# Economy of Taihei Tengoku

Currency Downtown skyline and port of Takao Taihei Tael (TTT) 1 April - 31 March $2.912 trillion (nominal, 2017)$2.612 trillion (PPP, 2017) (7th) 4% (Q3 2017) $55,241 (nominal, 2017)$49,557 (PPP, 2017) (1st) Agriculture: 1.2% Industry: 21.6% Services: 77.2% 2% (Q3 2017) 11% 48.1 (2010) 2.5% 1st $1,034 billion$1,146 billion (40% of GDP) AAA \$695 billion

The economy of Taihei Tengoku is trade-oriented and market-based. It is the seventh largest economy in the world by gross domestic product and the wealthiest per capita in real terms. It is characterized by low tax rates and other liberal policies, including free-port trade in the two major coastal cities of Nara and Takao.

The Taihei economy is an advanced industrial and service economy, and serves as a major manufacturing and commercial hub. The port of Takao is the busiest port in Wilassia by both transshipment and TEU throughput, and the 4th busiest port in Maredoratica. The Nara Stock Exchange is the largest in Wilassia in terms of capitalization. Its currency, the tael, is managed by the quasi-private Bank of Nara.

## Economic history

### Early industrial period

Yamato industrialization spans both the period of the bakumatsu as well as the years after the Heavenly Revolution. Under the late shogunate Yamato exports were chiefly primary goods like grain, timber, and textiles, produced by peasants and artisans. Alisnan industrialists, by invitation of the shogun (and sometimes without) settled in the country to improve Yamato production techniques so that factories in Alisna would enjoy cheaper inputs. The first water-powered textile mill in Yamato opened in 1839, and on the eve of the revolution a nascent cottage industry was forming in the cities and the river valleys. However, Yamato society remained a firmly agrarian one, dominated by rice farming and the samurai lords who controlled the land. Many of the first "industrial" workers were laborers forced off the farm by grain shortages and natural disasters, and the chaos of the revolution further depressed agriculture and almost wiped out the Yamato cottage industry. Even the God Worshipper victory did not bring recovery, as the initial regime proved unstable, almost slipping back into civil war.

Nara in the 1880s.

The Shokai regime and the the later Domeito tetrarchy established a policy of state capitalism to industrialize Taihei Tengoku. Drawing heavily on Questarian and Moravian economists of the historical school, Taihei policy sought to advance from an agrarian to a modern industrial stage as quickly as possible, with the state playing the chief role. Under Shokai Sei's National Defense State, the state controlled the "commanding heights" of the economy to restore the rice harvest and increase industrial output. Shokai redistributed land both by force and by reforms to revitalize agriculture and to resettle the war-torn provinces with loyalists. The Shokai regime also founded factories, built the country's first railroads, and expanded education by sponsoring foreigners to teach Yamato and for Yamato to study abroad. Shokai's death brought the Domeito into power; though they despised Shokai Sei for his draconian rule they agreed in substance with most of his policies, and the tetrarchy continued the economic plans while doing away with the political excesses of the National Defense State.

In addition to direct investments, loyal samurai left their domains, paid off by the state. The former lords mixed with the urban merchant families through business and marriage alliances. The fusion of the former warrior and merchant houses created the zaibatsu, Taihei Tengoku's first industrial concerns. State intervention in the economy lessened as the nineteenth century drew to a close. Economic planning could be delegated to these industrial families, who were at an advantage relative to the rest of Wilassian industry and rapidly catching up with the rest of the world. A mercantilist trade network began to form in Wilassia; this time Taihei Tengoku was its core rather than its periphery.

The Great War precipitated an economic boom in Taihei Tengoku. Initially neutral, it was a safe haven for merchant shipping and Nara was a vital port to supply the distant and/or beseiged colonies of both the Coalition and the League over land, and its industries took on record contracts to supplement Alisnan production. Its self-interested neutrality was a source of tension as the war drew into its third year. Taihei Tengoku finally sided with the Coalition in 1917, contributing significant forces to the peninsular theater and conducting landings around the Pearl Sea.

