The eUS Economy Part II - A New Day, A New Plan (or How We Will Recover)

Day 826, 09:02 • Published in USA USA • by PigInZen


In my last article I outlined some of the market forces at work that have led to our currect economic state. I proposed raising import taxes in most sectors. In this article I'll refine that previous article and make some broader suggestions regarding changes to our tax policies that we should consider to make our economy even more functional, profitable for companies and maximize tax revenues to the US government. I am certain that this will cause another stir but having this discussion is VITAL to our collective future.


Things Have Changed



Yeah yeah yeah, I know you all know that things have changed, you can see it for yourselves: manufacturing employees are battling falling wages, manufacturing companies are seeing reduced incomes from falling prices across the board, people are running around with their hands in the air screaming ARMAGEDDON! And yeah, I tapped into this national sense of malaise myself. I own three weapons manufacturing companies, two gift companies and a moving ticket company here in the eUS. My skill is in manufacturing too. So I've seen this first hand. The question I'm going to answer is WHY we're currently hating it. It's not too difficult to grasp, allow me to lay it out for you all.


PiZ Thinks He's So Smart, Eh? Tell Us What Changed, Then, You Douche



1. The US military has implemented widespread production of a wide host of raw materials and manufactured goods for their own supplies. This production is subsidized by military members' labor and has removed a large segment of demand from our market for weapons primarily. I'll discuss this first.

2. The eRepublik admins introduced the ability for citizens to purchase additional strength for gold (aka "Lana&quot😉. This has reduced the amount of money available for purchases of manufactured items such as weapons, gifts and moving tickets. Everyone needs food daily so the impact of this hasn't hit food consumption as badly as the other manufacturing sectors. I'll discuss Lana in detail second.

3. Our population has fallen from its highs. Citizen retention and recruitment is a hot button issue and affects our economy. I'll discuss population and demographics third.

4. We acquired a high iron region in Karnataka. Granted, the US government is currently leasing it from the Indian government, so we pay an ongoing price for the privilege of domestically producing iron over and above the cost to our economy. I'll get to the impact of high iron last.


Military Companies and Their Impact



Let's remember our economics lesson from last week. Markets naturally and automatically adjust to "equilibrium" - the point at which the supply and demand curves intersect. Equilibrium is the price of the given good or material. What we've seen happen gradually is that the military is no longer purchasing weapons off the market with tax revenues supplied by the US government. This has caused reduced demand. Reduced demand shifts the demand curve to the downward left causing a shift in price downward. This is all basic economics and was outlined quite nicely in my last treatise.

The root of the problem with military companies is that they make sense policy-wise and economically speaking in the long term. The up-front costs to build the infrastructure (i.e., buying the companies) and the hit to our economy from the reduced demand impact our economy brutally by forcing the remainder of the market to compensate and find a new equilibrium. Considering that the military is our country's largest bloc of weapons consumption we need to think about the impact this is having on the nonmilitary members of our society.


Lana and Gold for Strength



I'm sure many of our citizens are aware of the mantra "stuff > gold." I joined eRepublik when this idea was coming into vogue. Essentially "stuff > gold" was used to illustrate the importance of using your money to fight with weapons instead of using it to tank with gold. Everyone could recognize that getting military rankings up would result in higher damage - there's a 20% gain in each rank. The faster we could get people to that next rank the better it was for our national collective damage.

"Stuff > gold" changed when Lana was introduced. Suddenly people were spending 1.8 gold for .12 strength points. It was perceived as a godsend by some who see Lana as their ticket out of strength doldrums. The problem is that 1.8 gold equals 64 USD. 64 USD can buy you 23 weapons at the current price. That's four days of five fight training to rank up. We've removed a great deal of this demand from our market as well. "Stuff > gold" still applies, Lana is a raw deal for those that choose strength over weapons. For those at Field Marshall level, however, Lana is the shiz. Lana allows them to maintain parity in strength with their foreign tank counterparts. This is the new reality.


Population and Demographic Changes



A growing population demands more goods. A falling population needs fewer. Again, this is a demand shift and we're seeing the impact of it. There are many arguments as to why people are losing interest in eRepublik and I could write probably ten articles on separate reasons for this. The bottom line is reduced demand for products. It hasn't been new citizens that aren't returning, either, it's higher leveled citizens. These citizens are prime income earners and their demand is higher than low-level citizens. When they leave it hurts our economy more.


High Iron - the Holy Grail



The impact of obtaining a high iron region in Karnataka has had a profound effect on our economy. Previously the highest wages were to be found in manufacturing. This is no longer the case. Now the highest wages are found in land and the introduction of iron, a raw material in high demand, has pushed land wages up. We need to encourage this development, not fight it. Whereas we could make our bread and butter off of manufacturing before high iron, we're a land country now, our income will come from producing iron, oil, grain and wood. Increasing production in these sectors will only be good for our economy and goverment revenue.


