Industry and Economy

Arransia is often criticised for having a somewhat sclerotic and inefficient economy with many barriers to free competition. However, this has not prevented it becoming one of the top ten most prosperous countries in the world. At current exchange rates, its GDP per head is about 85% of that of Brunswick, but even if it were part of Brunswick, its unfavourable geographical location and scarcity of natural resources apart from coal would probably lead to a similar outcome. Domestic fuel, basic foodstuffs, public transport and housing are all significantly cheaper in Arransia than in Brunswick, and in terms of current purchasing power, the two countries are about on a par. In fact, if you are in work, don’t drive and prefer going to the pub to foreign holidays, you will be better off in Arransia than across the border.

In the early part of the 20th century, tariff reform was a major subject of controversy in Arransian politics, with the Liberals generally supporting free trade and cheap food, and the Conservatives supporting tariffs and the protection of domestic industry. However, in the early 1930s depression the principle of tariffs became generally accepted, and Arransia continues to maintain a system of protection. Tariff rates have, however, been much reduced in recent years, most particularly under the Liberal government of Robert Knox (b 1935) between 1990 and 1998. The general tariff is now 10% for foodstuffs and 15% for other goods, but rising to 75% for private motor vehicles and 100% for some textile and electronic goods. In general, the imports that are not subject to tariffs are those that are deemed essential and are not locally produced. Arransia has a free trade agreement with Brunswick and Serenity and most goods originating in these countries are not subject to tariffs, the major exception being motor vehicles. There is some compensation from the relatively low rates of income tax in Arransia, the basic rate currently standing at 16%, plus 30% for incomes over $40,000 a year.

Arransian governments, even Labour ones, have never engaged in wholesale nationalisation. However, a number of basic industries such as electricity and telephones were developed from the start as public utilities, and others such as the railways and some passenger shipping lines fell into government hands following bankruptcy in the 1930s or during the Great War. The government also acquired significant stakes in shipbuilding, chemicals, oil and steelmaking either to help support these industries or to provide investment capital. The result has been the creation of a distinctly Arransian form of part-public, part-private quasi-monopoly corporation such as the Arransian National Oil Corporation (ANOC), Sommersby Steel and Mayer McKechnie in chemicals. Many of these retain their original names and so do not immediately come across as "national champions". Arransia's national airline is Drummonds, not Arransian Airlines. Since 1981 the public stake in these companies has been steadily reduced, so most are now at least 60% in private hands, but they retain a strong government involvement and are effectively immune from hostile takeover.

Coal mining has always been privately owned, but since the Great War has been subject to strict legal controls through the National Mining Financial Framework (NMFF) which caused serious problems in the mid-to-late 1980s when unrealistic official wage rates obtained by the mineworkers’ union rendered many mines unprofitable and the owners effectively locked the miners out. There remains a somewhat confusing dichotomy between the landowners who actually own the coal reserves and the management companies that operate the mines. A handful of mines are now run as workers’ co-operatives, which in practice tends to mean that the miners receive markedly lower incomes than those working for conventional private sector companies. See here for a detailed description of the 1986-87 Arransian Coal Crisis.

In recent years, part-ownership by employee trusts has been encouraged for all forms of industry and since 1987 has enjoyed worthwhile tax advantages. Arransia also offers a favourable environment for family-owned companies, with no death duties payable so long as the businesses remain as going concerns and are not sold. This also applies to family farms. There are relatively few companies that do not have either substantial government or family involvement. These various factors make any form of hostile takeover of Arransian firms difficult, especially from overseas, and less than 10% of the economy is in foreign, mostly Brunswickian, hands. While in a number of respects Arransian businesses are protected from the full rigours of competition, the general business environment does encourage long-term planning and also tends to promote social cohesion. Even in the worst days of the mid-1970s, unemployment in Arransia never rose above 500,000, or about 8.5% of the workforce.

Arransia has an official accounting code which all companies and other organisations are required to adopt, although most of the larger ones also use alternative systems for performance measurement. Businesses are required to structure themselves in a way that reflects economic reality rather than purely to gain tax advantages, and to obtain the permission of the Ministry of Trade and Industry for any major restructuring. Compulsory redundancies are only permissible if a business can demonstrate that it is making losses and the redundancies form part of a coherent recovery plan. It is also difficult to put a company into bankruptcy without very strong justification, and Arransia has a Chapter-11 form of ongoing administration which keeps some companies going for years.

