STORM FROM THE SHADOWS â€“ snippet 103:
“– so that just about takes care of the domestic side,” Joachim Alquezar said, looking across the conference table at Dame Estelle Matsuko, Baroness Medusa. “I’m not entirely happy about the situation at Marian, but I think it’s mostly a tempest in a teapot. Someone in the local planetary government with too big an opinion of what he’s due feels like he got his toes stepped on, and he’s pissing and moaning about it. No one’s going to let him get away with it long enough for it to become a real problem, but I’m afraid this is hardly going to be the only place something like this is going to come up before all’s said and done. So it might not be a bad idea for Samiha to send someone from her ministry out to read them the riot act just to make sure his own people step on him hard enough.”
Alquezar, Medusa was pleased to note, showed no signs — as yet — of developing the sort of formality-craving sense of self-importance she’d seen out of altogether too many political leaders over the decades. Of course, there was plenty of time for that, she supposed, reminding herself not to let her hopes get too high.
After all, all of a pessimistâ€™s surprises are pleasant ones, she thought drily. Although I have to say, I think he’s a lot less likely to go that way than some of the politicians I’ve seen back home! Than lots of the politicos I’ve seen back home, actually . . . or than that poisonous little twerp Van Scheldt would like him to be, for that matter.
She wondered — again — why Alquezar didnâ€™t just go ahead and fire Van Scheldt. The man was certainly efficient, but if there was anyone in the entire Alquezar Government who she trusted less in the dark. . . .
“As you say, Mr. Prime Minister,” she said out loud after a moment, “this is a domestic matter for the Talbott Quadrant. It doesn’t really come under my umbrella as the Imperial Governor unless things get so out of hand I need to step in and squash someone. So far, this doesn’t strike me as even beginning to reach that level. Would you concur, Madam Secretary?”
“Oh, I’d say that was definitely the case, Madam Governor,” Samiha Lababibi replied with a smile. “Joachim is absolutely right about what’s going on, except that in this case, I’m fairly sure it’s not a ‘he’ who’s doing the pissing and moaning. I’ve got a pretty good idea exactly who it is, as a matter of fact, and if I’m right, it’s a ‘she.’ It’s not really that she got her toes stepped on, either; it’s that she was hoping for a little better opportunity to line her own pockets off of the investment credits program.” Lababibi shook her head. “I’m afraid a few people are still having a bit of difficulty realizing it isn’t going to go on being business as usual. As Joachim says, it’s not last time something like this is going to come up, either. I can think of some people right here in Spindle — and not visitors to my fair home world, either, I’m afraid — who feel exactly the same way and may actually be stupid enough to try and do something similar.”
And that’s something pretty remarkable, too, Medusa thought with a sense of profound satisfaction. Back during the Constitutional Convention, it would never have occurred to Lababibi to say something like that. Not because she’s ever been deliberately corrupt herself, but just because she’s always been part of the topmost layer of the political and economic structures here in Spindle, with all of the insulation from everyone else’s reality that comes with that. She might have sympathized intellectually with someone like Krietzmann, but she could never really have understood where Henri comes from. It was just too far outside her own experience. I wondered if putting her inside the Star Empire’s fiscal policies as the Quadrant’s treasurer would shake up her own comfortable little perceptions of the universe. I always knew she was smart enough for it to, at least, but smart doesn’t necessarily equate to wise, and I’m glad to see it seems to be working out in this case, at least.
“In this case, though,” Lababibi continued, blissfully unaware of the governor’s thoughts, “I believe I can . . . reason with the culprit. If I point out, speaking as the Quadrant’s Treasury Secretary, that the investment credits are being offered solely on a private citizen basis and that both the Alquezar Government and Her Majesty would look with . . . profound displeasure, shall we say, on any effort by local governments to interfere with that, I think she’ll get the message.”
