Worldbuilding 102: Economic Trade
Greetings and Solvents! ...Damn it! Oh well! Today’s topic is about trade! As your favourite alien Limax, I am very knowledgeable on trade! I make the best trades! Enjoy!
What is trade?
It is easy to talk about trade and think on it in an easy manner, but what the fuck is trade even?
Trade is when one entity exchanges goods or services with another entity for other goods or services.
Very broad, but ultimately, this is what trade boils down to. You go to a store and buy something? You’ve engaged in trade; you got a good in exchange for digital tokens or paper and pieces of metal (digital or physical money). While this is rarely thought of as such, it is trade, and I will show why it still counts.
Why does trade matter?
How much time do you have at hand? 24 hours a day, that is all you get by decree of time itself! Even if you work 12 hours a day, sleep 8, and then spend 4 hours enjoying life, that is not a lot of time. You can do everything yourself, at which, let’s face it, you’ll suck at everything. Jack of all trades, master of none, and all that. Or you can spend your 12 hours day in and day out mastering and perfecting a rare few skills or becoming the best in a single skill!
This is where early small scale trading comes in. We can all be equally shit at doing everything, or I can take my time and make the finest tools for farming that technology allows, and you take yours and work the land to make it produce as much food as possible. When you need tools, I trade it for the food that you produce.
What one has to pay attention to in this situation is that it is not a zero sum game. It is not the same amount of food produced or the same amount of tools. It is MORE food and MORE and BETTER tools being produced; by specialising, we have made both of our lives better, and more specialisation increases the wealth for everyone involved.
The wealth of nations
The famous book by Adam Smith himself, often seen as the founder of modern economics, can be discussed ad nauseum. My little example above explains how a town can get richer through specialisation, but it works on literally every scale. Within a single nation? Cities can specialise, too. Say a city lies near a mountain with remarkable amounts of iron, so they build infrastructure to facilitate the extraction of it from the ground. All industries around it exist to make the mining as efficient as possible. Then another city can do the smelting and have more train stations to pull in coal and iron ores to smelt it to usable forms.
But it doesn’t end there. Even nations can specialise! More infrastructure makes it cheaper to move goods around, so why not build everything to make cars? Focus on making the best cars you can! Let other nations smelt the best iron and the best aluminium, you have forms to create the chassis and engines! If you standardise basic pieces like bolts, screws and more, that can be done by another nation, and you pull those in to make your cars even cheaper and better!
Through ever increasing specialisation and focus around it, each nation can produce their specialty even easier and cheaper than if they tried to do everything. The nation has no more time than you do: 24 hours per day! So they have to pick between being bad at everything or being great at something!
Trade is not a zero sum game
As I discussed in my post on economics, for the longest time, it was thought that economics was a zero sum game. This means that for me to earn more and get richer, you must lose out. When the economy equals land, since it is all centred around food production (which is garbage for economies) then yeah, it pretty much is. But when economies leave this behind and production can be scaled differently, it stops being a zero sum game! It really isn’t before, either, and I will explain why.
Say I come to you wanting to exchange what I have for what you have. Will you ever accept a deal that you feel you lost on? No, of course not, you’ll say “no thanks” and leave, or tell me to fuck off if you feel insulted. After haggling, however, we reach a deal we are both happy with, and the trade happens! You feel like you got the better end of the deal, and I feel the same. We are both better off after the trade! That is, unless we are talking about scammers who try to pretend it is a trade but have no intention of keeping their end of the agreement. When both intend to keep their ends and do it, though, that is the secret to trade being an enriching process.
Value is not a physical object: it is nothing tangible. Value is a mental construct in our minds, and everyone values things differently. What I think is worth something might be obscenely expensive to you, but to me, it is worth it, so I make the trade, and I feel I won on it. Trade enriches everyone participating because the differences in value assessments makes it so that any trade agreed on in good faith will involve both parties assessing their own value having increased more than what they gave up.
