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Unendingfear

The trouble with taxes

29 posts in this topic

Now, as it stands, having obscenely high taxes only lowers population happiness. Given that most people seem to function just fine with their happiness in the thirty percents, there's obviously something wrong here. There is a reason that you don't find 100% tax rates in the real world, after all. Now clearly, something should be done about this. I'm also quite sure that I've read there weren't going to be any sort of revolutions added that could tople your government or anything like that before. Given these circumstances, I would propose that a black market mechanic is added to the game.

 

Now, what the black market would entail is essentially autofounded companies that eat up workers but provide no income. Why? When people can't make a profit through legal means, they will use underhanded methods. No matter how many police you have, they aren't omniscient either. That way, there would be a certain risk to having a really high tax rate. The percent chance of a black market company would need to rise as the tax rates did, and likewise for the inverse. Say at a 0% corporate tax rate and a 0% income tax rate the chance of a black market company might only be like 1% (perhaps lower), but it would rise to something like 50% at a 100% corporate tax rate and a 100% income tax rate, making just about every other company that gets autofounded an illigitimate enterprise.

 

This would add a balancing mechanic to the game. In the real world, with too high taxes the business would just be driven elsewhere. Considering that that doesn't happen in this game (yet anyways), it is unbalanced. As such, this black market would add a long term disadvantage to keeping really high tax rates, in a way that mirrors how the real world functions [one such article illustrating what I'm talking about; notice how none of the transactions are taxable in any way]. Alternatively, it would offer incentive to keep taxes low and people happy. Having lower taxes might in the long run be a better choice with more of your market taxable. It would provide short term problems of course; it would take longer initially to build up infrustructure and services, as well as being able to employ fewer state workers.

Edited by Unendingfear

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I think it would be better to just make a mechanic for closing down companies instead, and let private ones close down in response to high tax rates.

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I think it would be better to just make a mechanic for closing down companies instead, and let private ones close down in response to high tax rates.

Unfortunately, that wouldn't really work with the system in place. The auto found rate system ensures constant economic growth, even if some laws push it higher. Places closing down would simply push the unemployment rate higher; closer to the next auto-found event. If anything, that might encourage people to jack taxes up higher, so that they can quickly eliminate that "natural" 10% (or any other number really) unemployment they have accumulated. My suggestion would allow for a very tangible method that would be very difficult to exploit once they add the planned waiting periods for taxation (if I recall correctly) changes. Even if you were to "game" the system by changing it before the auto-found event, you would still miss out on several days of your usual taxation, making it more difficult to milk people of all they are worth.

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I don't understand why everyone is suggesting things that just slow the game down. It's plenty slow already.

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I don't understand why everyone is suggesting things that just slow the game down. It's plenty slow already.

Project terra advertises itself as a realistic nation simulator but most people are taking probably 70%+ of their nation's GDP in taxes. That's problematic, to say the least.

Edited by Unendingfear

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Project terra advertises itself as a realistic nation simulator but most people are taking probably. 70%+ of their nations GDP in taxes. That's problematic, to say the least.

I agree, but it's also a game. I want to have fun playing it as well. If your proposal were implemented, I would either have to bite the bullet and keep taxes high and pray that more businesses stay legitimate or play it semi-realistically and get even less money with a lower tax rate. With your current percentages, only around half of the businesses and their employees in my nation would be taxed and I would make half of what I'm making in net income, thus slowing the game down. (Something I don't want, considering I had to wait a week to upgrade to a metro).

I think that the main problem I had were the percentages; if the possibility of a black market forming wasn't so high in your OP (say a 25-30% cap at 100% personal and corporate tax rate) I might be on board. I'm all for realism, but not at the expense of my enjoyment of the game.

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I agree, but it's also a game. I want to have fun playing it as well. If your proposal were implemented, I would either have to bite the bullet and keep taxes high and pray that more businesses stay legitimate or play it semi-realistically and get even less money with a lower tax rate. With your current percentages, only around half of the businesses and their employees in my nation would be taxed and I would make half of what I'm making in net income, thus slowing the game down. (Something I don't want, considering I had to wait a week to upgrade to a metro).

I think that the main problem I had were the percentages; if the possibility of a black market forming wasn't so high in your OP (say a 25-30% cap at 100% personal and corporate tax rate) I might be on board. I'm all for realism, but not at the expense of my enjoyment of the game.

