Okay lads and lasses, I'm tired of answering these same questions over and over again and decided to finally write out what I felt was most useful to the economic side of this game. All of the following is from reading tool tips, adjusting strategies and paying attention to the balance sheet.
It's really important that you begin to understand Projected Income, Projected Expenses, Cash On Hand... But since I am not about to write a basic business administration course, let me just stick to the basics of the game.
There are multiple things you need to be aware of to generate wealth in the game:1. Population in two classes for taxable purposes; "Tax"
2. Trade items for Export that are obtained from colonial buildings and resources in your colonies; "Exports"
3. Natural Resources that generate wealth for the region with no effort; "Resources"
4. Trade Income from active treaties; "Trade"
5. Imported resources from trade regions such as Brazil, Ivory Coast, Madagascar, East Indies (differentiated from Exports because "Imports" must be shipped to your home country, then they convert to exports via trade agreements); "Imports"
6. Gross Domestic Product that is generated by buildings, resources and technologies; "Region Wealth"
7. Regional growth amongst population; "Population Growth"
1. Tax & Income vs Expenses
Set your tax policy on the Policies tab in the Government screen ("G"). Low taxes promote Region Wealth, Region Growth and significantly reduce the modifier to population unrest. Population unrest is simple - X number of points of unrest multiplied by a factor for the Taxes, multiplied by Government type, etc. Higher tax rate means the same amount of base unrest effects your Regions more significantly. Tax and Growth policies are set by Theater region, America, Europe, India.
Tax is a percentage of UPPER CLASS and MIDDLE/LOWER CLASS tax ratios. Lower class applies to Monarchies where the great majority are lower class.
The lowest possible rate of Tax in the game is 20%. The highest is 60% tax. Tax is directly calculated from Region Wealth, which is visible under the Region Browser just above the Location Browser. Raising taxes on the lower/middle class is often unadvised in the early game, as this significantly lowers your population growth. You can see for yourself in the Public Order display of the Region Browser.
As the economy is entirely intertwined but greatly simplified, there are very few places you need to look for management of your wealth and spending.
National Summary shows you your profit and loss in the Projected Income section. This is based on your tax income, plus trade income and other income, such as protectorates or diplomacy. This is summed and then the Army and Navy upkeep is subtracted.
Town watch is a non-constructable military force of entry-level civil watch. They spawn automatically if attacked. If you leave your capital defenseless, you will pay for Town Watch. Any time you leave a city un-garrisoned, you will pay a slight amount to keep it protected by these non-constructed low-cost civil defense forces.
The costs are subtracted from the projected revenue from and an estimate of your next turn costs are displayed. It's not absolute, but very close, usually within 10%. Events like losing a trade lane, breaking a partnership or having a trade lane or territory taken will greatly effect this number.
It is recommended that you never spend Tax dollars on military expenses. Your trade revenue and diplomatic/other revenue should be within 20% of exceeding or just falling short of your military expenses. Taxes should be considered as investments in your nation, not in your war-fighting.
When determining where and how to invest your hard earned ducats, consider the benefit the investment brings. Exports for example have no direct benefit without a trade partner and trade lanes being open between the Export, your central market (home region) and the buying market (trade partner, such as Ottoman Empire).
Investing in a gold mine would take priority over an export item, because it for example brings in 1800 ducat per turn to the region. That is directly benefiting your ledger balance by 1800 * TAX per turn; so a 30% tax (second slider for both low and high class population) is 600 ducats per turn.
Consider these things, and consider priority and return on your investment as you go along. Consider also that if you hinder your population growth, or your regional development by having high taxes, you may significantly decrease your regional township growth.
Deferring high taxes for 10 turns may allow you to place another building in a third time the time as if you had higher taxes. Look at the Region Browser's lower left hand corner and adjust your tax rate. You'll see the "Next Town Developing" information there.
Lowering the Upper Class taxes retains more of the Region Wealth. This is acquired by structures, infrastructure, ports and technologies.
Lowering the Lower Class taxes reduces the population growth penalty. More on these later.
2. Exports
The export concept is simple; either you are blessed with a region that has Sugar, Cotton, Coffee Beans, etc. or you aren't. While you'll likely acquire something of value to another nation, you may also need to Import something from a trade zone (see that section).
Regardless you will need to invest in these structures and your navy to protect your trade lanes. If you have a wealth of exportable resources, you may very well want to be quite careful who you wage war with, with whom you ally and so forth.
Exports have no inherent cash value until they are shipped to your central market. This is done automatically each turn. Each turn you generate a fixed amount of Exports. Based on the size and number of your Trade partners and your available supply of Exports you may have too few Export types to have a strong trading relationship.
More Export types makes you a more desirable trading partner. More supply of Exports lowers the overall market price 1-5 ducats per item, but increases the gross amount you trade with another nation. More in the Trade section.