Isolationism and trade as a weapon
If trade is so beneficial to everyone involved, why have and do countries to this day choose isolationism? Isolationism here means not trading with the outside world and trying to do as much as possible, if not everything, within one’s borders. There can be philosophical reasons for it, such as North Korea’s Juche which says it should be entirely self-sufficient, but there are other reasons, too.
When everyone is trading with each other, what happens if the nation that makes the majority of all bolts and screws suddenly says your country is an ass and refuses to trade with you? We have a sanction at hand! Which can be devastating if you are dependent on them to make your things. We can all look at Russia right now in 2023 and how they can make nothing without microchips which come from Taiwan! This can make certain nations not want to be in this situation, so they start doing things at a subpar level within their borders rather than feel dependent on anyone else who can at any moment turn against them. To which I generally say… maybe don’t be an ass? But being asses is what makes the story world go around, so have asshole countries that fear this!
Manipulating trade
Trade can be good, and it can be bad. Maybe not a large-scale wealth system on a national level, but as I have discussed in other posts, there are sweatshops, slavery (see post), and many other exploitative methods to make trade more favourable in certain directions at the expense of the exploited. There exist many tools to deal with this, and here are some that a nation can use against another nation.
Sanctions
The easiest one to use is to forbid natives to trade with the target nation. Product X comes from country Y? NO DICE! Sanctions can, if big enough, tank an entire economy, especially if you control something vital, but if not done properly, it is as efficient as a fly building a mansion. Look at North Korea for inefficacy of sanctions against them.
Embargo
This one is… an act of war. This is where one nation forbids OTHER nations to trade with their target through blockades, which means military ships, anti-air stuff, and more to prevent anyone from trading. This is why this is extremely rare as the moment you do this, you have engaged in war, and others can join in on the victim’s side against you.
Tariffs
As a giant idiot once said, “We’ll put tariffs on them and hurt them!” NO NO NO! Tariffs do NOT hurt the target nation! Sure, it can reduce trade and be a bit of a bitchy way to do things, but you know who it hurts the most? Your own damn people! A tariff is extra taxes on goods from that nation that you have the tariff against! Not taxes that the target nation pays, but that the IMPORTER, which is someone from your own country, pays to import it. This cost is passed onto the consumers and buyers who are people in your own country. The nation you try to harm… at most they see less trading, but it costs them nothing else.
Dutch disease
This is an interesting phenomenon when it comes to economics and trading. While I have stated that specialisation does help with increasing prosperity for everyone, there is a huge issue if you are DEPENDENT on one resource or thing. Converting your economy from one thing to another takes a lot of time if you don’t have a diversified economy. It is healthy for any economy to not have everything focused on one thing. Sure, you can be car manufacturing capital of the world, but you want other industries too so if the car market has a blow out and no one can afford them, you can start focusing on a new specialisation or a few others while working yourself up or holding out while whatever made cars unattractive blows over, and people want cars again!
Dutch disease is most commonly associated with natural resources, but it can be any sector in an economy. It is when the country focuses EVERYTHING on that sector, and everything that does not in some way support this one sector, or natural resource, gets neglected. It involves a lot of economic things, which I might need to put in a post someday–ANNE! (Anne: Added to our ideas list! Boy, we’ve got some great stuff planned!) Anyway, a lot of factors play in, but if you don’t want to do a lot of research, you can think of it as an economy living or dying on one sector, and any disruptions to that sector tank everything else because that sector stops being able to support the rest of the economy’s sectors as they are only there to support the primary one.
Trade in fiction
Okay, so we can trade to make everyone better off, but what about stories? Well, if you do modern times, it is extremely easy! It is business as usual, no need to change what is already happening world-wise. However, if we go more speculative and deviate far from your normal world…
Space Scifi
It is the future! You either go space opera across the stars, like I do, or maybe inside just the solar system! Either one is fine. If you stick inside the solar system, it is easy to justify with sky hooks! Watch that video, I strongly recommend it! Anyway, sky hooks are infrastructure for the solar system without FTL (see my blogpost) that will make any form of trading within the solar system dirt cheap and easy. Even travelling will get easier! It is a passive system that uses gravity and physics to sling objects through the solar system toward their destination where it will be in the future. So trading goes real easy and cheap, which means the asteroid belts can be mined, and scarcity of elements is a faint memory!
