Magitech Revolution

So, this one time I needed to figure out what the economy of a magically industrialized civilization would look like.

I had a pretty good idea of what I wanted the end result to look like:  a combination of steam and magic power, late 19th/early 20th century.  I had a pretty good idea of what magic was and wasn't capable of, the manufacture of magical tools, etc., so I knew what kind of materials would be in demand and some of what would be possible to manufacture.

The empire I have been/am building is one that I want to be seen as the kind of place readers might like to live.  This gets into the area of my ideological biases, and for some excellent thoughts in that head space I recommend you check out this article before continuing further.

It's cool.  I'll wait.

Most of my ideas on the kinds of policy this state would have are spurred by things I think we in America should be doing better.  I'd also dearly like it to be as authentic as possible.  Call it practical idealism.  The main characters are going to be members of this empire and while I will have a lot of fun with some of the bad things that happen in their system (it's human-based and therefore as prone to error and abuse as anything else) I would ultimately like it that when someone says, "I'm from the Empire and I'm here to help," the reader will more likely than not give them the benefit of the doubt.

I may have also bolted on some things that may not be optimal legislative or socially but I think are fun.  I think the concept of holdover pseudo-ceremonial feudal rank makes for a cool garnish, but I'm not about to suggest we start appointing anyone to a dukedom.

HAHA! CROWNS FOR EVERYBODY!

So I have some political and technological goals that this economy needs to serve, and a little vice versa-making sure there is a level of economic empowerment for people is going to require particular laws be in place as well as certain societal checks and balances.

The basic principle behind developing this economy was that it was the state's responsibility to equip all of its citizens with the tools they need to better themselves.  This includes a guarantee of healthcare, food, education and housing.  I'm a big believer in capitalism and competition as an excellent engine of progress, but for that engine to be the best that it can be it needs to be made out of the best materials you can find.

I came up with some historical reasons for why a society would develop like this and tried to figure out how it all would come together.  Healthcare is relatively easy as there are extant systems that work in a fashion that I find compelling.  Food can be obtained through subsidy, and in a setting where the government is paranoid about being cut off from a food supply the subsidies will be coming in from both directions.  Education is another system that is already done pretty well in some places.

Housing presented a problem as I always associated government housing with poor conditions and upkeep, however again it appears that's just because we are doing it wrong.


So there's a lot of government investment in the economy, as well as a large amount of regulation.  That means taxes.  And because they have a military that makes up about 6% of the population, they are going to need an assload of taxes.  I'm trying to keep things pretty progressive, so that means the more you make the more tax you have to pay.

My idea of the way taxes work is a yearly income tax being the sole method of collection: any money you receive from a salary, sale of stock, any time money comes into your possession, it's taxed as income.  Tax fraud results in heavy prison sentences and is very expensive.  On the other hand, there's no property tax, no sales tax, no other taxes to think about-just a percentage of the money you've made in the previous year.  There are even local tax offices that provide compliance services to make sure the process is relatively painless for everyone.

Now, obviously the best way to try to evade this is to attempt to pay people in barter.  This is, however, both fairly inconvenient compared to using cash, and the biggest earners most likely to benefit from it are going to be some of the closest watched by the in-universe version of the IRS.  Again, no system is perfect: some people in both high and low society are going to avoid taxes.  They, however, will be a small criminal minority.

What do you mean I can't declare Aragorn as a dependent?  He's only 87!

So I have an economy where food is very cheap and readily available, shelter is easy to come by, healthcare and education are provided and there are heavy taxes.  What about income-generation to provide for both taxes AND provide spending money to support growth and a consumer-based economy?

Food production and manufacturing will be large sectors, especially as while the magitech available does not automate things it does provide very significant labor multipliers.   Exporting both food and finished goods would be significant sources of income, though the technology level of the rest of the world is such that it could not absorb the level of exports the Empire could theoretically provide.  That is why internal consumption is so important, not just as an engine for growth and advancement but to keep money and goods flowing through the system.  Fortunately, there is not any real competition for home magitech appliances, and the infrastructure doesn't exist elsewhere to support them.  There are cultural and historical reasons for this-and the Empire isn't about to share the most critical magitech that allows it to hold a monopoly on a high standard of living.

Now, there is another facet here: corporations.  I was thinking that by law corporations would need to issue voting stock to their employees with a certain dividend payment from any profits (I don't know that I'll need to specify a percentage here; if I do, I'll have to figure that out as well).  There would also be fairly strict controls on corporate expenses in lieu of salary to avoid the tax dodge of having all your expenses paid for by a corporate account that technically doesn't belong to anyone and therefore isn't taxed.

Big stick? More like MAGIC stick!

So there's a lot of money here that is circulating into the state, but it's circulating back in the form of needed services and back into private businesses when people have the means to buy neat new stuff and better their station in life.  I'm a big believer that most people will actually try and go out and make money to eat better food, take in entertainment, live in nicer surroundings and feel accomplished.  Especially when they see their neighbors being able to move up by doing so.  Sure, there will always be some people who live mostly on the dole, but I don't think a few people taking advantage of a system should cancel out all the people who benefit and contribute back.  Here there are also some checks on abuses by corporations as well.

Those are the kinds of thoughts that I go into when designing the background economy to a setting.  They're not just important for a worldbuild-wank, but inform the kind of backgrounds characters have and references they will make to the way their culture works.