Economics In RPGs 8: The Digital Age Ch 5

Another image from Gerd Altmann from Pixabay. I’ve color-shifted this one because it’s been downloaded nearly 2,000 times already.
Now Updated! –
Scroll to the bottom of the page (past the table of contents) for the additional content if you’ve already read the main article.
I usually write the bulk of these articles on Monday and publish them at Midnight that night or just a little after. The Monday juts past has all sorts of significance for Australians.
The first Monday of October – actually, technically, I think it’s the Monday after the first Sunday of the month – is a public holiday, making this a treasured Long Weekend.
I always liked to take four days of my annual leave in the following week, so that my weekend effectively lasted for 9 days!
It’s the start of Daylight Savings in the Eastern states of Australia (I’m not sure about the other states). So I got one hour less sleep last night before anything else gets factored in.
This weekend marks the end of the football seasons here in Australia (well, the two biggest ones, anyway) – both have just had their grand finals. That doesn’t bother me much, I don’t follow the football.
But it also signals one week until the crowing event of the (local) motorsport season, the Bathurst 1000 – typically 16-20 hours of coverage starting on the Friday and running through to the Sunday, and that is something important to me. Everything else stops that weekend – and to do that properly, I need to prepare properly!
It’s also significant in a number of more personal ways. A niece and a nephew both had Birthdays over the weekend. I’m meeting my mother today, as she travels to my Uncle’s funeral (her brother). My new TV arrives on Tuesday or Wednesday (and would probably be here today if it weren’t a Public Holiday). And this is the week that I have to start Christmas Shopping in earnest.
When you put it all together, it adds up to a significant disruption of the usual routine.
Normally, I don’t take public Holidays off. For one thing, my Tuesday is already pretty full. On this particular occasion, however, I am taking a significant chunk of that Monday away from the keyboard, for reasons already stated. That could mean a delay in completing this article – and since I’m already geared up to accept that, I’m feeling no deadline stress to even try and get it done in time. So when it will get published, I have no idea.
So, if it’s late, now you know the reasons why.
Wow, I can’t believe that I got this finished so close to deadline!
The Digital Age, Sixth Period: Pandemic
Sometimes, sub-eras are quite lengthy – a decade or more. And sometimes they are only a year or two long.
Everyone has a different perception and a different lived experience of the pandemic to the perceptions and experiences of everyone else. While there may be commonalities between particular populations, Florida was not the same as Washington which was not the same as New York; Los Angeles was not the same as Toronto, or Auckland, or Sydney, or London.
The experiences of my relatives still living in Nyngan are different to those of my stepfather and mother in Crookwell NSW, which are different to those of my father and stepmother in the Central Coast, which are different to those of my Sister living just a few miles away from them, and all of those are different to my own experiences, which are different from those of my neighbor across the street.
Commonalities?
Even when you assemble a national picture of these disparate experiences, there are distinctive individualities to the experience – Israel is not the same as Hong Kong, which is not the same as Canada, which is quite different to Venezuela, which bears little resemblance to New Zealand, which is quite distinct from the Australian experience.
Someone who is adept at sniffing out the commonalities and highlighting the distinctions will one day write the definitive book on the time period, and millions of us will buy it, simply because it helps us relate each other’s experiences to our own.
And yet, despite being Different, these experiences are all the same in some degree; the differences largely come down to timing and extent.
Timing
Timing deals in several related variables. When the first cases were recorded; when the problem escalated to a crisis in the minds of the governing authorities; when they acted to contain it; and when they began to reduce restrictions.
To some extent, these are controlled by two or three overarching factors:
- the severity of the pandemic in the local jurisdiction, which impacts both the severity of restrictions imposed and their duration;
- the degree of success of those restrictions in containing further infections;
- local politics.
Extent
This is all about preventing further spread, and ensuring that emergency services are not overwhelmed. The latter point is a criteria one – if there is no more hospital space, or no more ambulance capability to deliver new patients, or no more doctors to treat them, a 5% mortality rate can become an 80% or more mortality rate overnight. And it’s whichever of these is the lowest that controls the overall result.
Having (say) 100,000 cases in the local region, of which 5,000 (that’s 5%) require hospitalization, and the same again might or might not, of whom a given percentage cannot be saved – initially, perhaps as many as 20%, later as few as 3-5% (I’ll use 10% as a convenient figure midway through these extremes), gives 500-1000 deaths.
If that’s per year, it’s negligible though tragic. If that’s per month, it’s serious. Weekly, that’s an emergency. Daily, it’s a crisis.
Now, let’s say you only have capacity for 3,000 additional patients a week. If you’re getting 10,000 a month, that’s no problem, though the margins are closer than you would like. If you’re getting 10,000 a week, that’s very bad news – it means that a high percentage of the 7,000 that you can’t treat are going to die, and at least 6,000 of those could have been saved.
The more extreme the spread, the lower the margins before it’s safe to relax restrictions, and so the longer those restrictions should stay in place.
Local Politics
It takes a truly global event to turn national politics into ‘local’ politics, but the Pandemic was an event of that magnitude.
- Some businesses rely entirely on the Stimulus payments. They are effectively closed. If the stimulus runs out before demand returns, they will close, creating negative economic growth. The smaller the business, the more susceptible they will be to this.