“Good.” Medusa smiled, then sobered slightly. “As I say, this does strike me as an internal matter for the Quadrant, and you’re quite right, Samiha. This entire credit program is being offered to private citizens, which means that, aside from the tax credit portion of it, it’s not properly a matter for government control or intrusion at all. You might want to deliver your message in a fashion which makes it clear my office and I are being kept in the loop, however. Let me do a little ominous looming in the background, but don’t make me any sort of explicit big stick. Let them draw any inferences they want, but not only is it not my place to be interfering in a matter like this unless you or Joachim request it, I want everyone to understand both that it I know it isn’t and that the Quadrant government is all grown up and able to make its own decisions and do any hammering you people think is required.”
Lababibi nodded, and Medusa nodded back with another flicker of satisfaction at how well the former president of the Split System was working out handling Treasury matters for the Quadrant. And not, this time, simply because of the shift in her attitude away from the “way things are” view of oligarchical privilege. Her awareness of the need to find the right balance between local decision and policy making — and enforcement — and imperial authority was another huge plus in Medusa’s opinion.
The entire situation was still something of a two-headed monster for everyone involved, of course. Under the new constitution, Alquezar, as the Quadrant’s Prime Minister, was the legal head of government for the Quadrant. That gave him and the rest of the Quadrant an enormous degree of local autonomy . . . and the accountability that went with it. However, the entire Quadrant was responsible for accommodating itself to the policies of the Star Empire of Manticore, represented and enunciated in this case by one Baroness Medusa. While she could not normally overrule specific policy decisions or acts of local legislation, she had complete authority — and the power of the veto — when it came to making certain those decisions and pieces of legislation fitted smoothly into imperial guidelines in those areas where the Empress’ authority was paramount. Despite the Quadrant Constitution’s neatly delimited articles and sections, actually implementing its provisions remained a work in progress, and that wasn’t going to change anytime soon. It was going to take some time for the lot of them to work out exactly how and where the pragmatic limits of specified authority and responsibility fell, but so far things seemed to be headed in the right direction. At least all of the members of the Alquezar Government seemed determined to see to it that they did.
The investment credits program and how Alquezar’s cabinet approached it were a case in point, in Medusa’s opinion.
Empress Elizabeth had decided, long before the Constitutional Convention had finally voted out the provisions of the Quadrant’s new constitution, that her newer subjects were not going to be taken to the financial cleaners by her older ones. At the same time, it was clearly imperative — for a lot of reasons — to push investment in the Talbott Cluster as hard and fast as possible. The Quadrant had a lot of people and a lot of star systems, but its seriously backward technology base urgently required updating and expansion, and investment capital was hard to come by locally. So Elizabeth and Prime Minister Grantville had decided that for the first ten T-years of operation, any new startup endeavor in the Quadrant would enjoy a reduction in taxation equal to the percentage of ownership held by citizens of the Quadrant. After ten T-years, the tax break would reduce by five percent per T-year for another ten T-years, then terminate completely in the twenty-first T-year. That gave tremendous incentive for investors from the Old Star Kingdom to seek out local partners, and all government really had to do was to keep track of that percentage of local ownership and administer the tax breaks. It most emphatically did not have any role in creating the partnerships in question.
Some of the local oligarchs appeared unable (or unwilling) to grasp that point. They’d expected to control ownership of the new enterprises much as they had dominated the pre-annexation financial structures of the Talbott Cluster. The smarter of them, on the other hand, had recognized early on that there were going to be enormous changes. They’d realized that they’d better adjust to the realization that elements of their populations who previously had been insignificant blips as far as local financial markets were concerned were about to find themselves highly attractive to Manticoran investment partners.
Which was exactly the way things were working out, much to the satisfaction of Elizabeth Winton. Many of the Star Kingdom’s investors were allowing their newfound Talbott partners to finance their share of ownership as a percentage of the tax credits, which had the effect of tremendously reducing the amount of startup capital the Talbotters required. That was allowing people from far outside the ranks of the traditional oligarchies to become significant players, which was about to both expand and strengthen the overall economy of the Quadrant while simultaneously severely curtailing the “old guard’s” control over that economy. Joachim Alquezar, his cabinet, and his Constitutional Union Party (which held an outright majority of over eighteen percent in the Quadrant’s new Parliament), all understood that, and they were working hard to push the process along.
