[UKR] Bee Hive or Free Market?

Day 670, 04:32 • Published in Ukraine China • by mihail.cazacu

The current situation of the Ukrainian economy is quite tough. The active population is rather small (hopefully things will improve now Dnipro is back but don’t forget to recover Siveria as well) Which means the internal market is also small. And a small internal market screws the manufacturing industry.

Because some players confuse Real Life with the game mechanics I am going to explain some important differences:

1. There is no such thing as the Internal Revenue Service/Financial Guard/Main Control and Revision Office (the American/Romanian/Ukrainian names of the tax enforcing agencies). Because of that tax evasion cannot be stopped in any way;

2. The only taxes an eGovernment can hope to collect are the VAT and the income tax on wages. The income tax on companies’ profit is extracted in general through tax evasion via the Monetary Market.

3. The problem is the VAT is collected only on manufactured products (food, guns, gifts, moving tickets). There is no VAT for raw materials. If the local manufacturing industry is dead the state will only collect the VAT on imported products. In other words most of the money for manufactured goods will go out of the country and the state will receive only some meager revenue.

This is why while in Real Life the free market model is the best model for organizing an economy, the free market is screwing eUkraine big time. Let’s see what happene😛

1. A small population coupled with a high iron region resulted in huge wages in the land sector (the highest in eRepulik). But the Ukrainian state doesn’t get much income through taxation because the profits of the iron mines are siphoned out through tax evasion.

2. The high wages in the iron sector, coupled with low import taxes for the manufactured goods (bread 15%, guns 7%, moving tickets 5%, gifts 10😵 together with an extremely low VAT (2😵 mean the bulk of the high wages earned by the “miners” goes outside the country. The State doesn’t make too much money either from the VAT or import taxes.

The consequence is the country lacks the money to buy hospitals and defense systems, items which can be bought only by the government due to the game mechanics. The military is also weak because there is next-to-zero gold for “tanking” (= buying wellness packs and q5 weapons for the soldiers with high strength and high rank).

The only way out is the “bee hive” model of economic development (the name was suggested by a comment made by Fokin_173 to my previous article). Let’s explain the concept:
1. There are people who see eRepublik as a game centered on individual objectives. There are other people who see it as a huge team effort. And there are people in between. They would not mind receiving battle hero medals or becoming Congressmen and country Presidents but they also value the teamwork;

2. The game rewards commitment with gold. Some gold is for everyday activities like the Hard Worker medal (5 gold for working every day for 30 days in a row) and the Super Soldier medal (5 gold each time the Strength levels 5, 10, 15, 20, etc are reached – strength only grows through training so to get that medal one needs to press the “train” button every day).

3. Other gold is received for the accumulated experience: for each level above 16 till 24 – 5 gold. After that, 10 gold. The good news is the more battles one fights, the faster he accumulates experience. And the more damage one does in a fight, the faster his rank grows and that in turn increases the damage in the future fights. Fighting without weapons cuts the damage in half. This means people move up the ranks two time slower and the Country’s military capabilities take longer to augment.

4. Because of the above, it’s in the best interest of both the Country and the individual players the players fight with weapons in every battle. This makes the “bee hive” concept very attractive: the players accept very small wages (enough to buy the daily bread) and in exchange are paid through weapons donations.

“Bee hives” can be State-owned or “cooperatives”/”joint stock companies”. In Ukraine’s case, the best State-owned “bee hives” would be in the iron and grain sector and the “bees” would be the National Army.

To clarify the concept of “regular Army”: everybody above level 5 can fight in eRepublik. The members of the National Army fight in those battles they are ordered to and at the hours when their intervention is the most important (usually in the last minutes of a battle). The general population either fights where the Ministry of Defense tells them to fight (not necessary in the same battles as the National Army) or they fight chaotically.

The State priority is to make sure the members of the National Army go up in ranks quickly, so investing the profit of the State-owned firms into arming the National Army soldiers makes lots of sense. In turn of course the soldiers have to work for the State-owned companies.

The private hives (“cooperatives”/”joint stock companies”) are companies working on the same principle as the State-owned bee hives. But the money to set up operation come from the players who would work there. They donate the initial capital, agree on a development strategy and then implement it. Speaking of the development strategies, there are 2 fundamental ones:

1. “Rank first”: the priority is to arm the “bees” with as many weapons as possible as fast as possible. This means most of the profit goes into buying weapons for the members of the “bee hive”;

2. “Profit first”: the priority is to upgrade the company first, given higher Q companies are much more profitable than lower Q companies. The members of the “bee hive” fight without weapons until the company reaches the desired Q level. Then the profit is high enough to allow buying enough weapons AND to make savings for other purposes (further upgrades, buying houses for the “bees”, buying better weapons, investing in another company).

The “bee hive” approach ensures a lot of citizens increase their rank fast, thus being better defenders of the country. The country as a whole gains both from the State-owned and the private “bee hives”.

The bee-hive approach also drives the wages down (the bees work for something close to the minimum wage). Lower wages make possible a national manufacturing sector. And since manufactured goods are subject to VAT, even the “private hives” contribute to the Treasury.

For those who would ask: “but don’t higher wages stimulate the consumer market?” I would like to point out right now all it’s achieved is to make the foreign manufacturing companies richer.

In Real Life when the wages are too high the prices also increase. In eRepublik, your high wages are spent on expensive products. A local manufacturing sector would keep the money inside eUkraine. You “create” capital through earning those 5 gold for “Hard Worker”, “Super Soldier”, level 16, 17, etc .and then that gold generate through YOUR work goes abroad on imported goods. It’s as simple as that. No need to have a Nobel Prize in economics to understand that 😉

In eRepublik, a strong national manufacturing sector keeps the gold generated by the population inside the country. Right now, the free-market economic model applied to Ukraine’s situation is sending that gold abroad. Sure, you do get gold back from the export of iron. But in the end you only keep the difference between exports and imports. And that difference is not uniformly distributed. It’s concentrated in the hands of the few. Too few to be able to defend the country effectively.

If you switch to the bee-hive economy your exports are going as before, but you keep more of the gold inside the country because you cut the imports. And the profits are more uniformly spread among the bees, resulting in more Field Marshals in the shortest possible time. It takes about 120 days to make a Field Marshal through the bee-hive system. Which means 10 Field Marshals per hive. There is no other method to get to that result faster for so many people at once.

So roll up your sleeves and start working!