Economics & Budget

2.2- Economics
   Economics, while a major feature of World Aflame II, is largely abstracted for the ease of play. Even with the vast amount of oversimplification, there are still some features, capabilities and responsibilities that the player needs to be aware of; particularly with regards to crucial government budgetary concerns. The economy is driven by the manufacturing, industry, agricultural and mining/oiling sectors; and the amount of goods those sectors produce in excess of what is consumed by the nation's economy itself.
    In order to fuel the industrial sector, fuel is consumed; as it is also devoured in the manufacturing sector. Agricultural goods are consumed as food and clothing by the populace itself. The population also uses manufactured goods as consumer luxury items, like radios, books, newspapers and the like. As the value of various types of goods fluctuates with the open market, the overall value of a nation's production likewise fluctuates, driven mainly by supply and demand. If a nation such as France requires much more bauxite than it can produce, and there is little available on the open market, the price of the related supply (refined goods) goes up. The more goods a nation needs to import, the more it offsets their total production value, as they need to pay for those items that their industries import. Thus, having healthy trade agreements with nations that can supply goods one's nation lacks, enables stronger growth in that nation's economy. If a nation lacks a specific type of economic good, that nation's economy might stagnate, or even drop into recession. 

2.2.1- Budget
    The budget, quite simply, is the cash and material the government has available for use. In the vast majority of nations, the cash available to the government is acquired from taxation of the populace. In a totally free market, the overall tax rate will be some 5% of the total economic value of the nation's production (less it's imports); while in mixed economies, it tends to vary anywhere from 20% to 50%- depending on the whim and need of the government. Note that as the production value of the nation changes with the supply and demand requirements of the market, and depending on the growth rate of the economy itself, the actual income that the government receives may vary dramatically. At times, this may lead the government into deficit spending- at which time the government is forced to take domestic loans to pay off their debts, which they need to repay.

2.2.1.1- Industrial Control (or lack thereof)
    One of the first, and for many, the hardest thing to get used to in running a country in World Aflame is the near complete lack of control the government has over the economy of the nation. This actually does mirror the real-world issues that most governments with free or mixed-mak

2.2.1.2- Strategic Reserves & Government Owned Materiel
    A government has the option- and in some cases, the responsibility, to purchase crucial supplies in order to stockpile them, in the event of a time of need. Any material can be stockpiled, though the physical location of the stockpile will need to be noted. This stockpile can be utilized by the government, should it prefer to use it's own goods to produce equipment or facilities to purchasing them on the market, at the time of construction. The government might also release it, or sell it, to the world or domestic markets, in order to stave off recessions caused by drops in production, or to raise needed cash, or what-have-you.
    The downside of the maintenance of a strategic reserve is that through inefficiency, the cost the bureaucratic red tape, storage costs and spoilage, between 1% and 20% of a strategic reserve stockpile tends to 'go bad' each quarter, averaging around 5% spoilage.

2.2.1.2.1- Purchasing Materiel from the Home Market
    In order to purchase materials from the home market, the government must pass a bill to make the purchase, where the bill notes the amount of cash to be spent. At the time the funds are disbursed, as much of the material is removed from the home market as can be taken without causing a deficit. This continues throughout the budget year until either a) all the funds are spent; or b) the year ends. The goods obtained are added to the strategic reserve stockpile quarterly, as they are purchased. This may, of course, have an effect on the market price of the goods themselves, as speculators begin to buy up lots of the material as well, in hope of making a profit off continued government interest in the goods.
    Generally speaking, purchasing excess goods from the home market will bolster values of these items internally, while costing the government less than if the same goods were purchased from the world market. This tends to help the producers of those goods domestically, by means of increasing their profits.

