failed attempt to rein in the EIC, which cost Britain the American Colonies. The latter created the British Raj as Britain doubled down in the east to recover from its losses in the west. An invisible thread connects the histories of India and America at this point. Lord Cornwallis, the loser at the Siege of Yorktown in 1781 during the revolutionary war, became the second Governor General of India in 1786.
But these events were set in motion over 30 years earlier, in the 1750s. There was no need for backroom subterfuge. It was all out in the open because the corporation was such a new beast, nobody really understood the dangers it represented. The EIC maintained an army. Its merchant ships often carried vastly more firepower than the naval ships of lesser nations. Its officers were not only not prevented from making money on the side, private trade was actually a perk of employment (it was exactly this perk that allowed William Jardine to start a rival business that took over the China trade in the EIC’s old age). And finally — the cherry on the sundae — there was nothing preventing its officers like Clive from simultaneously holding political appointments that legitimized conflicts of interest. If you thought it was bad enough that Dick Cheney used to work for Halliburton before he took office, imagine if he’d worked there while in office, with legitimate authority to use his government power to favor his corporate employer and make as much money on the side as he wanted, and call in the Army and Navy to enforce his will. That picture gives you an idea of the position Robert Clive found himself in, in 1757.
He made out like a bandit. A full 150 years before American corporate barons earned the appellation “robber.”
In the aftermath of Plassey, in his dual position of Mughal diwan of Bengal and representative of the EIC with permission to make money for himself and the company, and the armed power to enforce his will, Clive did exactly what you’d expect an unprincipled and enterprising adventurer to do. He killed the golden goose. He squeezed the Bengal textile industry dry for profits, destroying its sustainability. A bubble in London and a famine in Bengal later, the industry collapsed under the pressure (Bengali economist Amartya Sen would make his bones and win the Nobel two centuries later, studying such famines). With industrialization and machine-made textiles taking over in a few decades, the economy had been destroyed. But by that time the EIC had already moved on to the next opportunities for predatory trade: opium and tea.
The East India bubble was a turning point. Thanks to a rare moment of the Crown being more powerful than the company during the bust, the bailout and regulation that came in the aftermath of the bubble fundamentally altered the structure of the EIC and the power relations between it and the state. Over the next 70 years, political, military and economic power were gradually separated and modern checks and balances against corporate excess came into being…
…As an enabling mechanism, Britain had to rule the seas, comprehensively shut out the Dutch, keep France, the Habsburgs, the Ottomans (and later Russia) occupied on land, and have enough firepower left over to protect the EIC’s operations when the EIC’s own guns did not suffice. It is not too much of a stretch to say that for at least a century and a half, England’s foreign policy was a dance in Europe in service of the EIC’s needs on the oceans…
…To read both books is to experience a process of enlightenment (The Corporation that Changed the World by Nick Robins and The Influence of Sea Power Upon History: 1660-1783 by Alfred Thayer Mahan). An illegible period of world history suddenly becomes legible. The broad sweep of world history between 1500-1800 makes no real sense (between approximately the decline of Islam and the rise of the British Empire) except through the story of the EIC and corporate mercantilism in general…
…The 16th century makes a vague sort of sense as the “Age of Exploration,” but it really makes a lot more sense as the startup/first-mover/early-adopter phase of the corporate mercantilism. The period was dominated by the daring pioneer spirit of Spain and Portugal, which together served as the Silicon Valley of Mercantilism. But the maritime business operations of Spain and Portugal turned out to be the MySpace and Friendster of Mercantilism: pioneers who could not capitalize on their early lead.
Conventionally, it is understood that the British and the Dutch were the ones who truly took over. But in reality, it was two corporations that took over: the EIC and the VOC (the Dutch East India Company, Vereenigde Oost-Indische Compagnie, founded one year after the EIC) the Facebook and LinkedIn of Mercantile economics respectively. Both were fundamentally more independent of the nation states that had given birth to them than any business entities in history. The EIC more so than the VOC. Both eventually became complex multi-national beasts…
…But arguably, the doings of the EIC and VOC on the water were more important than the pageantry on land. Today the invisible web of container shipping serves as the bloodstream of the world. Its foundations were laid by the EIC.
For nearly two centuries they ruled unchallenged, until finally the nations woke up to their corporate enemies on the water. With the reining in and gradual decline of the EIC between 1780 and 1857, the war between the next generation of corporations and nations moved to a new domain: the world of time.
The last phase of Mercantilism eventually came to an end by the 1850s, as events ranging from the first war of Independence in India (known in Britain as the Sepoy Mutiny), the first Opium War and Perry prying Japan open signaled the end of the Mercantilist corporation worldwide. The EIC wound up its operations in 1876. But the Mercantilist corporation died many decades before that as an idea. A new idea began to take its place in the early 19th century: the Schumpeterian corporation that controlled, not trade routes, but time. It added the second of the two essential Druckerian functions to the corporation: innovation.