Now, if you do space opera between stars without FTL… There is no sensibility in that; it costs too much and will never be worth it! But let us assume you get FTL, and it is relatively cheap, so you can travel between stars easily! And get sexy aliens 😁 🤤 Okay, mind out of the gutter! Anyway, trading might seem sensible then, but for ordinary material, you have the previous paragraph. However, moving beyond a single solar system, virtually ALL normal elements exist in enormous quantities in solar systems if they look similar to yours. Solar systems similar to yours are a tall order, given what has been observed, but even with other kinds, the abundance of ordinary elements is so vast that trading in most cases makes little to no sense as the self-sufficiency factor grows too easily.
This is where my article on struos can come in and save us! If you make up your own materials that do new things and have them be much rarer than ordinary elements, trade becomes a necessity again if they do things ordinary elements cannot. And even if other elements can, handwavery, they are still better! By creating this new scarcity, the abundance in a solar system is removed, and trading is relevant again!
Fantasy
ANNE! Your section!
(Anne:) Finally! All of this talk of solar systems and not needing trade was starting to move too far away from the nice practical realities of fantasy! Well, okay, the fantastical realities of fantasy.
If you’re doing modern fantasy, or even semi-modern, you’re probably best off using a system of trade similar to what we currently have. However, you might have a rare element or two that’s scarce in some way, and the people who possess that element can name their price. And if you’re doing anything dystopian, there are plenty of places for greed and corruption to slither in. (Vivian: Always with the dystopias!)
Most fantasy tends to be set in a quasi-mediaeval time period where some elements are mediaeval, as is the general vibe, but there are other elements that aren’t accurate to Earth’s Middle Ages. But hey, it’s fantasy! Still, it’s likely trade functions in a similar way as it did back then, with some exceptions. If there are rare elements or rare magic (or rare people), make sure you understand how they function in terms of trade. Yes, even people, even if they’re not slaves. Though if you want to do slaves in your story/world, read Vivian’s blogpost on the subject. And remember that educating all those wannabe mages is something that can be traded, too!
In addition, it’s extremely common for fantasy to include isolationist nations. Like, completely shut off from the rest of the world. If you do this, you need to know how they survive without trade. Having a super advanced isolationist nation is extremely unlikely since they won’t be able to specialise in any one thing–remember, if you want to be able to specialise in one area, you need to be trading with people specialising in other areas! Could it work? Maybe. But you have to set it up carefully. In fact, Vivian talks specifically about how isolationist nations and technological advancement (fail to) work in zhir blogpost on communication.
One common feature of fantasy is a D&D style money system with gold, silver, and copper as the three levels. (Vivian: Screams like a banshee) You can tell how Vivian feels, and in another blogpost, zhi eviscerates this system. (Vivian: Main reason is that it is static, but a polymetallic currency that has the instabilities I speak of would be very fascinating). When you’re trying to come up with a currency, keep trade in mind. And when you’re talking about trade between nations, get complicated! Impose some sanctions. Throw in a tariff. And maybe, just maybe, launch the inevitable war between nations with an embargo!
Another thing to look out for is the Dutch disease Vivian described above. Your nations can have something that they’re known for, sure, but unless you want them to collapse, or be at constant risk of collapse, make sure they’re properly diversified. And if you have a species that specialises too much, the same holds true. Dwarves in Lord of the Rings are a little over reliant on metalwork, if you ask me!
And finally, magic itself! Not only might it be a rare commodity, it can also impact the process of trading. Do you have telepaths? How might that impact the act of making deals? Communication might be much quicker, which impacts trade as well, and if you have teleportation on a large scale, you’ve got an easy way to move goods at the snap of your fingers! Or a wave of your wand. Creating magic systems is an important part of fantasy–in fact, I’ve written an entire blogpost about it– and for every new magic or ability you introduce, try to think of how it impacts that nation’s relationships to the other nations, and how it might influence the trade that makes up such a large part of international cooperation (and warfare).
