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Catastrophe averted?

The leaders of the rich countries went to Washington to save the world from sliding into deep recess

Vincent Cable

Shadow chancellor, Liberal Democrats

By the low standards of economic summitry, the G20 meeting rated quite high. There was a predictable, no doubt pre-written, communiqué, full of the usual banalities. And the meeting suffered from the absence of the world's most important politician, who hasn't yet taken up office. But, these necessary caveats aside, there were important achievements.

The first is that the meeting took place at all. The ludicrous pretence of the G8 (or G7) that the old western powers should set the global economic agenda has been punctured for good. On a purchasing power parity basis, China has the second-biggest economy in the world and India the fourth. It has been clear for some time that China is lender of last resort to the global system (by, in effect, underwriting US government paper) and the main source of global incremental demand (and commodity price inflation). The Chinese self-parody as the pupil sitting meekly at the feet of a dominant, but erring, master defies belief. It is obviously right that China, India and the other main non-G7 countries should be at the top table.

The second achievement was the clear realisation that unless governments hang together they will hang separately. Enough has been learned from interwar history for us to understand the follies of beggar-my-neighbour economics. Perhaps a warning shock was being sent across the bows of the incoming Obama administration not to reinvent the protectionist tariffs of the 1930s in a new guise, directed at China or Mexico in particular, or aiming to salvage the US auto industry through public subsidy. But this new-found concern for open markets has not yet communicated itself to EU or Indian or Chinese trade negotiators, who show no enthusiasm for lifting the block on trade liberalisation under the Doha round.

While trade policy is on the back burner, macroeconomic policy co-ordination is not. With a few exceptions - Germany notably - there is recognition of the need for aggressive monetary and fiscal policy and for large-scale intervention to recapitalise banks. These interventions can be and are being undertaken nationally. But governments acting in isolation attract critical attention from capital markets and currency speculators, as Gordon Brown is discovering. Structures like the G20 are the best safeguard against chaotic, unilateral action.

Will Hutton

Economic commentator

It was remarkable to gather so much economic and political power in one room to address a common agenda. That was the good news - along with commitments to co-ordinate fiscal expansion, to expand the lending power of the IMF and World Bank (Japan's $100bn loan to the IMF will increase the Fund's lending capacity by 40 per cent), to boost cross-border supervision, to tackle credit rating agencies, to reassess mad accounting rules and require member countries to attack the bonus culture in the financial services industry. A year ago such an agreement would have been inconceivable.

The bad news is that much of this is shutting the stable door after the horse has bolted. Four things have to be recognised: that the world has profound imbalances between high-saving, high-surplus areas in Asia and the Gulf and low-saving, structural deficit countries in the transatlantic economy (Germany excepted); that a system of floating exchange rates and private banks can no longer take the weight of recycling those savings; that unless the system is de-risked and the burden of adjustment is placed on deficit and surplus countries alike, the global system faces breakdown; and finally, that the business model used by the banks to recycle surpluses - securitisation and hedging in the $360trn global derivatives market - is broken.

In plain English, China must accept that its currency must appreciate; Britain and America, that they cannot run their economies on foreign savings; and all players that there has to be a system of semi-fixed exchange rates between the yen, the euro and the dollar.

One tough reality is that, for all their new economic weight, China, Brazil, Russia and India do not have fully convertible currencies - nor do they want to accept the discipline involved in having convertible currencies.

Ann Pettifor

Fellow, New Economics Foundation

Over the past decade, the Group of Eight leaders turned their exclusive annual meetings into jamborees. Rock concerts, protesters and celebrities added populist glitz. However, the real purpose of the meetings - international co-operation and co-ordination - was ducked. At last year's G8 Summit in Heiligendamm, Germany, George W Bush and Gordon Brown vetoed Angela Merkel's agenda item for co-operation over tighter international regulation and financial oversight of capital markets. That task, they argued then, could safely be delegated to "the invisible hand". Now that the fantastic, self-regulating machinery of free markets has proved grossly malfunctional, it is good to hear talk of enhanced co-operation and regulation.

But, in places, the joint statement issued by the 20 world leaders borders on the delusional. The phrase "We must . . . ensure . . . that a global crisis, such as this one, does not happen again" implies that they are avoiding the next war when they are still losing this one.