Solutions to Halt Our Impending Doom



Let's not be like the dog in this pic...

1. Protect our most vital economic sector - LAND. We need to jack import duties up to the maximum on oil, grain, wood and iron. 99%. Domestic production of these materials is where it's at, we have an advantage here and we should exploit it. We don't need people exporting these materials here, we need to be producing them domestically, expand our employment ranks and reap the income tax from mass land employment.

2. Encourage countries that have no land resources to export to us. Look, let's face it. Anyone can manufacture weapons, tickets, gifts and food. (Constructions is separate and already an ailing sector... another discussion). Those countries without Land resources actually have an economic advantage in producing manufactured goods. We should let them do so and sell on our market. To this end, we should leave import duties at 1% across the board on all manufactured goods. This is going to piss a bunch of people off but this is the hard and fast truth - manufacturing will have to play second fiddle to land.

3. Drop the Income Tax rate to 10%. We need to stimulate domestic demand for manufactured goods. USD is the primary medium for purchasing weapons, moving tickets and gifts. Putting more USD in consumers' pockets will allow them to buy more. The goal here is to increase aggregate demand (i.e., the sum of all of our residents' demand) to stimulate the market. I did some quick calculations yesterday and for a skill level 4 land employee this will be about .75 USD a day, or almost two weapons a week. For manufacturing employees it's a little over one additional weapon a week. (Manufacturing employees make less).

4. Leave the VAT rates where they are. The idea here is to make the US market the biggest and fastest. The more goods sold here the better it is for all of us. The goal here is to have the lowest price on manufactured goods worldwide. This will encourage manufacturers to drop goods on our market and foreign buyers to use an organization to purchase goods here and donate them back home. We reap the VAT from these sales. This already happens and it's larger than you would think - some estimates put it at 20% of our domestic tax revenue per week.

5. Encourage exportation of raw materials. This too is a no brainer. The more raw materials we can sell overseas the better it is for our nation. We earn capital off of foriegn companies that have a real demand for these materials and are able to employ more citizens in the sector, reaping tax revenue from wage income.


WAIT WAIT WAIT, You're Effing Crazy, Man!



Actually, I'm not. Hear me out here: we're no longer demanding manufactured goods at the level we were before. Domestic manufacturers are taking it in the shorts. The only good sector in our economy are the land companies producing raw materials. Wages are high in land. Does this mean we abandon manufacturing? No, it doesn't. There will always be a way for domestic manufacturers to compete in the market but it won't be as profitable for owners or employees as those in land sectors. We should acknowledge this and maximize our potential. This means preventing foreign raw materials producers (except for diamonds!) from selling products here first. It means exporting RMs. It means keeping our manufactured goods sector open to keep prices as low as they can be. It also means we're going to go through a rough transition.

We have several advantages in this scenario - foreign manufacturers ALREADY sell goods on our market and foreign purchasers already buy goods off our market and donate them back home. The more of that the better - this is FREE MONEY to our government. We have the lowest import duties on manufactured goods in the world. Let's use that to our advantage.

Finally, the military needs less money. They're no longer buying as many weapons and other goods off the market. This was the primary argument for keeping income taxes at 20%. When I joined eRepublik they were at 15%. It's time for us to acknowledge the future is back and drop income taxes again. This time, however, we won't be hitting our military as hard by reducing government tax revenue as they're supplying themselves. The VAT from our market activity will make up some of the difference.


OK, So You're Pissed, Right?



I realize that my last article talked about jacking import duties across the board. Manufacturers (remember, I'm one too!) probably saw me as the point man for protectionist policy and they're probably correct in being upset now that I have backed away from that previous stance.

I've flip-flopped. I admit it. I originally saw wisdom in protecting our manufacturing market in order to protect jobs and income tax revenue from that employment. After looking at wages in the land and manufacturing sectors yesterday, however, the difference struck me like a two-by-four to the forehead. Land wages are high because raw materials are in demand and manufacturing wages are in the shitter because manufactured goods are not in demand. Instead of fighting the market, we need to work with it.


To Summarize...



We have crappy domestic demand for manufactured goods due to military self-sufficiency, lana, declining population and the introduction of high iron. We're tried traditional stimulus of war. That failed. Wages in land are 25% higher than in manufacturing. Any country can manufacture, only a few can produce iron, oil, grain and wood in quantity. Our market is already extremely active for weapons and we gain a great deal of tax revenue from the VAT.

To me the solution is simple: build ourselves into a land economy. Those that want to try their hand at a rougher manufacturing industry are free to do so. But land industry should be protected and encouraged. It is our future.





E Pluribus Unum. From Many, One.



I'LL SAY IT AGAIN: Together we have strength beyond measure. Do your part. Follow DoD orders. Fight with weapons. Maintain your wellness. SUPPORT THE CAUSE.