- Some businesses rely partially on the Stimulus payments. They are split between activities that are deemed “Essential Services” and those that aren’t. If the stimulus runs out early, they face a choice: reopen fully, and shoulder the associated risks, or downsize and shrink. The first choice may see them pick up where they left off, better their positions, or collapse – depending on demand. Overall, this will stifle growth but not cause the economy to go backwards. Those that downsize because they anticipate a reduction in demand shrink the economy, as before.
- Finally, there are those businesses that are not reliant on Stimulus payments at all. They continue to contribute to economic growth (best case) or are economically neutral (worst case).
- Under 500 Employees: 71,720,729 businesses.
- 500-749 Employees: 88,334 businesses.
- 750-999 Employees: 58,930 businesses.
- 1000-1499 Employees: 75,754 businesses.
- 1500-1999 Employees: 54,095 businesses.
- 2000-2499 Employees: 41,738 businesses.
- 2500-4999 Employees: 143,141 businesses.
- 5000-19,999 Employees: 304,674 businesses.
- 20,000 + Employees: 600,947 businesses.
- Second biggest employer: Amazon, 1.29 Million employees.
- Largest single employer: Walmart, 2.3 Million employees.
- 250 Employees x 71,720,729 businesses = apr. 17,930 Million
- 624.5 Employees: 88,334 businesses = apr. 55 Million
- 874.5 Employees: 58,930 businesses = apr. 33.86 Million.
- 1249.5 Employees: 75,754 businesses = apr. 94.65 Million.
- 1749.5 Employees: 54,095 businesses = apr. 94.64 Million.
- 2249.5 Employees: 41,738 businesses = apr. 94 Million.
- 3749.5 Employees: 143,141 businesses = apr 537 Million.
- 12499.5 Employees: 304,674 businesses = apr. 3,808 Million.
- 20,000+ Employees: 600,947 businesses = apr. 12,019 Million.
- Second biggest employer: Amazon, 1.29 Million employees x 1 = 1,290,000. – but these will be included in the above.
- Largest single employer: Walmart, 2.3 Million employees x 1 = 2,300,000 – also included in the breakdown above.
- People stand ready to buy Product X from retail salesmen.
- Retail Salesmen stand ready to sell Product X, but they need some to be delivered.
- Delivery Drivers stand ready to deliver Product X, but they need some to be manufactured.
- The Manufacturers stand ready to make more Product X, but they need the parts to be delivered.
- Freight Companies are ready to deliver the parts, as soon as they are manufactured.
- Manufacturers are more than happy to make the parts, but they need the raw materials.
- More freight companies…. you know the rest.
The Australian Experience
Let’s start with this quote from the previous chapter of this article:
On 23 January 2020, bio-security officials began screening arrivals on flights from Wuhan to Sydney. Two days later the first case of a SARS-CoV-2 infection was reported, that of a Chinese citizen who arrived from Guangzhou on 19 January. The patient was tested and received treatment in Melbourne. On the same day, three other patients tested positive in Sydney after returning from Wuhan.
— Wikipedia, COVID-19 Pandemic in Australia
Australia initially pursued a Zero-COVID “Suppression” policy, one of the largest places in the world that could reasonably even contemplate such an option. This policy held until late 2021, when it became clear that it was no longer tenable. In truth, it was probably always overly optimistic.
Combining strict controls over international arrivals and an aggressive response to local outbreaks with localized lockdowns and exhaustive contact tracing kept the case count low enough that most of the country could simply go about their business, unrestrained and unrestricted.
It couldn’t last, but it took a dog’s breakfast of confused lines of authority, miscommunications, and unwillingness to take responsibility for the wheels to come off.
On 8 March 2020, [the] Ruby Princess departed Sydney, Australia for a 13-night cruise around New Zealand.
— Wikipedia, Ruby Princess
The cruise was cut short on 15 March and Ruby Princess returned direct to Sydney from Napier
— Same source
…but no-one paid much attention to that at the time. I don’t remember it even being mentioned in the media.
On 19 March 2020, the ship arrived back in Sydney, New South Wales two days early from the New Zealand cruise, docking at 3am, as some COVID-19 swabs needed to be tested as an urgent matter.
The ship disembarked 2,700 passengers later that morning.
[emphasis mine]
The state health minister, Brad Hazzard, announced on 20 March 2020 that 13 of the people on the ship had been tested for the SARS-CoV-2 coronavirus, and 3 of them were positive. New South Wales health authorities asked all passengers to go into self-isolation. It was announced on 24 March that one passenger had died and 133 on the ship had tested positive for the coronavirus.
— Same source
By 30 March, 440 passengers had tested positive. One day later, the death toll was 5. The genie was out of the bottle; several returning passengers had been present at welcome-home parties and events, or had simply resumed a normal social schedule, spreading the virus far and wide. Ultimately, 900 deaths would be attributed to the Ruby Princess, either directly or indirectly.
This set the pattern for Covid in Australia – lockdowns and contact tracing would suppress the virus to an acceptable degree, restrictions would be relaxed, and someone would do something stupid and set off a whole new cluster. Schools and Aged Care facilities were particularly susceptible.
Even so, no-one realized just how profound these events were – not until the Australian Grand Prix was canceled in the second week of March, 2020. Since this event was to be telecast live – it’s not quite as big a deal here as the Indianapolis 500 is in the US, that’s reserved for the Bathurst 1000 – and the reporters had nothing to cover except the official confusion and eventual decision, it made headline news around the country.
