How welfare was supposed to - and maybe still can - save us all
Day 2,463, 12:01
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Published in Denmark 
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by
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by pho3nix
Yeah, I know economics is funkin' boring. Then again, what isn't around here?
A malfunctioning market is slow moving market.
A market is supposed to deliver goods and currency. If the flow of said things stop, then the market is in trouble. This is the centerpiece of modern economics: keep goods and money flowing, at more or less all costs. eRepublik is a bit different from real life. You can't really go bankrupt unless you've done some really shitty investments - and even then you're still able to feed yourself. And dismantle your buildings. And get training medals. And get hard worker medals. And so on.
With that in mind eRepublik has been struggling for quite some time to maintain activity in the market. The big mess started when you as company manager was allowed to start working in your own production plants. This sparked a lot of spending of gold, as people bought large amounts of companies and became self sustaining. That is; the people with the most money to spend suddenly had litte or no incentive to interact with the market. The solution was a quick fix. The admins programmed a bot to buy goods at a certain value, thereby emptying markets at uncompetative prices. Many made big amounts of money from this - Denmark included.
Suddenly the bot stopped it's spending rampage and the world fell back into recession. Noone would buy produced goods and the single player aspect of the game grew. That's where Welfare started off. The Danish economy was a mess. Prices were ridiculous as compared to salaries - since noone was hiring, and definitely not at decent wages. Something had to be done.
Newsflash: This is the internet.
IRL, central banks use rates of interest on money borrowed to banks to control the flow of money. If it's cheap to take a loan; you invest. It also makes saving un-attractive, as you're now earning less by saving your money. This usually triggers investment in some way or another - and I'm not going any further on this topic. In eRL however, we don't have central banks. Sure, the gold market is now an international one - which makes the monetary state of the world more stable. Still, the Danish government has no way of controling the flow of money in or out of the country. Lowering taxes is one way, but then taxes really have to be high. If you earn 5% more off a 12 DKK salary, then that's not really going to stimulate spendings.
If people don't earn anything, they can't spend anything. If they can't spend anything, companies can't hire. If companies don't hire and people don't have any income to spend - the state loses out on taxes. It's a lose-lose-lose situation. Someone needed to intervene. Denmark needed an increase in salaries. The general Dane, and especially the newborn Dane, needed help to increase their disposable income. The private sector could not help out, since there was no activity on the market. The employees couldn't agree to lower wages; they weren't earning enough as it were. The state had to step in. And thankfully; we were loaded with cash.
The picture above depicts how money was supposed to flow through the system. Money would be thrown at certain employers, in return for a steady supply of Q7 tanks for both export purposes as well as a general supply for the Danish population. Q7 facilities are REALLY expensive, and so we could choose three-four employers who would get an active work force supplied to them. The deal was to split the production in three: one (smaller) part for the internal market, sold in a competative way. A second part (bigger) for export purposes. Exports are really the only way of securing new capital into the country, and Q7 products are among the most sought after products. The third part was a reserve for the Danish military. In times of war, the state needed a supply of tanks for the general population.
The money for the Welfare program was pumped straight into the pockets of the employees. We made sure the applicants for the program were made aware of what they should be earning, and had a complaints officer on duty for any mixing with the salaries. This however meant that the employers now could spend more on WRM's without having to take wages into account when pricing their final products. This also created a big demand for WRMs on the market. At peak production, Denmark could use some 50.000 units of WRM per day.
The WRM-market was part of the plan for creating some breathing space for newcomers to the game to earn a buck on the private market. As long as the market would remain competative, there was a buck to be made for everyone. The increase of disposable income would also give people greater opportunities to participate in wars. The market as a whole would get a solid boost in other words.
What's in it for me?
But what about the state? In the middle of my three-term presidency, we were pumping out 20.000 DKK per month on the program. After a month, 50% of the money was back in the treasury. And it kinda makes sense. Sure we're putting money into people's pockets, but it's not too much - meaning people don't use it all to save up. The money is actually spent. Not all of it at the same time, but by paying work tax, VAT and using the salary to boost one's own companies money seems to return at a decent rate.