Which brought Medusa back to the situation in Marian. Apparently one of the local oligarchs — and, like Lababibi, Medusa thought she could make a fairly accurate guess as to exactly who the oligarch in question might be — had decided she ought to receive a “commission” for brokering and expediting the formation of partnerships between Manticoran investors and their Talbott colleagues. Words like extortion, graft, and bribery came to mind whenever Medusa thought about it, and she almost hoped the culprit would prove less amenable to sweet reason than Alquezar and Lababibi expected. She couldn’t remember exactly who it was back on Old Terra who’d been in favor of shooting a few people “to encourage the others,” but in this case, Estelle Matsuko was prepared to pay for the ammunition herself.
Figuratively speaking, of course.
That tax break works the other way. I am a local. I have the capital to do something. I will find a Manticorian, such as a sailor on shore leave, and offer him two rounds of drinks if he will buy one share of preferred stock@ one dollar, that being preferred stock that will receive 1% of all tax savings. My firm is now 99.999999% locally owned, and I am exempt from almost all taxes. And the sailor never has to worry about where his next pay check comes from.
This is a brilliant plan! When can I sign up?
You misunderstand the whole thing. It is intended to bring capital into the quadrant. When your local has enough money and expertise to build the corporation from the scratch he will get the full 100% tax extemption.
But to get somebody like Hauptmann or Alexander-Harrington to let the talbotters partake in the venture it needs some advantages.
Actually I do understand the whole thing. It is a superb example of state corporate socialism having effects that were not intended, but would obviously occur, namely that if you are a quadrant businessman you have just been handled a way to stop paying taxes.
So what? Manticore hasn't gotten these taxes anyway until now. They will get them in 20 years. But they will get much more tax-money with the new investments than they loose through clever talboters. The whole sheme is to bring badly needed money into the quadrant now and not in 5-10 years when the terminus brought up the area infrastructure alone, and still let the talboters reap the gain from their work.
It may be "intended to bring capital into the Quadrant", but George is correct that it may have unintended consequences. "Any new startup" could be the intended Manticore money flowing in, or it could be the current wealthy class in the system cashing in their old interests and making a new, tax-free "startup". Basically, whenever you make a tax loophole, people will find ways to use it. And not always the people you expect.
Yes, the local wealthy can use it. But what? The local wealthy are as a rule not so wealthy that it really is so bad.
There are two segments of the population in the Quadrant that could use this tax provision.
Those who have don't have any capital currently, but know the people, markets, have the ability to run the companies. Manticore is not going to be exporting thousands, hundreds of thousands of people to the quadrant, to run the companies. There is a war on. What Manticore can provide is the capital, which will be used to buy machines and factories (from Manticore) to build up the infrastructure. For these people, the program will work, as the Empress desires. The people of the Quadrant are critical to identifying the opportunities that exist (would a Manticorian ever come up with the idea for domed cities on Grayson? It took a local.
The second group of people in the quadrant that could utilize these tax provisions are the existing oligarchs, who, with their personal wealth, could invest in the quadrant directly.
a) Why is this a bad thing? In the first book, there was a comment made that one of the reasons that economic growth was slow in the quadrant is that the existing wealth was not being invested in the economy. Manticore is a Capitalistic society (even more so that the USA), and no one objects to the statement of, the rich get richer. (As an aside, who do you think will be investing in the quadrant, from the Manticore's side? The Hartman’s, Harrington’s, etc. Why is there an objection to the Quadrants rich getting richer, but not the Manticore's.)
b) The existing oligarchs probably don't, as a general rule, have the skills or ability, to identify and operate new business ventures. How many politicians, can you say, are capable of running a fortune 500 company, let alone, with the vision, to become a fortune 500? Further, it can only be worse in the quadrant, as the oligarchs are all prominent families, who never even had to work at being politicians.