### Taihei National System

The end of the Great War placed Taihei Tengoku as a civilized, industrial power, but still at an inferior position relative to Alisnan countries. It had gained a portion of the Sirenes from the WHOEVER, but its interests in newly independent Ruccola went unrecognized despite Taihei Tengoku contributing the majority of troops in the campaign. In protest Taihei Tengoku only agreed to observer status in the Maredoratic League and immediately re-normalized relations with Questers and Prekonate. The continuation of the Maredoratic Trade War worsened the country's economic outlook, as the war boom ended but (relatively) free trade did not return. The country's industry still relied heavily on imported inputs from raw materials to complex machinery, and its underdeveloped financial sector could not provide the capital needed as foreign sources fell behind capital controls.

The Domeito government, in an attempt to ameliorate its deteriorating terms of trade, implemented the National System in 1924. The state exerted its control over the economy once more through progressive cartelization, granting commercial privilege to the zaibatus in exchange for their compliance to government directives. Only the zaibatsus, now large industrial conglomerates, could provide the spare revenue to fund the government's industrial plans. State enterprises required huge initial investments and would take years or even over a decade to recoup its initial costs. In exchange, the Taihei government invested in Ruccola and South Alqosia to secure streams of raw materials while the central bank supported the zaibatsus with an expansionary monetary policy. Priority went to heavy industry, primarily in the north of the country, and to the military-industrial complex.

Economic growth slowed (as it did all across Maredoratica) during this period. The zaibatsu became organs of the state as they required more money to keep their industries operational, but simply printing money would destroy the country's scarce foreign exchange reserves with hyperinflation. As a solution, the Taihei government opted to demonetize the economy while placing production quotas on the zaibatsu to supply the needs of the population directly in kind. The Taihei government implemented peacetime rationing of gasoline in 1941, with rationing gradually expanding until most consumer goods were effectively demonetized by the 1960s in order to save all available money supply for international trade.

Despite this, the National System still moved towards crisis. The Maredoratic League Investment Bank made mercantilist trade nearly impossible. A sustained international trade imbalance would lead to a revision of the currency pegs to eliminate it even if one party was outside the League and not a signatory to the Bois Breton Agreement. The only solution was to directly increase the real Taihei economy; as state planners judged the domestic economy to be as industrialized as it could be presently the only alternative was war. The country instigated the Confronto against the Ruccolans, intending to covertly separate (and later annex) a large border region rich in minerals. The invasion failed and Taihei Tengoku faced international censure and stiff reparations payments to the Ruccolans.

### Liberalization

The collapse of the Domeito after the Confronto left the Rikken Aikokusha and its powerful leader, Ri Kou You, as the dominant faction within Taihei politics. The Rikken Aikokusha gained the majority in the Final Court in the 1966 tranche elections and Ri Kou You was crowned Wing King in December 1968. With the rest of the Regency rendered powerless by the collapse of the Domeito, Ri enjoyed a free hand in drafting and implementing comprehensive economic reforms. Between March 30 and April 1, Ri announced the replacement of the sen with the florin-pegged tael, abolished price controls and rationing, and merged the CBTT into the Nara Junker Bank to form the Bank of Nara, abolishing the National System in three days. In 1970 the adoption of the tael triggered another round of reforms, slashing most tax rates (including all tariffs) and reorganizing the Taihei welfare state around sovereign wealth funds and the negative income tax in place of the ration.

The economy quickly entered recovery and began a long period of sustained expansion. The suddenness of the reforms drained the excess cash reserves the zaibatsu held and monetized the now-legalized informal economy, ending the chronic shortages of consumer goods. Most zaibatsu collapsed into their constituent firms in order to resolve their outstanding liabilities. The transfer of capital and employees out of the cartels diversified the economy and created a multitude of new businesses on sounder financial footing. Taihei economic growth attracted foreign direct investment, driving further growth; the Taihei economy posted 11% growth in 1978. By Ri Kou You's death in 1999 Taihei Tengoku ranked sixth in the world for per capita income.

