Could the WW have something like a credit crunch?

[moonlite_tryst]

I'm not an economist and only have the vaguest idea about things such as GDP, inflation, deflation, customs and excise, but I do get that countries survive by trading with other countries, providing a marketable product or service, or selling a natural resource in demand by others. A ridiculously simple overview I know..

Which leads me to my questions:

How do you think the wizarding world economy works?

Do Uk wizards trade with other communities around the world and what do you think the UK wizards could offer?

Do galleons rise and fall in price like other monetary systems? Would Voldemort's actions have had a negaive impct on the WW economy?

How does Gringott's operate?

Do the goblins charge their human customers and would they have something like the Muggle money markets to make a profit on all that gold etc sitting in their vaults?

Could famillies like the Malfoys, Blacks and Potters have amassed their fortunes by taking advantage of generations of Muggle labour or Muggle ambition, such as trading in tea, porcelain, opium etc?

I'm thinking this gathering of wealth on the back of Muggle labour is very likely because there must've been Muggle borns throughout the centuries. Would the heir to a grand estate been made to renounce his title because he was a wizard?

Thoughts?

Comments

[oldenuf2nb.livejournal.com]

Intriguing question... and I think, the answer is yes. Especially in the cases of the Malfoy's and the Blacks. I can see the WW profiting from Muggle consumerism, without Muggles knowing that they are buying wizard produced items.

And in regards to Gringott's, I think the goblins would absolutely have bank charges.

[moonlite-tryst.livejournal.com]

Do you think galleons rise and fall in price like other monetary systems? And if this is the case, could Voldemort's actions have had a negaive impact on the WW economy, in that there was a loss of confidence with other wizarding communities around the world and investment/trade decreased?

I think the goblins would absolutely have bank charges.


How do you think they'd make a profit on all that gold etc sitting in their vaults? I winder if they invest in other operations around the world, magical or otherwise.

[oldenuf2nb.livejournal.com]

I would say that they would probably mirror the other monetary systems, and any war as an impact on the economy of the countries involved. In America, wars have been good for the economy. (if you don't count the current mess, which clearly is the exception). And I would think yes, being involved in a 'civil war' of sorts would certainly affect the economy.

I think the Goblins would charge interest. And I would absolutely believe that they would be invested internationally. They're too clever not to.

[moonlite-tryst.livejournal.com]

Which begs the question why are they allowed to control the money in a society that treats them as less than equal? I'd've thought it an obvious thing to freeze the WW assets, those superior ministry officials would soon open a dialogue about equality.

[romaine24.livejournal.com]

I just have a second, but, yes, UK wizards would trade with others.

Here's a snippet from the Lexicon that would back it up.

Trade Restrictions:

Class A Non-Tradeable Goods
(e.g., dragon eggs) (FB)

Class B Tradeable Materials (Dangerous and Subject to Strict Control)
(e.g., Erumpent horn) (FB)

Class C Non-Tradeable Substance
Venomous Tentacula seeds (OP9)

Ban on Importing Flying Carpets (GF7)
(classified as a Muggle artifact)


In addition, there's this about Percy.
Percy spent a lot of time while working in the Department of International Magical Cooperation writing a report about the need to standardize cauldron thickness to prevent the market being flooded with defective thin-bottomed imported cauldrons (GF5).

So I think you can assume that there is trading going on between the wizarding communities.

ok gotta run.

[moonlite-tryst.livejournal.com]

*runs after you* I'd forgotten about Percy's job and the cauldron thing. I'm also wondering about import and export. If things can be Portkeyed or Apparated to any location within a given radius, the possibilites for smuggling must be immense.

[beatnikspinster.livejournal.com]

Oh god. The WW economy tortures me when I think of it. The WW economy really hasn't been thought out at all in canon. Not one bit. I'm going to ramble a bit. It may have nothing to do with what you asked. SORRY! Feel free to ignore it. :)

Transfiguration & Precious Metals/Jewels
How can their money be gold, silver, and copper, if those materials can be conjured? If precious metals can be pulled out of thin air, or transfigured, then they're valueless for trade. It leads me to believe they can't. Or at least can't exist conjured/transfigured for anything but a limited amount of time. It's been suggested before, in an unrelated place, that the WW can "make" gold to exchange in the Muggle world. but the very act of being able to "magic it up" makes it valueless in the WW. Therefore galleons can either not be made of gold, or gold can't be transfigured, or galleons only have value outside the WW.