II. Schumpeterian Growth and the Industrial Economy (1800 – 2000)
…The action shifted to two huge wildcards in world affairs of the 1800s: the newly-born nation of America and the awakening giant in the east, Russia. Per capita productivity is about efficient use of human time. But time, unlike space, is not a collective and objective dimension of human experience. It is a private and subjective one. Two people cannot own the same piece of land, but they can own the same piece of time. To own space, you control it by force of arms. To own time is to own attention. To own attention, it must first be freed up, one individual stream of consciousness at a time.
The Schumpeterian corporation was about colonizing individual minds. Ideas powered by essentially limitless fossil-fuel energy allowed it to actually pull it off…
…If the EIC was the archetype of the Mercantilist era, the Pennsylvania Railroad company was probably the best archetype for the Schumpeterian corporation. Modern corporate management as well Soviet forms of statist governance can be traced back to it. In many ways the railroads solved a vastly speeded up version of the problem solved by the EIC: complex coordination across a large area. Unlike the EIC though, the railroads were built around the telegraph, rather than postal mail, as the communication system. The difference was like the difference between the nervous systems of invertebrates and vertebrates.
If the ship sailing the Indian Ocean ferrying tea, textiles, opium and spices was the star of the mercantilist era, the steam engine and steamboat opening up America were the stars of the Schumpeterian era. Almost everybody misunderstood what was happening. Traveling up and down the Mississippi, the steamboat seemed to be opening up the American interior. Traveling across the breadth of America, the railroad seemed to be opening up the wealth of the West, and the great possibilities of the Pacific Ocean.
Those were side effects. The primary effect of steam was not that it helped colonize a new land, but that it started the colonization of time. First, social time was colonized. The anarchy of time zones across the vast expanse of America was first tamed by the railroads for the narrow purpose of maintaining train schedules, but ultimately, the tools that served to coordinate train schedules: the mechanical clock and time zones, served to colonize human minds…
…The steam engine was a fundamentally different beast than the sailing ship. For all its sophistication, the technology of sail was mostly a very-refined craft, not an engineering discipline based on science. You can trace a relatively continuous line of development, with relatively few new scientific or mathematical ideas, from early Roman galleys, Arab dhows and Chinese junks, all the way to the amazing Tea Clippers of the mid 19th century.
Steam power though was a scientific and engineering invention. Sailing ships were the crowning achievements of the age of craft guilds. Steam engines created, and were created by engineers, marketers and business owners working together with (significantly disempowered) craftsmen in genuinely industrial modes of production. Scientific principles about gases, heat, thermodynamics and energy applied to practical ends, resulting in new artifacts. The disempowerment of craftsmen would continue through the Schumpeterian age, until Frederick Taylor found ways to completely strip mine all craft out of the minds of craftsmen, and put it into machines and the minds of managers. It sounds awful when I put it that way, and it was, in human terms, but there is no denying that the process was mostly inevitable and that the result was vastly better products.
The Schumpeterian corporation did to business what the doctrine of Blitzkrieg would do to warfare in 1939: move humans at the speed of technology instead of moving technology at the speed of humans. Steam power used the coal trust fund (and later, oil) to fundamentally speed up human events and decouple them from the constraints of limited forms of energy such as the wind or human muscles. Blitzkrieg allowed armies to roar ahead at 30-40 miles per hour instead of marching at 5 miles per hour. Blitzeconomics allowed the global economy to roar ahead at 8% annual growth rates instead of the theoretical 0% average across the world for Mercantilist zero-sum economics. “Progress” had begun.
The equation was simple: energy and ideas turned into products and services could be used to buy time. Specifically, energy and ideas could be used to shrink autonomously-owned individual time and grow a space of corporate-owned time, to be divided between production and consumption. Two phrases were invented to name the phenomenon: productivity meant shrinking autonomously-owned time. Increased standard of living through time-saving devices became code for the fact that the “freed up” time through “labor saving” devices was actually the de facto property of corporations. It was a Faustian bargain.
Many people misunderstood the fundamental nature of Schumpeterian growth as being fueled by ideas rather than time. Ideas fueled by energy can free up time which can then partly be used to create more ideas to free up more time. It is a positive feedback cycle, but with a limit. The fundamental scarce resource is time. There is only one Earth worth of space to colonize. Only one fossil-fuel store of energy to dig out. Only 24 hours per person per day to turn into capitive attention.
It is fairly obvious that Schumpeterian growth has been fueled so far by reserves of fossil fuels. It is less obvious that it is also fueled by reserves of collectively-managed attention.
For two centuries, we burned coal and oil without a thought. Then suddenly, around 1980, Peak Oil seemed to loom menacingly closer.
For the same two centuries it seemed like time/attention reserves could be endlessly mined. New pockets of attention could always be discovered, colonized and turned into wealth.
Then the Internet happened, and we discovered the ability to mine time as fast as it could be discovered in hidden pockets of attention. And we discovered limits.
And suddenly a new peak started to loom: Peak Attention.