To be fair, in most of Australia, nothing changed except the mood of the populace. But the sense of smug security was shattered completely, especially for those of us living in larger cities.
Australian borders were closed to all non-residents on 20 March, and returning residents were required to spend two weeks in supervised quarantine hotels from 27 March.
Many individual states and territories also closed their borders to varying degrees, with some remaining closed until late 2020, and continuing to periodically close during localized outbreaks.
Social distancing rules were introduced on 21 March, and state governments started to close “non-essential” services. “Non-essential services” included social gathering venues such as pubs and clubs but unlike many other countries did not include most business operations such as construction, manufacturing and many retail categories.
— Wikipedia, COVID-19 Pandemic in Australia
The Australian economic response
In terms of the economy, then Prime Minister Scott Morrison acted reasonably decisively, though his approach was (at least in part) guided by the criticism of his party of the methods (successfully) used to mitigate against the GFC.
Morrison’s approach was to support businesses on condition that they keep their employees ‘on the books’ regardless of whether or not they were engaged in any productive work for the business. There was also a relatively small support package for those on social welfare payments.
This approach was not without its critics, either. There was no allowance for profit levels, so some of the biggest beneficiaries were businesses that arguably did not need the support. Qantas Airlines also accepted the stimulus only to use legal trickery to fire its entire maintenance staff and send the operations offshore (they have recently been found guilty of this in the courts here).
Nevertheless, and despite the flaws and criticism, Morrison got a LOT of credit and political capital from his handling of the Pandemic. Which only makes it remarkable how precipitously he squandered it, and how total his fall from grace was.
The ultimate impact was to put the bulk of the stimulus money in the pockets of business owners, with a secondary amount finding its way into the hands of their employees, and a still smaller amount being provided to those who arguably needed it more. This largely diluted the spending of the stimulus, as trade was soon restricted to a much stricter definition of “Critical Services”.
In many ways, this parallel the approach taken in the US, so the post-pandemic effect has been similar in both countries.
COVID in the UK
I’ll admit up-front that aside from knowing it was very bad, I don’t know enough about the sequence of events in the UK to write intelligently about them. Local outbreaks took the headlines, and the tragedies in Italy and the US/Trump situation, filled most of what was left. Shoehorned in there somewhere was the rest of the news.
I suspect that this pattern will largely hold true everywhere – local first, terrible events elsewhere second showing how bad things could get, and everything else newsworthy scrunched into whatever broadcast time remained. The only exceptions would be the US itself and the scene of any of those tragedies.
In the US, the “local” would refer to the state or city, the national response and clown show would be second, tragedies elsewhere would be third, and anything else would be a remote fourth – but I wasn’t there, so I can’t say definitively.
But this principle is worth remembering by GMs – it won’t just apply to new coverage during Covid, it will apply to any high-impact local disaster.
Back to the UK:
The virus began circulating in the country in early 2020, arriving primarily from travel elsewhere in Europe. Various sectors responded, with more widespread public health measures incrementally introduced from March 2020.
The first wave was at the time one of the world’s largest outbreaks. By mid-April the peak had been passed and restrictions were gradually eased.
A second wave, with a new variant that originated in the UK becoming dominant, began in the autumn and peaked in mid-January 2021, and was deadlier than the first.
— Wikipedia, COVID-19 Pandemic in the United Kingdom
Once a vaccination program was underway, restrictions were gradually eased.
A third wave, fueled by the new Delta variant, began in July 2021, but the rate of deaths and hospitalizations was lower than with the first two waves – this being attributed to the mass vaccination program. By early December 2021, the Omicron variant had arrived, and caused record infection levels.
— Same source
A national Lockdown was introduced on 23 March 2020 and lifted in May, replaced with specific regional restrictions. Further nationwide restrictions were introduced later in 2020 in response to a surge in cases. Most restrictions were lifted during the Delta-variant-driven third wave in mid-2021. The “winter plan” reintroduced some rules in response to the Omicron variant in December 2021, and all restrictions were lifted in February and March 2022 as the Omicron wave continued.
— Same source
Economic Response and Impact In The UK
Parts of this have a very familiar ring to them.
Economic support was given to struggling businesses, including a furlough scheme for employees.
— Same source
The pandemic was widely disruptive to the economy of the United Kingdom, with most sectors and workforces adversely affected. Some temporary shutdowns became permanent; some people who were furloughed were later made redundant.
— Same source
Of course, no-one expected one of the casualties to be Boris Johnson’s position as Prime Minister!
COVID-19 in the USA – some observations and recollections
When the pandemic began, President Trump downplayed it to avoid a public panic. This was probably the right thing to do at the time – but he was too slow to then gear up when the true seriousness began to manifest itself.
What’s more, there was a shortage of protective equipment – there weren’t enough masks even for the doctors, never mind for the general public. Trump’s first really big misstep of the Pandemic was to play games in this respect – he should immediately have nationalized both a production facility and the existing supply, have distributed that existing supply according to need, and had that production facility churning out new PPE 24/7. he didn’t, and the only explanations can be
(1) that he had convinced himself that the downplay was the truth; or,
(2) that the need to continue the ‘no panic’ downplay was more important than the longer-term needs created by the pandemic.
Neither is particularly flattering toward his Presidency.
A Litany Of Disastrous Missteps
I can’t speak for residents of any other country, but here in Australia, the mismanagement of the pandemic has imposed a permanent pall over the Presidency of Donald Trump – not that he was all that popular beforehand, but it hit a new low in 2020. It’s not without reason that I referred to it earlier as the “Clown Show”.
