Common Dwarf Governments
First things first here - it seems the dwarves would likely take a flexible response approach to international conflicts. They would not want to risk disruptions to international trade or loss of investments if they do not feel the situation warrants such risks. Mobilization also imposes costs. Why pay them if you do not need to? For similar reasons mobilization means war and a dwarven kingdom would be quick in mobilizing once the decision is made. It would just take longer for them to decide war was needed. They would prefer diplomacy prior to military action. It also means that monopolies over economic resources would be the primary means of gaining obedience - rather than habit or coercion.
I suspect that they would take a combination first and second strike posture. I do not see the dwarves as reluctant to initiate a conflict if they saw an opportunity to advance their interests. Nor do they strike me as a group known for moderation. I would suspect that the first strike in the case of the Economic Hitman Model of international crisis escalation. However, the extreme defensive advantages they have would mean that if the other side initiates the conflict, they would use the second strike instead of a preventative war posture. They would effectively bait the enemy into a siege the enemy cannot win. After riding out the storm, they would strike back. Technically they would be perfectly placed to take a no strike posture, but the military power and more warlike/adventuresome nature of dwarves means they would probably choose to retaliate. Once conflict erupted in whatever form, they would probably opt for a counter force posture. they would prefer to take over the economic assets of the enemy. A counter value posture would leave nothing left to exploit afterwards.
As part of the dwarven flexible response and aversion to counter value fighting, a scorched earth policy would be avoided. Instead, the low intensity conflict position reliant on special forces, decapitation strikes, guerrilla actions, commerce raiding would be the default position. A limited war would be the high point of their escalation. They would probably be the most humane in the sense they would avoid targeting civilians. They might be a bit harsher with captured enemy soldiers - possibly enslavement. Both of these are rooted in the economic concerns. Civilians would be workers after, so targeting them would harm the economic interests the dwarves would be seeking to maximize. By the same logic, prisoners cost resources and war increases the demand for war material. So there is an incentive to use enemy soldiers in a "productive" manner. Commanders would justify this as an attempt to recoup the costs of caring for them. By a similar logic, they would only make prisoners of war permanent slaves if there was domestic demand. Otherwise they would be ransomed or released. executions would probably be unlikely. But in balance they would be the most limited war oriented faction and most humane, second only to elves.
In terms of secondary priorities, I think the dwarves would prioritize economic prosperity and international stability. The dwarves would want as much wealth as possible. Granted, from a domestic perspective, they would suffer from all the problems that seeking prosperity would possibly generate. Massive inequality and poverty will lead to instability even in the context of high total wealth. Infrastructure and wealth would be concentrated geographically and by class. Threats to exports can lead to international conflict. The needed subsidies could lead to the benefiting sectors a net economic drain. A tactic that political elites use to increase domestic prosperity is a policy of import substitution. But the tools to achieve this involve subsidies and tariffs, which also produce economic sectors that are net drains. But the elites are the ones who benefit from that system. Thus they would still follow these policies. International stability is a key prerequisite for the sort of international trade needed for dwarves to maximize their export led growth.
Thus, threats to the international system would be seen as threats to the dwarves. Because of this same dependence on trade for prosperity, the two priorities would be linked in the mind of the dwarves. As a result, they would prefer to maintain the status quo rather than destabilize it. It also means balancing would be the preferred means of countering problems.
Structure
Now, dwarves appear to set up their kingdoms in such a way that they resemble autocratic banana republics. The defining elements of banana republics are the stratified and entrenched class system. The bottom is dominated by a large and mostly poor working class. The ruling class represents the business, military and political families – the 1% to borrow from Occupy Wall Street. The economic elites derive wealth from control over primary sector of the economy and the exploitation of workers in that sector. The government tends to be autocratic in practice even if there are nominal democratic elements. This government receives most of its support from the business elites and thus rules for their benefit so that both sides get rich. The nation is essentially run as a private business for the exclusive profit of the elites. Policy is formed through massive collusion between private and public elites in a way that favors monopolies. Public lands are used for private purposes. Profits go to private elites while governments often are left liable for losses.
So, according to the Dictator’s Handbook, a common tactic used by rulers of nations rich in resources is to grant concessions to foreign firms to extract the resources. Often this is done with the outside firm supplying capital investment, specialists and upper and middle management while keeping the profits. Foreign workers would primarily be paid workers taking technical, professional and administration roles in the mineral processing. The host nation receives royalties and supplies the low wage, unskilled labor. Also common is high levels of corruption in both government and corporate spheres – bribes are paid to officials and cronyism rampant. Royalties are paid either directly to government officials or to secretive government accounts that are easy to embezzle from. This is done mainly because a foreign firms are easier to control. Basically staying in power is easier if one concentrates high levels of private rewards to a group as small as possible. Large groups of essential supporters, small rewards or investment in public goods all seem to be keys to being removed from power.
The corruption is common in resource rich nations in the real world as well. Governments recognize that increasing taxes is always unpopular. Therefore resource rich nations use the revenue to reduce taxes to lower than what would otherwise be practical. When this happens, the citizens have less incentive to pay attention to how money is spent by the government. It is not their money after all. Meanwhile, alert civil society groups and transparency laws threaten to expose the corruption that elites do engage in or reduce their share of the benefits. This provides an incentive for those elites to clamp down on those asking too many annoying questions. Those objections are often met with repression, which such states can afford to use more of due to the tendencies towards greater military and police budgets. Lavish showcase projects, grand palaces and the diversion of funds meant to help the poor to the rich are far more likely, even when local laws have to be violated.
There are several side effects to this sort of deal. One, it tends to exacerbate wealth inequalities in the society. The rich get huge piles of money at the top while the lower classes will struggle to survive. Political unrest is also a common feature – resentment of elites, the desperation of poverty and xenophobia related to dislike of the foreign firm (especially if there are racial or cultural differences) can lead to labor disputes or attempts at revolution. Coups are also common in this sort of set up. This means a combination of lower class popular uprisings seeking to eliminate the cause of their economically rooted suffering and elites trying to capture the wealth of the state would be core features of the political system. We can expect features of the government to be based on these twin threats.
So what we have are kingdoms that have a guild system, single public access points, welfare, slavery and government control over the mineral wealth, manufacturing and trade. Seems likely that the dwarven kingdoms would operate as palace economies. In this set up, most of the wealth is accumulated by the central political administration. The rest of society then relies heavily on government spending as a result. The central palace administration supplies producers with the capital goods for the production of further goods and services. Capital especially is regarded as the property of the monarch, which may then be disposed of as the king pleases – thus usually for the king’s own interests in a way that blurs the lines between economic and political ends. Any investment in a war would be expected to bring a return of plunder and prisoners, which became part of the endowment of the government. War thus served as both the means for the government to achieve its foreign policy aims and to extract profit.
