The doom resting on your local economy.

Day 1,140, 14:28 • Published in United Kingdom United Kingdom • by Apotygma


Dear readers,

It has been a while since I wrote something in my lovely newspaper. I see that my subscribers are still there and haven’t left me; I wanted to thank you all for that. I am active once again and I am willing to share with you the knowledge I built of economics throughout the years I spent in eRepublik and studying economics. I hope that new business owners will join me by subscribing, but let’s get down to business and look at something that you are currently already facing and will face for another month (at least).

Last couple of months, a lot of changes happened in the economical module and it is time now to see where they are leading us if no change occurs quickly. These changes should protect and develop the small and medium sized countries and especially their economy. You may now wonder what I am going to and why I am so afraid for us business owners.

To understand the point I am going to make, let’s get back to the first change that occurred the last months: the new productivity formulas for regions. For those that don’t know it yet, the admins implemented a few changes in order to move towards the new economical module that will be released end January (read begin March). Today, high regions don’t exist anymore. The regions you own now have a certain raw material that grants you a production bonus of 5% towards a certain category of products or raw material case of grain and iron regions. To give a brief summary: Fruits, deer, cattle, grain and fish all give a 5% productivity bonus per region towards food. Grain gives the grain production and 25% bonus. For iron, aluminum, rubber, oil and saltpeter give a 5% production bonus to weapons production. Iron gives iron production a 25% boost.

As you can see with these changes, owning a lot of regions has become a crucial element in the current eRepublik game. Recourses where already the origin of a lot of wars in V1 and that will be something that will not change in V2, however how easy they are to access is now completely different and the importance of owning all kinds of materials is now even more important. All big countries understand this very well and are trying hard to get the 25% bonus for their food and weapons industries. A well known fact also is that those two industries are the most important industries in the world as you can see bellow.



But you may wonder then: why does this change have such a huge impact on the smaller economies? Let’s take a brief look at the following screenshot


source : http://egov4you.info/eco/raw/page:1/sort:Country.weapon/direction:desc

We can see here that only a few countries have achieved a 25% production bonus and probably only a few ever will. The admins designed the game in order that normal countries can only posses 5 different raws at once in their home regions. This involves that if you wish to control al 10 different raws, you will need to take over at least 5 regions of another country. Easy on paper, hard in practice. To achieve this goal, it either requires a huge fighting power or a very strong economy/good department of MoFA so that you can rent regions. As you can see, something that only the largest countries in the world can achieve and not even all of them will.

For a small country it was easier before, as first of all, their manufacturing industry wasn’t influenced by owning different regions and owning 1 high region was fairly easy as a lot had one in their home territories. Now, having a 20%+ bonus is something very difficult even impossible for a small country not having 5+ original regions. We can therefore see that for small countries having permanently a high production bonus will be very hard. Even harder for them will be the impact on their economy. For that we have to take into account the impact of export licenses.



Export licenses are something that allows a company to sell its production in a different country with only the initial cost of 20 gold to pay (or 5 in extreme cases, which is not possible anymore today as far as I know). This is a very effective way to be able to sell production of your goods in a different country that has a higher price than the country where you are located. Company owners can this way make huge profits only because the price in another country is higher. As you can already guess out of my first paragraph, the consequences of the raw changes can be huge on an economy. The biggest impact will be on the production quantities.

With the recent changes, at equivalent wages, a company owner in a big country will be able to make 15 to 20% more products than a company owner in a small country. Let’s compare two cases in the food industry: Australia, with a 5% region bonus and the USA, with a 25% productivity bonus. We assume a worker at 100 wellness, with skill 9, working with the 0 gold booster, no referrer bonus and a citizenship bonus of 25%. This gives us the following production for a Q3 food company:

Australia 26.88 units of food
USA 30.72 units of food

We can see here a difference of 14.3% at the end of the road or 3.84 units a day. If we assume each unit is worth 0.06 gold, this gives 0.25 gold more revenue to a USA company owner compared to a Australian company owner or 0.02 profit per unit/ Not a big deal you might say but imagine this gives him a 2.34 gold more profits per month and PER WORKER ! This could mean up to 23.4 gold more profits per month. Company owners of those countries understand this very well and are now starting to flood our markets all around the world with cheaper products where you will hardly be able to compete with. Currently it is already an effect that can be seen around the globe, prices dropping and profits lowering for companies that are not located in a bigger country.

The interesting question then is how we can solve this and prevent this from killing our economies and company owners.



The answer to this question in very simple: import taxes. There is nearly no other way for a country to remain competitive unless through import taxes on products. A liberal right wing partisan may dictate that liberalism is the best way to live and will increase the overall profits. I would have to agree with him; in an ideal world this would be true. But eRepublik is far from being an ideal world. In the past, company owners could locate their company in another country than their own and make people work there. Profits could then be brought back the citizenship country and spent there. Currently this is no longer a possibility due to the 25% citizenship bonus, a bonus that is not easy to get in the current world full of PTO threats. Countries are not eager to give out citizenships to new people simply on the basis that they want to build a company there. This implies that citizens are stuck with their current citizenship and companies located in less efficient countries doomed to either close or end up work at loss due to dropping prices.

Other changes, especially in the food sector made this even worse, but more on that in an other article. What are the ideal import taxes?



The level of import taxes will depend from country to country and the disadvantage your products are suffering. A second effect you can directly take into account is the wage difference that can vary greatly from country to country. To go back to our example of the USA, their highest wage for a Guru* is 0.31 gold where someone in the eUK of the same skill would earn 0.51 gold! The disadvantage is getting worse sometimes>. This last effect can be explained by the lack of workers and a presence of too many companies not knowing their profit margins. The changes in the world economy are between it for something, for the eUK : we/they had a high grain region in V1 allowing them to build a large amount of grain companies and then export once again. Now that their bonus is gone, the companies still exist but work inefficiently (their owners not knowing that) along with a huge loss of citizens meaning a drop in workforce.

In my eyes, as said before, an optimal import tax should at least defend your country from the productivity disadvantage you are suffering. Higher is a possibility in order to compensate also for a higher wage cost. For eUK, 25% to 30% should allow our companies to defend themselves and not turn a loss on basic supplies. Higher could even be recommended but could then push to longer lasting unnecessary companies and wages not dropping as they have to.

If you encourage your congressman and government to make the necessary taxes changes, be aware that these will have to be reviewed with a new economic module that will come out soon enough. These should be seen as a temporary way to prevent people from buying too much export licenses to your country, damaging it for the future!

To explain a little more the idea of this: allowing high profits right now will push people to buy an export license to your country. In the future, that license will not disappear making that when the new economic module comes out, your companies will face an increased competition due to existing licenses that will be activated once again if the prices climb a little too high !.

I hope people took the time to read this article, and feel free to comment beneath if you do not agree with me.

Happy new year to all of you,

Apotygma