You seem to miss a important point. There are two types of oligarchs in the quadrant. There are Bernadus Van Dort and the likes that are not only relatively rich but also rather efficient in building cooperations. These are the ones that will invest in the quadrant and enlarge their ventures.
Then we have the… well… aristocratics in all but name, that see their wealth and the lifestyle asociated with it as a birthright and look down at the "lower classes". They may or may not begin a venture. But their whole thinking will in most cases prevent them from being successful.
They need workers, technicans and customers. But they can't be nice to these people. So they have no loyality. So if a manticorean investor comes to the workers and/or technicans and offers them the money to start their own venture they will jump on it in no time.
And the oligarch lost a big part of his workforce, a big part of his customer base and his monopoly in one single step.
Many of the oligarchs will keep large parts of their fortune, but their relative fortune will be much much dimished.
You do realize that the Harrington's, Hauptman's, Dempsey's etc, do not get the tax break, or at least their portion of the ownership.
Let's say that one of the younger Dempsey's is visiting the Quadrant and runs into the equivalent of Adam Gerrick. After a discussion over a beer or two, they figure out that they can start a company that will make them hundreds of millions dollars a year. Dempsey has enough money to start the company and could hire the engineer to be chief engineer, but then he would have to pay full taxes on the corporation. If they create the corporation with the engineer being half partner, his "part" of the start up cash is the half taxes that they pay for the next 10 years and the reduced taxes for the next 10 years.
What's more, that situation will build close ties bewtween the Quadrand and the Old Kingdom. -This- is the true point of the tax provisions.
To look at it from another angle, the situation that they're trying to avoid is one where branches of existing Manticoran buisnesses come in and dominate the markets in the Quadrant, stirring up resentment at those Damn Foreign Bloodsuckers.
I'm wondering if Harrington will send someone out this way to continue to build up her financial empire. I can see Hauptman doing so.
The basis of all trade is mutual needs. The quadrant needs Manticore factories, machines, medicines, and teachers. What does Manticore want? i) Troops ii) Ships. What does the quadrant offer? Investment opportunities, to get money, money that can be used to build ships. Manticore has been in a war for 20 years. With this program they will see a huge increase in the tax base, and revenue (although in 10-25 years), to build ships. It may not make a difference now, but in 25 years, Manticore will be unstoppable. The only reason Manticore hasn't lost the war yet, is that Grayson has managed a significant fleet build-up. Now imagine Grayson, multiplied by 30.
Yes, some of the Oligarchs are going to try to skim off the top, and they will be hammered down, but if they play by the rules, and are any good at it, it is a win win for everybody.
For the near future, Manticore will be making it's money off the tariffs for using the Lynx terminus. That terminus will allow worlds on that side of the Solarian League ship cheaper and quicker to a large hunk of the rest of the SL including Earth. The Empire can wait the 20 years for the taxes out of the quadrant.
The big difference between the Talbotters and Grayson is that Grayson knew the need for a powerful military. The Quadrant seems like it was a fairly peaceful place, and probably will not recognize the immediate need for a military build up. I would guess that they will get a large number of volunteers from the poorer classes. I imagine that even the pay for a recruit would be a significant amount of money.
Also Grayson actually received official manticorean fundings. It also had an inborn inventiveness that was for all purposes invaluable.
Count in the graysons need for spaceborn industry, their ingenious thinking, their religion that revells in new ways to do something and of course that they where in a war for most of 500 years, and you have your explanation why they could build up a relative modern navy in less than 10 years, inlcuding the yards, the ship designs and the understanding of the technology.
Of all the systems we know of in the quadrant, only Dresden seems to come near that particular mix bend for infrastructure upbuilding.