One of the more extreme "palace" economies out there was the Inca. Here, all goods and services were essentially collected by the state and distributed by it. To the point there was no money. All tools and food were distirbuted from the central warehouse. Well made cloth was a status symbol in part because it was given by the emperor as a gift. Production - especially in cloth - was carried out by quotas. In that context, herds of alpacas were sent to different regions who were in turn expected to send back a certain amount of cloth. Replicate that throughout the whole territory and economy. Taxes were collected through mandatory labor as there was no money to collect as taxes. The labor was allocated to infrastructure and production deemed essential by the emperor.
Now, it needs to be noted that I don't know if the term palace economy really was ever applied to the Incas, but it appears to fit. At the same time, the Incan society does not have money. The dwarves are a very money oriented society. I would imagine though that slaves would be liable for conscription into state service in the same way. Rich dwarves might be able to either pay taxes or loan their slaves to the government. Guilds might be required to send the government or king specifically a certain amount of goods and/or money to keep their licence. Food supplies and the key mineral of the kingdom are likely to become exclusive domains of the state and thus royal family.
I would suspect that these things put together would create a very monetized political system. The gold and silver reserves and wealth in the society would be seen as the chief ends of the government. We can also expect the real life economic grievances such as poverty and unemployment would take a greater place in the public discourse. Depressions and recessions would pose much stronger threats to a government’s legitimacy than in real life. The reverse – economic improvements – would also cause larger boosts to the regime than in real life. It is possible that all other factors would be eliminated from political calculations of the value of leaders. Gaining power would be seen as a viable means to get rich and the public good would be seen as a secondary consideration or merely side effect of self centered policy by leaders.
Such a political culture in a monarchy would produce a very complicated government structure. Corruption would be high. On top of that, every level of society would operate based on manipulation of obligations, favors, debts, peer and family networks and privileges. Those with power would likely use that power to reward loyalties through insider dealing and cronyism aimed at getting their friends and family rich. Thus, an overlapping maze of multiple power centers and patronage networks would control the government and the guilds dominating the economy. These networks would probably be centered around the king, royal family members, guild masters and other wealthy private citizens. Each would have their own personal priorities and agendas to pursue and supporters to appease.
Public Agenda
What sort of of revolution can we expect? Working class concerns over poverty and low wages, feelings of exploitation by foreign elites and international trade sounds like a recipe for right wing populism that can become fascism in its extreme form. The elites are also the main group able to fully indulge in their greed. Therefore, as long as they get their cut of the profits derived from mineral extraction and the foreign corporations that come in to extract it do not threaten their power, they will support that system. But this would alienate the lower classes significantly. They would not benefit at all from the gains of the exploitation. In fact, they will likely see that their interests as directly harmed in the process. Thus they will be very hostile. The result is a likely rise in right wing populism that will motivate revolutionary movements. Meanwhile, the glittering wealth will attract non governing elites into attempting coups, assassinations and similar palace intrigues.
Assets
The international power that either the Lonely Mountain or Moria would have is in its control over large proven reserves of minerals that allow it to control global supply and thus prices. Saudi Arabia and Russia, amongst others, gain significant power due to their oil and natural gas production. Saudi Arabia for example gets 87% of its revenue and 42% of its GDP from its oil. Similar proportions would seem logical for either Moria or the Lonely Mountain. Thus, the export of resources the dwarves have a monopoly on or control a significant market share would be a main source of money and global power.
In real life, nations with large natural resource reserves tend to have less overall economic growth, less democratic regimes and less advanced economies. However, they generate massive amounts of wealth for those who control them, even in the absence of wider prosperity or even political stability. Armed separatist groups or normal rebellions tend to arise in an effort to gain control over the resource. Government agencies in peacetime are more likely to fight for shares of the revenue or direct control over the extraction. Loot-able resources not only increase the incentives for armed struggle, but provide a financial base that can fuel a faction’s struggle longer than it would otherwise be able to. Whenever a nation sees discovery of a vital resource, increases in the price of it or sees the percentage of the economy related to the export of that resource, the risk of civil wars and terrorism go up.
Such fighting also spills over to the international level. Oil specifically seems to make a nation more likely to both start and be targeted for military actions. On one hand, control over resources grants not just the economic power that we will get into later, but also the greater ability to wage war. This same power also makes other states less likely to restrain the resource nation because the importer is dependent on good terms with the exporter. Attempts to restrain the exporter could hurt the economy and military power of the importer more than elites are willing to tolerate.
Strüver, Georg; Wegenast, Tim (2016-04-01). "The Hard Power of Natural Resources: Oil and the Outbreak of Militarized Interstate Disputes". Foreign Policy Analysis: orw013. doi:10.1093/fpa/orw013. ISSN 1743-8586.
History
Now, dwarves have the distinction of being the only race in Middle Earth to have waged a major war against an air power – dragons. Now, the Dwarves appear to have been defeated, driven from area to area as the dragons plundered all the treasures of dwarven mines. But this seems hard to believe. The huge dragons attacking fortifications built into the side of mountains should be rather hard for them to handle. All it would take would be small doors into the kingdom and something the size of Smaug would not get in. It might be able to successfully keep supplies from getting in, but it would not get in itself. Also, a race of master craftsmen with access to mithril should not have difficulty producing a ballistae powerful enough to pierce dragon hides. A few near gates or on the tops of mountains should be effective. Combine that with some air raid siren like warning system and the defenses would be complete. Similarly, we can expect the dwarves to have one of the best civil defense systems of Middle Earth and one of the few institutionalized disaster response systems. This war was 19 years long – the dwarves had plenty of time to get practice at this sort of thing.
This actually has pretty profound impacts on the main story of Lord of the Rings. Smaug attacked the Lonely Mountain a solid 200 years after this war ended. This means that the defenses put into place, such as the ballistae at the entrances and super tight and thick stone gates would have been in place. Now, the gap between dragon attacks might have meant that the disaster warning protocols might not have been followed as stringently as before, it seems unlikely that the devastation that would come from Smaug would actually have taken place. You would still get a cool battle as Smaug makes his attempt, but the result is still the same. The events of the Hobbit never take place. The sequence that leads to the discovery of the One Ring never gets set into motion. I hope to deal with the full implications of this in another section.
