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Citizens!

Following some interesting comments about what is economically beneficial in terms of rewards, and what sort of tax levels might work for the eUK in the run up to the Spring Break event, I thought I would do some thinking, and writing, about … the Economy!

Specifically, what nations can do to promote ‘healthy’ markets (i.e. increased consumer and production base).


Couldn’t resist

Starting with taxes, what follows is a very top-level tour of what levers countries have in eRepublik, what pressures can be experienced by the markets (things will get more expensive!), and end with some general principles for the approaches Governments may take to alleviate pressures or ride the wave of inflation.

Taxes recap for domestic/non-domestic suppliers

For aiding or inhibiting non-domestic (i.e. foreign) producers the most direct lever is of course Import Tax. Anyone who has an export licence to sell on a foreign market will be subject to Import Tax when selling there. They’ll also still pay Value Added Tax. The tax percentage will be deducted from their sale price.

Taxes cannot be set to 0, the minimum is 1%. This means if you are selling abroad you will always be subject to at least a 1% Import Tax. Typically you will see three approaches to Import Tax in eRepublik:

1. Set Import Tax to 1%, to make the market less competitive for foreign sellers.

2. Set Import Tax to 99%, to make a profit incredibly difficult for foreign sellers.

3. Go somewhere in-between to create favourable conditions for domestic producers whilst not entirely discouraging foreign sellers.

For domestic producers the Tax consideration is mainly Work Tax, noting that, as stated above they are also subject to VAT for manufactured goods. Across the world you will struggle to find countries with a Work Tax above the minimum of 1%. This means that VAT is slightly more interesting as there are examples of VAT being higher than 1%.

The eRep economy is a pretty closed system, but national income can be soent to support players. With events and player incentives having knock on effects on markets (explained below), it is crucial Congresses are on the ball and regularly reviewing their tax positions. In fact they should embrace being more experimental with taxes (particularly Import Tax) and seeing how different rates affect their markets.


Plato and the Markets

It is worth being mindful of how events and player incentives can influence the markets (and the money markets). These things are not always as static as you may think. For example, spinning the wheel several times effectively removes CC from the game, as money spent there does not transfer to Country Accounts or players. Meanwhile the prizes remove the demand from Gold by gifting players items they may otherwise purchase with it. Done at scale (i.e. worldwide) over time this can increase the value of CC - and so effectively decrease the value of gold.

The VIP shop (claimed your points today?) will begin to impact prices because it gives players the ability to purchase boosters with Raw Materials. Being able to use RM to purchase things, rather than to manufacture things with, removes RM from the game and production chain - this will drive up the price of RM across the global economy and as a consequence of manufactured goods too. With the value of Gold under downward pressure, subsidising purchasing with medal-winnings becomes less effective too.

Additionally prizes granting energy centres, EB’s and damage boosters drive up demand for weapons and food - so there’s a triple whammy hitting markets, devalued Gold, upward pressure on RM costs, and increased demand for manufactured goods.


Options for Governments and Congresses

One thing to make sure countries are ready to do is respond to events, such as spring break. Information on what players will need to do for rewards, and what rewards they receive is available in the media, and Congresspeople can therefore adjust taxes as necessary. However, as described above, taxes are OK at deterring non-domestic suppliers*, but they do little to make internal markets competitive and thriving.

*Some sellers will place extortionate offers on markets regardless of Import Tax levels to catch out people who don’t know any better / to take advantage of unhealthy markets.

What else can we do?

Effective deployment of National resources can go a long, long way to helping markets along. Demand and the purchasing power of citizens are key market forces which Governments can influence. Most nations actively seek ways to use their resources to subsidise players, and this will continue to be important for those nations which are not large.

One option is to support a small group of key producers. Questions on fairness aside, this will only really be a good approach in very small countries and will not encourage growth in GDP on a long term basis as it will make conditions harder for new producers.

Conversely, mid sized nations will get greater economic benefit if Government funds are deployed equitably/fairly across the whole consumer base. Some reasons for this are described below but in essence this is to do with increasing disposable incomes and demand across the economy.

Large nations may have challenges extracting funds from their treasury but will also find it easier to attract large numbers of producers and good region bonuses. This can create healthy market conditions without intervention but generally distribution schemes will help citizens and drive economic activity. Large countries have extra logistics involved due to number of players and limits on CC countries can access from their treasuries.


When subsidising citizens Congresses and Governments should be mindful that:

- It is optimal to support spending, not production. If you subsidise people of lower levels and who are not self-sustaining, they will buy products from people who are, a dual benefit. THIS MAKES YOUR MONEY WORK TWICE AS HARD! Conversely subsidising the top producers will not create a benefit across the economy, and will allow top producers to undercut citizens with smaller company holdings - suppressing economic activity and shrinking demand and the market by reducing spending power for large numbers of citizens.

- This means striking an appropriate balance. When identifying funds to use for this purpose, spreading them more or less equally over the consuming population (or in favour of those with less) creates more demand. You won’t need to apply many conditions to this, almost everyone will be spending and there’s little point trying to control or restrict what they spend on.

- Subsidising consumers will add to the demand for products, this will generate more economic activity - people will produce more to meet the demand. This is slightly different from the upward pressures on costs described above because people are paying for goods. Their CC does not vanish when spending, it goes to company owners and treasuries where it can be invested into more production. Players receiving funds will be less squeezed and more able to grow their company holdings.

- If you want to try and direct the spending toward domestic producers, raise Import Tax.

- If you are in a large country that struggles to get all it’s income out of the treasury, this guide has some steps that may help.

These tips are especially relevant to mid sized nations.


Conclusion

The mantra that there is not a lot citizens or nations can do about markets and the economy is untested. eRepublik has market forces, sometimes helped along by Plato, but which pro-active Governments and Congresses can also take advantage of. An essential element of navigating challenging markets is to be conscious of the need to drive demand across the economy.

In the real world (ew) this is called demand side economics. It is particularly relevant to eRepublik as there are finite things to spend CC on, and via gold farming a good production base can be built by any citizen. Subsidising spending will see funds used on products, so they will go to other players, hopefully ones in your nation!

This will often mean using resources to help people purchase things, rather than using them to help people produce things. This has a twofold benefit, it is a fairer way of distributing funds whilst also meaning more money moves from citizen to citizen - i.e. more people benefit from the CC as it moves from player to player. The alternative would be to heavily subsidise a handful of giga-producers, which might be tempting for some nations but will not generate a healthy or sustainable economy and risks pricing people out of production (and maybe therefore, the whole game!).

Thanks for reading!
Mr Woldy