The Economy of the Federation
Gene Roddenberry always wanted Star Trek to depict a future of humanity without war, without hunger, without disease and without poverty:
"In the 24th century there will be no hunger, there will be no greed, and all the children will know how to read." (Gene Roddenberry)
There are hints or statements in several episodes that particularly the economy of the future, or at least that of the Federation, works differently than today, and that something like a currency may not exist any longer. The evidence of the possible existence of money, however, is contradictory, and the question is discussed accordingly controversially. This article strives to find a half-way plausible solution based on canon evidence.
Kirk intends to pay the miners on Rigel XII for the lithium crystals, which to him appears as the normal course of action (TOS: "Mudd's Women").
Kirk says to Spock, "The Federation has invested a great deal of money in our training." (TOS: "Errand of Mercy").
Kirk asks Spock, "Do you know how much Starfleet has invested in you?". Spock starts to reply, "Twenty-two thousand, two hun ..." (TOS: "The Apple").
Cyrano Jones negotiates the price of the Tribbles with the bartender on a Federation space station. The bartender is expected to pay with credits (TOS: "The Trouble with Tribbles").
McCoy negotiates with an alien about a transfer to Genesis, and he says he would have enough money for that ("Star Trek III").
Scotty says that he is going to buy a boat ("Star Trek VI").
Beverly Crusher buys a roll of cloth on a bazaar on Deneb IV, and has her account on the Enterprise billed (TNG: "Encounter at Farpoint").
Four Starfleet starships rally at a planet called Dytallix B, which is said to be owned by the Dytallix Mining Corporation. Dytallix is apparently in Federation space (TNG: "Conspiracy").
The Federation bids a sum of 1,500,000 Federation credits for the Barzan Wormhole (TNG: "The Price", offer depicted in STTNG: The Continuing Mission).
It becomes obvious that Dr. Apgar's reason for developing the Krieger wave generator was to sell it to the highest bidder (TNG: "A Matter of Perspective").
Federation officers have to and are able to pay for drinks and for holosuite usage in Quark's bar (DS9).
Quark sells his damaged shuttle to a scrapyard, obviously in the Sol system (DS9: "Little Green Men").
Joseph Sisko maintains a restaurant in New Orleans, which is open every evening. Would he be at other people's service just for fun? (DS9: "Homefront", "Image in the Sand").
Yanas Tigan owns a mining company on New Sydney. Although the planet may not be under Federation jurisdiction, Trill is clearly supposed to be a Federation member (DS9: "Prodigal Daughter").
Tuvok, together with Janeway, buys a meditation lamp from a Vulcan master who doubles the price when he notices their Starfleet insignia (VOY: "The Gift").
Kirk tells Spock about 20th century Earth: "They're still using money. We need to get some." In the same movie, when Kirk is unable to pay in the restaurant, Gillian asks sarcastically, "Don't tell me they don't use money in the 23rd century," and Kirk tells her "Well, we don't." ("Star Trek IV")
Picard tries to explain to Ralph Offenhouse from the 20th century that there would be no need for his law firm any longer: "A lot has changed in three hundred years. People are no longer obsessed with the accumulation of 'things'. We have eliminated hunger, want, the need for possessions." (TNG: "The Neutral Zone")
When she asks how much the ship has cost, Picard tells Lily: "The economics of the future is somewhat different. You see, money doesn't exist in the 24th century... The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity." ("Star Trek: First Contact")
When Nog suggests that Jake should bid for a baseball card in an auction, Jake says: "I'm human, I don't have any money."Nog replies: "It's not my fault that your species decided to abandon currency-based economics in favor of some philosophy of self-enhancement." Jake: "Hey, watch it. There's nothing wrong with our philosophy. We work to better ourselves and the rest of humanity." (DS9: "In the Cards")
Jake talks to Quark about publishing a book on his life on the occupied station with the Federation News Service. Quark asks, "And they are not paying you?", which Jake confirms (DS9: "You Are Cordially Invited").
Janeway is visibly not accustomed to using money on the Mari marketplace. She may be just unsure about the value of the alien currency though (VOY: "Random Thoughts").
Paris says about the significance of Fort Knox: "Well, uh, when the New World Economy took shape in the late 22nd century and money went the way of the dinosaur, Fort Knox was turned into a museum." (VOY: "Dark Frontier")
There are numerous pieces of evidence in favor of money, in the 23rd as well as in the 24th century. Money seems to play a role in many cases in which the Federation or Starfleet as a whole or single individuals are dealing with aliens, and if they only have to pay for their drinks. There must be some sort of compensation.
