Economics in 3200
Under closer scrutiny, the prosperity of the entire Empire is built on one thing alone: slavery. So in essence, the Imperial Navy is merely a protection force for the slave trade. In this way, it is not unlike Ancient Rome.
The Imperial Empire: Healthy at the Core
The Imperial Empire's economic policy is officially described as 'strict capitalism', and this is true in theory. Taxes are extremely low, investment in infrastructure high and a large pool of slave labour readily available. Business practice is also often totally unrestricted, hence the term 'no social safeguards'. Any business wishing to start up in the Empire will receive a huge subsidy, especially so if it's a military contract, and a virtual lifetime guarantee of free labour. The universities of the Empire also produce exceptionally skilled engineers, and the Empire is famed for its scientific advances.
The core systems contain a relatively healthy middle class; consumer goods are manufactured in abundance for local consumption and slave labour is mostly restricted to private servants and small scale plantation work (citizens are usually employed in core system factories; the wages are high and the conditions excellent). Only in the colonies are slaves employed en masse in the great refining and mining systems.
On the surface, the core systems of the Empire are similar to those of the Federation. Social programs are in place; health care and education are free and universal, and there exists excellent infrastructure links. However, the economies of the core systems are maintained solely by the influx of wealth from the territory the Empire conquers. The core systems cannot continue to thrive independently of the Empire's territorial acquisitions because the Empire is dependent on the colonies for wealth. Taxes on the middle classes are so low and business so heavily subsidised that the central government must continually find sources of wealth beyond taxation. Only by Koloniale Raubwirtschaft is the consumerist capitalist economy of the core systems maintained.
An increase in taxation and production on Federation levels would alienate the middle classes and landowners, drive prices up and bankrupt many businesses. Slave labour must always be used in the colonies; labour raised from the affluent core systems is unwilling to toil to any comparable level for the wage necessary to guarantee a return on investment. Without Raubwirtschaft the economy of the core systems would fall apart, since the population have grown accustomed to the easy lifestyle that slave labour and low taxes bring. Essentially the influx of such enormous amounts of raw material and wealth from the conquered systems allows taxes to be so low, and also leads to chronic Dutch Disease; the middle classes aren't particularly enterprising, and they produce consumer goods usually only for the home market (the reasons for this are mentioned below). By Federation standards the manufacturing sector in the Empire is inefficient, despite most of it using slave labour.
The levels of wealth in the Imperial core are also far in advance of the capital cities of the Solar system, and on the surface the Empire appears to be more affluent than the Federation. Attention should be brought to the fact that the Federation invests far more in its colonies and demands far less from them. The population of the Empire sticks solidly to the core, since that's the only area where opportunity to make money exists, whereas the Federation population is free-flowing and sees opportunity to invest anywhere. Of course, it's also easier to control a centralized population.
The Empire's colonial plunder economy
As stated previously, the economy of the colonies is based on Koloniale Raubwirtschaft. The Empire plunders conquered systems, planets and territories and extracts all the resource wealth it can; as a rule there is relatively little cash flow from the core systems back to the colonies, initial infrastructure investments notwithstanding. The colonies are expected to pay for themselves and beyond, with little return, and to continue producing; this wealth invariably flows back into the heart of the Empire. The colonial economies are based on slavery, and unpaid work has no purchasing power, which effectively prevents the rise of a middle class and capitalism since there is no volatile capital to accumulate. There is no significant secondary or tertiary industry in the colonies. Essential goods are usually produced locally, but luxury goods and foodstuffs are often rare. Since there is no production of market goods for export, there is no cash flow into the colonies from the core systems (there is literally nothing to buy). The Empire prohibits private firms from establishing any large scale mining facilities since it needs to directly control such valuable resources and is unwilling to pay for them. Once these raw materials reach the core, they are sold for a nominal fee to local industry.
As the colonies become further away, what trade there could be with the core diminishes - this is offset in the Federation by the fact that local systems can trade with each other, regardless of proximity from the core. The whole economy of the Empire can be maintained only as long as the Empire is on expanse; if the Empire cannot continue to conquer new systems and expand outward it will be doomed. Due to the increased costs of defending an expanding Empire, a collapse may soon be caused by diminishing marginal return on investment in complexity; financial costs will increase but the means of meeting them will be steadily eroded, especially as the Empire expands further into the galaxy. Only by dividing rule can a collapse be offset. Governing so many far away systems centrally becomes more impractical as the Empire expands, but the Emperors are unlikely to countenance any erosion of their power.