Demography and Population
High birth rates would be encouraged to create a bigger working population and more soldiers - a common feature of mercantilist governments. Both were seen as positives. However, more free time, education or money granted to the lower classes would result in laziness and vice to the detriment of the whole society.
To counter rebellion from the lower classes, I suspect there will be a use of slave labor. Traditionally, slavery was used as a divide and conquer tactic to split the free labor by undercutting wages and making it harder to organize. Then, mines were also a common place slave labor was used. We also see slave labor common in modern resource curse nations, especially in the Middle East.
The side effects of this means there would likely be strikes, terrorism, lynching of slaves and former slaves and race riots. While the damage would likely be bad and hard to eliminate entirely, they would probably be simply isolated incidents with no real popular backing or directed at the foreign elements more than the elites. We can expect them to be persistent but no real threat to the establishment.
However, it must be noted that there is nothing that makes this an iron law. In real life, the autocratic nature of many resource rich nations means that there is no real in-built mechanism for forcing elites to act in accordance with the interests of the commoners. Repression, bread and circuses, race baiting, corruption and so forth do fail from time to time. When that happens, mass movements do arise that directly challenge elites. When those arise, states provide better public services. It appears that in the real world sort of autocratic resource rich states that I think the Dwarven Kingdoms resemble require some sort of mass movement to get public services.
One government that today is typical of the sort of government I see as real world dwarf kingdoms is Saudi Arabia. Now, they don’t use guilds any more but do use government spending, foreign labor, repression and mineral wealth as key parts of retaining power and managing the economy. Notable policies they use could be borrowed by the dwarves. The first is the demand that firms above a certain size employ a minimum percentage of native dwarves. Also important is the government serves as one of the largest employers. Now, given I expect dwarves to use explicit slavery, a modern day guest worker program would be less likely. But the retail, service and domestic sectors are where this program is most used in Saudi Arabia so we can expect similar guest worker arrangements in dwarf kingdoms. The combinations of guest workers and slaves would mean that poor dwarves leave to take jobs abroad as similar workers from those states would move in, creating a two way flow of remittances. Part of this stems from the fact the Saudi education system was garbage at the time these trends started, something that I expect would not be true in dwarf kingdoms as much. However, with slaves taking many low level jobs a trend could develop where native dwarves refuse to take menial and low wage/skill jobs because they would see those as beneath dwarves. Such a system will remain so long as there is a mismatch between the jobs of the private sector and what dwarves have the skills and will to do.
The logistics of their “free” migrant labor would also be a source of profits for the dwarves. In real life, recruitment agencies require rather large fees given their target demographics. However, they do provide jobs and the paperwork and transit needed to get to the job site. A medical exam is likely as well. Sponsors – likely the employer – are required for these guests to get in or to then leave. This system is one that grants large powers to the employers and sponsors, such that in Saudi Arabia it is seen as near slavery. Most guest workers leave within 6 years.
How many slaves and foreign workers would we expect in the dwarven kingdoms? Well, if we keep with the Saudi example, 31% of the populace can be expected to be slaves, guests and professionals. Of this group, 15% would be the skilled professionals. The rest were in farming, domestic work or cleaning. As the dwarf kingdoms would not conduct their own farming, I would imagine the farming sector would be the workers sent to the mines. Again taking Saudi Arabia as the basis, 90% of private sector employees would be migrants. Most citizens with jobs would be employed by the government with those few in the private sector working in guild dominated crafts.
What we can then expect from the mercantile, export led growth outlook is a shift in the guest worker programs. The dwarves would likely fight against stigmas attached to factory work, so only the lower classes would take the jobs. It is unlikely in my mind that there would be enough dwarves willing to go into the factories to fill all the jobs required to sustain export led industrial growth. Which would then lead to large sweatshops staffed by immigrants (probably human refugees from the War of the Ring) fueling the growth of the economy.
Territories
the dwarves rule over the Blue Mountains west of the Shire. To the far east they rule the Iron Hills. In the central areas they rule over Moria and the Lonely Mountain.
Th line of economic thinking I talk about here motivated the search for colonies in the 17th and 18th centuries. Colonies first grant control over new resources, thus lowering import costs. Trade to these areas can be controlled for the profit of the empire’s traders. Trade barriers can be bypassed and outflows of the all important gold is prevented. Similarly, an internal market is expanded for the manufactured goods at the core of the system. The indigenous populations were frequently also the first people the colonial powers attempted to enslave to work the mines and plantations. The dwarves do make use of colonies – the Blue Mountains and Lonely Mountains were both set up as colonies of refugees. This highlights the fact that dwarves, due to the threats of dragons and orcs, would have security interests in colonies as well.
Another element of dwarven foreign activities would probably be land purchasing. The sovereign wealth fund would probably take the lead on this, but normal government spending could be designated for this purpose as well. Such activities would serve two vital interests for the dwarf kingdoms. The first is securing food supplies. No dwarven kingdom is food secure. The military power of the dwarves also depends on their ability to withstand long sieges while feeding their entire populations off of existing food supplies. Through land purchasing by the government, these governments can secure reliable food supples that are not dependent on good relations with the same neighbors that would conduct the sieges. Related to this would be access to wood needed to fuel industry.
The second is gaining mineral rights to deposits outside the kingdom. While all the major dwarf kingdoms have significant reserves (monopolies in the case of Moria’s mithril), the closest they can get to total dominance over known reserves as possible grants them the sort of economic and political power they rely on. It may evolve so that the productive value of real estate holdings could become a metric to measure wealth second to gold or silver stockpiles.
It must be noted that while land would probably be the main target for investment, anything that could turn a profit would be exploited for that purpose. Foreign direct investment would be something that the rich dwarves would conduct regularly. Trade, especially in slaves, would most likely be one of the big targets. As would high value manufactured goods. Mines would probably be something governments would want to retain direct control over due to the strategic interests the regimes would have with mineral extracting.
Military
Everything together and what we see is a skill in siege warfare proportional to their lack of skill in open battle. This would mean they would mostly be defensive in nature, with offensives mainly used to drive back attackers. We also see them very vulnerable to air attacks. One side effect of this would be government ministries and programs aimed to make sure the kingdom is always ready to go under siege. This means huge stores of not just treasure, but war materials and food. The trade with humans would provide this food and the daily living requirements for the kingdom. Large standing armies would be prepared to handle attacks and fight against slave revolts and in the many tunnels.