Regarding the statements that suggest there is no money any longer, we are allowed to discount Kirk's mention of money in the 20th century, since this would not preclude that some other form of currency may be used in the 23rd century. Still, the few statements suggesting that currency and companies won't exist any longer, at least in the 24th century, are so definite that they may prevail.
Side note On an interesting note, DS9: "In the Cards" was produced just after "First Contact", and Jake's reply to Nog exactly mirrors Picard's words to Lily. Although DS9 is otherwise full of evidence supporting the existence of money, this episode pays tribute to the movie.
Picard's two statements from "The Neutral Zone" and "First Contact" as well as Jake's stance in "In the Cards" may have been meant to be subjective. As seen from the outside or with they eyes of someone from the 20th/21st century, Federation economy may largely work like Picard suggested. At least within an idealistic organization like Starfleet. But there must be some sort of monetary system, and if only for internal accounts. After all, building a Sovereign-class starship consumes far more energy, material and man power than a Type-6 shuttlecraft. This must be accounted for in some way.
Still, we wouldn't expect Picard to lie when he says, "there is no money". He may be right in that the cost for ship may not be correlated in any way to the cost of living. Most likely because there is nothing like cost of living any longer, in which case he would have better said something like "money isn't used any longer in every-day life". In the 24th century, there may be plenty of energy for everyone to get whatever he needs from the replicator. Industry, power generation and infrastructure is highly automated. There is so much of everything that no one would need to work. Maybe there is a high unemployment rate, and the few people working in industry, transportation and public services are quite respectable. Either that, or there are also many "fun" jobs besides that. Either way, the social position is still determined by the reputation of the job, only that payment seems to play a minor role. But money or Federation credits may still be necessary to purchase goods or services that are not ubiquitous. Clearly anything handmade or any service like Sisko's Restaurant would belong into this category. The loss of cultural values would be too sad if all this did not exist any longer.
Still, including all of humanity to his statements ("We work to better ourselves...") is quite pretentious of Picard. We may presuppose that social problems will have been largely solved, once there is enough of everything for everyone. One statement always goes along with the absence of poverty from 24th century Earth, and this is the absence of crime. But Picard clearly goes much further, because he suggests that the whole human nature has changed because the circumstances of human life are better. The universality of his statement is inappropriate. The human nature won't change, even if Picard and most of Starfleet are idealistic and fit with the new view of a humanity that does not strive for wealth any longer. But not everyone would be content with a decent apartment and maybe a small private hovercar. As long as there are human beings, there will be still greed and envy. What would the Federation government or local authorities do about individuals who live their lives at the expense of others? Who strive to purchase large estates and build palaces for themselves?But we may excuse Picard in that he is expressing a personal idea of how 24th century Federation economy should ideally work. This view is probably the one endorsed by the Federation and by Starfleet, although it may not be entirely realistic.
In this light, there may be some niches for companies like Dytallix or Yanas Tigan's mine, regardless whether they reside in Federation territory or on neutral ground. The Federation is a free society, and we would not expect private entrepreneurs to be outlawed. The reason why they do not have a major part is because they are only required to provide certain raw materials and goods that are not available anywhere and in any quantity. And such goods are likely to be traded with alien cultures. Even if the Federation economy somehow managed to go without a currency, an equivalent would be needed to trade goods with other civilizations. It is possible that the Federation credit is not much different than gold-pressed latinum in this field.
We cannot and we should not compare the economy of the Federation to 20th century communism, even if there are certain parallels in the ultimate goals (that were never close to be reached in any implementation of communism). Communism was an ideology to liberate exploited workers by expropriating the capital owners in an act of revolution. Quite contrary to that, the Federation economy may have developed in a slow process, owing to a tendency in which money became unable to keep up productivity any longer. The reasons may be twofold. Firstly, it is already visible now that Western industrial (secondary) societies are turning into service (tertiary) economies and ultimately into financial (quaternary) economies. Automation has largely replaced human power. Hardly anyone is still "productive", in a way that his workforce would be needed to produce new values. The quaternary economy we are facing would just shift around assets, which would gradually lose its equivalent in the form of industrial goods. Secondly, the availability of plenty of energy may give the death blow to the idea of money as a driving force. There is clearly no money equivalent to something ubiquitous.