My next article will be about some of the flaws we detected in the program, how we handled them and what I think the future holds for the program and Denmark in general.
/pho3nix
A malfunctioning market is slow moving market.
A market is supposed to deliver goods and currency. If the flow of said things stop, then the market is in trouble. This is the centerpiece of modern economics: keep goods and money flowing, at more or less all costs. eRepublik is a bit different from real life. You can't really go bankrupt unless you've done some really shitty investments - and even then you're still able to feed yourself. And dismantle your buildings. And get training medals. And get hard worker medals. And so on.
With that in mind eRepublik has been struggling for quite some time to maintain activity in the market. The big mess started when you as company manager was allowed to start working in your own production plants. This sparked a lot of spending of gold, as people bought large amounts of companies and became self sustaining. That is; the people with the most money to spend suddenly had litte or no incentive to interact with the market. The solution was a quick fix. The admins programmed a bot to buy goods at a certain value, thereby emptying markets at uncompetative prices. Many made big amounts of money from this - Denmark included.
Suddenly the bot stopped it's spending rampage and the world fell back into recession. Noone would buy produced goods and the single player aspect of the game grew. That's where Welfare started off. The Danish economy was a mess. Prices were ridiculous as compared to salaries - since noone was hiring, and definitely not at decent wages. Something had to be done.
Newsflash: This is the internet.
IRL, central banks use rates of interest on money borrowed to banks to control the flow of money. If it's cheap to take a loan; you invest. It also makes saving un-attractive, as you're now earning less by saving your money. This usually triggers investment in some way or another - and I'm not going any further on this topic. In eRL however, we don't have central banks. Sure, the gold market is now an international one - which makes the monetary state of the world more stable. Still, the Danish government has no way of controling the flow of money in or out of the country. Lowering taxes is one way, but then taxes really have to be high. If you earn 5% more off a 12 DKK salary, then that's not really going to stimulate spendings.
If people don't earn anything, they can't spend anything. If they can't spend anything, companies can't hire. If companies don't hire and people don't have any income to spend - the state loses out on taxes. It's a lose-lose-lose situation. Someone needed to intervene. Denmark needed an increase in salaries. The general Dane, and especially the newborn Dane, needed help to increase their disposable income. The private sector could not help out, since there was no activity on the market. The employees couldn't agree to lower wages; they weren't earning enough as it were. The state had to step in. And thankfully; we were loaded with cash.
The picture above depicts how money was supposed to flow through the system. Money would be thrown at certain employers, in return for a steady supply of Q7 tanks for both export purposes as well as a general supply for the Danish population. Q7 facilities are REALLY expensive, and so we could choose three-four employers who would get an active work force supplied to them. The deal was to split the production in three: one (smaller) part for the internal market, sold in a competative way. A second part (bigger) for export purposes. Exports are really the only way of securing new capital into the country, and Q7 products are among the most sought after products. The third part was a reserve for the Danish military. In times of war, the state needed a supply of tanks for the general population.
The money for the Welfare program was pumped straight into the pockets of the employees. We made sure the applicants for the program were made aware of what they should be earning, and had a complaints officer on duty for any mixing with the salaries. This however meant that the employers now could spend more on WRM's without having to take wages into account when pricing their final products. This also created a big demand for WRMs on the market. At peak production, Denmark could use some 50.000 units of WRM per day.
The WRM-market was part of the plan for creating some breathing space for newcomers to the game to earn a buck on the private market. As long as the market would remain competative, there was a buck to be made for everyone. The increase of disposable income would also give people greater opportunities to participate in wars. The market as a whole would get a solid boost in other words.
What's in it for me?
But what about the state? In the middle of my three-term presidency, we were pumping out 20.000 DKK per month on the program. After a month, 50% of the money was back in the treasury. And it kinda makes sense. Sure we're putting money into people's pockets, but it's not too much - meaning people don't use it all to save up. The money is actually spent. Not all of it at the same time, but by paying work tax, VAT and using the salary to boost one's own companies money seems to return at a decent rate.
My next article will be about some of the flaws we detected in the program, how we handled them and what I think the future holds for the program and Denmark in general.
/pho3nix
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