Focus on getting your exports to market, protecting your trade lanes and investing in Export development only if you can capitalize on it with your current trading partners. If you have three countries taking 20 Exports, but you have a supply of 60 Exports of one item, investing 3000 ducats to make 15 more per turn is a waste of money at that time.
To properly move Exports from your colonies to your home region, both the origin point and the central market region at home have to have trade ports. Without a trade port in the region, or road access from the resource to a trade port, your Exports will rot in the field or warehouses.
A roadway is also a trade lane, keep that in mind when planning expansion.
3. Resources
Iron, Gold, Timber, Wine, etc. are non-Exported resources that are available in most regions to some degree or another. Resources are very important as they generate a vast amount of wealth over time for the region, increase the overall Taxable base you have to work with each turn and or as Louis XV found out the easy way, will make you very fat, lazy and rich.
These are your number one wealth generating items in the early game. You want to focus on investing in these over your armies, your expansion plans, all but your Importing business. If you have gold, timber, iron, or wine, mine, chop and bottle until you're blue in the face. As stated in the Tax section, they have a direct impact on your Tax wealth. Some items have a direct, sizable increase to your Region Wealth which is accrued over time, each turn.
The sooner you get started with exploiting your natural resources, the sooner you'll have everything you desire.
4. Trade
Trade is essential and in a well run economy, your trade and other diplomatic revenue generating efforts will pay for your Army and Navy expenses. This was such in England, historically, as one lived to serve the other and neither was possible without it.
Trade is a very important aspect of the game. I've written a few other pieces on how to gain Trade agreements, so I'll keep this short. Buy, beg, borrow or steal your trade agreements. Even if you must pay 2,000 ducts, having a trade agreement with a strong, large, far-off power will pay for itself in just a few turns. Trade partnerships continue to grow over time, have significant diplomatic ramifications and even provide a bonus per turn for long running partnerships.
Key trading partners are; any of the big playable factions, Persia, Mughals, the colonies. Ideal trading partners are ones with multiple ports, strong navies and the ability to keep the ducats flowing each direction. Russia makes a very poor trade partner because the AI fails to keep control, or take ports and trade harbors.
I've written about Exports; here is where the Export hits the ledger book. Not only do Export prices fluctuate a little bit up and down, but a Trade partner will always consume more. As their population and wealth increases, so will their imaginary population's desire for imports from afar. Everyone wants sugar, ivory, and these intangible imports. Ideally you will have a large share of them to trade.
As you input both your own colonial Exports and trade region Imports, and the other countries grow, your trade balance will increase. Within 15 turns I've had trade partnerships exceeding 6,000 ducats such as with India, Ottoman and France. Smaller countries are still good trading partners, especially those on your borders which do not require sea trading lanes.
Keep a close eye on your Trade window. Do not hesitate to drop a partner that has been at war, he is taking your valuable time and trade slot; you can only have 2 per trade port attached to your central market region by land. Scotland for example, is centrally located to England for Great Britain, but Ireland is not.
You will see in your Government Trade browser that even with no imports or exports, you still have "Other Goods" to trade. This is some relatively fixed amount, as even very large trade partners consume roughly the same "Other Goods" as smaller partners.
Exports in Trade are allocated by some back-end mechanic I'm unclear about, but I believe it has something to do with population in the number of people and number of regions; it could be simpler than that, but the game doesn't tell you. A large partner will require more items, and if you have a small amount, these partners will take the lion share of your Exports and your smaller partners will get less.
Over time you'll see your Trade fails to expand, simply because you don't have MORE to SELL. So work on that. When you're core infrastructure, defenses and resources are exploited, hammer out the capability to export more resources OR... the customer economy is saturated with your goods, which will correct itself over time and continue to increase.
You'll always continue to make more with trade, while prices will go down, your Other Goods and long term trading partner bonuses will go up. Plus all the additional revenue you have to invest in your national economy, above and beyond your military will pay dividends.
5. Importing Resources from Trade Regions
Trade regions exist in Brazil, Western African coastline, the Straights of Madagascar to the southeast of Africa and in the East Indies. These trade regions each contain 5 trade post spots. If you don't know how to see these, click on the brass globe in the mini-map.
To navigate there, you must move your naval trade vessels (Large 1 on the ships sail in the unit card) to the southwest corner of the European ocean map, or the eastern edge of the Americas map and you'll see transit boxes. Sail your ship there, and the dialog will pop up with the destination. Each step of the map takes a turn to complete.
Brazil provides sugar, Africa and Madagascar provide Ivory (slaves have been removed for some strange reason, but replace "Ivory" with "African Slaves and some elephant bits" and you'll get the picture). The East Indies provides Spices. Each trade post provides roughly 15-25 items per ship. You can stack up to six trade ships per trade post.