Even more questionable is the call for continued "economic growth". In a world of finite resources on a planet with limited capacity to absorb toxic emissions, and with bushfires encircling Los Angeles, we would have hoped that world leaders had some awareness of the threat of climate change and of the limits to economic growth. But no. The gravest threat to global security - our rapacious attitude to the earth's resources - is once again whipped up with talk of "market principles, open trade and economic growth".

Jesse Norman

Senior fellow at Policy Exchange

One might have thought the G20 summit a good moment for some straight talk from the Prime Minister. Instead, the political wind machine was cranked up to full blast. The summit would be a second Bretton Woods. Gordon Brown would forge a new global consensus on co-ordinated intervention to stimulate growth (while, of course, leading reforms to prevent the banking crisis from ever recurring). Luckily virtually none of this was true, or the summit would have been a hopeless failure. With fiscal measures already widely adopted, the G20 hardly needed Brown's leadership. No surprise that he returned empty-handed.

Labour has moved from despondency to a manic desperation to remain in office. The result is that the ever-fragile concept of truth in politics has wholly been cast aside. Thus the humiliating bank nationalisation has been dressed up as an act of far-seeing economic statesmanship. And a sensible warning from the shadow chancellor that current economic policy puts sterling at risk has been condemned for breaching an irrelevant semi-convention dating from the time of fixed exchange rates.

Alex Brummer

City editor, Daily Mail

There is a golden rule of international financial meetings. The larger the "G" number, in other words the more countries involved, the less likely it is that any worthwhile or binding decisions will be taken. So while it was wholly encouraging that the G20 summit brought a number of emerging market leaders to the top table of finance, including China, Brazil and Russia, there was never any real prospect of the event becoming the new Bretton Woods.

Furthermore, the summit took place in the final days of the lame duck administration of George Bush. Once it became clear Barack Obama was going nowhere near the confab, the event became even more of an irrelevance.

European leaders may like to blame Wall Street and Anglo-Saxon capitalism for the credit crunch and the recession now spreading through the Group of Seven like wildfire, but there is no hope of concerted international action without the new White House and Federal Reserve on board.

Almost all that was agreed could have been decided before the leaders left home. The commitment to reviving the Doha trade round is pure motherhood and apple pie. The prairie populists on Capitol Hill are unlikely to be enthusiastic.

At the core of the proposals was the commitment to use fiscal measures, tax cuts and public spending to kick-start global economies. But despite Gordon Brown's enthusiastic embrace of a new Keynesian big-spending approach - as advocated by Nobel prize-winner Paul Krugman - he neatly forgot to mention that such big-spending ways were only for those countries with a "policy framework conducive to fiscal sustainability". The UK with its ballooning budget deficit, which could hit £100bn or more next year, is clearly in no such position.

It is hard to fathom in what way the G20 was "historic", as the Prime Minister claimed in the Commons. There is little original in a bunch of old ideas designed to remove risk from the financial system and control executive pay. That is what regulators should have done before the banks ploughed into the iceberg.

James Buchan

Author and financial commentator

What is the Financial Stability Forum? What is "mitigating against pro-cyclicality in regulatory policy"? What, if anything, has the G20 summit in Washington on the weekend of the 15 November achieved?

Nothing very much, is the answer to all three questions. In the twilight of a discredited US administration, and with President-elect Barack Obama absent, the meeting was never likely to achieve a great deal or generate excitement in the US. Yet the final declaration, drafted with suspicious ease by the delegations on Saturday night, has something for everybody but not enough of anything to scare the financial horses.

Nicolas Sarkozy, the French president whose idea the whole thing was, gained some support for more institutional government of trade and finance, but no super-gendarme international of the type that has been directing financial traffic in the French imagination since the 17th century. As Jean-Pierre Robin wrote in the Figaro: "Those with fantasies of supranational supervision will need to change therapist." The US, jealous of its commercial sovereignty even when it is going about without its shirt, put paid to those Gallic dreams and also gained some platitudes about free trade.

The new commercial powers, not only Brazil, Russia, India and mainland China but also rich oil producers such as Saudi Arabia, received diplomatic recognition of their deep pockets. "The world's geopolitical structure has a new dimension," the Brazilian president, Luiz Inácio Lula da Silva, said. "There is no logic to making any political and economic decisions without the G20 members - developing countries must be part of the solution to the global financial crisis."

I suspect the winner is Gordon Brown. The next meeting will be held under his presidency in London in April. The Washington ragbag of proposals to reform or tinker with the current system, such as reminding us about the Financial Stability Form and mitigating against that regrettable pro-cyclicality in regulatory policy, appeals to his technical vanity and plays to his technical strengths.