2.2.1.2.2- Selling Materiel to the Home Market
    If a government holds a strategic reserve of a key good, it also has the option of selling it back to the home market- or even releasing it for fee- to the home market, in order to stave off a recession brought on by the lack of a needed good to produce. This might be releasing a portion of the refined reserves, in the form of oil and coal, in order to prevent a shutdown of industry and manufacturing production due to an embargo of those goods; or in the form of preserved foods (agricultural goods), in the event of a drought or other loss of crops which might otherwise result in famine. Likewise, a government might simply sell goods back to the home market for cash. Selling or granting goods to the market tends to result in lower prices for the consumer, but less profit for manufacturers of those goods. This can help improve consumer confidence, but result in depression of the industry; should the rise in confidence not equal the lost profits. On the other hand, it can help reduce dependence for foreign goods- at least for a time.
    The process for releasing strategic reserves functions much the same as purchasing those goods initially. The chief executive issues and executive order to release the reserves, including the amount to be released. These are placed on the market for the year, and as industrialists, marketeers and speculators purchase them, they are taken from the trading block; and cash is added to the government's coffers. Of course, the more goods are released, the lower the price goes, and the less return the government might make on it's investment. Naturally, that is not necessarily the government's goal in releasing a strategic reserve; but it is a consideration,

2.2.1.3- Government Acquisitions
   Another use of a government's budget is to build government facilities, military and merchant marine units, transportation and infrastructure improvements, and the like. As with all other government budgetary actions, government acquisitions need to be purchased in a spending or budgetary package, authorized by the legislature, if required by the government form. The orders are officially placed as soon as disbursement is authorized, and are constructed for so long as funding is forthcoming.

2.2.1.3.1- Military Acquisitions
   Military purchases may take the form of raising additional infantry, purchasing goods and equipment to arm the military with, increasing the munitions stockpile, laying the keels for new capital ships, or similar arms. As with all budgetary items, military acquisitions must be approved by the legislature. Additionally, an appropriate facility must be present, and selected, for the construction of the arms. Naturally, here pork-barrel politics may rear it's ugly head again, as members of the legislature from competing industrial regions squabble over which factory complex should get the contract.
2.2.1.3.2- Industrial Acquisitions
    Industrial acquisitions are the authorization and funding for a factory to retool itself to produce a different military good; for example, retooling a land vehicle factory making US M3 tanks, to instead build half-tracks. The factories built and maintained by the government, while not actually truly government property in most cases, are treated as such for the purposes of the game, as the onus for protecting and defining them remains in government hands.
    As with more general military acquisitions, the placement and contracts given to industrial plants often become partisan battleground; as politicians are generally always looking to bring home the best of situations to their own votes- a Senator from Alabama may very well agree that the nation needs a new munitions plant, but may well vote against it, if it were to be built in Detroit, rather than Mobile.
2.2.1.3.3- Infrastructure Improvements
    Transportation and infrastructure are necessary for any modern, industrial economy, and are also key to providing efficient logistical support to armies in the field. Nations may opt to commence massive works projects, like the Trans-Siberian Railroad, the Eisenhower Interstate System, the Eire, Panama and Suez Canals, or the like, in order to improve the movement capabilities from one end of their nation to another. Without sufficient transport, a nation may find that it's economy is slow to grow; international traders may find gaining any market in such a nation difficult, and natural resources difficult to properly exploit.
    There is no one, set price for improving infrastructure. It varies by the type of improvement desired (road, highway, rail line, undersea tunnel, etc), the size needed (a road from Boston to New York would certainly cost less than the same highway, stretched to Los Angeles), and the terrain it needs to cover. In most nations, the government would need to pass a bill authorizing a commission to determine the feasibility of the exact project, and the commission would then undertake a mission to determine the cost and requirements of such a project, reporting this back to the government for a 'yea/nay' decision.

2.2.1.4- Deficit Spending
    At times, a government's expended cash may well exceed the amount it actually takes in, due to cost overruns in projects, shortfalls in the tax collection process, downturns in the economy, failing to make as much of a profit as planned on government sales, emergency spending packages; or any one of a number of other things. When this happens, the government is said to be in deficit spending.
    For the purposes of the game, a nation cannot intentionally enter deficit spending, needing to pass a budget at the beginning of each game year that is at least balanced, if not actually yielding a small surplus. When deficits do occur, the nation is assumed to have taken out an automatic domestic loan, to cover the difference. These loans follow the standard domestic loan rules; and, as such, must have a minimum payment made each year; and must be paid off within ten years, at most. Additionally, as with all domestic loans, a 10% interest rate is applied at the time the loan is taken out, which must also be repaid in full.

