Comparative Advantages

I've said elsewhere that Goonswarm Federation alliance's DNA has a healthy dallop of nullsec bear in it.  Nullsec bears, as you'll recall, are former highsec carebears who have migrated to nullsec at some point and adapted to that rough an tumble lifestyle with its sovereignty wars, calls to arms, bug-outs and quickly shifting turns of fortune.  Some set aside their carebear ways altogether once they get a taste for fleet combat, but many switch hit.  They play the industrial side of the nullsec game when the skies are clear, and fleet up to do their bit when war clouds loom. 

Though it sounds counter-intuitive, nullsec space can be a fairly safe place for an industrialist to ply his trade when the barbarians are not rushing the gate.  Depending on where in player controlled nullsec one is, one can travel many jumps without encountering another ship.  Quite a contrast from the crowded gates in highsec.  In fact, given the relative peace and quiet of nullsec, along with the plethora of raw materials needed for production so readily at hand, one would think the markets in nullsec would be fairly bursting at the seams with high value goods produced by part time bears.

Alas.  Not so much.

Nullsec markets tend to be much less functional than their highsec counterparts.  There are a number of factors driving this phenomenon; drags, and on occasions outright obstacles, to nullsec manufacturing productivity.  Some of them have to to with a healthy logistics infrastructure, including jump ships and jump bridges that allow goods to move with relative ease from highsec market hubs to the deepest corners of nullsec space.  Others include the relatively high cost and low efficiency of nullsec refining and production services which are often structured by nullsec alliances such that if makes better economic sense to compress rare minerals and jump them to highsec for refining and subsequent production than to attempt the same in nullsec. 

With the exception of items of particular interest to nullsec alliances or items that can only be produced in nullsec (such as capital and supercapital ships) there is little incentive for a nullsec bear to turn his hand to production.  Meanwhile, the obstacles and high overhead associated with nullsec production means that items produced there are not competitive with the same items shipped in from highsec.  The combination of barriers to production and ease of transport mean that nullsec producers' best prices can nearly always be undercut by traders with jumpships.  And, as I pointed out above, the population of nullsec is smaller on a system by system basis than it is in highsec which means less demand for most goods in nullsec than in the highsec market hubs.

Further, the small nullsec customer base means that highest end minerals and moon goo that are not used for nullsec specific products such as supercapitals, and are often controlled at the alliance level, are sold in highsec where the demand and the prices are highest.  As a result, those bears that do produce in nullsec are unlikely to get high value product inputs originating in nullsec at a significantly lower cost than their highsec counterparts. 

While nullsec tends to be safer on a day to day basis than lowsec, it is not a terribly secure place to locate inventory.   The ebb and flow of nullsec sov warfare means that inventory maintained in player owned outposts are subject to loss if the owner's alliance loses control of the outpost.  I've written elsewhere that careful advance planning is required in order to minimize the impact of sovereign space loss on player assets.  This is a non-trivial exercise when dealing with the usual player's collection of ships and fittings.  Moving and securing a high-volume market inventory that may span multiple nullsec outposts in a given regional market during time of war and invasion would require extensive planning and infrastructure.  While investing in such an exit strategy is costly from both a time and ISK standpoint, failure to do so exposes anyone heavily invested in nullsec markets to excessive loss.

Finally, even after the anomalies nerf, ratting is by far the easiest and preferred means of making ISK in nullsec.  Not only does it provide quick and easy ISK to the ratter, the automated taxing of this activity fills corporate and alliance coffers, pays nullsec rents and alliance membership fees, and drives system upgrades. Industrial activity, on the other hand, only fills alliance and corporation coffers through fees on industrial services such as mining and assembly.  As a result, most alliances maintain such fees at a high level, often discouraging or outright banning the use of POS as a means of obtaining those services, in an attempt to eliminate competition to outpost services and maximize outpost service revenues.  Of course the result in such cases is that nullsec productivity is further reduced and, more often than not, stations earn only a fraction of what they might if service charges were properly optimized. 

CCP has been grappling with this problem for some time.  It is, in large part, the reason behind the partial nerf of jump-bridge networks and CCP Greyscale's love affair with nerfing jump freighters.  It is also a bit of an obsession with Mittens and drives much of his "farms and fields" thinking and is, in some part, behind his attacks on high sec mining and trade hubs.  Indeed, Mittens (or a few of his more thoughtful underlings) may be the first nullsec alliance leader to put significant thought to the nullsec industrial production and the balance of trade with highsec.

Unfortunately, the solutions Mittens' economic team have come up to date seem sharply focused on diminishing the highsec side of the equation rather than the development of a robust industrial infrastructure in nullsec.  Rather than lowering the barriers to and creating incentives for production in nullsec, they seem myopically focused on degrading the productivity in highsec in order to bring it into parity with nullsec's structurally and functionally less efficient productivity.

Like many nullsec alliances, Goonswarm is much better disposed toward tearing down than to building up.   This is the road of least resistance Mittens currently seeks to travel in order to get to his goal of a market dominant nullsec.  However, if Mittens' economic ministers are truly interested in developing the farms and fields paradigm, building up nullsec's industrial capacity must become the primary focus of their efforts.  That will take some clever thinking on their part and require an incentives program geared toward creation rather than merely destruction.