Paul Mason

Economics editor, Newsnight

There was a sense in Washington, despite the throbbing engines and bulletproof glass, of powerlessness. The communiqué was stronger on the causes of the crisis than on co-ordinated solutions. Policymakers are right to stay focused on the near-term dangers: these are country-level debt default, the rising cost of borrowing for non-financial companies, rapid job losses and - via feedback - further destabilisation of the banking system. We are moving into the phase of fiscal stimulus but there are powerful technical arguments that say without "quantitative easing" - that is, printing money to stimulate demand - it doesn't work. The same people who told me it would come to recapitalisation, that the TARP (troubled assets relief programme) would not work, are now saying: nationalise the banks and print money.

Despite the urgency of the focus on near-term dangers, what was obvious at G20 was the lack of vision as to the future growth model of capitalism. The problem was seen as a failure of regulation; the solution a pretty weak brew of re-regulation that will get diluted even more as the lobbyists begin to have influence. But the problem is more fundamental: the growth model based on high debt instead of high wages has failed and will be hard to revive.

Peter Mandelson

Secretary of State for Business

We have been caught in a global whirlwind of extraordinary force.

It has brought with it a fear that has gripped the world economy and taken hold here at home. We are seeing it every day, with fear among consumers that is depressing demand; fear among banks that is inhibiting them from lending; fear among small- and medium-sized businesses that banks are just about to cut off their credit lines. The choice facing us and governments around the world is this: do we act decisively to counter and overcome this fear, or do we become paralysed by it and fail to act?

The government has already shown its willingness to take the bolder course as the first mover in setting about stabilising the banks. What is needed now is action to stimulate the demand essential for recovery. The UK economy, like economies in the rest of the world, needs a shot of adrenalin.

The Bank of England has already made a significant cut to interest rates. This monetary stimulus now needs to be matched by a fiscal stimulus. And because this is a global crisis this is best done if the benefit of the measures taken nationally is maximised by the same measures being taken around the world. That was the message from the international conference in Washington, as governments recognised the need to take the action necessary to stimulate their economies.

People will say, "But you are resorting to borrowing in order to deliver the stimulus that's needed." My answer to that is, what is the alternative? We certainly haven't heard one from the Conservatives.

David Cameron and George Osborne, trapped by their desire to oppose everything the government does, refuse to accept the scale of the challenge the world's economies now face and the prescribed international action. Their stance appears to be, if the rest of the world disagrees with us, it is because the rest of the world is wrong. The result is incoherence and an Opposition at sixes and sevens. One minute this is "do all it takes" and the next it is - as we heard this week - leave the recession to "take its course".

Sitting on our hands watching houses repossessed and businesses go to the wall is certainly not the approach being urged on me by people I have been speaking to up and down the country. They want their government to act to stimulate demand in the economy here and now. With all due prudence, that is what we are going to do.

Diane Coyle

Author and economist

The G20 meeting confirmed a robust and rapid response (by past standards) to recession, even in the US operating under a rump free-market administration. Policymakers around the world have been shaken to see the financial system at the brink of collapse - on their watch.

Yet it is difficult to predict how severe the recession will be. Bank lending to businesses and individuals is virtually frozen. In many (but not all) areas of the economy, activity has come to a halt. The last financial boom and bust, ending in 2001, had surprisingly little impact on jobs and growth, as the financial bubble had become increasingly untethered from anything real. Today's vicious circle of evaporating liquidity is much more serious, but lower interest rates and bigger government deficits will help. The underlying trends are easier to outline. Some challenges are clearly unaltered, such as climate change and our ageing society.

The technological opportunities are still there, too, in communications, the internet and biotechnology. Globalisation will be less driven by finance in future, but it will not be unwound. It would take a generation to turn back the clock on economic linkages, and the cultural impacts are permanent. In fact, the crisis has underlined our interdependence across national borders.

What has changed is the political economy of globalisation. In the triad of efficiency, fairness and freedom which dominates political choice in democracies, fairness will take priority in the years ahead, and the drive for ever greater productivity gains will retreat. The semi-nationalisation of the banks has started to shift the boundary between public and private domains; we will have to think more carefully about how to govern private choices that have big social spillovers. The G20 did not touch on this profound question of governance.