The Taihei economy continued to grow into the 21st century, eventually becoming the wealthiest in 2009. The Taihei economy last entered recession in 1990, after a Communist revolution in Questers destroyed significant Taihei investments in the country. Since then the economy has posted continual growth, the longest such period in modern history. The 2014 global financial crisis threatened another recession in the Taihei economy, to which the government responded to by formally adopting a gross national income target. The Bank of Nara dropped its reserve rates below zero, dramatically increasing the money supply to counteract the decline in economic activity. This unconventional monetary policy averted recession but prices rose dramatically, with the economy experiencing 10% inflation in 2014 and 4.7% inflation in 2015.

## Sectors

### Primary sectors

Agriculture produces about 1% of Taihei GDP and employs about 1.5% of the working population. The staple crop is rice, produced mainly in Kozuke and Mutsu commanderies. Agriculture is shrinking in both value of production and in employment: the average farmer is 56 years old and aging, many farming small plots only to supplement pension incomes. Immigrant workers rarely move out to the rural areas where most farmers live. Taihei fisheries collapsed in the 1990s due to overfishing, but are undergoing a recovery after fishing permits were decreased and there issue nationalized under the Fisheries Bureau.

Taihei Tengoku possesses marginal mineral and hydrocarbon resources. Domestic sources of iron and coal were almost entirely exhausted in the early 20th century, though one mine in Yamase commandery still produces low-grade anthracite coal for domestic use. Small mining operations in the north and east of the country extract minor amounts of antimony, lead, mercury, silver, titanium, and vanadium.

### Light industry

Taihei Tengoku's economic recovery rested on light industry. Most of the globe prioritized high-technology and capital-intensive industries during the Trade War, suppressing the consumption sector directly and indirectly. Taihei Tengoku's early liberalization rested upon an expansion of its light industry to increase its output of exports and employ its labor force, with the food and textile industries central to the recovery. As the Maredoratic Trade War wound down in the 1980s, Taihei Tengoku's well-developed light industry sector developed the country's first multinationals.

More modern light industries include consumer electronics and pharmaceuticals. Taihei Tengoku's unconventional patent system (subsidy-based rather than monopoly-based) encourages rapid and high-volume manufacturing of new intellectual properties before the government subsidies expire, and also allows new technical knowledge to disseminate across the entire industry rapidly. Taihei Tengoku accounts for about one-seventh of global pharmaceutical exports, mostly by generic drugs.

### Heavy industry

Under the National System, heavy industries like rail, shipbuilding, aviation, and arms manufacture received priority over all other economic sectors in resource allocation. The zaibatsu at the core of the National System were without exception heavy industrial concerns. Initially, these zaibatsu challenged the cutting edge of Maredoratic industry and were able to produce significant advances on their own, such as the invention of high-strength aircraft aluminium by the Tosa zaibatsu in 1940. However, the strains of the Bois Breton Agreement caused stagnation as labor productivity declined and the Taihei economy reached its intensive limits, unable to integrate into larger markets. By the 1960s many zaibatsu were "zombie firms:" slow-moving, structurally unsound, and kept together only by the cannibalization of other parts of the economy (such as the demonetization of the consumer sector).

