The Unrealisticality of Government Owned Companies

Day 348, 23:19 • Published in United Kingdom United Kingdom • by Dishmcds

So, just to be clear, unrealisticality isnt a word. Just thought it applied.

We're seeing a movement towards Government run and owned companies here in the UK. The problem lies within the overproduction of goods that occured with the stoppage of the war module, the change in the production formula allowing Raw Materials to produce massive amounts of goods (along with the first point), and the overall capitalistic approach that is being forced into today's workplace. Companies are suffering from the wage schemes they've come up with, paying through the nose for less than skilled workers. We currently havent come up with the new suitable wage scheme through unforseeable changes from Beta to V1.

So, first, why Government owned companies wont work:

As RonaldChris pointed out in one of the Unemployment articles earlier this week, we've got roughly 1900 people in the United Kingdom. Of those 1900 people, roughly 900 to a 1000 have jobs, leaving about 900 people out in the cold. This has occured through companies shutting it down due to high amounts of stock, and the recent lack of GBP (which was at an insane rate of .30 for some time) that has since been corrected. Companies simply were forced to invest at those prices due to the lack of GBP, which has depleted many of the Gold reserves that those companies had, including larger corporations such as Ape, KFC UK, and even Aurum has had it's difficulties. Many people have said a Government owned structure would work better, but I believe this to be a falsehood. Why?

The new production formula limits most companies outside of construction to 10 workers for maximum productivity. Using this, we'd need roughly 90 new companies to combat the unemployment problem alone. This would increase the oversupply problem, and eventually we'd end up in the same cycle. Even Government owned companies would be forced to pump hundreds of Gold into those companies to pay salary, which would eventually prove as expensive as carrying 29 MPP's (which is another issue for another time).

So, 90 new companies to combat unemployment? That means we'd be looking at, at the very least, about 150 GBP per week invested in each company, making total cost somewhere around 13,500 pounds per week just to run the Department of Work. For those keeping score, that's about half of what we recently proposed to give the Ministry of Defence. And that's per week.

So, overall, the problem is two fol😛

1. How do we get around the production problems we've had due to a long oversupply cycle?
2. How do we continue to employ people when we know we're simply going to take a loss?

Proposal: The Small Business Administration

Earlier this week, a relative newcomer to the UK (and good friend of mine) brought something to the public eye. He had asked for a loan to consolidate some of the lower quality companies. When it was met with the Government owned idea, he pointed out that this is something that would normally be handled by a small business administration, in charge of loaning monies to struggling companies, so they can stay afloat during times of need. This would be two fold.

For those who weren't here for it, several months ago a proposal was mentioned for a "Social Responsibility Contract", or SRC which it has been called. I was opposed to the idea as it was written, as it encroached on a GM's ability and rights to manage as they see fit. Under the terms of the Small Business Administration, I would propose a contract (which I've written a small draft of in light of the request of the loan by Dnouser) to ensure that GM's that wanted to apply for help in times such as this would be required to sign. It wouldnt be near as long, and ensure that GM's still had the ability to change prices, employ people as they see fit, and simply operate in a manner that wasnt harmful to the eUK. The only terms I saw proper to include were:

1. Price floors: Price floors for each product (ie moving tickets, oil, food, weapons, etc) are going to be essential to developing this idea. A GM who sells beneath a price floor for the sake of selling is automatically taking a loss, which is both unproductive from a GM's standpoint as well as a community standpoint (counting against interdependance, which I'll outline in the summary).

2. Sales limits: Part of the recent issue is that companies who have overstocked for some time due to poor management decisions (ie keeping an absurd amount of employees), and undercutting (or a combination of the two) are one of the reasons we've reached the valley we're in now. They are setting mountains of product at cheap levels (ie 7K stock for .20 food), which is simply trying to offload stock. This will not work, as the other companies will not have sales, and eventually try to undercut just to make enough to pay their salaries. Rinse, lather, repeat.

3. Extension periods: If it's deemed that the result of the loans are being met, then extensions may be granted in the loans. Each and every plan or initiative has the possibility of working, but until it's put to proper use, we won't really know. Things such as the TfL, Unions, etc could possibly work, but they need to be put to use first in order to determine if we need to either change them slightly or scrap them altogether. Just as monitoring tax rates are necessary more than once per five months, monitoring sales habits of GM's are just as necessary.

Interdependance:

Right, so I use this term quite often, but just so everyone knows what I'm referring to, I'll redefine it in Erepublik standards briefly.

Each and every company in each industry is interdependant on the other. While it's nice to make all the sales you possibly can, not one company in the UK, including the larger corporations like Aurum, TB, or PI, could employ each and every worker, if for no other reason than the productivity formula would make it impossible to maintain a profit to the GM (or Government, if you care to debate that point again). Being that food, our main source of life here in Erepublik, carries a max of ten employees for maximum productivity, at any level (which to me still sounds somewhat rediculous to have built a Q5 company that can only carry 10 employees at max), Aurum relies just as heavily on companies like TB and PI to carry their max employee level as well. Oil companies are interdependant on Moving tickets to sell in order to keep demand up (which isnt happening in case anyone else noticed), grain is necessary to build food, but due to the lack of sales and large amounts of stock even food companies are being forced to shut it down until some of it sells.

Let me be frank about something: Government Intervention in the economy happens every day, whether you want to admit it or not. By releasing GBP into the market or pulling it from, we're affecting what a savvy GM should be charging for their products. We've dropped the rate down to .028 recently to maintain a lower currency value so companies can charge a bit more for their goods while maintaining a relative value to Gold on the market. Just because we're not selling "Government Cheese" (which is one of my favorite expressions, btw), doesnt mean we're not affecting the market. It just means we're not selling directly into the market, affecting it directly.

Solution:

So, in my point of view, asking for the Government to own their own companies is rather unrealistic. We'd need to set up and run 90 companies (which is about 3 times the size of Aurum for those keeping score at home), the money involved (roughly 13.5K per week), and the time in making sure salaries are paid according to skill, and so on. GM's make profit because they keep track of these things. Good GM's can make a decent living while not working because: They put all the work into making their company successful. If they don't they arent successful, it's that simple.

1. Don't sell more than 50 per time (possibly 100 in food due to the amount required per day and the pain it is to have to constantly log on), at a price floor worked out for each industry. I'm going to talk to the MoW and see if we can, together, come up with some kind of floor for each industry and quality.

2. Don't undercut, you're only killing yourself.

3. Realize this problem has nothing to do with the free market. This has been a long time coming in most countries around the world. Oversupply has been an issue with Erepublik since the beginning of time, and we're just going to have to work with it until the production formula is fixed to each type of good it produces. It's unrealistic to expect one formula to work for both Grain and Hospitals.

4. Small Business Administration: This is going to be proposed to Commons as of this evening (my time, this morning UK time). I think this is going to be the best way to encourage growth, satisfactory working conditions, and ensuring that both our unemployment and market problems are fixed all in one nice neat little bundle. This is going to require GM's to both cooperate while maintaining their independance as General Managers, rather than extensions of the Government.

Thanks for your time. I hope that you're at least willing to look at the positives of this proposal rather than who it's coming from. This is neither a campaign speech nor does it need to be. We're reaching a boiling point, where good GM's are going to be affected rather negatively here. We've skirted this line for some time, and no matter where your vote lies, this needs to be dealt with.

Thanks

Dishmcds
Minister of Trade