Now, we know that unskilled dwarves would probably not have it to well, competing with slaves for jobs and many moving away. One impact of this could be a form of poverty draft – where the need for extra security and the higher unemployment rates means that there is supply and demand for more soldiers. Sparta did something similar. Their extremely militaristic society was possible due to slaves freeing a higher percentage of available manpower for the army. This larger army was then used to suppress the slaves. This extra manpower would probably ripple though the economy as well – more people would be available for manufacturing jobs.
But what happens when nations attacked in the Economic Hitman model do not surrender? Well, in the Economic Hitman model, the first stage is covert actions. Normally, this means either the assassination of the head of state or a coup. The idea is to remove the non cooperating leadership and replace them with a more pliable group. As this new leader would know the costs of defiance, they would be more inclined to obey.
Another option at this stage is the dwarves providing aid to opposition groups in the target nation. All out war is risky and costly even when victory is achieved. Hence the use of proxies. These groups just need to have a pro dwarf orientation and be willing to push for regime change. Once such groups have been found, it is just a matter of getting the funds in. Any opposition political group, insurgency, underground, criminal, terrorist or group of dissidents would be useful for this purpose. This matter must be done covertly as this would clearly be interpreted as an act of war. But until discovery, medical aid, safe havens, food, transportation, weaponry and so forth can be sent in. The proxies then become a stronger threat. Then, these groups can be dropped when they are no longer useful. Just like with sanctions, there is a possibility for the pressure to cause concessions without full fledged destruction of the target regime.
Economic warfare also involves covert sabotage of economic assets, such as blowing up mines or burning crops. Thus special forces attacks that destroy crops just after harvest works. As would the destruction of important bridges. Or blockades could be enacted. Preclusive purchasing of commodities would also work. The raids of the Wild Men and the attacks by the Corsairs can be seen as Middle Earth’s version of economic warfare.
But most famous of these militant actions is privateers. Private groups are officially allowed by a government to attack the trade of another nation and keep some of the spoils. Think legalized piracy. This allows any and all trade to be stopped in ideal conditions, as there are only so many traders, ships and pack animals available. Damage would occur faster than the ships or animals could be replaced, so even available goods cannot get to where they need to go. But at a minimum, there would be losses and there would be an extra cost to providing protection.
Foreign Relations
The other implications for their homes and trades would be a set of alliances. The eagles would be the obvious one. They would likely provide air cover in exchange for armor. Dwarves live under the same mountains the eagles build their nests on top of and dragons would be the only real major threat to them. However, this would likely be strained due to the fact the wealth of the dwarves would attack higher than normal dragon raids into eagle areas.
The other would be with the humans like with the Lonely Mountain and Dale. Beyond the trade links, it is likely that the humans would provide troops in exchange for the dwarves providing a place of refuge and food assistance in times of crisis.
The established order has several historically tried and effective tactics to contain populist revolts of the sort I predict for the Dwarves. The use of foreign wars is one that seems to be consistently used. The Aztecs particularly used “flower wars” at the beginning of each emperor’s reign to demonstrate strength and reinforce established power dynamics – effective both for the external tribute flows and the containing domestic opposition. Failures in these often were harbingers of future revolts.
Full scale wars of conquest would probably only be launched based on revanchism. This position is basically the political desire to reverse the losses in a previous war - normally territory. The revanchists want literal revenge for the defeats incurred and to undo the losses. This position holds that it can or ideally should come from a new, victorious war. We see the dwarves act on these impulses both with the Lonely Mountain and Moria. They lost their wealth, power and homes to enemies they have been fighting for generations. Both cases see them attempt to conduct violent actions to destroy the occupying force and reclaim those areas. They define those areas as essential dwarven lands due to historical and ethnic affiliations. They feel they must reclaim them to redeem those lands and in some cases themselves.
Competitors who would benefit from a change in the international economic system would be those who import from the dwarves. They would gain the benefits the US does in terms of oil imports. But this would threaten the economics of the Dwarves, whose power is based on their reserve currency. This would provide an incentive to go to war to preserve the status of their currency. The Petrodollar Warfare Theory posits that the US uses similar offensive actions to achieve similar aims. Though its logic is somewhat different.
Beyond this, they would probably use the same economic power they seek to maximize. Russia for example is known for threatening to cut off natural gas supplies to get policy concessions. OPEC also manipulates the price of oil to both get more money and to affect international policy. The Dwarves very well could exploit their monopolies or oligarchic position in key minerals. By making people dependent on their reserves, they can then manipulate the price or even cut off supplies until the target surrenders.
There is also a critical PR element to this as well. Aid to the population and charity work would be needed to ensure that the people do not turn against all of this outside control over the local economies. While jobs would be provided, resentments at the outward wealth flows would still arise. So would grievances over unemployment and displacement from land. We can also expect that the dwarf run enterprises in foreign lands would probably not pay great wages. Thus, charity could be used to buy off discontent in the same way that welfare is used to appease the domestic unrest.
Other tactics include the manipulation of trade and aid. The dwarves can provide aid or loans at below market rates in exchange for policy concessions. Investments can be made that make key politicians rich. Exports can be subsidized so that the other nation gets them cheaper. Then there is the obvious opportunities for large scale development aid. When using this tactic, the construction would be financed depending on the project with some given as gifts. Others would be paid for through low interest, concessional loans; built in partnership with both sides taking on different construction responsibilities or through some other kind of local partnership.
Development aid would be critical in this arrangement. The poverty of other nations is a threat to those who rely on exports, as those nations cannot buy as much. Following the trend so far, this aid would be official state aid provided to the host nation such that the majority of the gains go to wealthy partners as a tool to buy loyalists. The projects are likely to be the major infrastructure projects that require large capital investments but generate large profits to the construction firm. Thus, the dwarves get economic development and access to markets while the local elites earn money in the process. The local populace can be ignored. There will be some investment in education and healthcare, but will most likely to be minimal. Maximal economic development in economies stuck at medieval technology do not need much education at all for most jobs. Thus, perhaps basic literacy and enough healthcare to keep them from dying on the job would be all aid would go to. As a result, the average person would see little of the aid money spent. Like trickle down economics, the aid would provide some gains, but mainly short term and very small. Administration costs and commercial ventures would profit immensely.
The loyalty is important, as the economic development would favor local elites and the dwarves over the local population. What would really happen is allied leaders would have their positions solidified. The inefficient and corrupt elements of the recipient state would be rewarded and thus no real reform would be domestically motivated. Thus, things that would have naturally been corrected would actually get reinforced. Elites get the money to operate without the local tax base supplying revenue and greater military spending can occur to deal with the unrest. In fact, the heads of state and their personal network gets rich (in this case by design) while the rest of the state struggles. In some cases, civil servants could not be paid, while in other areas many fake employees got paychecks. With no oversight, the results is based on the honesty of those getting the aid, which is not always assured. What is common in almost all cases is that recipient nations become dependent on the aid to function.
