Enlightened Empire

Chapter 423: Budget Proposal and Short-Term Plans

As the budgetary meeting continued, Corco got increasingly upset by their weak financial situation. Why had he spent so many years improving his country's income when they still ran out as soon as he wanted to spend a little. Annoyed, he questioned Brym. Surely, his money-hungry ward was exaggerating their problems.

"I don't see how we have so little money," the king began. "I know the war was expensive, but it's not like we won't have any money coming in for next year. I mean, we now control an additional ten noble estates directly. Surely, that would massively improve our income too, right?"

However, Brym quickly dashed Corco's hopes.

"It's true that we have also significantly increased the total territory under the crown's control. That alone will lead to a sharp increase in revenue, but that will only manifest in the long-term as well. Nominally, those territories are still in the hands of the local lords. Although we can press some wealth from them in the form of taxes, and we can probably gain some of their grain harvest, it's not harvest season yet. Until then, controlling these lands will also be accompanied by some costs, which means that we won't have much left to spend on frivolous projects."

"I don't think we have any frivolous projects planned," Corco complained. "Everything we've decided on so far is absolutely necessary."

By now, the king sounded more stubborn than determined. Even so, the stingy Brym remained steadfast in the face of his big brother's desperation. One by one, he listed off all expenses on his fingers.

"We are already committed to rebuilding Kapra and Antila, as well as taking care of all the refugees from the two cities. In addition, we have plans to further strengthen the navy to deal with the situation on the Verdant Isles. Then there is the planned reorganization of the army, which will come with significant costs, even with the previous compromise suggested by Fadelio. On top of that we have the extensive infrastructure projects we've planned, including free public schools in all our new territories, as well as new highways and beacon towers to Port Ulta and a connection through the midland hills from Kapra to Anticasa in the north and Rufalasta in the south. Today alone, we have also added more administrative cost through Queen Sumaci's new subsidies for farmers. Even with our increased funds, and even if we add no more policies and encounter no emergencies throughout the year, we do not have the financial means to afford everything. At the current pace, I estimate that we will run out of financial reserves by late autumn or early winter. At that point, we will either have to start printing money or sell our precious metal reserves, both of which could collapse our currency. Instead, I believe it is more prudent to reduce spending. At least a few of these plans need to be cut or delayed, or the kingdom's next winter will be a catastrophe."

In response, the king frowned deeply and leaned forward. His elbow on his desk, he began to tap his lip as he thought deeply. These issues were too severe, and not something he could just brush away with another casual order. Brym was certainly exaggerating a few things, but most of what he said had to be the truth. Since Brym had spent most of the war in his finance division, or in the central bank, he knew more about this topic than anyone else. Corco had no reason to distrust his assessment. They really were running out of money.

Faced with such a reality, Corco was in a dilemma. All these projects were necessary early steps for their future development, so the king really couldn't cut any of them without affecting their next course of action. Of course, further printing of money was out of the question. He didn't want to turn his shiny new paper currency into Zimbabwe dollars after all.

So, since both choices offered by Brym were impossible, he came up with the only remaining solution to the problem.

"Right," he finally said after coming to a conclusion. When he looked back up, the entire room was staring at him with bated breath. Still, the best the king could offer for now was the obvious: "Anyone got any ideas on how to increase our revenue then? Short-term solutions preferred."

"We could always blackmail the rebellious lords some more. They still have plenty of money left, and no more power to resist us."

The first suggestion came from Sumaci, a true pirate's idea.

"No," Corco denied without a second thought. "If we squeeze the lords too hard, they won't cooperate and it'll be harder to take over their territories. Also, our allied lords will become nervous too."

"The most obvious solution would be additional taxes," Fadelio tried.

"Or we could try issuing some bonds," Brym added. Immediately, the king's face lit up. Maybe there was hope yet for the southern kingdom's minister of finance.

"I like the idea of bonds," the king said. Although bonds were something no country in the world had ever done, Corco had taught the basics of finance to Brym, so his ward was well aware of the concept. With the issuance of bonds, the government would essentially borrow money from their citizens. In their current situation, it was akin to a spring of wealth. Though once his head cooled down a bit, Corco realized the limitations of the idea.

"Still, it'll be the first time we do something like this. The people won't be familiar with it, so they won't be too enthusiastic."

"Yes, we certainly won't be able to fill our entire shortfall with just bonds," Brym conceded.