Iain Macwhirter

Political commentator

The G20 was largely a throat-clearing session and was never going to put in place the foundations of a new international financial system. Progress on the stalled Doha trade talks is encouraging but provides no guarantee that protectionism will not raise its head in the coming economic slump.

It is inevitable that countries faced with financial collapse will try to defend their economies by any means possible. Britain is already far down the road of "beggar my neighbour" economics by the "managed" devaluation of the pound, a crude attempt to boost UK industry by lowering the prices of British exports and creating a de facto tariff wall around imports from abroad. It won't work because Britain does not make much of anything any more except debt, and the world has plenty of that already.

But the collapse of the pound will seriously damage what is left of UK financial services. No one in their right minds would put money into the UK economy now, with the property market collapsing, UK banks insolvent and government borrowing likely to reach £100bn in the next 18 months.

Gordon Brown seems to believe that sterling is like the dollar, and that people will buy our dud pounds whatever the likely losses. However, as we are discovering, sterling is not a reserve currency and unlike the US we cannot force other countries to pay our debts. The future for our battered island is likely to be hyperinflation punctuated by appeals to the International Monetary Fund for emergency aid. Forget about spending our way out of recession - the UK government simply lacks the resources to fund the huge borrowing that would be required. Something will have to give. Brown will have cause to regret being so beastly to the Icelanders.

Richard Reeves

Director of Demos

James Carville, the hardened political aide to Bill Clinton, said that if he was reincarnated he'd want to come back as the bond market: "You can intimidate anybody." Right now it seems odd to think of any financial markets threatening anybody. But it is one of the ironies of the current economic situation that the capital markets still have some serious muscle.

Western governments, faced with recession, need to throw a lot of money at their ailing financial institutions - money that can be raised only by selling Treasury debt, mostly to the capital-rich investors of the Far East. For Gordon Brown, this is likely to become a more difficult sell, as Prudence is given the push and the pound takes a nosedive. Even national exchequers invite sceptical scrutiny in this new, nervous world.

The financial crisis is at heart a loss of faith. The word credit derives from the Latin credo - "I believe". When the Titanic of the financial world - in the shape of Lehman Brothers - was allowed to sink, the bonds of trust stretching around the world were snapped. In an instant, everyone stopped believing in each other.

A number of sensible measures should be on the agenda when the G20 reconvenes next year, including legislation to ensure bonuses in financial services are paid on the basis of five-year performance; new "pro-cyclical" provisioning rules requiring finance houses to increase their store of capital in economic upturns; and tougher, independent regulation of the rating agencies whose doe-eyed assessments of banks built on a mountain of paper helped get us in this mess.

There is, however, no quick technical fix for such a dramatic loss of confidence. Trust can be lost in the blink of a market-trader's eye - but it will take years to rebuild.

TEN THINGS THEY ACHIEVED

  • 1 Created a road map aimed at stabilising the world economy and overhauling the banking system with targets for the end of March 2009
  • 2 Advocated Keynesian big-spending
    “fiscal stimulus”
  • 3 Expanded from a small club making world decisions to recognise the importance of the economies of Brazil, Russia, India and China
  • 4 Agreed to reform international finance institutions, including better transparency and supervision of credit ratings agencies
  • 5 Agreed that the Financial Stability Forum should include emerging economies
  • 6 Banks and hedge funds to hold increased levels of capital and cash
  • 7 Recommended “supervisory colleges” for all major cross-border financial institutions
  • 8 Return to the Doha round – trade ministers to meet in Geneva next month
  • 9 Instructed G20 finance ministers to draw up plans and timeline
  • 10 Agreed to meet again, in London next April

. . . AND FIVE THEY DIDN’T

  • 1 Agree a future growth model for capitalism. Instead they reconfirmed their “shared belief in market principles”
  • 2 Agree detailed plans for regulatory reforms of banking
  • 3 Establish a plan of action for achieving the already endangered Millennium Development Goals
  • 4 Set up an international supervisory body with sufficient power to control global markets
  • 5 Halt the run on sterling, which fell sharply against the euro and dollar

Alyssa McDonald

This article first appeared in the 24 November 2008 issue of the New Statesman, How to get us out of this mess

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Starting Star Wars: How George Lucas came to create a galaxy

On the 40th anniversary of the release of the original Star Wars, George Lucas biographer James Cooray Smith shares the unlikely story of how the first film got made.

