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"Morrowland", where the story begins, is a microcosm of early modern society, with a king, a burgher, a merchant, and a worker. The novel and its sequel take place roughly in the 20th century, but have anachronistic elements. China is still an empire, Native American Indians and Eskimos still live in traditional ways, yet there are ocean liners, telephones, a postal service, chewing gum and other modern conveniences. There are many fictional locations, like the "Crown of the World", a vast mountain range coloured in red and white stripes, and the "Magnetic Cliffs". Some locations are based on real places, such as the Himalayas, and legendary ones, such as the magnetic cliffs in the Voyages of Sinbad the Sailor and a beautiful abandoned city under the sea, patterned after Atlantis. China is depicted in a phantasmic way; in later German editions, the country name was changed to Mandala.

In Morrowland, people lead an old-fashioned, idyllic life, albeit with modern conveniences. The rest of the world, however, is full of fantasy. As the Frankfurter Allgemeine Zeitung wrote, children read Jim Button at a time in their lives when "the existence of dragons is as real as dinosaurs and kings closer than the chancellor". The contrast between reality and fantasy is reflected in several places. In Morrowland, Jim is a normal child. He plays outside and doesn't like to wash; his mother sometimes worries about him. Outside Morrowland, however, he goes on adventures, experiences exotic cultures, fights a dragon and finally, saves a princess.

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