I Became a Witch and Started an Industrial Revolution

Chapter 28: The 80–20 Principle — We take eighty, you take twenty.

Mitia wandered around the village, going into the poorest houses and talking with the common people.

In principle she was not there to make trouble for anyone; she was just checking where the work had fallen short.

She had walked through several such villages — the more remote, the more she had to look.

Everything else could be talked about, but when it came to food, if even one household went hungry it meant the local leadership team had a problem.

This was the area Mitia supervised most strictly.

The nationalized land reform had reduced land taxes to the minimum; fertilizers and seeds at the source were all handled by the government.

If a household lacked labor, or if there were lonely elderly people, their plots were instead rented out to local garrisons to cultivate; the soldiers gave up a portion of the harvest and in return received actual grain.

If the policies were fully implemented, there would be no principled problem of hunger — unless someone tried to revive the old noble-style land grabs.

If that happened, she did not mind marching in and making everyone retract their claws.

Fortunately she did not find that kind of problem.

Basically people were a bit strapped, but they could still eat three meals of thin gruel.

The remaining issue was simply that land yields could not keep up.

She did have a not-quite-a-solution.

At present, because grain was a necessity, its market price remained relatively high.

If she encouraged the populace to develop some industry and commerce, they could earn extra income to balance expenses.

Most important, with her support industry could crush surrounding countries at a lower level — by harvesting foreign wealth to fatten their own.

Build larger factories, hire more workers, make more products; when ordinary people had money the products would circulate, tax revenue would rise, and she could subsidize grain prices to bring them down.

That sounded all right in theory, but the concrete execution plan — and how to restrict and prevent the rise of big capital later — was another problem.

Mitia thought for a moment and asked the elderly man beside her, “Old Village Head, are there any craftsmen in our village?”

“Ah?”

“I mean people with a special skill, like carpenters, blacksmiths, that sort of thing.”

“Oh, that. We have a few. Take Karl’s family — they’re carpenters by inheritance.

The stools and tables they made were sturdy and durable; they’re still doing it now.”

“It’s just that their prices are a bit high; ordinary families can’t always afford them. Mostly they still farm to make a living, and only take a small job now and then to earn pocket money.”

“Then come on, take me to his house. I want to get a concrete understanding.”

“All right, Commander, please follow me.”

Mitia and her party followed the Old Village Head to Karl the carpenter’s house and spoke with Old Karl.

“Making stools and tables takes a lot of time and effort; that time cost is there, so it’s very hard for us to lower prices. Otherwise we might as well honestly till the fields…”

Mitia crouched down, looked at their so-called carpenter ‘tools’, and asked aloud:

“So — if you had better tools to improve your efficiency, your costs would come down, right?”

“Ah? Yes, Your Excellency.”

Mitia nodded thoughtfully.

“I understand. For a while you can pay attention to the government notices posted in town, or wait for the civil officials to come down and explain.

The government will distribute a batch of new machines to you; we’ll talk about how to receive them later.”

“All right! Thank you, Your Excellency!”

“You don’t need to call me ‘Your Excellency’. If possible, call me Ms. Mitia. Actually I prefer the title ‘Comrade’.”

“....”

Back at the Commander’s residence, Mitia began to draft the industrial plan.

She had, subconsciously, accepted that industrialization would crush small household handicraft workshops — and, in fact, that was true.

But she seemed able to use a comparatively reasonable policy to help those people in the territory transition, rather than passively waiting for them to fade away.

First, she ruled out the state-owned enterprise model.

She would only use state enterprises where stability and security of basic livelihoods were needed, and for national defense industry, and for high value-added luxury goods.

Those three corresponded to people’s lives, national security, and sources of tax revenue; the latter could subsidize the first two, so they had to be kept in state hands.

She would not nationalize everything, but she would not fully liberalize either — absolute free-market economics meant disorder and chaos, a winner-takes-all world that only grew fatter.

Total control would not work either.

So what should be done?

Mitia’s idea was a compromise: private, but not entirely private.

She hoped to suffocate capitalists in the womb in this world!

Her initial move would be to decree that military factories spin off a portion to specialize in civilian machinery.

For example, if carpentry’s handcraft costs were high, they could develop and manufacture a batch of cutting machines needed for sawmills.

Then those machines would be leased, as interest-free loans, to certified original craftsmen so they could manufacture goods at low cost and quickly.

If a craftsman grew — from a small workshop into a small factory employing workers — at that point he would need to apply to the newly created department to found a company.

The key was: if his application was approved, he would obtain a legal, compliant company license and qualification.

A factory turned company would become a shareholding company.

Products he made, after inspection, could be sold externally through official caravans.

The company would adopt a dual-share mechanism: real shares and virtual shares.

Real shares conferred management rights, ownership, and voting rights; virtual shares only conferred dividend rights.

At first the owner would fully hold the real shares, but starting from the tenth employee’s hiring the company would automatically form an Employee Committee, whose chair would be elected by the employees’ votes.

On the legal level the Employee Committee would automatically hold 10% of the real-share profits to distribute dividends to those ten employees.

The Employee Committee’s real-share portion would increase with the company’s rating, scale, total assets, and number of employees, up to a cap of 99%.

Employees themselves did not directly hold shares; after joining they received profit distributions from the Employee Committee’s allotment, so these were called virtual shares.

If they left or were dismissed, those allocations would automatically revert to the Employee Committee.

Actual shareholders were the Employee Committee and the owner; even if the owner held only a minimum of 1% real equity it would still constitute the basis for exercising managerial rights — in principle the Employee Committee did not intervene in management.

Of course, that 1% was the floor for real shares.

For virtual shares the owner’s subscription could cap out at 20%, meaning he could at most take 20% of the company’s total profits; the remaining 80% belonged to the employees.

Whether a company could make money and how much it earned would become a matter that concerned everyone in the company; everyone would have visible value.

The idea was workable, but implementation would be difficult.

So Mitia merged accounting, auditing, and tax departments and embedded them directly into companies.

Each company reaching a certain scale would have to apply for accountants and auditors specially trained by the state; their wages would be paid by the state, and they would operate parallel to the company yet remain independent.

Above them would be a chief tax authority that had the right to monitor the company’s cash flow on site at any time, so they could collect taxes accurately.

In short, Mitia set a profit threshold for unborn capitalists: no matter how large your company became, you would have to give eighty percent of its benefits to the employees.

This was the 80–20 principle as Mitia understood it.

And to fetter their hands further, she separated company finances; the state tax department could directly pry into their accounts, and there remained the final check — the Employee Committee.