Conflict
(Vivian:) Now, how can this be used in an actual story? Many ways! It depends a lot on the story in question. For example, you can have your ragtag team of heroes stop an actual embargo as they notice the build up for it or learn of it some other way. After all, an embargo is an act of war, and that could spark huge wars that will consume the entire world as tens of millions will die!
Another alternative is that a region, city, planet, suddenly loses vitally important goods that they need to function. Could be food, magical rocks, or rare struos, and tension is building. Imagine a winter town that gets cut off by an earthquake, an avalanche, anything, and now they are on their own. Things are now bad, but what if they are running out of something vital if contact and continued trade cannot be established? Fuel? Food? Medicine… Where is this from? Oh yeah, a real story about Balto the dog!
The key in the last example is to use the specialisation that is so useful normally against people in order to create a looming disaster that is just around the corner and somehow be unable to get the necessary goods. Depending on magic, technology, physics, everything, it can be achieved in many ways that depend only on your creativity.
Alternatively, if one nation has huge leverage with their trading, it can be used to show what a bunch of bastards they are, ready to harm another nation that is dependent on them for ebil reasons!
Smuggling
There is an old saying that I am making up right now:
Where there is a market, there is a supplier, if the price is right.
In my economics post, I discussed that the free market is impossible to get away from entirely, and that is still true. There are goods and services that both a source or target nation can agree on they do not wish to trade. Or the source country can simply not give a flying fuck what the target country of the trade thinks. That’s where smugglers come in. Fun fact, Anne finds smugglers strangely sexy; Anne, are you taking something? (Anne: I think it’s well-established that they’re the best! Just look at Han Solo in the original Star Wars trilogy!)
Anyway, the most common goods that are frowned upon by the target nation are… drugs. Lots and lots of drugs that make your own people addicted. A classic example of this where the source nation does not care is of course East Indian Trading Company and China with opium. Someone produces it and trades with the people while breaking the laws of the target nation.
To accomplish this, one has a few routes to go. If a nation is sufficiently large or sparsely populated, there will be border regions where there is simply no possibility for the target nation to make sure influxes of goods are done properly. So you go in where you cannot be grabbed! After that… Well, you get the same problem as the next option. You deliver it under the noses of the authorities. Hide it either inside yourself–do NOT do this with drugs! It is extremely dangerous if anything bursts!–or hide it in other things so people think it is a legitimate good. Like you manage to hollow out a watermelon and fill it with crack. Of course with drugs, the issue is that there are dogs and who knows what you make up in order to find the drugs! But you know, some nice… lubrication in the form of untraceable cash might make the border control look the other way! If they are corrupt enough… If… How many drugs are in Russia right now?
If you focus on things that don’t smell like weapons or the likes, it can be much easier if the quantity of legitimate goods is enough that no one can be arsed to check everything; better hope they don’t randomly pick the one with the contraband! This step of dealing with authorities will always come somewhere along the smuggling route where a large market exists for your contrabands. There will be authorities, and you hope you have someone on the inside, or they are corrupt enough, or you are clever enough to bypass them!
And smuggling people? Even harder! In some ways, at least. In other ways, it can be a lot easier. Maybe someone can dry a person into a pill, then add some water to restore them? Now that would be an interesting thing!
Summa Summarum
Trading is an important aspect of a culture and civilization. What they trade, how they trade, and why they trade are all big questions that are influenced by geography, available resources, and cultural history when it comes to culture-specific items. In general, a free market trading style leads to more prosperity overall, but as I discussed in my economics post, that can become highly concentrated, and thus limitations on trades have benefits that can outweigh the loss in prosperity.
For stories, think about what the trading contributes. Is it a way to give your protags things they should, or shouldn’t, have, or is it central to the conflict itself? It all depends on the story you are telling, and what you wish to happen. All in all, it is ripe with tension, ways to acquire things, and much else important to your story, if you choose to include it!
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