A minimum wage was introduced in by the Ingham government in the early 1960s but now stands at a relatively modest $3.75 per hour, having been increased from $3.50 in early 2007. All workers are also entitled to a minimum of 20 days' paid holiday, plus 11 public holidays. Arransia has a strong trade union movement, with about 40% of private sector and 70% of public sector workers belonging to a union. However, the unions are generally fairly moderate and non-political, and the 1980s coal crisis gave them a strong dose of reality, if that were needed. The Labour Party has historic ties to the unions, but they no longer have any formal role in its organisation. In the 1930s the Arransian unions were expelled from the Socialist International for being too accommodating to capitalism, and have never rejoined. Despite this, Arransia now has one of the highest proportions of unionised workers in the developed world, and, with its concentration of high added-value manufacturing industries required many skilled workers, has been described as "the best place in the world to be working class".

Unquestionably, Arransia has done well economically in the 1990s and the first half of the 2000s, and the crises of the 1970s and 1980s are a fast receding memory. Some commentators have suggested that the “Arransian Way” of promoting social cohesion and long-term planning in fact is likely to deliver better economic results than the more openly competitive capitalism practised in Brunswick. However, in reality, Arransia cannot be separated from the wider economy of Brunswick and the overall prosperity of the two countries to a large extent goes hand in hand. Much of Arransian economic policy is expedient and influenced by short-term political factors, and the government cannot be credited with any deep insight. Individually, Arransian people tend to be independent-minded, hard-working and resourceful, and it is probably this that has brought the country economic success almost despite the policies of the government. It should also be mentioned that, while nobody is allowed to become destitute in Arransia, the country has never been particularly generous with social benefits and therefore there is a strong incentive to remain in employment.

This characteristic resourcefulness means that one field of industry in which Arransia can be said to excel is what might be broadly described as “bespoke engineering”. Arransia is responsible for not far off half the tonnage of ships built in Sabrantia, and is a major producer and exporter of mining equipment. She sends brewing and distilling plant all over the world, and is a dominant producer of paper-making machinery, with the Balfron, Edirn firm of J. W. Chadwick being international leaders in this industry. In contrast, virtually all domestic electrical goods sold in the country are imported.

Arransia has never manufactured aircraft (apart from some very small light planes) but Arransian companies have become increasingly important as suppliers to the Brunswickian and Mayonnaise aircraft industries. Most of the undercarriages on modern Brunswickian airliners originate from Arransia.

In recent years, a number of sharp-eyed Arransian entrepreneurs have been adept in acquiring Brunswickian firms in "rust-belt" industries that have fallen on hard times. Thus we have Milligan Tools owning a large number of engineering operations, and, most prominently, Crichton Chemicals owning a huge chlorine plant at Elko. Over 200,000 Brunswickians now work for Arransian-owned companies. Predictably, thus rankles amongst some Brunswickians, and it is often claimed that these companies are taking advantage of more liberal laws in Brunswick, where Brunswickians would not be able to make similar acquisitions in Arransia. Tom Crichton, who is a chemical engineer by training, and can't be regarded as any kind of asset-stripper, tends to respond that in Arransia such companies would never have got into such trouble in the first place. In this context, it should also be pointed out that, despite the obvious Arransian barriers to foreign ownership, large swathes of the Arransian retail trade are in Brunswickian hands, plus most of the country's growing electronics sector.

Arransia is unusual in that the official central bank, the Royal Bank of Arransia, is also one of the four major commercial banks. The government has a 33% shareholding and appoints some of the directors. The RBA probably has about 40% of the market for retail banking but is less prominent in the commercial sector. The other major banks are the National Commercial Bank, the Manufacturers’ Trust Bank, and the somewhat smaller Northern Bank, which is mainly confined to the six northern counties although it does have branches in the major cities of the south. These banks are not permitted to either merge with each other or be taken over by foreign banks, although one of the main Brunswickian banks has a 25% stake in the Northern Bank. This results in a situation where retail banking, although conducted with high standards of probity, is not as competitive as it might be. In an attempt to redress this, during the 1990s the Knox government permitted foreign banks to conduct retail banking in Arransia subject to meeting solvency requirements. In practice this has only been taken up to a limited extent by some of the main Brunswickian banks, mainly targeting high-value customers, and has made little difference to the overall market. There is considerably tighter regulation of the kind of financial products that may be offered than in the UK, and it is illegal, for example, to provide better rates only to Internet customers.

There is a strong tradition of mutual Building Societies which continue to provide most housing finance. There are over 100 of these, most of which are fairly small, with only the Stainton Building Society having anything like national coverage. They are prevented by law from demutualising, borrowing on the wholesale money markets or paying a premium to take each other over, and so tend to stick fairly closely to their original purpose. In recent years they have been permitted to offer simple current accounts and unsecured personal loans but in general tend to do this mainly for their existing customer base rather than marketing these services aggressively.

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