Muggle Trade
The WW could access wealth by trading goods with the Muggle world that are easier to access or transfigure. The influx of goods would drive down the value of the commodities. In large amounts, this would cause serious damage to the Muggle economy with deflation.

If the Malfoys, Blacks, and Potters amassed fortunes based on Magical-Muggle trade, the results would most likely be disastrous for the Muggles. The worst could be passed along to the general population, but it would still impact the Muggle upper classes. They would be in the position of power to learn of the source of the deflation. The resulting friction could be a serious problem. The WW may cast a xenophobic eye on the non-magical world, but those in a lateral position of power would go toe to toe with the sense of entitlement.

There's this blog entry (http://scottneigh.blogspot.com/2006/09/political-economy-in-harry-potter.html) with a lot of questions about the WW economy. It's Marxist and a bit pedantic, but still has some good points about the inconsistencies.

[pir8fancier.livejournal.com]

You know, I think this gets into very murky waters, because JKR was very determined to keep the wizarding world somewhere around 1650 in terms of technology, etc. So basically we have a very limited economy. It doesn't seem reasonable to assume that you didn't have farmers, etc., because you had minature towns with your normal run of shopkeepers (and yes, they sold "magical" goods, but basically a pint is a pint). I think that the prohibition between the Muggle and the Wizarding world was so profound that I don't see trade between these entities at all. Even the dodgy trade was seen as dodgy within a wizarding context (Mundungus and his cauldrons).

If we accept the idea that the wizarding world is stuck in the 17th century, I bet aristocrats like the Malfoys (and probably the Potters as well) made their wealth from licenses along the lines of the East India Company. They clearly weren't shopkeepers in origin. Although I don't think explicitly stated, it seemed like the Malfoy were of landed wealth. So perhaps they leased farms, ran sheep, cattle, bred horses, similar to their 17th century Muggle breatheren, but I'm betting it was more on the licensing end of things with other countries. Clearly, wizarding is international, with Bill traipsing around the globe.

[beatnikspinster.livejournal.com]

Deflation isn't confined to industrial production or within national borders. It happened with the Dutch tulip industry in the 1630s. The Statute of Secrecy was made official in 1692. Before that? I can see deflation-sparked conflict as the impetus for separation from the rest of the human species. (OMG! Maybe they caused the Dutch Tulip Collapse?!)

As to the aristocracy, feudal income as sustainable wealth was already eroded by the 17th century, so I'm sure any wealthy was surviving via colonialist commerce. But there's that 90 year lag again. Yes, the WW is international, so international trade and colonialism would follow. But would/could they confine their greed within any borders, logistical or magical? Without a Statute of Secrecy, I honestly can't see Wizards restricting themselves from the low overhead revenues of trade within Muggle Europe.

[pir8fancier.livejournal.com]

Rationally I don't see Wizards restricting themselves, but in terms of JKR's determination to keep them so isolated, it would make sense within the context of the novels. I mean, who in their right mind would use a quill when you can use a pen? It's a mindframe that I don't think fits a rational economic system. A rational economic system would have a shadow world where Muggles and Wizards interact. But that doesn't happen in the series. Look at the big deal that is made of the Prime Minister being the ONLY one in the British cabinet who learns of his counterpart in the wizarding world. Personally, I don't think you can discount JKR's insistence on these world's being separate (and not equal).

I could see the Malfoys being colonialists. Having tea plantations with house-elves as pseudo slaves.

[beatnikspinster.livejournal.com]

Why would they need a Statute of Secrecy at all, if no one was interacting? I saw my comments filling in history in her last question, rather than present day economics.

But yeah, I can see some of what your saying, especially if you're trying to extend JKR's intentions. I tend not to care what she intended, ever. I take the what canon facts exist and fill in the rest in an interesting way. I loathe "But It's Magic". It's too close to Jabootu's "It's In The Script" for me. To supplant reason with JKR's impulse-driven construction means waiting for her, personally, to layout the specifics of an economy for us. She didn't establish a portable systemic foundation to extend the WW without her hand, so unless I utilize reason to fill in the blanks, I'm can't write fancomics at all.

[moonlite-tryst.livejournal.com]

To supplant reason with JKR's impulse-driven construction means waiting for her, personally, to layout the specifics of an economy for us. She didn't establish a portable systemic foundation to extend the WW without her hand

*coughs politely and raise hand* Um... blond here. Can you say it again in simpler terms?

[beatnikspinster.livejournal.com]

Sorry about the confusing language. *blush* I've been trying to figure this out for the last few hours, and write it in a way not too mangled.

