I am working on a fantasy novel taking place in a fictional part of the world (containing three island nations) separated from the rest of the world. The economy of the three nations is separated from the rest of the world, and the reason is that they are three magical nations. The standard of living in these three nations is high, which contains free education (also higher education) and free healthcare. The biggest of the three nations' biggest export is fish and seafood and magical technology. Do you think these three nations would be able to survive and have such high standards of living without having slaves to work for them, when they are only exporting to two other nations? The first island has around 80 million people, the second has around 2 millions and the third has only around 1 million. Let's say the taxes are high. The reason why I am asking this is because I want my fictional countries to be realistic, even if they are magical.
I don't think so. The first island would need a huge livelihood to keep it running or could use the second and third islands for support. Well to me anyway. What if the second and third have rich natural resources? That would keep the first afloat for sure.
Magic to me sounds like "free money" basically. So I can't see how they would become bankrupt. Also, could you be a little more specific what you mean with "high standard of living", I mean are you talking about what would be a high standard of living in the Middle Ages or today?
If they are exporting it is not seperate from the rest ofthe world. And what are the importing in turn. The key element to coming up with a belivable fantasy economy is to ask: Where does the food come from? Who produces the food? How big pre dent of the people need to produce food to substain the society? How does the chain from production to costumer look like? And then ask the same question for: Iron. Drinking water. Cloth. Tools. Salt. Building materials. Etc. You don't need to go in depth in any of the questions. If you can produce a reasonable answer it is enough. If you can't come up with an answer, you got a problem and then you fix it. This will ensure you don't end up with a "Thriving city in the middle of the desert" or something like that. Your islands sounds a bit like Iceland apart from the magic bit Somewhat isolated but not totally so. With some trade and not a huge population. So if you want some historical reference looking at Icelands pre-modern economy might be helpful.
So you are basicly talking about an island version of Norway? I don't see how the first nation can have 80 million citizens. The three islands would have to be huge to sustain it. And why do they export fish to the other islands? Can't they fish themselves?
Economics is just a game, as long as you don't need things from outsiders playing a different game, you're okay. Let's say all the people on an island volunteer and they have plenty of food, clothes, and homes they all willingly make for each other, but they don't have oil to burn for fuel. People on the mainland do have it and they don't volunteer to give things, rather they demand gold. The people on the island don't want to mine their mountain for gold, but now they're forced to. That would ruin the situation on the island because now instead of enjoying farming and stuff to benefit your people you have to go to the mountain and be a minor just to get fuel. Now, the volunteer economy is doomed and the standard of living goes down. So, my point is the economy of your islands depends on what they need from people outside of the island. If magic can create food and other goods then their economy would be self-contained. For instance, I raise horses, but have no magic, so I pay the wizard to create hay for my animals. He might then buy my horses with our money or in exchange for his services. That means the island has a circular economy. However, if the islanders can't create some important item through magic and we only have fish to exchange for it, they're in trouble unless our fish are very valuabled. That is when we become vulnerable. Side Note: This was the excuse the Soviets used for never starting communism in the USSR. They said they needed a dictatorship first because you can't have communism unless the whole world is sharing and on the same page.
I would recommend that you introduce a barter system on that one island. Practically everything can be bartered for something else on the island. For example- A hairdresser can get food from the farmer after cutting his hair. (Of course, the hairdresser could still request money for the service, but if you make the barter system part of the culture the hairdresser would likely choose to barter) If most things on the island can be bartered for, the people have less need for money and the government would be able to use the money gained from imports to pay for the health care, education and everything else that cannot be bartered for.
Anything is possible, but I would give the magic limitations. Example: Don't allow your magic to create a fish from nothing. "It's supper time. What are we having?" "Halibut!" Wendy raised her wand, and halibut fish and chips appeared on the dinner table.
Today.I'm sorry for being unspecific. The story is taking place in today's society and the islands are a parallel world. Let's say that the standard of living is like many places in today's Europe. Free education, free healthcare, social services, equal rights etc.
I see. Well, magic notwithstanding, that requires pretty much the same make-up of the economy as you find today in highly-developed countries. I.e. less than 5% of the population in agriculture, and the rest split between industry and services. Since you have placed your islands in isolation, you don't have a cheap-labour country to do you manufacturing for you, so you'll need everything on-site. The same goes for minerals. Our standard of living requires having practically all except the transuranic elements at our disposal, including rare earths, to be incorporated in technology. So, you would basically need to give your nations access to practically every mineral in abundance (or they generate them by magic... I don't know what you're planning... ). But given all that, I don't see any reason for them not to prosper. Only thing I doubt is that they would only export fish, since that implies that there is no other resource readily available.
Economy is a scaleable system. Whether a world has three or seventy-nine continents makes no difference, similar to how a secluded tribe can have a viable economy just as well as an enclosed empire could. Our global economy is an enclosed system too, since we don't trade with other planets. The interesting question is whether a high standard of living could exist without someone within the same system having a low standard of living. History suggests the answer is no, but I'd leave that to those with a degree in economics.
Economies go bankrupt when the flow of money within the economy fails to match the activity within that economy. If a farmer doesn't think that the money that they will earn from raising crops will reimburse them adequately for their effort then they will likely restrict their crops to only what is required for survival. So long as the money flow is not restricted by bad debt, massive hoarding, fraud, devaluation (through inflation or currency debasement) and the people can expect adequate rewards for their efforts, then your economy should be viable. Except for the 80 million people living on a primarily fish diet. On such a small world they would likely fish out their resources very quickly.