While making THX 1138 in 1970, writer/director George Lucas told composer Lalo Schifrin that he wanted to make a Flash Gordon picture, an updating of the 40s sci-fi serials that he’d enjoyed as a child. It would, however, be those serials not as they were, but how he remembered them as having been. When the rights to these proved unavailable, he began to work on original idea, hoping to create something similar, but which he would own himself.

In January 1973, after completing his 50s nostalgia picture American Graffiti but before its release, Lucas began his outline for this space adventure. The first line of this near-incomprehensible document was The Story of Mace Windu. Mace Windu, a revered Jedi-Bendu of Opuchi who was related to Usby CJ Thape, Padewaan learner to the famed Jedi.’

"Jedi" was a word Lucas had coined to describe a clan of warrior mystics who were essential to his story. A man whose fascination for Japanese cinema had become a general interest in Japanese cultural history, he’d named them after the branch of Japanese drama that drew moral and instructive lessons from stories set in the past – Jidai geki.

This version is set in the thirty-third century and features a teenage Princess, droids, an Evil Empire and a grizzled Jedi warrior, General Skywalker, whose plot role resembles Luke’s from the finished film, although his character is Obi-Wan Kenobi’s. It climaxes with a space dogfight and ends with a medal ceremony. Among the planets named are Alderaan (here the Imperial capital) and Yavin, at this point the Wookiee homeworld. Some characters from this draft (Valorum, Mace Windu) would eventually find a home in The Phantom Menace more than twenty years later.

By May Lucas had a 132 page script, The Adventure of Anikin Starkiller. Skywalker had acquired the forename Luke but was no longer the protagonist. This was Anikin (sic) Starkiller, one of the sons of General Skywalker’s old comrade, the partially mechanical renegade Kane Starkiller. Anikin had to protect a Princess, aided by two robots R2-D2 and C-3PO.

Lucas had worked backwards from Flash Gordon, looking to uncover the source of his appeal, hoping to transfer it to his own story. Once he’d worked his way through the comic strips of Gordon’s creator Alex Raymond, he tackled Edgar Rice Burroughs, Jules Verne and Edwin Arnold’s Gulliver on Mars. Conversations with his New Hollywood peers about the archetypes thrown up by his reading – and which he increasingly saw everywhere – brought him into contact with Joseph Campbell’s then newly published Myths to Live By (1972) an anthology of lectures and essays from a man who devoted his career to identifying the basic archetypal characters and situations which he felt underpinned all human mythologies.

"The book began to focus what I had already been doing intuitively" Lucas later said, an idea which seemed to him to itself reinforce Campbell’s contention that such archetypes and situations dwelled in a collective unconsciousness. Lucas expanded his reading to epics of all kinds, and began planning a visual style that would combine the vistas of Japanese master director Akira Kurosawa with the kind of static-camera realism which he’d used on American Graffiti.

Lucas wanted over-exposed colours and lots of shadows, but shot in a way that made them seem unremarkable. Seeing the Apollo missions return from the moon "littered with weightless candy bar wrappers and old Tang jars, no more exotic than the family station wagon" had illustrated to him the problem with every fantasy movie ever made. Their worlds never looked like people lived in them. His film would depict a "used future". Describing the aesthetic he’d sought to American Cinematographer he explained: "I wanted the seeming contradiction of…fantasy combined with the feel of a documentary."  To Lucas Star Wars wasn’t science fiction, it was "documentary fantasy".

There was only one studio executive Lucas thought had any hope of understanding what he was trying to do, Fox’s Alan Ladd Jr, son of the late actor. Like Lucas and his contemporaries in New Hollywood, Ladd was a man driven by a love of cinema. Lucas could communicate with him through a shared vocabulary, describe a planned scene as being like something from The Searchers (John Ford, 1956) or Fahrenheit 451 (Francois Truffaut, 1966) and be understood. Ten days after his presentation to Ladd, they signed a development deal. Fox agreed to pay Lucas $15,000 to develop a script, plus $50,000 to write the movie and another $100,000 to direct it, should it actually be made. American Graffiti associate producer Gary Kurtz was named as Producer for Star Wars, and received $50,000.

The script development money gave Lucas enough to live on whilst he continued work on the screenplay. As he did so it changed again; a ‘Kiber Crystal’ was written in and then written out. Skywalker became Deak Starkiller’s overweight younger brother before becoming the farm boy familiar from the finished film. Characters swapped names and roles. A new character named Darth Vader – sometimes a rogue Jedi, sometimes a member of the rival ‘Knights of Sith’ – had his role expanded. Some drafts killed him during the explosion of the Death Star, others allowed him to survive; across subsequent drafts his role grew. Some previously major characters disappeared altogether, pushed into a "backstory", Lucas choosing to develop the practically realisable aspects of his story.