Simply put: the extraction of resources by slave labour and the transfer of subsequent wealth to the core systems maintains a high standard of living for the citizens of the Empire. There is zero economic growth in the mining colonies, and the result in the core is an economy wholly dependent on subsidy, very low tax, plentiful cheap resources sold at a fraction of their real value, and slave labour.
The Federation: Fostering loyalty through Independence
In the Federation, the system allows for the flow of manufactured goods in both directions, allowing industry to develop freely in the core systems and the colonies. This results in strong independent systems producing their own goods. These Federal systems maintain political links to the Federation, but are economically independent. They pay a modest tax to the Sol Government and invest instead in their own systems. The Federation's wealth is based not on conquering systems for their raw materials and taking them by force, but by fair and free trade. Because of this, the Federation does not require a Navy on such a large scale as the Empire's. The outlying systems are kept loyal by their own independent wealth and their role in the great trading system. They can also afford to contribute largely to their own defence and protection of their own trading fleets, something which costs the Imperial Navy dearly (Imperial Navy convoy fleets are the largest drain on resources and manpower). Although taxes are higher, the middle class sees immediate return on their investments and is not restricted to the core systems. Fortunes can be made in any system. Likewise, the Federation acquires the raw materials necessary for this production by trading manufactured goods or peaceful settlement.
As the Federation grows, cost of defence does not, as long as the systems are encouraged to be economically independent. This is the reverse of the situation in the Empire, where another territory acquired is a mixed blessing. Although it may provide resource wealth for centuries to come, the funds must immediately be found to pay for its defence without alienating the middle classes at home. Because of this the Empire grows weaker the larger it becomes, yet failure to expand results in falling income to the detriment of the Navy - the very force that keeps the Empire alive. Since trading is the lifeblood of the Federation, expansion leads only to increased wealth. Expansion is the result of a continual desire to invest, not, as in the Empire, a constant need for resource wealth to pay for a large navy and pacify the population.
The term 'colony' is often erroneously used interchangeably to refer to a planet within a system or the system itself. The system itself is the colony, not the planet. Planets within systems are usually named numerically for the system's star. Any planet that is deemed worthy of settlement and extraction will often be given a more personal name, and then referred to by many as the 'colony'. This is incorrect, although a star system is not classed as a colony unless there is a colonial planet within it, hence the confusion. A system that is not significantly habituated or exploited is obviously not a colony. Although the Federation does establish colonies, before long they are admitted to the Federation as their own economic entities. They are no longer colonies because although still connected, they are no longer subject to the Federation. They are given a large amount of economic, and to a lesser extent political, freedom.
A typical Imperial colony (a system lying at least five sectors from the core systems) consists of large underground mining facilities, extracting whatever resources are present on the planet(s), and large slave camps, often breeding large populations of fresh manpower since the turnover is so high. The only major export of any colony apart from raw materials is slaves - even then the wealth will fall into the hands of private traders who are shrewd enough to import slaves to sell on the open markets back in the core. Slaves are often officially listed as an export commodity, but the Empire itself limits its own slave trading to supplying the mines and factories. A small staff of loyal administrators form the only non-slave population, and posting to a colony is not deemed to be an honour. There is no local production to speak of, since there is no population for it to serve, and there is no incentive to start producing since all goods and resources are taken back to the Empire without payment of even a nominal fee. Since the purchasing power of a colonial planet is limited to a very small team of administrators, clerks, police and a Navy garrison (if it warrants it), there are minimal convoys required to supply it. Instead these administrators take frequent trips back to the core systems and bring back whatever their personal wealth allows. Luxury goods in the colonies are indeed a luxury. Local production sees that the slaves basic life needs are met, and little more. Investment by the core consists of a small city, often built beyond the needs of the administrative population for egotistical reasons. Roads, parkways and public buildings are built to exacting standards with often sparse but quality furnishing. Power and processing plants are built to ensure the colonial planet is able to supply its own energy, water and oxygen needs (and often food too, if the planet's atmosphere allows). Furthermore, the mining and extraction facilities are built, and a system of highways often link the key areas. Once initial infrastructure has been paid for and the local administration put in place, the colony is left to its own devices and expected to fulfil certain production quotas. With nothing more than a primary industry, once the resources run dry the planet will probably be abandoned or used merely for breeding slave populations.