2.2.1.5- Domestic Loans
    Domestic loans are those loans taken out by a government from sources internal to it's own economy. These loans are guaranteed by the government, and must be paid back within 10 years, including a 10% interest; applied in full at the time the loan is taken. (E.g.: If a government took a loan for 100 cash, it must repay 110 cash within 10 years.)
    In the event a nation would default on a domestic loan, the government must sell off any and all possessions it has, for 1/2 the cost of their component parts, in order to pay back the loan. If the government no longer possesses any arms, material, gold or facilities, the economy completely collapses, and the government goes bankrupt. In most cases, a depression this deep will cause massive spiraling inflation, destitution, and a complete collapse of the government itself. Needless to say- this is a bad thing.
    As domestic loans are taken out from purely internal sources, at no time can a government borrow more than 10% of it's gross domestic product in one budgetary period. Should a government need to do so, due to emergency spending bills or the like, they must either secure a foreign loan, or sell off goods as above.
    Nations are never allowed to default on domestic loans.

2.2.1.6- Foreign Loans
    Foreign loans are those taken out from other governments, for any one of a number of reasons. Foreign loans differ from domestic loans in any one of a number of ways. Firstly, the amount that may be acquired is limited only by the lending nation's ability to loan it. Secondly, the interest rate is far higher- typically 25%, though individual nations may lower that to as little as 15% (no lower- no legislature would allow that, for the purposes of the game). Additionally, there is nothing that will prevent the nation from defaulting on a foreign loan, save for the other nation. As a result, giving a foreign loan is as precarious as needing one , which accounts for the higher interest payments any sane legislature would levy, in order to compensate for it's risk.
    In order to take or grant a foreign loan, approval must be granted by the chief executives of both nations; and both nation's appropriate legislative body; and must encompass terms of the size of the loan, how it will be paid back, and over how much time. Additionally, a flat, one-time interest rate must be fixed (for GM ease of handling). The contracting parties may, if they like, fix other conditions to the loan, such as extra terms for late payments; and other means of collection in the case of a complete default on the loan.
    Of course, any and all of these terms are open to negotiation, prior and after-the-fact, unlike the fixed domestic loan.

2.2.1.7- Domestic Spending
   Domestic spending is that portion of a nation's budget which is spent to improve the life of it's civilian population through any number of social projects; from welfare to small business loans, and from social security and unemployment protection to government sponsored mail-delivery, schooling, and civilian law enforcement.
    Domestic spending tends to be an anathema of most Right-wing governments; who believe that a free economy allows for- and requires- civilians to take care of their own, and earn themselves enough to retire. On the other end of the political spectrum, left-wingers hold domestic spending dear, and will seek to preserve it at virtually any cost- if not actually expand it.  Thus, the level of domestic spending a government authorizes often becomes a battleground between the two economic ends of the spectrum.
    It should be noted that in mixed  and planned economies, a certain level of domestic spending must be maintained, in order to support one's people- particularly planned, where the government itself owns all businesses and industry.