First, rejecting an idea as rational feels arbitrary. The WW is too derivative of the real world to reject things like deflation out of hand. It's not a wildly original, alien world like those created by Octavia Butler or Ursula K LeGuin. It doesn't escape the bonds of convention, so RL phenomena don't feel out of place for me.

Second, the WW canon responds only to JKR's ever-changing impulses, which are inconsistent, and not a system no matter how many encyclopedias there are. For example: magic can't bring back the dead, except with death's ring or priori incantatem or a horcrux or a horcrux removal AK. Except after interview retcon, then it's not really back from the dead, just looks like it. Portraits totally don't count as resurrecting a person, except there's never a glitch talking to them, unless you totally want to prove how not real they are. Wanna bring Snape or Lupin back from the dead? Good luck!

Without JKR's impulses, the WW can't be expanded. Not by its own authority. So fanon can either use reason to fill in the gaps or substitute anyones impulses. (Unless one person/group asserts their idiosyncrasies as a proxy authority for JKR over fandom. Fancoup.) Canon is governed by erratic authoritarianism, making all fanon subversive regardless of approach. This leaves neither rationality nor impulse with more authority than the other. In the light of this, "rational" isn't a convincing criticism.

[moonlite-tryst.livejournal.com]

Having tea plantations with house-elves as pseudo slaves

Most definitely, or even growing the more unsavory crops such as opium or cannabis. Now that I can see having great potential.

[moonlite-tryst.livejournal.com]

to keep the wizarding world somewhere around 1650 in terms of technology,

True, except, it seems, for the Howarts express. However, I'd've thought that if the muggle population increases due to improved infant mortality rates, then surely the percentage of muggle borns reaching Hogwarts would increase and with them an influx of muggle ideas to challenge the status quo of the pre-industrial WW.

bet aristocrats like the Malfoys (and probably the Potters as well) made their wealth from licenses along the lines of the East India Company.

Yes. That's the sort of thing I was implying. I'm sure they could be quite creative in muscling out the competition, especially if the competition were Muggles. That would also work for gold, silver and other mining operations.

I think that the prohibition between the Muggle and the Wizarding world was so profound

This leads me onto something else that keeps niggling at me. What about the reactions of muggle born landed gentry or royalty when the owl from Hogwarts arrives? If they didn't lock their more than strange child away, then said child may return as heir to an estate with notions of trade between the two, or is it expressly forbidden?

[pir8fancier.livejournal.com]

Unfortunately, I think that any attempts to create a rational world within the confines of her imagination is impossible. I really don't think that she cares that with wizards being born into Muggle families there would (rationally, that word again) crossover between the two societies. That wouldn't work in her visual framework for this series. Part of its charm (although it starts wearing thin by book 5, IMO) is that the wizarding world is so archaeic. At certain points it's mandatory that things BE rigid, that the world's don't meet, for the plot to move forward. The only time she let's the "real" world intrude is when it serves her purposes (with the magical car business and making fun of Arthur Weasley).

She can't even make her magic follow a certain integrity, so I think that for us to construct a complicated economic system that has an integrity is a fool's errand. Basically, if you wanted to construct a financial basis for wizarding wealth, then I would use the aristos in the 17th century as a loose model (East India Company model) and let your imagination go wild. I think some things would be a given. Malfoy's are landed wealth, but they also have strong ties to the government, so I can see them leaning on their government lackeys for the granting of lucrative trade licenses. This seems a given.

Part of the problem here is that these characters tend to act in a vaccuum. With the exception of the Weasleys, the Malfoys, and the Grangers, we have no idea what peoples' parents actually do. We have no idea what Grandparent Potters did, although we know they are Purebloods. They do not seem landed, because no land passes onto Harry, BUT they had money.

You know, I'm of the mind to just go for it and let the world be your oyster, keeping in mind that we have a few givens and are dealing with a world that had no technology.

I think an excellent role model might be the Bertram family in Austen's "Mansfield Park." The family was landed and aristocratic, but it was limited and the bulk of their wealth came from slavery. That fits with the Malfoys!

[moonlite-tryst.livejournal.com]

Very interesting entry, although some of it lost me. I didn't know they could transfigure gold. You're absolutely correct, they'd valueless for trade. maybe it's like a fools gold: shiny on the outside, but worthless.

Therefore galleons can either not be made of gold, or gold can't be transfigured, or galleons only have value outside the WW.

I'd say that gold can't be transfigured because if galleons only have value outside the WW, then Harry is not as wealthy as hagrid led him to believe.