"Still, it's better than nothing," Corco said. "Make a plan for the issuance. Since it's the first time, we need to be careful, especially in terms of marketing. Apart from that, it seems like our only choice is a tax raise, if no one has any better ideas. Though we can't just raise our taxes blindly. First, we'll have to assess what can, and should be taxed. I want a detailed report on my desk as soon as possible. Only tax things we want to disincentivise, don't tax anything just because it would make us a lot of money."

This was a common problem with governments that Corco wanted to avoid. For example, if they just raised taxes for the country's farmers, they would immediately fill in their financial shortfall and even have plenty left over. However, they wanted to attract new farmers into the countryside at the moment, and such a tax would achieve the opposite.

Thus, while taxes were certainly the best method to solve their money problems, they came with their own host of issues. It would take weeks to assess possible plans until they could work out a proper policy. Just when it looked like they wouldn't come to any results today, Fadelio spoke up again.

"Actually, I believe there is a fast method to raise a lot of funds in the short term, without harming our long-term plans." As soon as he said it, the king's attendant and prime minister drew the attention of the entire room. "It pertains to the matter I already mentioned earlier, the problem I have discovered before."

"Out with it then," the king said, impatiently grasping at the offered straw.

"At once." Fadelio seemed to collect his thoughts a bit and flipped through his notes, before he finally spoke up again. "When I returned to Saniya, I read through some reports and noticed that the profits and production volumes for several of our manufactories have gone down. I made some spot checks already, and it seems like many of them are running at low efficiency. For now though, I have yet to find the exact reason."

"Then just get more people to supervise, and our income will be up immediately," Sumaci said.

"We don't have enough officials already, remember?" This time, Corco was the one to dash everyone's hopes. However, he wasn't discouraged. Rather, he felt like he already knew what the problem was, and where the solution lay. Although he thought they could wait a bit longer for this monumental step, now was as good a time as any, and they really needed the money. Though before he could come to a final decision, Fadelio explained further to make up Corco's mind.

"There's also a limit to how much we can supervise in the first place," Fadelio added. "After all, demand for our products increases every year. At a certain size, these businesses just become too unwieldy to control completely. That leads to poor efficiency and corruption in unseen places. At least that's my working theory for the problems. As a result, I believe it would be for the best if we simply sold all nonperforming manufactories to private citizens. This way, we would immediately solve all of our money problems, and since the profits from these businesses are poor, our long-term revenue would barely be affected."

For a while, everyone was silent, all with their own thoughts. Antaya would surely consider the risks involved to Saniya's security should manufactories in some places change hands. As always, Sumaci would think about ways to implement similar ideas in her own kingdom. Meanwhile, Brym just stood there, empty shock on his face. However, although Corco knew that this next decision would be a heavy blow to his young ward, he still did what had to be done.

"In that case, I guess it's decided. From today on, we will stop trying to be merchants."

This time, Brym stared at him, wide-eyed and speechless, searching for words of protest. Yet before he could gather a coherent thought, Corco spoke up again.

"I know what you're thinking," he preempted the complaints. "In Arcavia, we went through too much and fought too hard to reestablish master's merchant company. Throwing that away seems like an insult to my master, and to your father. But we're a country now. we can't keep operating like a merchant company."

Of course he knew what these words meant to Brym. When he was still just a kid, his father was unjustly murdered and robbed of his life's achievements. All the old Gerrit Fastgrade had left behind for his son had been the merchant company under his name, or what had been left of it. Now, Corco was asking him to give up the last token of his dead father. Though of course, Brym's guardian wouldn't really be so cruel.

"Don't worry, we won't have to give up everything," he said. "We'll still retain the stores around Medala, as well as all of our high-profit manufactories, at least. I was your father's student too, so I won't just let his name die."

After Corco's reassurance, Brym looked better almost immediately.

"And sooner or later, this step became inevitable," the king continued his explanation. "As any business grows larger, it also becomes more unwieldy, just like Fadelio said. Apart from inefficiencies due to interlocking processes, the more we profit, the more incentives those at the bottom have to skim off the top. To fix either problem, we'd need ever more supervisors to stay efficient and to keep everyone in line. Though of course, those supervisors could just be inefficient or corrupt themselves, so we need even more to supervise the supervisors. Eventually, we'll reach a limit and become unprofitable. It seems like we've now reached the limit of our state-owned production model, so it's time to transform."