2.2.1.8- Propaganda
   Another item that many governments include in their spending is propaganda. This is a concerted media blitz from the government to convince the populace of the virtue of a particular stand on one issue or another. This might be to drum up support for raised taxes which would allow for a massive rail project; or to convince the people that a war against a certain nation is justified, or to promote domestic purchases in order to prop up a flagging economy. Virtually anything may be propagandized.
    In order to properly utilize propaganda, a nation needs to be sufficiently educated in order to understand print media; urban enough to attend rallies; technologically advanced enough to possess radios, movie theaters, and later, television. Without the appropriate means of getting the message out, the effort is wasted.
    When planning the campaign, the national leader must state the means of which the message is to be spread, and the actual content of the propaganda message. For example, one leader might decide to launch a massive radio blitz, which would feature him or herself calling on the nation to "Reject the lies of the fascist scum of Turdnia, and arm yourself to resist their invasion! Report to the nearest army recruitment office now!"  Another might begin a more subtle campaign in the newspapers, in the form of paid editorials, explaining historical 'facts' about the nation of Willieland; and how they have caused the collapse of great Turdnia by treachery and deceit; and how it would only be just desserts for Turdnians to somehow reclaim their lost territory in Willieland.
    Additionally, the government must fix a price on how much they are willing to spend in such a mission of information and misinformation; typical costs are around one cash for every ten thousand people the nation intends to reach with the propaganda campaign.
    It is important to note that propaganda need not be limited to one's own nation. As long as there is some means of access available, one nation's government or industries might propagandize another's, by purchasing air time on radio stations, or ads in newspapers. Only in nations with stricter controls over individual rights (such as a fascist state), or access to domestic markets (a la a planned economy) may restrict these thought-incursions, and only then by actually, actively legislating against it.
    Propaganda campaigns must be passed in some sort of a budgetary bill.

2.2.1.9- Military Maintenance
    Maintaining an active military requires funds and equipment. The more active and ready the military, the more it will cost. The costs associated with raising and maintaining one's military must be included in any annual budget package. (See the section on the military for actual costs.)

2.2.1.10- Funding Research
    A government may opt to spend some of it's income on research and design of new technologies. The national leader must specify which category of technology is to be researched (or the specifics for a type of unit to be designed), which R&D facility is to attempt the research, and must get the legislature to pass an appropriate budgetary item, allowing for the appropriate funding for the project (see Technology section).

2.2.2- International Trade
   International trade is the lifeblood of many nations- notably those with unbalanced or underdeveloped economies. The largest and most complex aspect of trade- that of transactions between private industries of resources and consumer goods- is the most abstracted. Typically speaking, having a trade agreement helps your nation, should you be trading with a nation that has a market for the goods that yours may export, and/or meets a need possessed by your nation. For example, France possesses little to no bauxite, a valuable strategic mineral. Thus, signing an agreement with a nation that produces bauxite would be in France's best interest.
    The actual game effect of trade pacts lies primarily in the health of your nation's economy. Should a nation be getting all the goods it needs, and at fair prices, the economy will prosper and grow. Should a nation be lacking in certain things, prices will soar, and the economy might crash. Likewise, if a nation has overstocks of produced goods and no market to sell them in, production will slow, and the economy will dip into recession or depression, as workers lose their jobs and businesses evaporate.