This is an important clarification to the idea that Star Wars was "always" a part of a larger saga, one later incarnated in its sequels and prequels. That’s true, but not in an absolutely literal way. Star Wars itself isn’t an excerpted chunk of a vast plotline, the rest of which was then made over the next few decades. It’s a distillation of as much of a vast, abstract, unfinished epic as could be pitched as a fairly cheap film to be shot using the technology of the mid 1970s. And even then much of the equipment used to make the film would be literally invented by Lucas and his crew during production.

In August 1973 Graffiti was released and became a box office sensation, not only did the profits make Lucas rich (he became, at 29, a millionaire literally overnight) its success meant that Lucas was able to renegotiate the terms of his Fox deal. Rather than making demands in the traditional arenas of salary and percentages Lucas wanted control of the music, sequel and merchandising rights to his creations. Fox conceded him 60 per cent of the merchandising, aware of its potential value to them, but eventually agreed that Lucas’s share would rise by 20 per cent a year for two years after the film’s release. Few films made money from spin-off products for a whole 24 months, and Star Wars would surely be no different. Lucas got the sequel rights as well, albeit with the proviso that any sequel had to be in production within two years of the film’s release or all rights would revert to Fox.

Most important amongst Lucas’ demands was that, if it went ahead, he wanted the film to be made by his own company, not by Fox. That way he could control the budget and ensure all charges and costs made to the production were legitimately spent on the film. The experience of watching Mackenna’s Gold being made while a student on placement a decade earlier had taught him just how much money a studio could waste, and on a film like Star Wars – which was both ambitious and would inevitably be under-budgeted – it was crucial that this did not happen. Control of the music rights also had a sound reason behind it. Universal were making a fortune out of an American Graffiti soundtrack that was simply a repackaging of old hits featured in the movie. Of the profits of this Lucas saw nothing despite having selected the tracks featured and fought long and hard for their inclusion in his film.

In March 1975, Ladd took Lucas’ draft to the Fox board. They passed it and budgeted the film at $8.5m. Characters bounced in and out of that script right up to the preparation of the shooting draft, dated 15 January 1976. This was tailored to be as close to the film’s proposed budget as possible, and contain as many of the ideas, characters and situations Lucas had spent the past few years developing as he considered feasible.

This draft is the first version of the script in which Kenobi dies fighting Vader. Previously he had been injured, but escaped with Luke’s party. Alec Guinness, who had already been cast, was initially unhappy with this change, but was persuaded by Lucas that a heroic death followed by appearances as a spectral voice would prove more memorable to audiences than his spending the last third of the film sitting on Yavin whilst the X-Wings went into battle.

Filming began on location in Tozeur, Tunisia on 22 March 1976. Before shooting Lucas sat his crew down and made them watch four films which he felt between them defined what he was after in Star Wars. Stanley Kubrick’s 2001 (1969), Douglas Trumbull’s 1975 Silent Running, Sergio Leone’s Once Upon a Time In the West and Fellini’s Satyricon (Both 1969). The Leone picture was full of the sun-blasted vistas Lucas wanted to evoke for Tatooine, and the Fellini film, with its aspects of travelogue and attempts to portray an entire society in a fly-on-the-wall manner gave an idea of the "documentary fantasy" approach the director was so keen on. All four films shared one vital element: they’re windows onto lived-in worlds remarkable to audiences but regarded as ordinary by the film’s characters.

The first scenes shot for Star Wars were those of Luke buying Artoo and Threepio from the Jawas outside his foster parents’ home. Producer Kurtz had allowed 11 days for the shoot, after that a borrowed army C130 Hercules was scheduled to pick up the cast and crew.

A few days into shooting, creature make-up man Stuart Freeborn was taken ill and had to be flown back to Britain where he was diagnosed with pneumonia. Other crew members contracted dysentery. On 26 March Tunisia experienced its first winter rainstorm for half a century, damaging equipment and exterior sets delaying filming of key scenes.

