Starship Ecomomics

More on MegaCorps ...

Cynthia Higginbotham writes :
[On why Megacorps have all the trade in the galaxy tied up.]

> 1) If a good spec trade route already exists, a  major  corporation  will
> have it tied up solidly.

This would mean that the megacorps  spend  most  of  their  resources  on
keeping  hold  of all the speculative trade routes, routes that are going
to shift & change at the whim of their customers. To  quote  you  from  a
previous article

> Subject: (2617) starship prices & economics

> Steve Higginbotham:

> There  is  every indication (from the tables) that only a small ship (400
> tons or less) can make any significant amount of  money  by  spec  trade.
> Significant  in  terms of starship payments. If there was that much money
> to be made, Tukera would get an exclusive contract, and the profit  to  a
> starship owner would vanish.

The  problem  with  speculative trade, from a Megacorps point of view, is
that it doesn't involve a regular, reliable supply and demand. It's  made
up  of  lots  of  little  cargoes,  which  may not be available twice and
involve certain risks. They're unlikely to fetch the same price twice  on
the  same planet - it takes a skilled crew to make significant profits on
such deals.

If a Megacorporation wanted to make a profit  from  the  differing  trade
classifications  of  two  planets,  it  would  set  up a regular run, buy
manufacturing capacity on the source world and set up retail  outlets  on
the  destination  world (s ). That's what Megacorps do, it lets them ship
thousands of tons of cargo in big ships and make real profits.

With such a profitable business  to  engage  in,  why  then  should  they
divert  valuable  skilled  employees, who could make them much more money
elsewhere, to small speculative trade runs which would cover the cost  of
the  starship  in  a few decades ? That's not to say they don't make some
use of free traders for checking  out  new  markets  - the  free  traders
given  as  retirement  bonuses  are  clear  evidence  of  their buying up
bankrupt merchants and using them for a while,  but  the  way  they  give
them  away seems to show that they aren't using them as a major source of
income - It's easier to give a leftover ship to an ex-captain  who  wants
to continue to do a little trading, and collect the payments from him.

> 4) Assuming your business plan is based on  speculative  trade,  it  will
> mostly  likely be a newly profitable route.  If the route continues to be
> profitable, in the long run Tukera or a similar large shipping firm  will
> undoubtably move in and take it over.

That  doesn't  mean  the  route  will  no longer be profitable. The goods
available for speculative  trade  represent  the  'spare'  output  of  an
entire  planet,  which  would  take hundreds of large ships to move, even
assuming the planetary government  would  let  a  single  megacorporation
take  over every manufacturing business, and the destination planets that
are prepared to pay enough for these goods for them to be profitable  are
likely  to  want  *anything*  the source planet is selling, so a megacorp
buying up all the air-raft spares (for instance) is  unlikely  to  affect
the market for, say, military weapons.

> 5) Given: you have to explain your route to the  lending  agency.  Given:
> the  lending  agency is a part-owner or is owned by Tukera or other major
> shipping firm, it is not  unreasonable  that  the  lending  agency  might
> inform  its  parent of any potentially profitable leads that it acquires.
> A secret shared is no longer a secret.

Speculative  trade  routes  aren't  secret -  anyone checking through the
planetary trade classifications can see which planets will sell  low  and
which  are  likely  to  buy  high. The very nature of the small ships and
small individual cargoes used for such trade means that the  markets  can
never get too much of the goods.

> 6) It is also not unreasonable that the lending agency will make  a  loan
> in  spite  of  the fact that it knows that no profit will be made and the
> starship will be repossessed. This is because  they  can  then  sell  the
> starship  to  Tukera or whoever at a breakeven price for the bank, and at
> a considerable profit for Tukera. The only loser is the poor schmuck  who
> got the loan.

The  real  looser from such a deal would be the bank. The person (s ) who
got the loan loose their 20% deposit (or  whatever  ),  small  change  to
everyone  but  them, the Megacorp gets a starship at a price certainly no
less than they could  have  had  it  build  for,  and  the  bank  gets  a
reputation  for double-crossing it's customers. That bank can't close and
start trading under another name, it can't keep insider dealing  on  such
a  scale a secret, and it's reputation is linked to the megacorps who own
it.

> 7)  This  happens in the real world. In the U.S., we have Anti-Trust Laws
> and insider trading regulations, etc  to  prevent  this  sort  of  thing.
> However,   indications  are  that  the  Imperium  does  not  interfere in
> business to that extent, especially since the  imperial  family  and  the
> high  nobility  are  significant  stockholders  in said megacorporations.
> Expect such scenarios to be even more common in Margaret's Imperium.

The Imperium doesn't interfere  with  interstellar  trade  and  commerce,
that's  left  to  the  individual  planetary  governments.  The  problems
imposed on megacorps by such governments are  completely  different  from
those  faced  by  independent  free  traders.  The  only  limitations  on
megacorps are how much of each planet it's government will let them  buy.
They  can  afford  to build as many ships as they can make a profit with,
they have the organisation to sell goods  produced  on  one  world  on  a
dozen  others,  and  so  they  can  specialise and use bulk-production to
lower costs and raise profits.

But such a setup would make each planet dependent on the  output  of  all
those  others it received goods from, and especially on the megacorp that
found markets for all it's goods and supplied all it's needs.

Such an arrangement might well benefit the planets involved, raise  their
living  standards  and  encourage  interstellar peace and harmony as each
planet found their ideal place in the orderly interstellar empire.

But how many planetary governments are going to sell  their  planet  into
what  would  effectively  be  slavery,  giving  a megacorp control of any
significant portion of their economy would give  that  megacorp  leverage
to  push for whatever it wanted, and there would be no hope of assistance
from  the  Imperium  - It  doesn't  interfere  in   interstellar   trade,
remember.  And if the Megacorps banks have been ripping people off to get
the deposits they paid for their free-traders, how trustworthy are  these
people who say they want to help run your planet ?

> Again,  the  upshot  is that, given the *present * pricing scheme, in the
> Imperium, most commercial starships will be owned by  the  government  in
> the  form of subsidized merchants, or government-protected in the form of
> megacorporate ships. Is this the picture of the Imperium that you want?
>--- Steve & Cynthia

The  present  pricing scheme is only applicable to small free traders, it
says nothing about megacorps being able to buy up *all * the  speculative
cargo  at the same prices. It does demonstrate that free traders can make
a speculative profit if they're good at what they do, which is what  it's
there for.

"What's  that  Mr Carcharias ? The pharmaceuticals in District 268 ? Yes,
we'd already tried for an exculsive contract, but their government  won't
touch  us  after  you  stole  so  many  of their peoples money in crooked
starship deals.  They  said  they  preferred  not  to  give  a  bunch  of
criminals  control  of  their  economy,  even when we bribed the heads of
state, their police took a week to quiet the riots after  they  announced
the  deal,  so  they  had  to  call it off. Your methods of operation are
becomming a liablity, stock dividends from new business  have  fallen and
I'm afraid the banks going to have to let you go. Goodbye Mr Carcharias."

		Simon Anderson