We can agree that the current taxation system is not the most realistic in terms of the effects of absurdly high taxes on an economy. The point was raised that, of course, this is a game and that the fun of the game would be compromised if the proposed black market system were to be implemented. It is correct that things would slow down if everything else were to remain unchanged, however, either a decrease in the amount of money required to purchase things or an increase in the amount of revenue earned by corporations or individuals (thus requiring a lower percent tax to achieve the same tax revenue) would negate this effect. Further, I believe a change like this would only enhance the experience of the game. For me, I take pleasure in the competitive aspects of games. For competition, you simply have to have differentiation, some way to make yourself stand out from the rest and the current system does not do that. There is a set, optimum (and unrealistic) tax rate. All one has to do is take a look at the top fifty largest nations and take a look at their tax rates. Nearly, if not every one of them has a 45 percent personal tax rate and a 100 percent corporate tax rate. Instead, there should be advantages and disadvantages to having either a higher or lower tax rate so that there is not optimum tax rate but a plethora of diversity, even among the upper echelon. Personally, I would love to see long term effects of a high tax on the health of an economy with higher unemployment and less business growth and overall stunted economic growth, but I also understand that developing a system that complicated is probably unrealistic. So, as it stands, I believe this black market idea is a good, feasible suggestion.

Edited by Coolguysky

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Imo, every simulation game like this has an optimal way to grow or make money. That is how guides are made and it makes sense that the upper echelon would have the best setup possible. I do, however, register your point about wanting a variety of viable paths.

However, I believe that no matter what you implement, players will find the best possible setup. Even with this black market thing, people will experiment and find the optimal tax rate to balance these new factors.

Lastly, if the developers do decide on adding this, your suggestions to adjust prices to not make the game as slow as it would be unchanged is a great idea and something I can agree with.

Edited because my phone is stupid.

Edited by Dabigbluewhale

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I think this is a terrible solution to this issue.

That was some excellent feed back with great ideas on how to fix this glaring error in "a game that aims for total realism."

I agree, but it's also a game. I want to have fun playing it as well. If your proposal were implemented, I would either have to bite the bullet and keep taxes high and pray that more businesses stay legitimate or play it semi-realistically and get even less money with a lower tax rate. With your current percentages, only around half of the businesses and their employees in my nation would be taxed and I would make half of what I'm making in net income, thus slowing the game down. (Something I don't want, considering I had to wait a week to upgrade to a metro).

I think that the main problem I had were the percentages; if the possibility of a black market forming wasn't so high in your OP (say a 25-30% cap at 100% personal and corporate tax rate) I might be on board. I'm all for realism, but not at the expense of my enjoyment of the game.

Anyways, Dabigbluewhale, I'm sorry, but a nation with what, 90%/100% (higher, lower? your answer is quite vague) tax rate should not face by any lengths similar growths to a nation with a tax rate much lower. If I want to make my nation an And Rand libertarian capitalist paradise, it should at least have marginally better economic growth than a Scandinavian Liberal Paradise Worker's Paradise with a a public sector that consumes 50%+ of the nation's GDP. This isn't the type of game to appeal to a casual audience, considering once more

right from the front page. While it might make it "fun" for some people to have their nation's populate magic urber-kawaii furry kitsune people who love peace and are ~one with nature~ and live fur centuries on end in perfect happy harmony; that kind of stuff doesn't make it into this game. These kind of economics make just as little sense from an economic perspective.

The numbers I gave were entirely arbitrary, they could be higher or lower or what have you. They just made it a nice and digestible piece of information. Still, the point stands, while people who have a high tax rate and massive public spending in every area of life might have longer lifespans and what have you, they should not experience economic growth on equal footing with other nations who have nothing but the absolute minimum government spending as required by Project Terra. The USSR did not experience the same economic growth rate as the decadent capitalist west.

Now, considering the developers also intend to add in - among others - an economics scale

  • Economy: Capitalist - Socialist [1]
perhaps as a nation slides further on the socialist side the changes in society/culture brought on by going further towards the socialist side could work towards softening the brunt of the negative effects brought on by massive taxation; but by no means remove them entirely. Perhaps while maintaining say a 0 on the scale, neither capitalist or socialist really, a taxation rate that causes a reduction to 35% happiness and a black market foundation rate of 45% might be blunted to 50% or 60% happiness and 20% or 25% with total socialism. Once Chris fixes up the issues with Public Companies, if you want to maintain a large white market while maintaining massive tax rates then you should have to found lots of them. With a lack of private incentive because of the public sector, the public sector should have to compensate, even if it means lower overall growth rates and economic prosperity. There's a pretty famous saying with a lot of truth to it; "you can't have your cake and eat it too." You can't have an omnipotent/omnipresent government money vacuum and a healthy, vibrant, growing private sector. Life just doesn't work that way.