One got the very strong impression (rightly or wrongly) that Dr Fauci was controlling the effective parts of the response, working around the interference of the Clown-In-Chief.
This impression started to form early on, when Australian news would describe the severe restrictions (including spending a week in quarantine in a third nation if traveling from a country that had an ongoing outbreak) and then cut to footage of US citizens breezing through customs – quarantine was only required of foreign nationals, according to the broadcasts.
Cue a collective face-palm.
And then the news would talk about the dire situation in Italy, and that in New York City, and the overall impression was that few (if anyone) was learning from the experiences of others, especially in the US administration. I remember commenting to someone at the time, “this can’t end well”.
It didn’t.
Next, Trump signed the ” Coronavirus Preparedness and Response Supplemental Appropriations Act” into law, which provided $8.3 billion in emergency funding for federal agencies.
Which sounds very impressive until you realize that this is only about 12.9 Billion Australian Dollars – and the Australian Government’s first Stimulus package was 17.6 Billion Australian dollars – and that a second tranche of stimulus worth another 66 Billion AUD would be allocated before the first had even taken effect. To match this commitment per person, the US response would need to be 1.07 Trillion Australian dollars (about 690 Million USD).
If our government could do it, why couldn’t “the greatest economy on Earth”?
The Ivermectin nonsense. The “Bleach” incident. Putting his son in charge of the Vaccine – about which we then heard nothing until Biden came to office. Continuing to downplay the virus even after he was hospitalized with it. Exposing his Secret Service detail to the virus for a publicity stunt. The list just went on and on.
Ultimately, the US did step up and allocate significant funding to Stimulus packages. The question remained, how much worse was it because of all this nonsense?
Medical Economic Impact
By putting the available PPE up for auction to the highest bidder (which is effectively what Trump did, with the Government reaping the profits), Trump triggered a massive inflationary surge in the medical supplies industry of the US
This duly leaked into related fields. Trump can’t be fully blamed for that, the same thing happened in different forms everywhere.
Eventually, supply caught up with and even exceeded demand, and over time, an equilibrium was achieved.
It’s worthwhile spending a moment considering the mechanism by which this was achieved. It’s called competition – when all supplies are perceived as fundamentally the same, price differentiates. The business that is willing to forego some small part of the exorbitant profits demanded of the others gets all the customers, and all the profits. The others either have to lower their prices to match, or even try to undercut the competition to make up lost ground.
Assuming there is no collaboration to keep prices high by manipulating the market, competition drives profits down to a reasonable level.
A blended economy
I’ve already discussed stimulus payments, so I’ve excised the section which was to discuss them. Instead, let’s look at the results:
Put this together, and its the impact on the first and second categories, in combination, that is dominant. If it exceeds the growth from the third category, you have an economy heading into recession. Now, factor in the relative impact on the economy displayed earlier, and it’s easy to see that the first category will largely outweigh the other two in terms of impact.
The economy during a pandemic is a blend of all three.
An economy without stimulus payments is effectively the same as those payments having ended prematurely. That’s why there is a common element of such payments in most economies around the world – the amounts, the timing, the duration, and the delivery mechanism may vary, but the broader reality remains.
Reopening in a Blended Economy – Local Politics II
Politics on a smaller scale – the state level – also played into decisions about when and how to reopen. In particular, because Biden was now President, and advocating for caution, the Republican states pushed hard for a quick reopening.
It would be unfair and unrealistic not to acknowledge that they had a point to be taken into consideration – the shutdowns were undoubtedly bad for business, small businesses in particular. In fact, it’s fair to say that the impact was inversely proportionate to the business size.
And that’s the problem. The Republican initiatives favored large companies over small, because larger companies were better able to absorb a proportion of their workforce being ill.
If your business has 2 employees, and one becomes ill, that’s half you operation crippled. If you have 10, and one becomes ill, that’s bad – but if 9 of the ten have to stay home even though they are not yet sick, that’s devastating.
To get some sense of that, we need some sort of comparison of how many businesses there are of a given size. The following is an excerpt from a page at AskWonder.com, US Employers by Employee Count, research by Dagmawit W:
(Data from 2018. Counts branches and franchises as separate businesses. The totals in the last 2 entries are over multiple operations centers, obviously!)
Let’s multiply those numbers by the average number of employees in the range, which should give a truer picture of the average economic impact of each scale of business:
It doesn’t matter where you draw the line between big and small – that 17,930 at the top of the list overwhelms anything else you can add. Even the combined power of the top 601,000 businesses (in terms of employees) doesn’t match up. In fact, if you total the numbers for businesses of 500+ employees, and throw in Amazon and Walmart as free extras, you get a grand total of 16,739.74 million – still short of the 17,930 million of the first category.
That’s always been the Democrat’s secret weapon for a healthy economy – don’t neglect the big businesses, but prioritize conditions that help small business flourish. It’s not as headline-grabbing, but it works.
Sidebar: A perception of “socialist” policies
Counties with a strong social safety net, like Australia, can be viewed as extending this general concept, on the basis that an unemployed person is essentially a business with zero employees.
The stronger the safety net, the more they contribute to the economy, which creates the conditions for greater employment, which leads to them leaving that category.
The different parties differ in the use of honey and the whip to get them to make that change, but the principle remains.