Lucas wanted the stormtroopers to ride ‘dewbacks’, dinosaur-like domesticated beasts that allowed the troops to move across the desert. One dewback was built, out of foam rubber stretched over a wire frame. It could only be used in the background and no one was ever seen riding one. The other live animal Lucas wanted to portray was a Bantha, a huge horned, shaggy beast reminiscent of a prehistoric mammoth. It was to be the mode of transport for the Tusken Raiders, faintly Bedouin, vaguely mechanically-enhanced humanoids who attacked Luke in the Jundland wastes. In the end, creating the beasts proved impossible, and while they were referred to in dialogue in scenes that were shot (‘bantha tracks…’) none of their sequences were lensed.

As hard as the shoot was on Lucas, he at least had an idea of what he was trying to do and how it would all fit together. The actors, suffering stomach troubles, sunburn and long days, were less clear. Anthony Daniels trapped inside an almost immovable fibreglass body suit suffered the worst. Twenty five years later he would give credit for helping him to get through the Tunisia filming to Alec Guinness. "He was incredibly kind to me…I firmly believe that I wouldn’t have completed that arduous task of shooting without him."

Once the Tunisian shoot was over, the cast moved to EMI Elstree Studios in Borehamwood, outside of London. Star Wars was being made in the UK because it wasn’t possible to shoot the film in Hollywood at that time, not that Lucas – with his lifelong disdain of LA itself – wanted to anyway. Star Wars required nine stages simultaneously, something that no Hollywood studio complex could guarantee at anything like sufficient notice. In March 1975 producer Kurtz had flown to Italy to look at studio space, but found nothing suitable. He then caught a plane to London, where Lucas joined him.

Together they scouted UK film studios. Pinewood was a possibility, but management insisted Lucasfilm hire their technicians, a condition which became a deal-breaker. Neither Shepperton nor Twickenham had enough sound stages (although the giant Stage H at Shepperton  - bigger than any stage at Elstree – would ultimately house one scene of the film) which left only EMI Elstree. Then losing £1 million a year, Elstree was being kept open more or less on the insistence of Harold Wilson’s government, whose allies in the Trades Union movement considered the closing of the facility unconscionable. Elstree had no staff, and anyone who wished to rent it had to supply their own technicians and much of their own equipment. Off-putting to many, it sealed the deal for Lucas and Kurtz, who wanted to move their own people in. They hired the facility for seventeen weeks starting at the beginning of March 1976.

To design and build the sets needed to turn to Elstree into a realisation of Lucas’s screenplay they hired John Barry, a British designer who had worked under Ken Adam on Barry Lyndon (Stanley Kubrick, 1975) a film Lucas admired enough to hire its costumier John Rollo as well.

Elstree’s two largest stages were given over to Mos Eisley Spaceport and the interior of the Death Star. Both the Mos Eisley hangar bay and the one inside the Death Star which replaced it on the same stage were constructed around the full size Millennium Falcon set created by John Barry’s protege Norman Reynolds. Built by Naval engineers at Pembroke Dock, Wales it was 65 feet in diameter, 16 feet high and 80 feet long. It weighed 23 tonnes.

The absence of Stuart Freeborn, still recovering from Tunisia, meant that most of the aliens seen in the Mos Eisley cantina sequence were completed by assistants and lacked any articulation at all. Unhappy with the scenes as shot, Lucas resolved to do to re-shoots back in the USA.

The last scenes to be shot were for the opening battle, as Vader and his stormtroopers boarded the blockade runner. With little time Lucas used six cameras, manning one himself (Kurtz manned another) and shot the sequence in two takes. The six cameras produced so many different perspectives on the action that even the duplicated events that are in the film are unnoticeable. The finished sequence, chaotic though the creation of it was, is amongst the best put together moments in the movie, a superb evocation of Lucas’ documentary fantasy approach, and the cameras dart in and out of the action like reporters shooting newsreel footage. Virtually the first live action seen in the picture, its style later went a long way towards convincing audiences that what they were seeing was somehow real.

Principal photography completed on 16 July 1976, although some re-shoots and pick up shots for the Tatooine sequences were undertaken in Yuma, Arizona in early 1977. Amongst those scenes shot were those featuring the Banthas. Lucas borrowed a trained elephant from Marine World, and had it dressed to resemble a more hirsute, fearsome pachyderm. Mark Hamill was unavailable to participate. He’d crashed his car of the Antelope Freeway in LA shortly before and was undergoing painful facial reconstructive surgery. Although Hamill should have been involved in the re-shoot, in scenes of Luke’s landspeeder moving across the desert, Lucas had no choice but to film them without him; he took a double to the shoot, dressed him in Luke’s costume and put Threepio in the foreground. Also re-shot, over two days in La Brea, California, were portions of the cantina sequence. New cutaways and background shots were filmed to be inserted into the Elstree footage in order to eliminate as of the unsatisfactory masks as possible.

