Chapter 695: Chapter 392, Economic Reform and Development Plan_2
Lowering the rating by one level means innumerable benefits; the taxes are reduced significantly, and no level of government wants to be responsible for that.
It’s basically impossible to get approval unless the situation is truly exceptional.
The 0.4 developmental degrees that the Fatches Tri-Star has lost must be carried forever—unless there’s actual development.
The Fatches Family originally received around 2.8 billion in taxes annually from Tri-Star. After paying the Imperial Tax of 2 billion, the remaining 800 million or so made for a comfortable life.
But if it rose to 3 billion, that would be unsustainable.
If Gu Hang didn’t replicate the Alliance system here and continued to use the old United Government’s system, it would be futile.
…
After doing the math, did Gu Hang end up having to invest an additional two billion each year into the Fatches Tri-Star?
That was unacceptable.
Investing to stimulate local development, Gu Hang had no regrets. That was for a bigger return in the future.
But this money was purely overpaid taxes, which he definitely would not accept.
Raising taxes and malicious harvesting could be done, but they would undoubtedly have a significant negative impact on local social production.
Only by implementing the Alliance system could the existing shackles be broken, allowing for more efficient collection of surplus value.
At the same time, only under the Alliance system could the full potential of the advanced technologies Gu Hang possessed be realized.
For this reason, he had been traveling and investigating with his political officers, studying local data of Fatches for over a month.
By now, the officials from the Alliance Government, led by Osenia, who came to take over the Fatches Tri-Star, had a preliminary strategy in place.
The person reporting this strategy was none other than Osenia herself.
The first step was to reform finance, abolishing the currency issued by the Fatches Regime, which only circulated within the Fatches Tri-Star, and replace it with the currency issued by the Alliance.
For the next two years, the existing currency of Fatches could still be used, but subsequent issues would primarily be in the Alliance currency, a dual-track system; the people of Fatches could also exchange their old currency for new currency at a set rate within these two years.
Building on this, the second step was to invest in the construction of state-owned factories. On one hand, to build new factories offering more employment opportunities; on the other hand, to nationalize the industries owned under the concept of the “Fatches Family.”
The old Fatches government did not directly control enterprises. However, the direct and collateral relatives of the Fatches Family owned many industries and wealth. Gu Hang would certainly not be courteous about these.
With these two foundations in place, it would involve direct reform of the people’s livelihood.
The workers, technical experts, clerks, and government employees working in state-owned factories would be assigned ranks, with allowances issued according to those ranks. The original benefits associated with those ranks would be partially cancelled and converted to currency based on the local prices of Fatches planets, included in the allowances. Most of the cancelled benefits were in-kind, including the supply of food, daily necessities, entertainment; but medical benefits, educational benefits, housing security, would be retained.
The hospitals and educational institutions that were nationalized would be freely accessible to all with ranks. They would enjoy different levels of medical and educational benefits based on their various ranks. People with different ranks would also have different baseline housing conditions, which the government would guarantee.
The people working in these newly invested Alliance Factories and government employees who pledged loyalty to the Alliance Government would initially have relatively high position settings to ensure their living standards were not lower than before; but to avoid assuming too much financial pressure, their numbers were limited. Highly skilled technicians in the factories, important management positions, and key government employees would have clear ranks.
Regular workers and employees would maintain their previous salary levels, be paid according to their wages, but would not have ranks, and accordingly, would no longer have housing, medical, or educational benefits.
Next, the costs of education, healthcare, and housing were increased, making job ranks more coveted.
Subsequently, a pathway was opened for normal private enterprises to be nationalized. The existing managers would remain in their positions, transforming into managers of state-owned factories with Alliance ranks, with the specific rank determined by the original enterprise’s scale and revenue; once nationalized, the corresponding workers and employees would also receive ranks.
All state-owned enterprises would be supported by the Alliance Government. The support was mainly technical and in product procurement. The products of state-owned enterprises were assured of sales, as long as they met the requirements under the relevant quality supervision departments. All their products would be handed over to the state for Imperial Tax payments, welfare distribution, market sales, interstellar trade exports…
For non-state-owned enterprises, government procurement was not entirely unavailable, but it was likely to be affected under the preference for state ownership.
However, in terms of market sales, they would not be affected—if they couldn’t beat state-owned factories in price and quality, that was their own problem.
Osenia’s whole strategy was essentially a dual-track system, adding a state-owned sector to Fatches’s existing economic foundation. By tying welfare to it, they ensured that ‘established’ personnel of state-owned factories and government employees enjoyed treatment that was no worse than before, or even better, in a high-welfare, high-stability environment.
At the same time, it limited the upward mobility of the populace and enterprises outside the system.
This was driving private enterprise into the system.
But the core difference lay in the accessibility of the Alliance system to the populace and enterprises. It was open to all, especially to the populace; it was almost a case of rejecting no one. Those with capabilities were welcomed with open arms to join state-owned enterprises, the government system, and industries like health and education; those without much ability but willing to work could now receive wages not worse than in private enterprises; the Alliance clearly planned to expand the system’s staffing and ultimately bring everyone into the rank system.
However, for enterprise owners, the conditions were much more stringent. They went from being bosses who kept all the surplus value from their employees and grew rich or went bankrupt depending on their skills, to a situation where, despite high ranking, their income would be a lot less compared to when it had been all theirs.
Moreover, although they were retained, only by doing well could they keep their positions and advance in rank; do poorly, with low production, inefficiency, and poor sales, and they might be demoted or transferred to another enterprise as lower-ranking personnel; for corruption or major faults, they could even end up in prison or face execution.
But not convert to state-owned?
Then await being squeezed out by state-owned enterprises and ending up with nothing—not even a rank.
Only the truly exceptional, facing issues such as taxes, the need for market marketing, lack of government procurement, and the necessity to offer high wages to retain talent that could offset the state sector’s welfare benefits, leading to increased costs, could ensure great efficiency, then you’re impressive, deserving to make money.
The ultimate goal was to hope that under these reforms, Fatchess Tri-Star would transition smoothly into a normal, ideal United Government system environment: mainly a state-owned economy, with the private sector as a supplement.
Of course, these reforms were a significant undertaking.
But the implementation was phased.
Not all policies would be launched at once, but reforms would be implemented gradually. Starting with important sectors such as energy, mining, metallurgy, military industry, and heavy industry, the nationalization would be pushed first, with others to follow slowly.
“…We estimate that after the relevant policies are introduced, our public expenditure will increase significantly. After the reforms begin, Fatchess Tri-Star’s total tax revenue will continue to decrease, but after adding the net profit from state-owned enterprises’ revenue minus expenses, we expect to provide no less than 2.5 billion in revenue in the first year and to increase by 5% annually. After five years, Fatches can be self-sufficient, no longer needing subsidies from the Alliance Government, completing the Imperial Tax, and starting to generate surplus,” Osenia recounted their estimates and summaries seriously, offering the five-year economic reform and development plan she had prepared according to Gu Hang’s requirements.
Gu Hang listened attentively.
This was essentially about spending money to ensure public well-being and maintaining existing productivity while tolerating some losses to gently push for the Alliance system, ultimately achieving the desired effect.
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Starting tomorrow, I’ll be on a business trip for a week…