A similar effect takes place with socialized medicine – early intervention transforms those who would otherwise have become drains on the system into productive contributors. The net cost is not only lower, it gets defrayed, making it much lower.
At least, that’s how we see it. GMs should be familiar with this if they want to properly represent those nations in their games, or people from them.
Candor also compels me to admit that not everyone in those countries agrees – most of them align with the ‘cut off your nose to spite your face’ perspective of the Republicans. But they are a relative minority here (5-10% of the population at most.)
But It’s Not That Simple…
Is it ever?
Let’s say the economy reopens tomorrow after a shutdown.
This is a supply chain. It’s like a bunch of railroad cars hooked together – there’s some give between them. The first one starts moving, and then the second, and so on.
In the case of the salesman, whatever stock they have on hand has to last them until fresh Product X arrives. They have a problem if it’s perishable. The Product X manufacturer is similarly constrained by whatever parts inventory they have.
If all these businesses reopen simultaniously, someone’s going to get the short end of the stick. Ideally, you would want a progressive reopening in which each step only gets back to life as usual when the step below them has something for them to do.
But that’s impossible to organize, in practice. Especially if you throw in complicating factors like one or more of the parts manufacturers being overseas in a country that has NOT reopened.
Shutdowns disrupt an economy, and without stimulus, push negative growth on that economy. Re-openings are equally disruptive, and those disruptions have the same effect, usually worsened because stimulus payments have either been removed or reduced.
The Fall Of Trump, The Success Of Biden
Trump’s management of the Pandemic was a disaster. David W. Rudlin
points out on Quora that the US had 4.25% of the world’s population but 16.9% of the world’s deaths.
President Biden, at the very least, is an effective administrator. His hand may have been forced by Republican governors to some extent, but he successfully managed the reopening of the US economy despite the difficulties described.
Key to this is the development and successful distribution of the Covid-19 Vaccines. Despite a number of false starts along the way, we got there.
The Digital Age, Seventh Period: Post-Pandemic
Like most Pandemics, this one hasn’t really ended – it’s just sort of petered out as we have learned better to adjust to the new reality. We survived, individually, and are now trying to get on with life, collectively. But that collective deep breath has contained some unexpected wrinkles along the way, because trying to predict the future is never going to be wholly satisfactory to those who get their tails caught in the door.
Some post-pandemic experiences are shared fairly globally; others are distinctly local, a consequence of the distinctive individual experiences mentioned earlier.
For example, the governor of the Reserve Bank – the institution that sets interest rates here in Australia – made the mistake of forecasting little or no change in those rates in the course of reopening. Yes, he was eviscerated for the forecast; in hindsight, it was a fairly silly prediction, and one that was quickly proven inaccurate. In a nutshell, he should probably have known better.
Around the world, Inflation peaked at somewhere around the 7-8% mark, post-pandemic, and in many places, it has now fallen to a rather more comfortable 3-4%. At the same time, the jobless rate has fallen below what is considered sustainable. This series would be incomplete without look8ing at why that’s the case.
Supply Chains: Rebuilding Trade
The story starts with supply chains, and the problems with everything reopening at once described earlier. But supply is only part of the equation.
The other part is demand. This was suppressed during shutdowns, but in most industries, surged when lockdowns were lifted. And, because of the stimulus payments that were needed to avoid a recession (or worse, a Depression), people had the money to satisfy that demand.
When demand is high, and supply is low, prices rise. And that’s inflationary.
But it also creates a demand for employees to product the supply. So there is an immediate increase in the employment rate. And that means that even more of the population have money to spend and things they want to spend it on. Demand gets another tick up, so it still exceeds supply.
Workforce Decentralization
On top of that, a lot of businesses found that their employees were more efficient or more productive when they were working from home. That can only mean that the restrictions they had imposed on the workforce were counterproductive in terms of profitability.
This has created a trend toward decentralized workplaces. Demand for skyscraper offices has fallen in most CBDs, sometimes precipitously. The price of such real estate is falling, and falling fast.
That sounds deflationary, or it should. The problem is that a skyscraper concentrates real estate holdings by it’s nature; all the businesses that used to occupy skyscraper space are looking elsewhere for what central office space they still require, and the places they are looking are NOT concentrated to anything like the same extent. Rather than a floor of a skyscraper, they are looking for a building of their own.
Demand outside the CBD has risen by far more than the demand inside it has fallen – and that means that overall, this causes inflation to rise.
The full social and economic impact of this won’t be understood for years, possibly even a decade or more, but some predictions are possible. Eventually, CBD real estate will fall to the point where the cache of being in the heart of a city reasserts itself. A number of businesses will realize that they can sell their existing properties for a profit and buy that cache relatively cheaply.
CBDs will change in character somewhat, but equilibrium will be restored – especially if the CBD demands of these businesses are downsized to accommodate decentralization. Ultimately, we’ll end up with an even greater concentration of businesses in city centers.
Restricted Oil
On top of the factors already described, there’s the price of oil, or – more specifically – the price of petrol (what the Americans call gasoline), and the price of diesel as well. Let’s call it “fuel”.
During the pandemic, there was no demand for fuel, so prices went down. To sustain the oil companies – a cynic might say to sustain their profit levels – President Trump ‘persuaded’ Saudi Arabia to cut their production – but, as usual, there’s more to this story than a lot of people realize.