This game isn't meant to be a buy everything you want in what day type game either. There's plenty of games like that by groups like Zynga if you're interested. My entire nation's population is less than an eighth of New York city's alone. I've been playing it for over a month at this point too. The game progresses slowly. As for your "enjoyment of the game," while me having an army composed entirely of trout wielding bushmen might really enhance my enjoyment of the game, by no means should it be on par with the dedicated players who spend time investing in the research and development required for a modern army, who spend time/money on military infrastructure, etc. If you want an economic powerhouse of a nation, perhaps it would be wise to reduce taxes from 100% in a game that holds any semblance of realism.

Edited by Unendingfear

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Well, I was thinking about it a bit simplistically. To be honest, I had forgotten that the developers were adding in an economics scale and this part of your reply was intriguing.
 

Now, considering the developers also intend to add in - among others - an economics scale perhaps as a nation slides further on the socialist side the changes in society/culture brought on by going further towards the socialist side could work towards softening the brunt of the negative effects brought on by massive taxation; but by no means remove them entirely. Perhaps while maintaining say a 0 on the scale, neither capitalist or socialist really, a taxation rate that causes a reduction to 35% happiness and a black market foundation rate of 45% might be blunted to 50% or 60% happiness and 20% or 25% with total socialism. Once Chris fixes up the issues with Public Companies, if you want to maintain a large white market while maintaining massive tax rates then you should have to found lots of them.

However, from what I read of your original proposal, it mentioned nothing of this and I just saw an attempt to slow down the game for the sake of "being more real." I do see you gave a lot of thought to this proposal and I apologize for shortsightedly dismissing it. However, I still think it's not the best mechanic to add that balance and realism you're looking for. The idea that private companies just shut down and close their doors in protest and move to a different nation to do business is much more likely than half of a country becoming members of drug cartels and prostitution rings.

 

I would rather consider a scenario where high taxes would make autofound less effective at a certain tax rate and higher (i.e. businesses hire less people because wages are a thing), businesses don't even autofound at a certain tax level (because why would you go into a business where you lose money), or that businesses automatically close down when there is no profit to be made and thus it would be in your benefit to keep taxes at sustainable levels. While we're at it, let's add a happiness meter to companies so that we can see the effect legislation/tax rates have on them.

Lastly, what the hell are trout wielding bushmen?

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Well, I was thinking about it a bit simplistically. To be honest, I had forgotten that the developers were adding in an economics scale and this part of your reply was intriguing.

 

However, from what I read of your original proposal, it mentioned nothing of this and I just saw an attempt to slow down the game for the sake of "being more real." I do see you gave a lot of thought to this proposal and I apologize for shortsightedly dismissing it. However, I still think it's not the best mechanic to add that balance and realism you're looking for. The idea that private companies just shut down and close their doors in protest and move to a different nation to do business is much more likely than half of a country becoming members of drug cartels and prostitution rings.

 

I would rather consider a scenario where high taxes would make autofound less effective at a certain tax rate and higher (i.e. businesses hire less people because wages are a thing), businesses don't even autofound at a certain tax level (because why would you go into a business where you lose money), or that businesses automatically close down when there is no profit to be made and thus it would be in your benefit to keep taxes at sustainable levels. While we're at it, let's add a happiness meter to companies so that we can see the effect legislation/tax rates have on them.

Lastly, what the hell are trout wielding bushmen?

Well, I hadn't thought of that stuff at first. The great part about suggestions is that they aren't static things. If they are, then that too is a problem. A black market is more than just drugs and prostitution. Did you by any chance read the link I provided about the soviet economy? Simple goods like shoes or the right size coffin for your mother became black market goods because they were no longer possible to obtain through legal means. If you've ever been to New York City, you'll see a lot of people selling watches and purses on the side walk, they're technically a part of the black market because they have no permits and pay no taxes. Key emphasis on the taxes. While the black market gets (rightfully so perhaps) a bad reputation because of illegal goods and services like human trafficking or cocaine, it also encompasses say a banned book in a repressive country, or smuggled shoes for your kids under the USSR. The point being, it can literally be any good if the reason for avoiding legal methods is taxation.