As for Muggle trade, what you say is an excellent point for the ww as it stands in the 20th century. I was thinking they could've gained their wealth in the past, say the Tudor period, before the seperation of both worlds when great fortunes were made from the voyages of exploration.

[graylor.livejournal.com]

The wizarding economy is a mystery to me. If you can Transfigure things into gold and you have a gold-based economy... ?

Personally, this seems like a big gap area in the books so hand-waving/exploration is certainly warranted by fic-writers.

The wealthy wizards would have many options in the Muggle world. To a certain sort protection rackets would certainly appeal ("Nice ship you've got there, squire. Pity if something happened to it.") That sort of thing could have even given rise to the Ministry's regulations.

Then there's "semi-public" magic ("Better hire that Weasley bloke, lucky bastard, never got hit by a storm with him aboard even if he is right useless at gutting fish.") Where everyone knows something is happening but no one says anything explicit.

And then, for the modern Malfoys, my favorite, "cheating" at stocks. Divination in the form of arithmancy is popualar enough to be taught regularly: why not apply that information to Muggle markets? Add in the ability to manipulate gold/silver/whatever markets through transfiguration and you have an excellent, presumably mostly legal, racket.

It's not like travel between worlds is restricted for wizards: with enough money, I'm sure they could get their fingers most anywhere.

[moonlite-tryst.livejournal.com]

this seems like a big gap area in the books so hand-waving/exploration is certainly warranted by fic-writers.

I think the transfigured items would have to be like fools gold, looks pretty but worthless, or it has a finite life span.

Nice ship you've got there, squire. Pity if something happened to it.

Haha! I like the example you've given. Also, before they were regulated, or so rare, Time-turners could've been put to good use by a canny wizard wanting to know whether some new found venture was worth putting his or her precious galleons into.

Divination in the form of arithmancy is popualar enough to be taught regularly: why not apply that information to Muggle markets? Add in the ability to manipulate gold/silver/whatever markets through transfiguration and you have an excellent, presumably mostly legal, racket.

Oh yes. I like you're thinking. Which could lead to Draco's finances being in trouble now with the current state of affairs. If I knew enough about the City, there could be a damn good plot there.

It's not like travel between worlds is restricted for wizards

Exactly. And no one ever says a Portkey costs money, so travel is not confined to the rich, which makes me wonder about smugglimg. If wizards can pop up all over the globe and shrink things there's potential for an active market in smuggling ancient magical artifacts. Ooooh! I've just bunnied myself.

[raitala.livejournal.com]

Oo, interesting question! I think there must obviously be an international trade in magical objects, materials, ingredients etc. There must be small enterprises, making the honeyduke's sweets, making parchment, robes etc. The WW has shrunk so much, at least in Britain that any large-scale operations or land-holdings would be too difficult to hide. I imagine there must always have been tie ins to the muggle economy, land and property ownership and investments. It is perfectly possible to keep the statute of secrecy and maintain a substantial portfolio of muggle assets. I'm sure the goblins would be adept at maintaining an untraceable fog of off-shore accounts, trusts and companies obscurely registered. Who knows, maybe the whole off-shore tax haven system was initiated by wizards :D

[moonlite-tryst.livejournal.com]

The WW has shrunk so much, at least in Britain

Now this is something I truly don't get. I can understand the population being small when the Muggle population is small because there woudn't be many muggle borns to swell the ranks. But, with the population explosion in Britain since developments in sanitation and health care, it doesn't make sense that the UK WW is so small.

If the muggle population increases due to improved infant mortality rates, then surely the percentage of muggle borns reaching Hogwarts would increase and with them an influx of muggle ideas to challenge the status quo. I'd've thought that development would be the very thing that started Grindlewald off on his journey to pure blood supremacy.

As for the goblins, why on earth would anyone entrust their wealth to a group of beings they treat less than equal, unless there's some serious protection spells at work that prevents the goblins from spiriting away all those galleons.

The short answer as regards a similar credit crunch...

[wemyss.livejournal.com]

... is, No. An almost equally short answer is, No, because the Wizarding World uses commodity money rather than fiat money.

The long answer, including all your points, will require its own post.

Re: The short answer as regards a similar credit crunch...

[moonlite-tryst.livejournal.com]

Fiat money?

Nothing to do with Italian motorcars....

[wemyss.livejournal.com]

Fiat money is notes, paper currency, required by law to be accepted as legal tender but not backed by or redeemable for gold or other commodity of intrinsic value.

And here is that longer answer I promised.

[wemyss.livejournal.com]

http://wemyss.livejournal.com/182444.html?#cutid1