2.2.2.1- Consumer Goods
   Nations negotiate trade agreements for consumer goods- those used by the domestic market, by civilians, which promote or improve the standard of living, feed the populace, or otherwise meet the needs of the civilian population. Typical goods that are automatically traded in this manner are manufactured goods and agricultural products. These will flow from nations that have surpluses in these goods to those which are at deficit, at domestic costs (i.e.: the government does not deal with them) based on world market supply and demand. While the governments make no profit from this exchange directly, the costs paid for such needed foreign goods are deducted from the nation's Gross National Product, to determine the Gross Domestic Product- and thus the income the government receives from taxes. Additionally, paying higher costs for consumer goods can stagnate or even depress the trade-debtor nation's economy, under the weight of the purchase costs of the foreign goods.
2.2.2.2- Direct Trade
   Direct trade occurs when two governments agree to exchange specific goods that are in government stockpiles for other goods, or some other consideration. This form of exchange is subject to legislative approval, and does not directly effect the economy of either nation.
2.2.2.3- Trade Routes
    Trade routes are crucial to any trade agreement. In order to conduct trade between one nation and another, the two nations must be able to trade a direct path between the population centers in their home country, and that of the other nation, without passing through any other nation that both nations do not have trade agreements with. More often than not, this takes an over-sea route, being traced from one port facility or shipyard in one nation, to one in the other nation. By this means, the least number of nations are traveled through; and the greatest amount of goods can be moved in the shortest time.
    Trade routes that go through third party nations are very costly to the shippers. As goods are sent from Nation A to Nation B, through Nation C, they cross the border between nations A and C, and are then subject to the import tariff, even though Nation C is not their destination. Then, they travel overland to cross the border between Nations C and B, and are again subject to the tariff rate of those nations, further reducing the profit margin. By the same token, with the trade crossing only ocean in a route from port-to-port, the trade is only subject to the tariff rates from Nation A to Nation B. Clearly, a better alternative.
    Additionally, the amount of distance that must be traveled in order to deliver the trade goods further raises the cost of the trade. Goods traveling only from New York City to Montreal- even if overland- would clearly cost less to transport, than the same goods were they to travel from New York to Ankara, or Baghdad. All these costs are added to the cost to the importing nation, further depressing the economy of the nation. As a result of this, maintaining trade routes with nations that are nearby is the most advisable.
    Another factor that comes into play is interdiction. When nation is at war (or not, depending on the specifics), another nation might decide to interfere with the flow of trade goods between it and it's trading partners, by means of military action. This might take the form of positioning troops on vital rail lines between the states; or aerial bombardment of convoys; or submarine or surface commerce raider attacks against merchant shipping; all depending on the trade route. This might necessitate the two trading partners taking some form of defensive measures to protect their trade.
    When two nations agree to trade, they must trace out the actual trade route for their goods to take. In absence of this, the GM will assign the most direct one- though this may well not be the most cost effective.
2.2.2.4- Tariffs
    Tariffs are taxes levied on foreign good incoming to a domestic market, whose primary purposes are to help protect the domestic market from foreign penetration, and to provide a little income to the government; but have the side effect of making your nation a less valuable trading partner. For example, the modern-day United States has very healthy steel production capabilities, but due to costs associate with refining it, (notably as labor); a higher cost needs to passed on to the consumer for the US steel business to be profitable. On the other hand, Brazilian labor is cheap, and thus Brazil can set a very low price to it's exported steel; a price that would cause US steel consumers to want to purchase Brazilian-forged steel, rather than that forged in Pittsburgh. This would be very bad for the US steel industry, so the US sets a high tariff on Brazilian steel, in order to protect US steel interests, but causing Brazil to want to seek a better market for it's steel elsewhere. This is called protectionism. Protecting the US steel industry will make those constituents happy, but being effectively denied the US steel market will not likely please Brazil; and could likely annoy US steel consumers, who would prefer to purchase cheaper steel.
    Tariff rates are negotiated between national leaders, as a crucial part of any trade pact, and must also be ratified by those nations with democratic systems.

2.2.3- The World Market
    The World Market is an abstraction, representing the world's general level of supply and demand, as well as a non-specific way for a nation to move some of it's excess goods- though this does require government intervention.
    In the event a nation has excess goods produced, that the government does not want to purchase, and that there is no additional market for with that nation's trading partners, a continued surplus of goods in this nature would cause a natural contraction of that industry, and a depression in the price of those goods domestically. In order to stave that off, a national leader can authorize and executive order, releasing such goods into the 'World Market'; a common pool of such goods, which any nation may purchase the goods from, regardless of trade agreement status.
    Much like domestic markets, the World Market prices are driven by supply and demand. If every nation in the world releases food units into the market, and no one is buying them, the price on food (agroproducts) will drop dramatically. On the other hand, if there are few heavy industrial production units available, and virtually every nation is interested in them, the price will naturally rise.
    Each year, goods are released into the World Market, prior to any orders being placed to buy in the market. Initial prices are set for the goods, depending on the amount available. Then, nations may pass spending or trade proposals to the market, acquiring the good(s) that they desire. As more proposals are made for a certain item- particularly if beyond the supply- the price shoots up. If surplus remains, the cost goes down. Once the year is complete, the cash (only) proceeds are split on a share-by-share basis to the nations contributing their goods to the World Market, and any unsold goods returned to the coffers of the donating nation. (This, of course, will likely result in contraction of that economic sector, and possibly an increase in unemployment.
    This process is that which sets the general value of the goods produced by the world's nations; and thus drives the GNP and GDP of those nations; though this is modified by domestic consumption and production values.
    Special note: Nations which have had economic sanctions levied against them by the League of Nations may not take part in trade on the World Market in any categories in which those sanctions apply.