Liberalization destroyed many zaibatsu outright, though this was reflective of the economy in general, which was over-industrialized and sustained many large factories at the expense of consumer production and quality of life. The explosion of light industry and services that rehabilitation brought siphoned many unproductive factory workers to these firms. The repeal of import restrictions also brought competition from Alisna, which was similarly over-industrialized and sold its excess production at low prices to a recovering Taihei economy. The few zaibatsu that survived reorganized into "industrial combinations" (工合, kōgō). A kogo consisted of a large portion (if not all) the domestic firms in a given sector (e.g. Kujo-Havel's monopoly on domestic shipbuilding) competing against foreign firms within Taihei Tengoku rather than with each other. Most importantly, the kogo did not have a bank under their control nor could they have more than an indirect relationship with the Bank of Nara, which countered the trend of the old zaibatsu to "zombify" without solid budget constraints.

The remaining state intervention in the economy is concentrated in heavy industry; the government subsidizes many industrial concerns for the sake of maintaining a military-industrial complex. The government privatized the national rail service between 1980 and 1986, as well as most of the road network. Most shipping ports in Taihei Tengoku are administered by their respective metropolitan or commandery government.

### Services

Taihei Tengoku has a highly developed service sector. Nara, in addition to being Wilassia's most visited city, is home to the continent's largest stock exchange.

There are no laws criminalizing insider trading.

## Law and government

Government spending in FY2017.

Negative income tax and VAT (30%)
Healthcare (21%)
Defense (21%)
General affairs (8%)
Investment (6%)
Environment (2%)
Other (12%)

### Regulation

Since the late 1970s Taihei Tengoku has led the world in ease of doing business rankings. The permit requirements to start a new business takes about one business day and involves one three-page form. Most disputes are settled in well-funded public arbitration courts with few explicit statutory regulations. There is no minimum wage, and labor market regulations such as work hours and benefits are almost entirely determined by bargaining.

The Taihei government maintains an unconventional intellectual property regime. Patents under Taihei law do not grant a monopoly license nor do they grant royalties from competitors using the patent. Instead, they grant a negative VAT for the holder of the patent for a limited time, with the magnitude and duration of the tax break determined by the Patent Bureau. Trade secrets do not exist per se in Taihei law as well. However, violation of non-disclosure agreements and similar clauses are punished as felony fraud and other intellectual properties such as trademarks are vigorously protected by the law.

### Taxation

The Taihei government levies three principal taxes: the income tax (including the payroll tax), the land value tax, and the value-added tax. The government ended corporate taxation in 1999, although copious deductions had made it long irrelevant, and abolished taxes on capital gains in 2004. The National Revenue Bureau collects about 19% of GDP as taxes annually.

• Income tax: Unlike most countries, Taihei income tax is assessed not as a rate but as direct payments. The size of these payments are continuously determined as the distance between gross income and a logarithm. The logarithmic formula is expressed as n times the base-n logarithm of the ratio of gross income to the average income. For incomes below a ratio of 2 the post-tax income is higher than gross income. Theoretically, the effective tax rate approaches 100% as personal incomes reach into trillions of ecus. In practice, personal incomes never reach this level of punitive taxation; the highest effective rate paid in 2017 was 21.9%. Spending on education and deposits into pensions and health savings accounts allow deduction of up to half the income tax. Citizens exempted from the draft pay an extra 3% of pre-tax income for twenty wage-earning years.
• Payroll tax: Unlike income taxes, payroll taxes are assessed at 10% gross salary, used to evenly fund the Pension and Hospital Fund accounts of employees.
• Value added tax: 3.33% (one-thirtieth) of most consumer goods. Food, clothing, and medicines are generally exempt.
• Land value tax: 1% of ground rent.

### Spending and investment

The state spends approximately 19% of GDP annually. Its largest commitments are income supplements, healthcare, and the National Protection Army. About 6% of the national budget, amounting to 1.5% of GDP, is invested in a sovereign wealth fund each year.

The Taihei government maintains three sovereign wealth funds under the management of the Bank of Nara: the Pension, Hospital, and Revenue Funds. The first two are funded by payroll tax revenues and provide retirement and medical savings accounts to citizens from long-term bond revenues. The Revenue Fund is a more liquid revenue equalization fund serving as a "war chest" in case of emergency.