Domestic oil production was rising rapidly in the US, to the point that in October 2018, they exceeded 11 million barrels of oil production a day, becoming the world’s leading oil producer. That puts Trump’s ultimatum to the Saudis – cut production by 9.7 million barrels a day or lose the 75-year-old military alliance with the US – into a whole new context, doesn’t it?
But there’s another wrinkle – the Saudis had been engaged in an oil war with Russia, that had been increasing production and driving prices down. Trump’s demand was that the Saudis lose that conflict. Interesting point, eh?
See this article at Reuters for more information if interested.
The oil price rose – but there were other oil suppliers increasing their own production – Nigeria, for example. The Saudis began actively bidding up the price of oil supplied by other producers, including Australia, while adhering scrupulously to the agreement forced on them by Trump.
So the oil price rose, and so did the fuel price. And then the lockdowns ended.
International & Domestic Travel
There was little demand for international travel, and less supply was made available, keeping air fares at a record high. Denied that avenue for their pent-up thirst for travel, for being somewhere other than where they had been locked down, people turned to domestic travel instead.
Demand spiked, at much the same time as the Saudis were actively pushing the price of oil up.
Revenge? or Normality?
There was a lot of confidence about a Saudi increase in production once Trump’s deal expired. Instead, they announced a fresh cut, driving the price of oil (and fuel) even higher. This, of course, is inflationary, and some might be tempted to claim that the resulting economic damage was revenge for Trump’s blackmail.
I don’t think that’s warranted, for two reasons – (1) by now, Biden was in the White House and a lot of relationships had been reset; and (2) the oil war with Russia was over, and Russian oil supplies were increasingly threatened by the consequences of the invasion of Ukraine. In effect, despite Trump’s intervention, Saudi Arabia won the oil war. Why upset that with vindictiveness? Instead, further winding back the increases of the past meant that they kept more of what they have always regarded as a strategic commodity.
I could be wrong about this, but I think this is normal service being resumed, not revenge.
Paying The Piper
So you have excess cash in the economy (inflationary), high employment (inflationary), increased demand pushing princes up (inflationary), supply-chain problems pushing availability down and prices up even more (inflationary), increased heat in the real estate market (inflationary), and higher fuel prices (inflationary) which creates higher energy prices (inflationary) coupled with a war reducing the supply of oil and gas from Russia and food from Ukraine (inflationary)… is it any wonder that we’ve ended up with reasonably high inflation?
I think this litany of influences demonstrates why I thought the prediction of little change in interest rates to have been a silly one. Not everything on that list could have been predicted, but there was enough that should have been obvious to predict at least modest increases in interest rates.
Crystal-ball Gazing
Until the extra money in the economy washes out, interest rates will remain high. How long that takes depends on what people spend their money on.
Higher interest rates have an impact on that, too. Money is like water, it flows downhill; the interest rates charged by banks are taking some of the heat out of the real estate markets, but they will be stubborn; the first to go will be domestic debt. Paying off too much of that can also overheat an economy, but counterbalancing that is the inevitable increase in necessities.
Once a reasonable balance is restored, inflation will drop to an underlying value that reflects the things that are not susceptible to Interest Rate manipulation – workplace decentralization and fuel / energy costs.
The latter are being influenced by the drive toward Carbon Neutrality, which complicates the situation and is likely to keep prices relatively high. But outside of that, we are approaching a ‘new normal’. Some places – like the US – are already there. Australia is not, at least not yet. Our inflation rate is falling but not fast enough for comfort.
Wages Growth
The problem is that the longer inflation rages unchecked – even if it is less than the high-double digits of ages past – the more it fuels demands for compensatory wages growth, and that’s another inflationary cause. That’s how we got to those 18%+ values back in the 70s and 80s.
Governments the world over have a delicate juggling act, and each slip has potential global repercussions because we’re back in a global economy again.
Some slippage can be tolerated. Too much can be economically disastrous.
An Imminent Pivot? (The Near Future)
I can’t help but feel the world is approaching a critical point, where the course of history will be changed, one way or another. It might be in the 2024 elections – the choice between Trump and Biden seems pretty stark, but if Trump is forced to withdraw by his legal troubles, it might be any of a number of trump-lites on offer.
The possibility of an armed insurrection should Biden win reelection – however brief and certain to fail – presents another possibility.
But let’s presume for a moment – just in order to explore all the possibilities – that Biden doesn’t win, but the Republicans have managed to put someone relatively sensible up, or Harris takes over the top job. With relative inexperience, what are the odds of a significant slip on the economic side? Worse then with an old hand like Biden in charge, I think.
On top of that, we have climate change, and workplace decentralization, and changes to spending habits – there are already indications that shoppers are re-prioritizing, and retail is going to have to adapt in response, and more and more banks here are going cashless (is the same trend occurring world wide? I don’t know, but suspect that it is). Throw on top the potential chaos in the energy market and the potential collapse of the insurance industry, and… wait, you want me to explain that last one?
The Insurance Failure
Australia is closer to the edge of this change than many places in the world, along with Canada and the Western and Midwestern US. Why? Because we’ve all experienced climate catastrophes that can be attributed to climate change in recent times.
- The Record temperatures in the US
- Hurricane and tornado activity in the US
- The Canadian Bushfires (though maybe they call them Wildfires there, the way the US does?)
- The floods and bushfires in Australia (discussed in previous chapters
- The floods in India in 2019…
- And South Asia in 2020 and 2021, and 2022…
- And finally, the 2023 Dema Flood of Eastern Europe.