"I understand," Brym finally said. He sounded a lot more composed than Corco had thought, and even offered a small smile. "In that case, I will make a comprehensive list of all our companies and get rid of all non-performing assets. There's plenty of private businesses in Saniya already. Most are just small, private workshops, but there's already a few privately owned manufactories. Surely, many of our citizens will be eager to snap up our large shops as soon as they are on offer."

"Yeah. You should talk to Fadelio and the people in the industrial division about the details. Don't rush into it, our money problems aren't that pressing just yet. However, make sure that you don't include essential industries in your list."

"I am not sure I am familiar with the term," Brym said.

"I assume that it would include anything related to warfare, like the steel mill and weapons manufactories," Sumaci explained. After all, she was also one of Corco's students. As a former princess, her classes had been more focused on power politics, so she was familiar with the concept. "Since the crown is at its most vulnerable during a war we'd be easy to exploit and our costs would explode If we had to buy our weapons from a private company at that time."

"Not only weapons and steel production, essential industries also include food production and finance," Corco added. "'Essential' means anything a private citizen could use to blackmail or even control the government under the wrong circumstances."

Immediately, Brym understood.

"So I guess that was the main reason why we built the central bank," he said, before Corco concluded the argument:

"And that's why both it and the mint will always remain fully owned by the government."

Finally, some harmony had returned to the room. Their biggest problem had been solved, and everyone seemed to have a unified vision of their future. However, there was still a single discordant voice remaining.

"This all appears excessive," Antaya said, once again with a bowed head despite the earlier reprimand. "So what if these commoners take advantage of war and make some money? In the worst case, they will be rich, but what can they do with their ill-gotten wealth? As long as they live in this kingdom, they will be in our hands."

"In the short-term, that may be true," Corco said. "But money is power after all, and our constitution and written law guarantee the security of all our citizens' property. So we can't just take their stuff without justification, if you were implying that. In any system, wealth and power will eventually accumulate more and more, in the hands of very few. That's because more money breeds more power, and more power breeds more money. So eventually, the country will be run by a handful of people who have accumulated all the power and wealth in their hands. At that point, the country no longer serves the benefit of its people, and it no longer operates to make itself stronger. Instead, it will only serve the interests of a select few, to the detriment of everyone else. By that point, the country isn't far from collapse."

"In that case, we could simply monitor these rich and powerful men," Antaya still argued, a smirk on her face. "Everyone has a dark secret they wish to hide, these greedy people more than most. We can use these secrets to control them with ease. Thus, please rely on the ghost warriors to do this work for you, my king."

Once she was done with her sales pitch, Antaya's bow became even deeper. However, Corco wasn't impressed.

"I'd rather not spy on my own people if I can avoid it," he said.

And I don't want to give too much power to my secret service either. In the end, it'd just be you with all the power.

"It's not a pressing issue anyways," Corco said instead of his true thoughts. "These processes of accumulation happen slowly, over many generations. Most likely, no one in this room will live to see this power imbalance ever become a problem. However, I'd rather not have my ideal country collapse a hundred years after my death. That's why I want to implement some measures to handle the issue now, since we still can at this point."

"So there are solutions to this rule?" an inquisitive Sumaci asked.

"Of course there are," Corco replied in a smug voice, happy to act as a teacher again after a long time. "For now, our societal structure is still pretty flat, so we can implement all kinds of measures against this accumulation before any private citizen becomes too powerful to trouble us over it. Apart from retaining a controlling stake in essential industries, there's a number of other solutions as well. Since we have a lot of time though, there's no reason to implement everything all at once. Still, some ideas fit neatly into our short-term policies. First off, let me tell you all about worker cooperatives."

Thus, through the small meeting of a few people, the kingdom's future took shape, to influence the lives of millions.

Year-End Summary

Country Name: Kingdom of Southern Medala Year: 6th Strife

Population: 4.15m (+6.25%)

Royal Territory: 225,000

Income: 29.8m Sila

Seigniorage: 9.2m Sila

Grain and Agriculture: 7.1m Sila

Direct Trade From State-owned Businesses: 7.8m Sila

Tariffs: 2.4m Sila

Other: 3.3m Sila

Treasury: 8.46m Sila Precious Metal Reserves: 55.2t silver Debt Ratio: 0%

Standing Troops: 12k commoners

Reserves: 18k commoners, 16k warriors

Steel Production: 230 tons

Farmland: 62,000 hectares

Yield: 0.9 tons per hectare

Literacy Rate: 17%