Most likely, the aid will be conditional, tied aid. It seems hard to believe that a group like the Dwarves would give up anything without some tangible gain for it. The most obvious thing would be a requirement that specialists and technical staff be sent to oversee the administration of the projects, making those individual dwarves rich in the process. A real world aid tactic requires the government getting the aid use the aid money to finance imports or services from the donor nation/its companies.
But the most valuable would likely be the structural adjustment programs. By using aid, the dwarves can effectively buy compliance of local elites as discussed above. By making them rich and dependent on the dwarves, the local elites can be forced to enact policy changes on top of simply buying more dwarven goods. Such actions in real world IMF programs include privatization of state owned assets and deregulation, both of which would allow the dwarves to make more money in the target economy. Other common elements are cuts to wages and enhancing the rights of investors. Again, also would be beneficial to dwarves. Similarly, local elites would be the only ones who can benefit from the privatization of state assests, like state owned enterprises. Thus, the structural adjustment programs would help solidify the alliances with local elites too.
All of these programs would result in the dwarves essentially becoming neocolonial masters of large sections of the world. The aid programs would give them control over government policy. This and their investment and trade policies would then give great amounts of control over the commanding heights of the economy.
What happens when the other nations do not comply with the dictates of the dwarves? So, there is a book out there called “Confessions of an Economic Hitman”. While the debate remains about whether the things described in the book are actual US policy, it could serve as a basis for how the Dwarves would operate beyond this. The policy described starts with the use of intergovernmental loans to cause unplayable debt in the target country. The loans are used much the same way as the development aid I discussed above. Local elites and companies in the lender nation make a lot of money while the normal people get ignored essentially. But there is a wrinkle – because it is a loan to the government, the government is forced to pay back the money with interest. Not the mostly private citizens who benefit from the loans. Thus, the lower classes are forced through their taxes and diversion of state revenue from social programs pays for loans they do not benefit from.
Not only that, but the debt is intended to provoke a debt crisis. Once the debt becomes too massive it cannot borrow more money – even for solid investments with high return on investment. This in turn compromises its ability to cover its own expenses and pay for social programs. The sort of policies that are required to solve a debt crisis often involve privatization and selling off state assets. Then there is austerity programs that often lead to recessions and high unemployment. That assumes that repayment is even possible – which is unlikely in the context of the lender seeking to drive the debt as high as possible. Theoretically, this has the power to shut down the government. While there is a debate as to what the best solutions are to a debt crisis, there does not appear to be a genuinely good one.
The result is the dwarves could offer debt forgiveness or more loans to the target nation in exchange for policy concessions. The list would probably match those from above, calling from the neoliberal austerity or IMF’s structural adjustment program playbook. But one tactic nations have used to get repayments for debts in the past was taking over government customs and tax collection. If that tactic is adopted by the Dwarves to get repayment, it could yield huge amounts of revenue.
To give a sense of just how much could be generated, I found the tolls charged to bring goods into Paris and how much state owned Paris markets charged vendors to set up stalls in them. As the value of the currency then was based on the value of the silver in them, I took the weight in silver of in the coins of the day and looked up how much that much silver would cost today. Vendors paid a yearly rent between $137.16 to $822.9 and an additional $2.29 to $4.57 per day a market was held. Import duties were $18.29 to $9.14 per wagon load, $4.57 to $9.14 for a cart and $2.29 to $4.57 per delivery of goods on horseback. Now, that may not sound like a lot, but that is a significant amount for a feudal society and adds up quite quick as one tries to meet the daily needs of a population like Gondor with 2.7 million people.
When dwarves find themselves in interstate disputes, their economic power means that they are perfectly placed to engage in economic warfare. The most famous is sanctions. One of the more common versions is blocking arms shipments to the target. But with control over remittances leaving the kingdoms, guest workers that can be used as hostages, control over local farmland, debt arrangements and land based trade routes, the dwarves have a lot of leverage. This is on top of the already discussed power granted by control over mineral reserves. Then they could also shut down the businesses they own in the target nation.
All of these would cause huge destabilization in the target nation. Cuba, Iran and Venezuela are all great examples of what happens when a nation is cut off from the international economy. In the more extreme cases, these sanctions are used to intentionally inflict harm on the targeted population with the hope that they overthrow the government. More often, success comes from the loss of tax revenue, destabilization of the economy and humanitarian concerns by the government induces changes in policy.
It is most likely that the economic sanctions, withdrawing of credit and cutting off of resources to the target would be a first step, inserted in before direct covert activities. Covert attacks like the assassinations and coups would be used next. After that, proxies, raids and privateers would be used short of war. All out war would be the last ditch effort. When it is used, it would aim at total regime change after a quick war. It seems likely that the cost of war and the destruction of economic assets would mean the dwarves would be keen to minimize it. If full capitulation is offered by the regime, it will be taken. Domestic collaborators would also be promoted as quickly as possible to reduce occupation costs. Full nation building or annexations would not really be a goal, as long as the money flows. But reparations and economic concessions would.
Agriculture & Industry
The policies that we can expect from the dwarves would follow the same lines as in the real world mercantilist pollicies I talk about later. All land would be utilized for agriculture, mining or manufacturing. As a result, all raw materials would be used in domestic manufacture, since finished goods are worth more.
One interesting point of comparison here is between the dwarves and the Incan Empire. The Incan Empire is located in one of the harshest environments out there. The Andes Mountain Range is on average 4,000 meters high. Thats enough that one can expect it to freeze at least once a month. But it also presented unique possibilities for growing food.
Within a few hundred kilometers, at least 20 different life zones can be found. This compressed variation in environment allowed the Incans to grow upwards instead of sideways. Think using the mountains as skyscrapers one can farm on the sides of. The harsh temperatures I mentioned above meant that pest and disease problems were more localized and some form of food was being produced relatively close. Instead of having to go to an entirely different province to get food when pests caused famine, one simply needed to go up the neighboring mountain. This also made it easier to store food. In fact, a form of ancient freeze dried potato was developed that could actually last a long period of time.
This led to a relative degree of welfare and cooperation. A strong ethic of aid, charity and recipirocity was developed. Widows, the sick and disabled had their lands worked for them. Surpluses were stored and given to famine hit areas and the poor.