 

In a place where corporate taxes were at 100%, that would drive most if not all businesses into the black market, even things as innocuous a dairy farm would look for ways to sell in the black market to avoid losing everything. Hence my objections.

 

The trout wielding bushmen was a reference to Monty Python, a comedy perhaps less laughable to me than a 45%/100% tax rate being the norm.

Edited by Unendingfear

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Well, I hadn't thought of that stuff at first. The great part about suggestions is that they aren't static things. If they are, then that too is a problem. A black market is more than just drugs and prostitution. Did you by any chance read the link I provided about the soviet economy? Simple goods like shoes or the right size coffin for your mother became black market goods because they were no longer possible to obtain through legal means. If you've ever been to New York City, you'll see a lot of people selling watches and purses on the side walk, they're technically a part of the black market because they have no permits and pay no taxes. Key emphasis on the taxes. While the black market gets (rightfully so perhaps) a bad reputation because of illegal goods and services like human trafficking or cocaine, it also encompasses say a banned book in a repressive country, or smuggled shoes for your kids under the USSR. The point being, it can literally be any good if the reason for avoiding legal methods is taxation.

 

In a place where corporate taxes were at 100%, that would drive most if not all businesses into the black market, even things as innocuous a dairy farm would look for ways to sell in the black market to avoid losing everything. Hence my objections.

 

The trout wielding bushmen was a reference to Monty Python, a comedy perhaps less laughable to me than a 45%/100% tax rate being the norm.

I know that a black market is more than those things; I was thinking of an extreme example to illustrate my point.

I didn't join this thread to argue about real-world economic policies. I'm here to talk about game mechanics, so I skimmed your paragraph about the USSR. Let's just agree to disagree. If a black market function is implemented to offset high tax rates, if it betters the game, more power to you. I just think that regarding the issue you brought up of high taxes not reflecting reality, there are many other ways to balance that area of the game.

Sorry, never have watched Monty Python, so forgive me for not knowing the reference.

TL;DR: I'm tired of replying to this thread, so I guess you win.

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Unfortunately, that wouldn't really work with the system in place. The auto found rate system ensures constant economic growth, even if some laws push it higher. Places closing down would simply push the unemployment rate higher; closer to the next auto-found event. If anything, that might encourage people to jack taxes up higher, so that they can quickly eliminate that "natural" 10% (or any other number really) unemployment they have accumulated. My suggestion would allow for a very tangible method that would be very difficult to exploit once they add the planned waiting periods for taxation (if I recall correctly) changes. Even if you were to "game" the system by changing it before the auto-found event, you would still miss out on several days of your usual taxation, making it more difficult to milk people of all they are worth.

Automatically founding companies whenever the unemployment goes above 15% and tax rates are low isn't realistic either when they don't react to what you do afterwards.

I would suggest something more like an equilibrium mechanism instead, so a high corporate tax rate means less private companies will form and more will disband. I think that would be more fun than putting permanent black market companies into the game that you can't interact with in any way. And I don't think that's very realistic either, for them to stay in your nation without regard for changes to future policies. So far as I can tell the effect of the black market companies on your nation are the exact same as having the portion working in them unemployed, except they're permanent. I think that's neither realistic nor fun.

 

 

The numbers I gave were entirely arbitrary, they could be higher or lower or what have you. They just made it a nice and digestible piece of information. Still, the point stands, while people who have a high tax rate and massive public spending in every area of life might have longer lifespans and what have you, they should not experience economic growth on equal footing with other nations who have nothing but the absolute minimum government spending as required by Project Terra. The USSR did not experience the same economic growth rate as the decadent capitalist west.

That's false - the USSR has vastly higher growth rates while the west was in the great depression, and in the decades after the second world war. Only in the last decades, while it attempted to liberalize its economy, did its economy stagnate. Over its entire lifespan, the USSR's economy had in percentage grown more than USA's. I also think it's rather flawed to compare the socialist countries, which were all poor to begin with (and locked up in an expensive arms race with the west), to historically rich western countries. Plenty of capitalist countries in Africa, South America and elsewhere don't experience the same growth as the rich west at all. Growth definitely depends on more complicated factors than simply the economic system, so I think the game should include viable paths for both capitalist and socialist economies.

 

But that should really be irrelevant to what happens based on your tax rate for private companies. Planned economies don't tax private companies, they nationalize them. As for income taxes, they too aren't really relevant in a planned economy because wages are already earned from the state so increasing taxes would be the exact same as decreasing wages. Taxes are a more relevant mechanism for capitalist welfare states (like the ones in Scandinavia) where the states participate little in production but use mainly taxes to fund a lot of publicly available services.