The presence of a military base alters the economy somewhat, since it brings in private contractors, specialists, engineers, and personnel. This means there are further needs to be met. Not only supply, but commercial needs arise: shops, drinking establishments, brothels and a whole host of places for servicemen to spend their money. Often a colonial city sprouts up in the surrounding area of the military base, and given time will grow to become economically independent, more so if research laboratories are established. The demand for free labour to serve these cities is high, and subsequent high wages often attracts people from anywhere in the galaxy, often Independent systems; it takes a particularly high wage to attract any Imperial citizens. These military colonies often flourish and form the base of power for a region of systems. A loyal nobleman is invariably appointed to govern military colonies and he is tasked with protecting a number of surrounding sectors. Loyalty is favoured over ability, since these colonies are often provided with enough military force to seriously challenge the Empire if they should so wish. These colonies inevitably also serve as a springboard to acquire further colonies and a place of secure fall back should a large scale rebellion occur in a neighbouring sector. An example is Anayeth, a prosperous colony by Imperial standards containing lots of military facilities and a large population of Imperial and Independent citizens, most of them serving local factories and service industries. It should be noted that this is the exception, not the norm.
Huge initial returns on minimal investment, due to free slave labour, are the incentive for the resource-hungry Empire. Within a couple of years the Empire can turn a barren rocky planet into a cash cow. Their colonial systems bring in mass amounts of wealth for minimum investment and the slave trade provides a limitless pool of free labour. The inner core contains terraformed planets of limitless wealth; to be a free citizen in the Empire's core is an easy life. Socialist policies provide Imperial citizens with every luxury and safeguard, and the population are not required to work particularly hard. This of course comes at the expense of the many millions of slaves toiling eternally in distant colonies.
In sharp contrast is the Federal colony. As soon as a new planet is settled the Federation pours relatively small amounts of money into the system in the form of subsidies for local industry; often tax breaks for a number of years, or low interest loans to set up factories. The Federation never pays directly for infrastructure, and this fosters a real sense of achievement and identity in the new colony. An enterprising individual, through subsidies, will own the factory he builds, and pocket the wealth from the goods he sells. This is true colonial capitalism, Federation style. It keeps the Federation's costs down and also results in many unique colonial styles; for example, no two public buildings in Federal colonies are ever the same, whereas each Imperial colony is effectively a clone of all the rest. The market for any goods produced is essentially the rest of the entire Federation - even neighbouring colonies are viable markets, whereas in the Empire local colonies are equally lacking in population - but initially much smaller scale markets are found in the form of the local population. The population will grow quickly, since there is always a rush of prospectors and enterprising individuals; people eager to make money in a new place. The Federation will even offer subsidies to transport companies that offer routes to a newly settled system, again reducing their own costs by negating the need to transport millions of migrants across the galaxy.
A local government is set up with almost complete power over the system. Naturally, industry thrives and the colony can pay for its own infrastructure and once the factories begin producing the Federal subsidy is no longer needed. The system can finance its own police protection and escorts for its trading convoys. Since the middle class also thrives, the colony itself then becomes a market for the rest of the Federation and trade flourishes. The core systems of the Federation are eager to pay real currency for manufactured goods and each system will choose to offer their own particular specialities, often taking advantage of their raw materials and the expertise of the immigrants who settled there. By this point the system is no longer considered a colony. It becomes another bone fide member of the Federation. The Sol Government is no longer required to furnish the system with anything other than honest payment for manufactured goods.
Care is taken to avoid allowing any system to produce all the necessary components of a Federal Battleship - the pretence is to encourage each system to specialize, although the genuine reason is to prevent any one system from acquiring sufficient firepower to challenge the Federation's rightful claims to the system. An example is the Sirius system, by far the wealthiest in the Federation. Despite accounting for over 40% of all the Federation's hydrogen and military fuel production, Sirius has minimal military shipyards.
Although these systems aren't controlled directly by the Sol Government, they usually remain staunchly loyal to the Federation. The flow of wealth may be two way, and the core systems may have to work just as hard (if not harder, due to long since depleted resources) but the real advantage lies in the fact that the overall economic power of the Federation is far in advance of the Empire, and each new colony will remain a powerful entity, even after its own resources dry up.