Alpacas were the only local domesticated animal. It had a huge amount of cultural significance as it provided both meat and clothing. It was less than stellar at pulling plows, so a lot of fieldwork was still done by hand. But the cloth it produced was quite practical for the Andean environment. In fact, the gambesons made with alpaca wool were so good soldiers would come out of battles alive but looking like porcupines.
Irrigation canals were built into the sides of mountains to water terraces built on the sides of the mountains. A retaining wall was built to hold a layer of rocks, with sand then soil put on top. This would trap water that would normally run down the mountain. The rocks would also store heat, keeping crops from freezing. With this, they were able to feed their poopulation with only 2% of their land being suitable for crop production.
The manufacturing economy would probably not be the same sort of one of Isengard but rather individual self employed craftsmen operating in a guild system on steroids. But export led growth would start with the exporting of raw materials. As wealth accumulates, the government would then invest that money in supporting the guilds whose craft the kingdom has a comparable advantage with internationally. To pull this off, subsidies are the most obvious means of doing this. However, this would also mean currency devaluation as that tends to make exports cheaper in other nations. Wages would also likely particularly depressed in this sector. Cheap labor is one way that export orientations express themselves in the real world. It is likely that the drive to produce pressures to maximize the volume of goods produced. The result is factories, sweat shops and the eventual destruction of the guild system.
The increased demand for goods that comes from export led economic development would also push dwarves to become one of the first to industrialize outside Isengard. They already had the large capital requirements and raw materials needed to set up a factory system. Then there is the extra labor that comes from dwarves not farming, plus my expected use of slaves and guest workers. Expansion of colonial territories would grant more markets for the goods and more raw materials.
Mercantile policies apply to international trade, so it would be unlikely that internal tolls and tariffs would fragment the internal markets, allowing for internal demand to help fuel the process. Next, European rulers, desperate for revenue, formed alliances with their domestic merchant classes. Thus trade was a key to improvements in government revenues, just as it would be for the dwarves. Lastly, there is the technical mindset of dwarves that when combined with their crafting orientation would drive the sort of innovations at the core of industrialization. Essentially, all that is missing is a stable environment and sufficient international demand – something the War of the Ring would likely bring about.
Regulations for self interest, state granted monopolies, price fixing, increasing barriers to entry and natural market distortions all are also what I would expect from dwarven economic policies. I would also expect that the guilds would be the primary beneficiaries of government contracts and subsidies. Guilds would also probably be the main source of high levels of corruption in senior officials.
Trade & Transport
At a macroeconomic level, these dwarven kingdoms would probably seek to use mercantilist ideas. Essentially, gold and silver would be the measure of wealth for the dwarves. Thus, they would seek to maximize the amount of those in their stores. What they don’t mine would have to come from elsewhere. Historically one tactic used for this was trade and balance of payments surpluses. Given their craftsmen nature, it seems that trade policy would focus on importing cheap raw materials they can’t mine themselves and export the more expensive manufactured goods. Trade barriers would be erected to minimize imports as those lead to the loss of gold supplies. Economics was considered zero sum. Wealth is seen as finite and any gain must come from someone else’s loss. Production was seen as the main goal with no concern for consumption.
It is also likely that the control over trade routes would be exploited similarity. Moria for example is in a perfect position to serve as a trade route through the Misty Mountains. The Lonely Mountain is in another key area for regional trade. We see in the real world that major energy superpowers wish to control oil pipelines and international disputes have erupted over pipeline placement. Territorial expansion has been sought as a tool to control trade, such as the British over Egypt or Russia over the Turkish Striates. When one’s profits are bound up in the need to get goods to market and as cheaply as possible, such concerns over trade routes would probably be a factor in dwarven decision making.
To me, the Incans can provide another useful model that can be modified to fit the dwarves. They had a pretty solid highway system though the mountains with warehouses every 13.6 miles. These stored a wide variety of goods that could be distributed as needed. The fact they were spead over the entire empire and on the main road meant that the goods could be sent to most locaalities with relative ease and speed. Now, the Incans had no rivers that could be relied on, large draft animals, money or wheels. All things that naturally facilitate trade. But this Incan infrastructure was still surprisingly effective given the mountainous terrain and harsh environment. I would imagine that the dwarves would use the same basic system. After all, Moria specifically would be contrained by similar geography. But the dwarves would incorporate money, draft animals and wheeled wagons/carts into it.
This highway system covered 25,000 miles of the second highest mountain range on Earth. Impressive rope bridges were common. As were way stations manned by the fastest runners in the local village. This system meant that even in this environment messages could cover 243.58 miles in a single day. This was faster than Rome with its use of mounted couriers.
Education
Now, we know that unskilled dwarves would probably not have it to well, competing with slaves for jobs and many moving away. It is likely that most dwarves employed in the private sector would be in the skilled or semi skilled manufacturing and craft sector. This means that the state would have a strong incentive to have a better education system. The education would be geared towards producing semiskilled and obedient industrial workers and soldiers. Such investments in vocational education (or any for that matter) are common in areas where the state’s tax revenue goes up as does worker productivity. As the state benefits from the increased quality and quantity of manufactured goods and higher trade surpluses, this would be true for the dwarf kingdoms.
Infrastructure
To support this and the trade that the government relies on to get its goods to market, it would likely invest in infrastructure. Transportation is a major security priority. The minerals would be sent out and the food collected and sent back home. In a similar vein, the dwarves would probably also be the most vigilant in fighting bandits. Good roads mean nothing if highwaymen exploit them as hunting grounds. Piracy would be less of a concern due to the fact dwarves have little coastline and thus chance to trade on the high seas. But this would also have the side effect of the dwarves valuing stability in the regions they trade with. War, famine, civil unrest and state failure all hurt business.
Now, infrastructure development, developing trade surpluses and access to markets would be the economic goals of Dwarf kings. How would they do this though? Trade missions would be essential parts of diplomacy. Diplomats themselves would also probably serve as business agents of the state, making deals for direct investments loans and aid packages – probably with a cut for themselves built into contracts. Local collaborators would be cut in as well so that key players in local politics get rich as the dwarves move in. Meanwhile, public projects to appease the masses would be thrown in, such as building and donating sports facilities or schools.
The result would be diplomats being part state official and part business agent. On top of normal dialogue between governments, they would probably be the ones investing the sovereign wealth fund money allocated for projects in their host societies. They would also likely work to make partners with local notables, so that important people also profit from Dwarf spending in the area. Similarly, they could scout out and secure partners for private investments by wealthy dwarves or secure local agents and middlemen.