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Automatically founding companies whenever the unemployment goes above 15% and tax rates are low isn't realistic either when they don't react to what you do afterwards.

I would suggest something more like an equilibrium mechanism instead, so a high corporate tax rate means less private companies will form and more will disband. I think that would be more fun than putting permanent black market companies into the game that you can't interact with in any way. And I don't think that's very realistic either, for them to stay in your nation without regard for changes to future policies. So far as I can tell the effect of the black market companies on your nation are the exact same as having the portion working in them unemployed, except they're permanent. I think that's neither realistic nor fun.

That's false - the USSR has vastly higher growth rates while the west was in the great depression, and in the decades after the second world war. Only in the last decades, while it attempted to liberalize its economy, did its economy stagnate. Over its entire lifespan, the USSR's economy had in percentage grown more than USA's. I also think it's rather flawed to compare the socialist countries, which were all poor to begin with (and locked up in an expensive arms race with the west), to historically rich western countries. Plenty of capitalist countries in Africa, South America and elsewhere don't experience the same growth as the rich west at all. Growth definitely depends on more complicated factors than simply the economic system, so I think the game should include viable paths for both capitalist and socialist economies.

But that should really be irrelevant to what happens based on your tax rate for private companies. Planned economies don't tax private companies, they nationalize them. As for income taxes, they too aren't really relevant in a planned economy because wages are already earned from the state so increasing taxes would be the exact same as decreasing wages. Taxes are a more relevant mechanism for capitalist welfare states (like the ones in Scandinavia) where the states participate little in production but use mainly taxes to fund a lot of publicly available services.

Firstly, I concur with what was said about the auto found function being stuck on fifteen percent, no matter the tax rate, and I also agree that the black market companies should not be a permanent stain that can never be removed from the economy. If this black market idea were to come into fruition though, I would suggest that the percent chance of a company or portion of a company's revenue be an overarching percent chance, not just when companies are founded. This way, users can not simply adjust the tax rate when approaching the auto found to avoid the black market companies. Also, I would suggest that the amount of revenue being black market be constantly gravitating towards a set percent depending on what tax rate one has. So, this would also entail a reverse black market effect over time if taxes are lowered. Under a system like this, a nation with a low tax rate could raise taxes temporarily during an emergency such as war to greatly increase revenue without long term socialist effects. While I certainly agree that a black market effect is not the most realistic primary effect from high taxation (although it can be one effect), under a system like this it would at least serve to make the overarching long term effects of both socialism and capitalism present in a believable form.

Now, as far as the effects go for planned economies, I trust China would serve as a good indicator of how the game would present their results.

"... [China] had transformed its vast and inefficient agricultural sector, freeing its peasants from the confines of central planning and winning them to the cause of reform. In the 1990s, it had likewise started to restructure its stagnant industrial sector, wooing foreign investors for the first time. These policies had catalysed the country's phenomenal growth. Instead, China had to take what many regarded as the final step toward the market, liberalizing the banking sector and launching the beginnings of a real capital market." http://en.m.wikipedia.org/wiki/Economy_of_China

Edited by Coolguysky

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READ THE QUOTE blah blah. was a good post.. just too long! also wasn't this guy but the post before him!!

 

i agree with what you said, although the tax stuff is probably one of the biggest problems, seeing as how the 15% unemployment rate thing is weird, yet still realistic in a sense, it is still not the best way to offset unemployment.

 

-with a high unemployed economy the population is willing to work for less therefore you have more companies coming you to your nation starting businesses and then hiring your low income population.-(which makes the 15% more realistic i guess).

 

if you wanted to add such distinction between socialist and capitalist economics, then you should also have to add communism, and nationalism, as they are more base systems used for the creation of socialism...

 

and although many would say socialism, communism and nationalism are the same thing, they aren't. governmentally they share differences based on their inherent government types, and their economic types are different aswell, ranging from complete state ran growth to no state regulation at all.

 

however this could just be me saying things others have already said... blah blah... wasted post.

Edited by kiosixos

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Can we agree that this is a GAME?

Making it 100% real would be boring as ********. Id rather go play RL.

Though, I agree that the taxes could be more realistic, I think the game is slow enough and I think this idea is a terrible solution that doesn't even consider the long term.

The auto found function will also change in the future.

Back in alpha, you could actually choose when auto found would activate.