A cash value will be shown based on the current price but this is somewhat misleading, as the imported goods have no cash value without a market. This sea lane value amount is really there for you to understand the profit potential of the sea lane, and also to see what other nations are hauling over the same sea lane.
Sea lane value isn't directly added to your ledger, but you can easily gauge when you blockade a sea lane of the potential damage you are doing to your enemy, or that a pirate or foe is doing to you!
I start each game by slamming out as many consecutive Trade Ships as possible. I hustle to each of the trade regions, with the East Indies being my top priority. While Spices are not the highest price trade item, they are the rarest item in the map with the fewest available non-Asian continent colonies. Ivory is second most important, but that's irrelevant.
You want to get a monopoly on trading posts, because then others can't get cheap and easy Exports to markets that rightfully belong to YOU. You do this by quickly sending off as many trade ships as you can, and putting one trade ship per available trading post in each trade region possible.
Their upkeep is low, their cost is moderate, but if you can forestall attacks and wars, you can easily afford to pay for any future wars and expansion just from trade imports and smart trade agreements.
6. Region Wealth & Why It's Good
Having a strong region with it's own internal wealth is important. When your trade lanes are blocked, and your wars are dragging out (at least later, when people get a good few mods in place) you're going to need a healthy local economy and private capital to draw from in taxes. If you don't allow this to accumulate it will never develop.
Every region gets subsistence farming. Sheep, cows, dairy products, vegetables, consumer goods - all this falls under basic subsistence. Each region has a limited amount of this available to them. It expands based on population increases and available population. You also gain growth to ports, roads, towns (manufacturing) and resources.
As you invest in your local region, you will gain modifiers that multiply this, such as with ministers or certain building upgrades or technologies. These are important, really important, considering the next paragraph.
When you invest in infrastructure, ports, factories and townships that manufacture, you are adding a significant amount of constant wealth locally to your taxable Region Wealth. In addition to manufacturing, consider resources. When you have resources, manufacturing, infrastructure you not only have fixed amounts that you earn each turn; it grows each turn! When you add those technologies and upgrades, they are multiplied!
With moderate taxes, there is no reinvestment locally. You get the same amount, minus a shrinking amount (really too small, quite honestly, or is that the globalism pessimist in me speaking?) for higher taxes. Your wealth "flees" the region.
The sooner you invest in your local infrastructure and the more constantly you invest in your regional development, and avoid wasting resource slots with schools, bawdy houses and churches, the sooner you can relax with port, watch your vast navy and army conquer all.. and write stupid help documents for people too lazy to read tooltips and figure 
out for themselves.
7. Population Growth
Population is very abstract in this game compared to M2TW. You're dealing with entire countries in population. That means three things right off the bat; you have a lot of people to feed, you have a large pool of taxable populations, some colonies will never, in your game time, ever be of any consequence (and STILL aren't even without birth control and smallpox vaccines!)
Food is important. To the lower class, food is wealth. The more food generation, the more people are happy and wealthy. The more population available that is healthy and happy, the more you can tax them and the more they will produce. In terms of the game, this really means, the happier the people, the faster they will expand to new ports and towns.
Once you have expanded to your full number of ports and towns per region, screw em. Tax em to the hilt and drive em to your colonies. So far I can't see any benefit in keeping population growing in the continent once I've received all ports and towns. Correct me if I'm wrong, but "We're out of space, can I recommend Virginia?"
I don't see anything else important about keeping the lower population happy and well fed, other than avoiding revolt, causing unrest due to famine or other things that a half-dozen dragoons can fix in a heart beat. If all else fails, get yourself a colony, or they will leave for someone else's muddy little backwater.
Trust me though, people migrate.
Closing Thoughts
It's really important to take a long view on your economy, but to begin building it immediately. Less is more for the first six to ten years, when it comes to military campaigns. If you need to spend money early, before you have strong trade in place, and manufacturing and food production, it WILL DELAY YOUR EASY WIN by several dozen years.
Just like with compound interest, if you get started early, you'll finish better, faster with more money. They've made significant improvements in the genre with the trading, economy and the rest. When the AI is better, lots of wars will and will not be fought based on economic power. As vanilla, I don't think the AI even knows it exists.
Usually within 12-15 turns I'm coasting on 20% tax rate, feeding my Army and Navy on ducats taken from some foreign market at great profit! It's laborious sending all those trade ships out and hustling to get a good spot in the queue, but it's worth struggling for. Even if you have to, send a navy to a trade region, start a war and take those spots! By 1715, I can have England earning 30,000 ducats a turn in Trade and have a near monopoly in all trade items.
Have fun, hope this helps.
Coman
Company Man's Guide to ETW Economy
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Originally Posted by coman