Then, they would make sure that there is regional stability to make the world safe for their trade and investments. First, they would seek to preserve the existing regimes. This means first ignoring human rights abuses in other nations. Security assistance would also be provided to keep friendly regimes in place. Then, humanitarian assistance, peacekeeping missions and even nation building activities would be used to restore stability to areas facing social, economic or political collapse.
Capital
Government System
Banana Republic
Power Structure
Unitary state
Economic System
Command/Planned economy
Currency
There would probably be a major debate on monetary policy. Weaker currencies make exports cheaper in external markets and thus exports will rise – thus benefitting the dwarves. But dwarves being defined as greedy would also want a strong currency as that would mean that what they own would be worth more. I am not entirely sure where the Dwarves would fall on this.
One thing that can be certain is that over time the Dwarven currency would be a commodity currency. This means that its value would rise and fall with the price of commodities exported. This is common in nations whose revenues are heavily dependent on the export of specific raw materials. As a result, the economic impacts of the rise and fall in raw material prices will be increased due to the impacts it has on the value of the money. This then grants the Dwarves a powerful and moderating policy tool. Studies have shown that exchange rates can predict export prices, so the Dwarves can manipulate their currency to influence the demand for raw material exports. But like all economic calculations, one needs to balance the price per unit with the total number of units in demand. It is entirely possible for demand to increase faster than price decreases. This means that decreases in price can lead to greater profits. This then provides incentives for moderating the price point. It also grants the policy elites wide power that is less dependent on the international markets.
While the value of commodity currencies are often protected by the values of exports of the raw materials, a similar effect can be achieved through trading that resource in a currency. The value of the US dollar was protected after the abandonment of the gold standard due to it being the unit of account for oil. Buying and selling oil required having dollars, which then increased the demand for and thus value of the US Dollar. Should the Dwarves push for their currency to be the unit of account for mineral reserves they have monopoly control over, their currency could become a lot stronger and grant them greater economic power/control. Should the resource be of strategic importance (like iron needed to make weaponry), other nations are required to keep large reserves of that currency.
Stability is a running theme here, as is the need for stronger value. As a result, we can expect the dwarves to have commodity money as well. This is distinct from the commodity currency idea mentioned above. Here, the idea is the value of the money is based on the value of the metal inside it, such as when gold or silver is used to mint coins. Another alternative used for paper money is having the money be redeemable in whatever commodities it is backed by (known more often as representative money). This means that the value of currencies is reflective of the market value of whatever it is made of or backed by.
Hence the value of gold, as it is common enough to be useful but rare enough to still have high value. It is also rare enough and hard enough to get that its supply is relatively stable. But the supply obviously can continue to expand, allowing for increasing the money supply and thus for economic growth. Silver is more common and has less value. Its relative abundance (compared to gold) is why a lot of medieval currencies were silver – like the British Pound. But this same phenomenon is why gold currencies were worth around 10 times as much per unit of the metals used. One way of balancing this was the use of silver in the coins themselves and gold held as a reserve as backing. Seeing as how one needs enough coins in circulation to actually conduct trade, this seems like a solid compromise for the dwarves.
Then again, fiat currencies not backed by anything allow governments to regulate the flow of commerce much more. This is something the Dwarves would be very interested in doing. This is where representative money becomes useful. Here again is a bit of a trade off. The gold standard protects against hyperinflation and abuses of monetary policy that would benefit the Dwarves. But deflation is an issue and nations that abandoned the gold standard recovered from the Great Depression faster.
The downsides basically consist of a limited money supply. Should the economy grow faster than the money supply, credit and capital supplies will be insufficient. Inflation can also arise should gold increase faster than the economy. Also, speculative shocks are considered more likely in nations using the gold standard should the financial position of the government appear weak. This induces governments to be less risky in order to avoid exposure.
However, on balance I think that the Dwarves would stick to the gold standard. Long term price stability and fixed exchange rates both benefit international trade, something the dwarves would rely on. Inequality in gold deposits means that the gold standard gives disproportional advantages to those with the gold reserves. In Middle Earth that means the Dwarves. The overall stability of the monetary order naturally benefit those who control and profit the most from it. This means that the Dwarves would most likely value the stability of the gold standard over the growth of fiat currencies.
"US dollars no longer a quote currency in Venezuela". Xinhua Net. 18 October 2018. Retrieved 19 October 2018.
One possibility is the promotion of their currencies as international reserve currency. This can take many forms, but all involve requiring institutions and governments hold large amounts of the currency in order to conduct international transactions. Given the likelihood of Dwarven control over trade and raw materials, this should not be hard to pull off. One of the side effects of this is that the issuer can borrow money and import goods cheaper, something that the Dwarves would like. It would also protect against inflation, which hurts creditors. As I expect Dwarves to be international creditors, this then would make it a popular tool. The banking system seems to prefer reserve currencies that are strong and stable, which means Dwarven monetary policy would prefer a gold standard aiming to minimize inflation. This status as a reserve currency also seems to be backed by the strength of the overall economy – so the Dwarves would want to see their economy be the dominant one in Middle Earth. More important is that their economy be stable and inspire high levels of trust in international financial elites, investors and bankers. This would provide a moderating influence over Dwarven foreign policy.
Another possibility is the use of Seigniorage to make money. This term means revenues generated through the difference in the cost of producing and distributing the coins and its face value. To use a simplistic example, should a coin have a face value of $25, then that it what the government essentially receives for it when the coin enters circulation. But, if it only took $20 of gold and labor to make, then the government made $5. This can be quite high in real life – the 50 state quarter program of the US Mint generated $6.3 billion this way. The US government generates 45 cents per dollar of paper money. The total for 2000 was $25 billion. This combined with the reserve currency system could also generate significant amounts of money for the government. A federal Reserve report states that starting in 1964 the US government got $167–$185 billion from seigniorage revenues off currency held by foreigners. This averaged $6–$7 billion dollars per year of 2 decades.
Why exactly to private citizens in other nations hold on to foreign currencies? Strong and stable foreign currencies can actually protect the savings of people who live in nations facing hyperinflation. Periods of higher political instability or military risk see people want to hold on to stable currencies more.
Large foreign reserves of other nations protect against inflation. It also allows the issuer to gain revenues from seignorage and by issuing bonds at lower interest rates. As a result, the government can run higher budget deficits at a more sustainable level than most other countries. When this is based on the need for importing raw materials (oil being a big example of this in real life), the price of these raw materials is going to be more stable in the currency issuer. This is increased when the commodity in question is denominated in the currency in question.