The mods said during Beta testing that the 15% thing will.change.

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Now, as far as the effects go for planned economies, I trust China would serve as a good indicator of how the game would present their results.

"... [China] had transformed its vast and inefficient agricultural sector, freeing its peasants from the confines of central planning and winning them to the cause of reform. In the 1990s, it had likewise started to restructure its stagnant industrial sector, wooing foreign investors for the first time. These policies had catalysed the country's phenomenal growth. Instead, China had to take what many regarded as the final step toward the market, liberalizing the banking sector and launching the beginnings of a real capital market." http://en.m.wikipedia.org/wiki/Economy_of_China

Again, the USSR had decades of high growth rates with a planned economy, China too has had moderate growth rates before the great leap backwards. No matter what example you come up with, we must look at the bigger picture. I can also find you plenty of capitalist countries in the south without success, but I'll refrain from suggesting capitalism should therefore inherently lead to economic failure in this game.

 

Liberalizing China's economy meant opening it up to investors from historically vastly richer countries than the socialist bloc. To see the effects of foreign countries investing, you only need to look at North Korea in the 1950's and 1960's where they had much higher growth rates than South Korea due to the USSR and China investing in it. Today the situation is the exact opposite (north/south). Again, growth depends not simply on the economic system but also the other countries you interact with. (That's an aspect I think will be very hard to simulate for Project Terra if it aims at 100% realism, however.)

 

Anyway, the fact remains that both socialist and capitalist countries have achieved growth throughout history, for this reason, I think the game should make viable paths for both economic systems.

 

if you wanted to add such distinction between socialist and capitalist economics, then you should also have to add communism, and nationalism, as they are more base systems used for the creation of socialism...

 

and although many would say socialism, communism and nationalism are the same thing, they aren't. governmentally they share differences based on their inherent government types, and their economic types are different aswell, ranging from complete state ran growth to no state regulation at all.

I think neither nationalism nor communism are base models for socialism and need to be included separately. Marxist socialism is a planned economy where the means of production are owned by the state. Communism in Marxism is a future vision and goal of socialism where the productive forces and technology have grown so strong that distribution can be based on need instead of work.

 

Nationalism isn't an economic system (but as you point out isn't socialism or communism either - in fact, communism and most forms of socialism are internationalist ideologies and oppose nationalism). I think you might mean corporatism (the economic system implemented by fascist countries who typically have a nationalist ideology). I think it would be interesting also to have corporatism as a viable path in the game, although I wouldn't want to choose that path myself.

 

I think giving players control over tax rates, the creation of state owned companies, wages for state companies, and including the private companies autofounding under some conditions the players can interact with, and laws that can interfere with the companies, gives enough freedom to choose between some simplified versions of capitalism, corporatism, welfare state or socialism (which for communists would be the initial step towards communism). The tax mechanics and state companies just need to be improved.

Edited by Bla

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I apologize for going tangential to the purpose of this thread but I felt the urge to reply to a few statements that have been posted. 

the USSR has vastly higher growth rates while the west was in the great depression, and in the decades after the second world war.

This is misleading, as "...In 1933 workers' real earnings sank to about one-tenth of the 1926 level."  http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

And also read the Soviet famine of 32-33 http://en.wikipedia.org/wiki/Soviet_famine_of_1932%E2%80%931933

China too has had moderate growth rates before the great leap backwards.

If what is being said is that the "great leap backwards" was caused by capitalist policies than I would simply refer back to the original article posted.

 

Over its entire lifespan, the USSR's economy had in percentage grown more than USA's.

This may be true, but it is also greatly misleading because the USSR was just then starting to industrialize. "By this time about 18% of the population lived in non-rural areas, although only about 7.5% were employed in the non-agricultural sector. The remainder were stuck in the low productivity agriculture" http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

So, measuring growth by percentage gives an inaccurate impression because the starting point was so poor.

An example of this would be an individual who starts a career earning 1000 dollars a year and another individual earning 1 million dollars a year. If, by the end of their careers, the first is earning 2000 dollars a year while the second is earning 1.5 million, the first one grew more from a percent standpoint but it is clear how this would be deceiving. 

 

Liberalizing China's economy meant opening it up to investors from historically vastly richer countries than the socialist bloc. To see the effects of foreign countries investing, you only need to look at North Korea in the 1950's and 1960's where they had much higher growth rates than South Korea due to the USSR and China investing in it. Today the situation is the exact opposite (north/south). 

