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Recently, there have been growing voices and support amongst eMalaysians for a protectionist economy and for the Congress to push for High Import 99% Taxes on essential manufactured goods - Food, Weapons and Gifts. Allows me to explain perhaps why Free Economy has its merits and Why the Issue of Economy recession will not be solved by 99% import taxes:



Global recession and overproduction (and Lana)

I have written an article, "Overproduction issue, recession and its relevance" 6 months ago (before Lana comes along). I advised everyone to have a read as what i have written then still holds true today. There are some pointers on what small nations government can do in that article (another topic!)..Anyway, the gist of the overproduction problem:

The current economy module, without decay or depreciation of products, with upper bound of how many that can be consumed/used a day would result in overproduction problem. The most willing consumer only consumes 1x good, 10x gifts, 5x weapons per day. Furthermore only 1x house per citizen, 1x hospital per region and perhaps 1 defence system per region are needed.

As players grow in experience/skills, its productivity increases. A player, technically can only use 5 weapons (5 fights) and 1 food a day. Since Q5 > Q3 > Q1 companies in productivity, high level companies would produce more efficiently, and would rely on growing lower level population to support its increase efficiency.

Before Lana took all the gold out of the economy system, it was calculated that a highly experienced citizen with skill level 9.5 is self-sustaining for 5Q1 weapons and 1Q4 food. With the introduction of Lana, many citizens simply STOP consuming weapons/gifts etc and used their Golds for training.

Thus we have ourselves - an overproduction problem- and Global Economy Recession.



6months of overproduction and Lana - where are we now?

In my article 6 months ago, i have predicted the following events - let's see how true and far we have come since:

5. Overproduction and huge market stock surplus forces manufacturer/producers to reduce prices in order to sell.
6. Decline of prices in general (deflation aka Japan 1990s economic problem?).
7. Decline of profits of companies. Some unprofitable sectors would be forced to collapse as well.
8. Reduction in salaries, due to lower profits/sales.
9. Reduction of comsumption as now everyone has less money to spend.
10. Further reduction in demand for goods/products >> lower prices (6), lower profits (7), lower salaries (😎, and reduced consumptions (9).
11. Growing insolvency of firms and general unemployment scenario.
12. A period of recession (as in real world) and dying newbies (unless the state compensates by running unprofitable businesses and welfare office (free food)).

In my humble opinion, even without Lana in the picture, we are currently at 10 going 11. Firms are closing down and being sold but we have still no unemployment scenario. We just have people with extremely low salary...



But protected economy works in RL....and eHungary/ePoland

Well, we are not alone (with the Recession and call for Protectionism). Many eCountries have its fair share of citizens wanting more protected local economy. Some prominent former eCongressmen (of eUSA), some eMalaysians and some just lying Congressmen. Spare some time to read the explanation from the former VP of eUSA, woxan - why Imports ARE NOT killing the economy, but Lana is . eUSA for a long while was on 99% import taxes and horrible horrible salary/profit economics depression. The only way they survived then was through buying RL golds and golds from medals.

So, why some enations can still survive with a total closed economy - like eHungary or ePoland?

Well, firstly, we don't have 19296 citizens like eHungary or 57129 citizens like ePoland. I like to quote what i told spykerman - "eMalaysia - small country with low population and does not have enough companies to cover all levels of quality and all range of goods. To impose 99% of tax will simply force our consumers to change their consumption. at the end, our overall tax-income decreases and eMalaysia companies won't sell more..."



Why protect the companies and hurt the citizens??

The way i see it - Protected economics - be it in eRep or in RL, without a substantially large domestic market, would effectively hurt the consumers/citizens and helped the local companies. 99% import taxes would raise domestic prices of these goods (temporarily), and eMalaysians will be forced to buy from the inefficient local producers. Would this translate to higher wages/salary like how some people like to think? NO. Would this gives more profits to local companies? Maybe. Would this rejuvenate our economy? NO.

Question then:

Why do we protect inefficient companies and hurt our own citizens? More so, some of this companies are not even eMalaysians owned. (we have many eRomanians/eIndonesian companies here). Moreover, the companies profits/income are generally untaxed (through money market). Even if the org/company owner is eMalaysian, chances are - he/she would be saving to buy Gold and pay Lana.



Conclusions and what's next?

There are hundreds more articles around the eWorld explaining the same issue to the population and admin. Read this pieace from PigInZen (current eUSA president) to gain a big picture understanding. Lana, falling population, growing productivity, and obselete economics module/mechanics are Killing the economy. Not the free Economy. Free Economy is Essential for small enations like eMalaysia.

There are many more excellent articles explaining the economics concept of eRepublik...and soon, there will be v2 economic module, and some of the issues of overproduction and what not will change.

So, fellow eMalaysian, sorry for the long-winded article, but if you still don't understand, please spare some time to ask. Segan bertanya sesat Jalan (Shy to ask, you will be lost).

ps: I need someone to translate this article..please PM if you can. It is obvious that many eMalaysians, especially the few who raised the issue of economics, read better in Malaysian language.

Your humble servant,
Carr de Vaux
Editor of Chronicle of Democracy Viva