Now, in real life, the major player that benefits from this is the United States regarding oil. Since the US imports a lot of oil and its economy is dependent on oil, the price of oil is an important political issue. Keeping the currency strong makes imports cheaper, thus the price of oil is kept down via this sort of monetary policy. It is also more stable due to the reduction of exchange rate fluctuations. However, the Dwarves need to export their raw materials to keep their economy going – not import them. This would put pressure on them to keep the currency weaker so to promote exports. Hence part of why I am not entirely sure whether Dwarves would prefer strong or weak currencies.
What is clear to me is that the dwarves would need a stable currency that is the main one used in international trade and denominating commodities in the international markets. A representative currency based on gold or silver would fit this. The gold standard in the US was supported by the financiers, manufacturers and railroad executives. I would image that due to the fact those would be the dominant sectors of the Dwarf Economy that they would prefer this standard as well. But silver allows for more coins to be issued. Silver standards though allow for more coins to be minted. The downside is apparently the value of US coins minted with silver were essentially fiat currencies. This stemmed from the fact that the value of the silver in them was less than the face value of the coin. Thus the “free silver” movement was essentially inflationary. If the other monetary policy tools I described that allow for the containment of the inflation caused by a switch to the silver standard, this could be less of a problem and still create enough money to facilitate international trade and be stable.
It might be possible to use a modified version of the Silverite 16-1 proposal. The original proposal was to set the value of 1 ounce of gold as equal to 16 ounces of silver. In my modified version, I propose the coins be made from silver and be redeemable in gold at similar ratios. To protect against inflation pressures, I think the medieval British pound can be used as a basis for the coins. They were 1.4 ounces in weight and 92% silver. Keeping with the 16 to one ratio of gold ounces to silver, a person could walk in and redeem £12.42 for one ounce of gold. This would probably have issues, but it is the best I can see given the economic position and values of the dwarves.
Just as important for this is not just the monetary policy but also fiscal policies (taxation and spending) and political stability. I hope to get into this at some point.
Milton Friedman, "Bimetallism Revisited", Journal of Economic Perspectives Vol. 4, No. 4 (Autumn, 1990), pp. 85–104 in JSTOR
Walter T. K. Nugent, Money and American Society, 1865–1880 (1968)
United States Mint FY 2013 President’s Budget Submission United States Treasury
http://banking.senate.gov/docs/reports/dollar.htm
"50 State Quarters Program Earned $6.3 Billion in Seigniorage - Coin Update". news.coinupdate.com. Retrieved 11 April 2018.
http://www.federalreserve.gov/releases/z1/current/ and See:Edgar L. Feige "New estimates of overseas U.S. currency holdings, the Underground economy and the "Tax Gap" https://ideas.repec.org/p/pra/mprapa/19564.html
Bernanke, Ben (March 2, 2004), "Remarks by Governor Ben S. Bernanke: Money, Gold and the Great Depression", At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington, Virginia.
Goodman, George J.W., Paper Money, 1981, p. 165–6
Mayer, David A. Gold standard at Google Books The Everything Economics Book: From theory to practice, your complete guide to understanding economics today (Everything Series) ISBN 978-1-4405-0602-4. 2010. pp. 33–34.
The next major international implication of the exporting or dwarven minerals is effectively the Middle Earth version of petrol dollars. Huge mineral reserves exported abroad tend to produce more money than can be effectively invested or spent in the domestic economy. Petrol dollars are commonly spent on imports of consumer products, luxury goods, weapons and construction materials. They are also used to buy the debts of other nations or as foreign aid or direct investment. These tools grant the spending economy a strong position in the other economy and state. This will become a powerful tool as the dwarves continue to amass larger and larger surpluses and realize that investments can lead to even greater returns. Thus, we can expect investments, debt purchasing and aid as a tool to both gain more money and exert power over targeted economies.
This is often done through sovereign wealth funds. These are controlled by the heads of state and are formed with money from commodity exports or foreign currency reserves. They typically invest in other commodities, bonds or real estate. This helps deal with the nature of mineral based wealth – high and frequent price changes, unpredictable supply and finite reserves. The result is income that can cover government expenses during slumps in production or price.
Major Exports
Exports of gold and silver will be prohibited. Foreign policy will seek to maximize the opportunities for selling surplus manufactured goods to foreigners, which are to be paid for with gold and silver as much as possible. Exports are to be subsidized.
Internationally, these kingdoms can influence world events though the manipulation of their mineral production. Control over world prices and even shutting off production entirely can have dramatic effects over economies that require those imports. Threats or favorable mineral concessions can be used to get other powers to do what they want as a result. Meanwhile, a supply of mineral reserves can make it easier to borrow in international credit markets due to the collateral offered. Similarly, it can gain better terms as it is less dependent on the loans. Controlling global deposits and possessing large spare production capacity allows the dwarves to increase or decrease commodity supply at minimal additional internal cost, and thus able to influence prices and balance the markets, providing downside protection in the short to middle term.
Normally, the dwarves are likely to simply respond to market prices in deciding their production and export targets. However, independent producers may attempt to take advantage of reductions in dwarf exports and increase their own as a way to undercut the dwarves. Should this happen, the political calculations would take over. The dwarf establishment would then drastically increase production to essentially flood the market. Smaller producers will be crushed. While the dwarves will operate at a loss, they will be able to withstand it and gain in the long term.
The Petrocaribe treaty could also prove to be a way in which the Dwarves deal on the international stage. This deal is centered on Venezuela oil exports to 17 other nations in the area. Basically, Venezuela sells oil at market value for 5%-50% up front. It then gives nations a one to two years grace period. After that, the remainder is paid over 17-25 years at 1% interest if oil prices are above US$40 per barrel. This is meant to cut out the middlemen and thus keep the profits from sales of oil. Now, given the use of middlemen described elsewhere in my discussion of Dwarven economics, I doubt this would be the center point of policy. But this could be effective to undercut attempts by other nations – especially enemies – from gaining control over trade in important raw materials. Also, the direct links that such a system creates between governments could mean it could be a basis for improved political and economic links with people the government deems that desirable.
Major Imports
Imports of foreign goods would be discouraged as much as possible. Where imports cannot be avoided, some form of barter would be preferred over paying for them with gold and silver.
Import substitution would be encouraged to minimize imports. This means high tariffs, especially on manufactured goods and forbidding colonies to trade with other nations. Subsidies are also to be granted to industries that supply replacements for imports. This is complemented by research or direct subsidies leading to innovations that allow products to be replicated with local materials instead of scarce ones that need to be imported.
Location
Related Professions
Controlled Territories
Related Ethnicities
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