I certainly agree that investing in a country breeds economic growth. However, the purpose of investing is to put money or resources into a producer of goods or services for them to buy capital, or in some way use, with the purpose of that entity using it to yield higher profits. The motivation for investing is for the investor to (hopefully) make more money than was originally invested upon return. From a Communist perspective, there is no financial (political in the case of North Korea) motivation to invest because the purpose of a Communist producer is not to turn a profit and so can not give the investor a return on their investment

 

Now, with this being said, I must also say that socialism and further, Communism, should be viable paths. I would love to see a vast diversity of economic policies in the game because the contrary would be rather dull. However, I do not believe that nations with those policies should have economic growth and output matching a capitalist free market. I have a feeling we will have to agree to disagree on this issue though. 

Edited by Coolguysky

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This is misleading, as "...In 1933 workers' real earnings sank to about one-tenth of the 1926 level."  http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

And also read the Soviet famine of 32-33 http://en.wikipedia.org/wiki/Soviet_famine_of_1932%E2%80%931933

I wrote growth rates, not real earnings. Quoting from the same article you're linking to:

"As weighed growth rates, economic planning performed very well during the early and mid-1930s, World War II-era mobilization, and for the first two decades of the postwar era."

 

 

If what is being said is that the "great leap backwards" was caused by capitalist policies than I would simply refer back to the original article posted.

No, my intention was to give a counterexample of socialist economies achieving growth, which was before the great leap backwards. I don't claim that the leap was due to capitalist policies, I just point out socialist economies have achieved growth and thus shouldn't be barred from that in the game.

 

 

So, measuring growth by percentage gives an inaccurate impression because the starting point was so poor.

An example of this would be an individual who starts a career earning 1000 dollars a year and another individual earning 1 million dollars a year. If, by the end of their careers, the first is earning 2000 dollars a year while the second is earning 1.5 million, the first one grew more from a percent standpoint but it is clear how this would be deceiving.

Percentage growth should still be a more comparative and less misleading measure than absolute GDP growth per capita, because GDPs tend to follow approximately exponential models and not linear ones. But if you can come up with a more theoretically sound way to compare economic growth I'd definitely like to see it.

In any case, I stand by my statement that socialist countries have achieved high growth rates and should be able to in-game as well.

 

I certainly agree that investing in a country breeds economic growth. However, the purpose of investing is to put money or resources into a producer of goods or services for them to buy capital, or in some way use, with the purpose of that entity using it to yield higher profits. The motivation for investing is for the investor to (hopefully) make more money than was originally invested upon return. From a Communist perspective, there is no financial (political in the case of North Korea) motivation to invest because the purpose of a Communist producer is not to turn a profit and so can not give the investor a return on their investment

The investments from socialist countries in North Korea originally were things like buses, building materials and such, I don't know to what extent they expected a return - I think it comes closer to being classified as aid, but nevertheless it resulted in high economic growth rates. My point was just that if a poor country like China switches to capitalism, the rich western countries who had vastly bigger economies back then will cause high growth rates for China due to investments. Had those western countries been socialist, China's situation could easily have been the opposite, like the North/South Korea situation in the 1950's and 1960's. As such, I don't think you can conclude from China's situation that capitalism is superior to socialism in achieving economic growth - if China had never been trading or interacting with other countries and went from no growth in socialism to high growth in capitalism, sure, but that's not the case.

 

Anyway I'm glad to see that you agree there should be a diversity of economic paths in the game.

Edited by Bla

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I believe my intentions were misconstrued in a few areas, so allow me to clarify.

First, when I said that a statement was misleading, I was not contending that it was false. I was showing that the impression the statement conveys is not entirely accurate.

Percentage growth should still be a more comparative and less misleading measure than absolute GDP growth per capita, because GDPs tend to follow approximately exponential models and not linear ones. But if you can come up with a more theoretically sound way to compare economic growth I'd definitely like to see it.

In any case, I stand by my statement that socialist countries have achieved high growth rates and should be able to in-game as well.

My intention in this case was not to attack the measurement of GDP growth by percentage, but to show why it grew as such. In the time frame that was used to compare the Soviet Union with the U.S. I previously showed that the USSR essentially started as an underdeveloped agricultural economy while the U.S. started as an economic powerhouse of the time. Simply by virtue of obtaining technology of the time, a country would show high growth percentage. This is convergence, or the catch up effect.

