Chapter 33

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Chapter 33: Mixing Truth With Falsehood

Before taking the stage, Leader One reached a contradictory agreement with the military and the parliament.

The military wanted more investment, while the parliament wanted to decrease military spending.

Leader One agreed to both sides. Now seated on the stage, he had to resolve this conflicting commitment.

Then there was a military reform plan that made the marshal very happy and sad after reading it, finding both good and bad points in it.

"The military is asking to extend the military service to three years, but it’s not realistic at the moment. If we implement it, there will definitely be problems. Let’s forget about extending the military service for now. We need to wait for the next military reform."

The marshal nodded.

"I will meet all the military’s requests for increased investment. I will increase salaries and allowances, upgrade to new weapons and artillery, improve training and ammunition supply, and renovate and expand barracks."

The marshal nodded.

"However, the military is asking to increase military expenses, and that’s not possible. We must reduce them. The high military expenses on paper are causing everyone to panic, and our neighboring countries are continuously increasing military spending in response."

Leader One needs to reduce military expenses while increasing investment in the army, which sounds strange but there is a way to make it happen.

The marshal turned to page 47 of the reform plan, pointing to a clause.

"Your Highness the Regent, transferring military investment funds to the Ministry of Industry’s account seems a bit inappropriate, doesn’t it?"

Leader One asked, "Is military industry a type of industry?"

"Well, it is, but… um… um…" The marshal hesitated, not sure how to express his thoughts.

The marshal believed that military industry is indeed a type of industry, but investments in military industry should fall under the Ministry of National Defense budget and not under the Ministry of Industry expenses.

Leader One thought that the government financial planning in the early 19th century was quite rough, with some confusion among military expenses, military industry, Ministry of National Defense, and Ministry of Industry.

For example, if the military wants to significantly increase ammunition supply and needs to build a new ammunition factory, how should the cost of building this new factory be considered?

In the systems of various countries in the 21st century, in capitalist countries, this cost wouldn’t be included in military expenses at all.

Because the military says, "We need ammunition."

The company would use its own money to build the factory, produce the ammunition, and only then would the money spent by the military on purchasing ammunition be considered as part of military expenses.

If the military industry company doesn’t have enough money, it should go to the bank for a loan.

If the loan is not enough to build the factory, and the military enterprise is on the brink of closure, causing a potential loss in national defense strength, the Ministry of National Defense will then provide relief funds.

The relief funds do not count as military expenses; they are considered as administrative expenses of the Ministry of National Defense, and the enterprise has to repay the money.

How was military spending calculated in the 19th century?

When the army needs ammunition but the enterprise claims they have no money to build a factory, the army provides funds for the construction. Once the factory is operational, the enterprise sells ammunition to the army to make money.

In the end, the army spends money on building the factory and then buys ammunition, and all these expenses are considered military spending, which is like giving away money for free rather than as a loan.

Therefore, Leader One reformed Prussia’s military spending calculation method and military industry development model.

In the future, military enterprises cannot expect to receive benefits for free. They either have to loan from banks or from the government, and government loans will be recorded as part of the Ministry of Industry’s finances, not the Ministry of National Defense.

However, even if you prevent them from receiving undue benefits, some small military enterprises may struggle to survive and require subsidies. These subsidies must also be included in the Ministry of Industry’s records, not counted as military expenses.

There are changes in Blue Star’s Germany military industry; Mauser, Keluobo, Rhine Metal, and MAN are all becoming state-owned enterprises. Leader One nurtured them from their early days without fame or significant work, investing in them considerably. These four companies are expected to become state-owned enterprises, with the founders holding a certain share and operating as professional managers and chief engineers.

The pre-loans or subsidies for the four major state-owned military enterprises will be counted in the Ministry of Industry’s finances, not considered as military expenses.

However, if the military needs to purchase weapons and ammunition, or develop new weapons and equipment, this money must be included in the military expenses.

Although Leader One’s reform may seem like a bit of a shortcut, it is reasonable. This is how military expenses are calculated in the 21st century. The calculation of military expenses and the development model of military industrial enterprises in the 19th century were still in the early stages, and quite crude.

After all, capitalism is quite crude these days.

The subsequent changes in military expenses were indeed a real shortcut, no matter how you look at it.

The marshal picked up the paper, propped his chin with his other hand, with a look of disappointment on his face.

"Funds for new construction, expansion, and repairs of military camps will be removed from the military expenses and added to the list of funds for the construction department."

Leader One, "It’s all about military-civil fusion. When the military camp is no longer needed one day, it will be converted for civilian use. It’s reasonable to calculate it in the construction department’s funds."

"Salaries and allowances for Ministry of National Defense staff will be added to the list of funds for the Ministry of Finance."

Leader One, "Soldiers get paid by the Ministry of National Defense, but civil servants should get paid by the Ministry of Finance. Those secretaries, assistants, and clerks in the Ministry of National Defense office are not soldiers, they should go to the Ministry of Finance to get their salary."

"The office supplies of the Ministry of National Defense and the General Staff Department are all included in the budget of the Ministry of Education and Science."

Leader One, "All those papers, pens, rulers, compasses, sand tables, maps and so on are considered as stationery and teaching materials, so it’s reasonable to account them under the budget of the Ministry of Education and Science."

The Marshal flipped through the document and noticed many small items were removed from the military budget. He couldn’t help but admire the cleverness of Your Highness the Regent.

However, he had some doubts. Even though a significant amount of money was invested in military industries, removing the trivial expenses from the military budget wouldn’t reduce much on paper.

"Every little bit adds up, Marshal, look at the last page."

"The military budget as a percentage of the total financial expenditure decreased from 40% to 29%?!!! That’s a significant decrease!"

Although the military budget appeared to have decreased significantly on paper, in reality, the investment in the military had not reduced at all. In fact, it had slightly increased and was hidden in the financial expenditure records of various departments.

The Marshal carefully reviewed the military reform plan personally written by the prince regent, or more accurately described as a deceptive military budget reform plan.

He didn’t know how to react. Saying yes was good because the military received more actual investment. However, saying no was not good because the budget allocated to the Ministry of National Defense decreased.

There seemed to be no room for bargaining at the moment. The marshal chose to accept the proposal.

"But Your Highness the Regent, surely there are clever people in the council who can see through the military reform scheme. Will they agree?"

"They will definitely agree," Leader One smiled slightly. "Even if every member of the council sees through it, they will still agree."

Within government agencies, the amount of funding is equivalent to the level of power.

Despite the hidden military expenses being managed by the Ministry of National Defense and Leader One, the money in the departments’ accounts did increase. Even if the money stayed in the accounts for just over ten days, a good profit could be made.

The demands of the council members were not actually about reducing military spending, but about increasing their own benefits. Each of them had personal interests tied to certain departments or had close associates placed in certain departments. An increase in departmental funding and influence would allow them to profit.

Leader One proposed a significant reduction in military spending on paper, which could also benefit the council members in reality. It was both for show and substance.

"If there are opposing voices in the parliament tomorrow against this proposal, it only means that person is too clean – that they really have no personal interests linked to this and have not placed any close associates. They are a truly honorable senator," Leader One said with a smile.

Marshal, "Oh… Your Highness the Regent is very funny, I want to tell this joke to others."

Leader One asked curiously, "Did I tell a joke?"

Marshal replied, "Yes, you did, honorable senator."