While supervising editing of the film Lucas experienced chest pains, and was rushed to hospital where he was treated for a suspected heart attack. He was later diagnosed with hypertension and exhaustion, both exacerbated by his diabetes.

Fox were by now trying to book Star Wars into cinemas, and had picked a release date in May, long before the 4th July public holiday, long regarded as the opening weekend of summer. Fox wanted $10m in advance bookings for Star Wars, desperate to recoup an investment that internal studio sources had now decided was foolish. They secured less than $2m, and achieved that only by implying to theatres that they wouldn’t be offered Charles Jarrot’s much-anticipated The Other Side of Midnight if they didn’t sign up for Star Wars too. Before its release several exhibitors complained at this "block booking" and filed suits; Fox was later fined $25,000 for the practice, punished for forcing cinemas to agree to show something which was, by the time they paid the fine, the most financially successful movie ever made.

In early 1977 Lucas screened Star Wars for a group of friends, it was nearly finished – although the opening crawl was longer and many of the special effects shots were absent, represented instead by sequences from World War II films and real combat footage shot by the USAF. Among those present were Brian De Palma, Alan Ladd Jnr, Steven Spielberg and Jay Cocks. Martin Scorsese had been invited but troubles editing his own New York, New York meant he didn’t turn up.

De Palma hated Star Wars, and spent the post-screening dinner rubbishing it to anyone who would listen. Others present were unsurprised, De Palma had behaved in the same way during the group screening of Scorsese’s’ Taxi Driver; laughing loudly through Cybill Shepherd’s conversations with Robert de Niro, and at one point shouting "Shit!" halfway through a tense scene. Only Spielberg seemed impressed, and told Lucas that he thought Star Wars would take $100m. Lucas pointed out that nothing took $100m, and countered that Spielberg’s Close Encounters of the Third Kind would do better at the box office. The two directors wrote what they considered realistic estimations of what each other’s film would make in its first six months of release on the inside of matchbooks, which they then traded. By the time Lucas got round to opening Spielberg’s matchbook and saw the figure $33m in his friend’s scrawling hand Star Wars had already made ten times that.

Odd as it seems now, when every blockbuster is prefaced by months of breathless, unrelenting media "enthusiasm", Star Wars wasn’t released on a wave of hype or accompanied by an extensive marketing campaign. It was released (on 25 May 1977) to thirty-two screens, after a barely publicised premiere at Mann’s Chinese Theatre in Hollywood. It made $2.8m in its opening week, but didn’t receive a nationwide release for two months. Despite almost unprecedented success in preview screenings, Fox were still unsure of what to do with Lucas’ bizarre children’s film. Indeed it, only got a Hollywood opening at all because William Friedkin’s Sorcerer – which had been intended for this slot at Mann’s – wasn’t finished.

So negative had advance feeling about Star Wars been that Lucas left the country; he was still in LA on opening day, finishing the sound edit (he was unhappy with the copy playing downtown, and unknowingly embarking on a lifetime of revising his movie) but the next day he and his wife (and Star Wars film editor) Marcia flew to Hawaii, where they were joined by friends, including Spielberg and Amy Irving. It was an attempt to escape what Lucas felt would be the inevitable terrible reviews and wrath of the studio. Even when Ladd called him to share his excitement over the movie’s colossal opening weekend, Lucas was unmoved; all movies labelled science fiction did well in their first few days due to the business attracted by the neglected fanbase for such things. It was only when the film continued to do outstanding business and was expanded to more and more theatres that Lucas considered returning early from his holiday, and began to realise that the film he’d just delivered had changed his life.

As "Star Wars" expanded into more cinemas, and people began to queue round the block to see it, shares in Fox climbed from well under $10.00 to $11.50 each; over the next three months the value rose to $24.62, nearly trebling in price, such was the film’s value to the embattled studio. It was a magnificent vindication for Alan Ladd Jr, who had more than once had to intervene to stop colleagues closing down the film’s production completely. He had never lost faith in Lucas and his bizarre idea, but he was virtually the only person employed by Fox itself who hadn’t.

Just a few weeks before, as the end of the financial year approached, Fox had tried, and failed, to sell its investment in Star Wars to a German merchant bank as an emergency pre-tax write off.

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