The investments from socialist countries in North Korea originally were things like buses, building materials and such, I don't know to what extent they expected a return - I think it comes closer to being classified as aid, but nevertheless it resulted in high economic growth rates. My point was just that if a poor country like China switches to capitalism, the rich western countries who had vastly bigger economies back then will cause high growth rates for China due to investments. Had those western countries been socialist, China's situation could easily have been the opposite, like the North/South Korea situation in the 1950's and 1960's. As such, I don't think you can conclude from China's situation that capitalism is superior to socialism in achieving economic growth - if China had never been trading or interacting with other countries and went from no growth in socialism to high growth in capitalism, sure, but that's not the case.

My intent here was never to claim that China prospered by adopting capitalist policies without foreign involvement. That would be ridiculous, considering the size of Chinese exports. My point is actually in this statement when talking about investment in the socialist nation of North Korea "I think it comes closer to being classified as aid." That is what I was getting at, there is no financial motivation to invest in a fully socialist nation, so money given to the nation at that point is precisely that, aid. There is a vast difference between investment and aid. Investors did not invest in China's economy simply because the nation was in the capitalist group or because they wanted to see the well being of China, they did this to become wealthier themselves. Even assuming that China could reach the same prosperity under a socialist economy with the same amount of money given to it by rich socialist nations, those rich nations would be sacrificing the money they put into China because it would be aid, not investment. Unlike North Korea though, China is too massive to be continually sustained by foreign aid.

I actually would not argue the possible merits of Communism on the theoretical level, I just do not see it translating to the real world. In any case, the data has been presented and I doubt either of us will be swayed at this point, but I respect your view as I hope you have come to respect mine. At least for the purposes of this thread, we do agree that socialism should be a feasible route.

Edited by Coolguysky

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First, when I said that a statement was misleading, I was not contending that it was false. I was showing that the impression the statement conveys is not entirely accurate.

My intention in this case was not to attack the measurement of GDP growth by percentage, but to show why it grew as such. In the time frame that was used to compare the Soviet Union with the U.S. I previously showed that the USSR essentially started as an underdeveloped agricultural economy while the U.S. started as an economic powerhouse of the time. Simply by virtue of obtaining technology of the time, a country would show high growth percentage. This is convergence, or the catch up effect.

But this was a reply to the claim that

 

The USSR did not experience the same economic growth rate as the decadent capitalist west.

 

which I demonstrated was false.

Whether GDP growth by percentage is misleading here or not, that's not relevant to the argument. The claim was made the USSR didn't experience economic growth like the west (note how the quote mentions growth rate, and that's simply false.

 

 

My point is actually in this statement when talking about investment in the socialist nation of North Korea "I think it comes closer to being classified as aid." That is what I was getting at, there is no financial motivation to invest in a fully socialist nation, so money given to the nation at that point is precisely that, aid. There is a vast difference between investment and aid. Investors did not invest in China's economy simply because the nation was in the capitalist group or because they wanted to see the well being of China, they did this to become wealthier themselves. Even assuming that China could reach the same prosperity under a socialist economy with the same amount of money given to it by rich socialist nations, those rich nations would be sacrificing the money they put into China because it would be aid, not investment. Unlike North Korea though, China is too massive to be continually sustained by foreign aid.

But China has benefitted from the aid. Instead of North Korea having (more than likely) collapsed due to the destruction in the war and USA/South Korea gaining a stronghold on the Korean peninsula, they developed a strong military during the cold war serving as a buffer state between China, the USSR and South Korea. And after becoming developed North Korea could help China and USSR in their efforts in return. For example the aid helped North Korea establish an industry which meant they could trade with USSR and China, so they got access to more resources in return for their aid. Aid can definitely be mutually beneficial and the socialist countries could get their investments back through trade or aid even though it came as aid in the first place. The Marshall plan that USA gave to western Europe is an example of how little difference there can be between aid and investments.

 

In terms of growth, my point was that here's little difference between investment and aid. Either can help rapidly building up an industry and lead to high growth rates. The fact that investments from capitalist countries don't tend to come in the predominant form of aid wouldn't really be relevant in a socialist world. If the west were socialist and controlled an economy equal to that of all the large western corporations and states today, China's growth could definitely be sustained by aid from the west, expecting to gain access to products from China, just the same way it has largely been sustained by investments from western companies.

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Okay guys, this is a thread about proposed changes to the tax system in PT not a debate over history, or the theoretical virtues of different economic systems, or how China and the USSR compare to the US, etc. Let's get back to the topic please.

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