:
We are approaching a point where Failure to mitigate climate change sufficiently could be regarded as an act of war akin to the use of weapons mass destruction (because of the indiscriminate nature of the resulting damage).
Will we reach that point? I hope not, because global unity on the cause will inevitably be forced into a pre-existing matrix of alliances if that happens. But it could be the foundation of a new global unity, too. Either way, it’s one more potential transformation that – once it takes place, if it takes place, will completely change the world.
But I’ve wandered off-track. The simple fact is that people who thought they were insulated against the full impact of these disasters have discovered that they are not protected. Another point that we are approaching – at already, in some places – is that if you need insurance, you can’t afford it, and if you don’t (except in case of freak accident), you have no incentive to buy it (because freak accidents and ‘acts of god’ are also not covered).
If people no longer trust the insurance industry to be there when they need them, they will start to sequester emergency funds themselves. They will resist actually purchasing homes – let someone else take the risk. The social impact will be subtle but unstoppable, and economies are not geared up for it. What’s more, governments are increasingly expected – even required – to fill the gap, and that’s not baked into their budgets, either.
The increase in frequency of event currently perceived to be occurring (whether it really is or it’s just a statistical anomaly), coupled with the perceived increase in the severity and scale of these events are pushing this problem to a crisis point.
Generational Change
There’s one final factor that needs to be taken into account when discussing the possibility of such a transformative change – the rise of Gen Z.
People of my parents’ generation have been dying off at a serious rate for quite a while now. They are in their 80s and 90s at this point. My generation are about to enter the same phase of life – we’re in our 60s and 70s. Both groups are reasonably well balanced between conservative and progressive politics, and both are becoming increasingly irrelevant any political outcome.
In their place comes Generation Z – who are, from all reports, far more politically aware as a broad group than most of us were at that age, and most have been alienated by the partisan politics that conservative parties have been exhibiting for a while now.
It won’t take much of a shift for political landscapes to be rewritten. It’s been reported, for example, that Democrats actually won the popular vote in Texas at the mid-terms (or maybe it was the last Presidential election?) – that it was only the gerrymandering of the republicans that enabled them to stay in power there. Texas has so many vote sin the Electoral College that if it ever flips, the Republicans can forget about the Presidency for decades.
There are too many critical issues on which Generation Z have opinions and want action – and they will start electing those they think can deliver it.
There are too many changes afoot at the same time for this not to be the end of one era and the beginning of another.
Sidebar: What Unifies The Digital Era?
IT is all about taking DATA and transforming into INFORMATION through analysis and application of context.
- Data: You visited Website X.
- Context: Website X sells general product type Y.
- Information: You may be interested in buying Product Type Y. Other companies who sell product type Y will pay us to insert ads for such on other pages you visit.
This is the process that has made Google one of, if not The, biggest company on the planet.
Over the decades, we’ve gone from very poor at capturing data to very very good at it. In the course of that same period, we’ve gone from almost-inept at transforming it into something meaningful to being very, very good at it.
And as we have done so, our decision making – personal, professional, and political – has increasingly been driven by the efficacy of the results.
Impersonal, hard, facts. It’s worth remembering that when people protest progress, it’s usually the first of these that they have a problem with – and their second problem is with being told what to do by someone they don’t trust. Eventually, they’ll make the association between those instructions and a machine, and we’ll have a new batch of Luddites on our hands.
And this at the same time as Generative AI is becoming a thing…? Isn’t that food for thought?
The Downfall Of Scott Morrison
I’ve discussed his path through power over the last several chapters, I may as well close this post out by completing the story.
As the post-COVID election began to loom on the calendar, there was a clear mood for change. The instability of the Morrison government had seem minister after minister resign, the government was beset by scandal after scandal, and the never-ending failure to resolve and implement an energy policy combined to have the election balanced on something close to a knife-edge.
And then it emerged that, at the height of the Pandemic, Morrison had contrived to have himself sworn in as head of several ministries without informing the ministers already responsible for those portfolios.
This is like the President of the US secretly appointing himself Secretary Of State AND Secretary Of Energy AND Secretary Of the Treasury – without informing the people he had already appointed to those positions.
At first, it was only the Ministry Of Health, but then it grew to three ministries, and – after the election – two more came to light. And to this day, he refuses to acknowledge that he did anything wrong.
Generation Z in Australia gutted his party at the election. Morrison resigned the Prime Ministership but remains a back-bench member of parliament – like the President resigning, but remaining as a member of the House (there are unkind suggestions that he is so on the nose that no employer will actually hire him). And, in his place, we have a leader of the conservative coalition who is even less popular than Morrison was at the time of his defeat.
Instead of the usual (progressive) rival party, the Greens saw a significant upswing in their results, but even bigger were the rise of a group now known as the “Teal Independents”. These are conservative-oriented except when it comes to one key policy area – they believe climate change is real and demand stronger policy action to address the problem. It’s as though the conservatives had shed their centrist elements, becoming so extreme in the process that they were all but undetectable (sound familiar?)
Which direction Gen Z will force politics into, ultimately, I don’t know. But they are going to drive it, of that there can be no doubt.
One more break and then it will be the final chapter of this series – about how to use all this information in RPGs. But first, it’s time to update the Table Of Contents:
In part 1:
- Introduction
- General Concepts and A Model Economy
- The Economics of an Absolute Monarchy (The Early Medieval)
In part 2:
- The Economics of Limited Monarchies (The Later Medieval & Renaissance)
- In-Game Economics: Fantasy Games
In Part 3:
- The Renaissance, revisited
- Pre-Industrial Economics I: The Age of Exploration
- Pre-Industrial Economics II: The Age of Sail
In Part 4:
- Industrial Economies I: The Age Of Steam
- In-game Economics: Gaslight-era
- Industrial Economics II: The Age Of Electrification & Motoring
- Industrial Economics III: War & Depression
- In-Game Economics: Pulp
- In-Game Economics: Sci-fi
- In-Game Economics: Steampunk
- The Pre-Digital Tech Age
- World War 2
- Post-war & Cold War
- Government For The People
- Aviation
- The Space Race
- Tech Briefing: Miniaturization
- Behemoths Of Blind Logic (early computers)
- The Promise Of Atomics
- A Default Economy
In Part 7
- Economic Realities (Inflation & Interest Rates)
Part 8, Chapter one contains:
- The Digital Age: Themes
- The Digital Age: 70s-80s
- The Digital Age: 80s-90s
- The Digital Age: 90s-00s
- The Digital Age: 00s-2010s
Last week, Chapter 4 of Part 8:
- The Digital Age: 2010s-2020
In this post, Chapter 5 of Part 8:
- The Digital Age: Pandemic
- The Digital Age: Post-Pandemic
- An Imminent Pivot? (the near future)
Still to come, in the final part of the series:
- In-Game Economics: A Plot-based foundation
- In-Game Economics: Modern
- In-Game Economics: A broader net (Fantasy +)
- Future Economics I: Dystopian
- In-Game Economics: Dystopian Futures
- Future Economics I: Utopian
- In-Game Economics: Utopian Futures
- In-Game Economics: Space Opera
- In-Game Economics – Look Beyond The Obvious
Addendum
A couple of thoughbts that I should have included in the “Near Future” section of the main article but didn’t think of at the time.
Third Party vote-stealing
One of the specters being raised in discussions of the 2024 elections is the prospect of third-party / independent candidates ‘stealing’ enough votes from the Democrats that Trump gains a narrow Electoral College victory.
Most of those I have discussed this possibility with, have poo-poohed it, and I’m the first to admit that it might not happen. But it has happened before (that’s one of the reasons we had President G. W. Bush instead of President Gore), and in a close election, anything that shifts voter balance, even just a little bit, can be decisive.
That’s why the Gen Z factor is likely to be vital. The usual argument that I am offered as rebuttal is that US politics is a two-horse race, no third-party candidate will ever win the Presidency. Which completely misses the point – under this scenario, they aren’t electing a third-party winner, but they are diverting votes that would otherwise flow to the more progressive candidate.
Thinking that it can’t happen because they can’t vote in a third-party winner is exactly what Scott Morrison thought about the coalition inner-city heartland at the last Australian Federal Election – and look at how that turned out for him.
Food Insecurity
One of the most troubling consequences forecast for climate change is food insecurity – where the crops you usually grow, and on which your nation relies, fail in whole or in part, because of the temperature change or associated weather events.
When people get hungry enough, wars have been known to start. I was thinking about that this morning and realized something. From day one, the Invasion of Ukraine has been put down to the vanity and ego of Vladimir Putin.
What if there’s more to the story? Ukraine is sometimes called the World’s Bread-basket – what if it’s not territory or oil & gas that is motivating Putin, but food insecurity? If this is the case, then he would have to view it as an existential threat to Russia in order for him to go to the lengths he has done – and that means not only that he won’t ever back down, but that he will throw everything he can muster at the situation, regardless of the national cost.
This is just speculation – but it’s very interesting speculation, and raises the prospect of the West having misread Russian intentions and motives from the outset, which in turn would hamstring any attempts to resolve the crisis. No peace overtures made thus far could be even contemplated by Putin, they aren’t telling him anything that he wants to hear.
I suspect that it will be decades, if not longer, before the whole truth of the matter is known – if it ever is – but it’s a possible angle on the Invasion that should not be forgotten.
How Long
I’ve indicated that I view 2024 as a watershed year, but there are so many thrusts toward change underway that most will be incomplete by the end of next year. In fact, I think it likely that it won’t be until 2030 that the shape of the ‘next era’ is fully understood, and it might not be until 2035 that the trends come to fruition.
A lot can change in 11 years….
- Economics In RPGs 1: The Early Medieval
- Economics In RPGs 2: The Later Medieval
- Economics In RPGs 3: Pre-Industrial Eras
- Economics In RPGs 4: The Age Of Steam
- Economics In RPGs 5a: Electric Age Ch. 1
- Economics In RPGs 5b: Electric Age Ch. 2
- Economics In RPGs 6a: Pre-Digital Tech Age Ch 1
- Economics In RPGs 6b: Pre-Digital Tech Age Ch 2
- Economics In RPGs 6c: Pre-Digital Tech Age Ch 3
- Economics In RPGs 7: Economic Realities
- Economics In RPGs 8: The Digital Age Ch 1
- Economics In RPGs 8: The Digital Age Ch 2
- Economics In RPGs 8: The Digital Age Ch 3
- Economics In RPGs 8: The Digital Age Ch 4
- Economics In RPGs 8: The Digital Age Ch 5
- Economics In RPGs 9: In-Game Economics
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