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I strongly recommend you read pt. 46 before you read this.  

For All Nails, pt. 43:  Tails and Dogs

December 1973

Taipei, Taiwan

Carl Salazar was a good businessman, and Carl Salazar could read
balance sheets.  Even ones as long and complicated as Kramer
Associate's consolidated business statements.  The saldo was a deep
deep red.  [1]  It had been ever since Project Taichung.  No, it had
been ever since the Global War.  Tossing away 40 _billion_ pounds on
the war had blown a giant hole in the company's balance sheet.  [2] 
Kramer liquidated practically all its liquid European financial assets
to pay for those operations, and had been lambasted in Britain for it.
 [3]  Later British moves against the company's assets caused further
pain.

Then came project Taichung.  And the submersible project.  And the
missile program.  Worse yet, unlike regular investments, those
projects continued to lose money once they became operational.  The
satellite project might, eventually, perhaps turn a profit one day ---
but the market for orbital communications relays was at best
speculative.  Anyway, Kramer's rockets were heavily over-engineered
for any possible commercial purpose.  [3a]

Of course, one possibility to cover the capital hemorrhage was arms
sales to countries like Australia, Japan, Scanindinavia or the CNA. 
That was a big step, however.  Kramer had made some cash selling
modern submersibles to the Scandinavians, and obsolete naval surplus
to the Japanese, but those markets were only so deep.  Japanese
purchases were, in fact, falling.  Security concerns meant that Kramer
never got R&D contracts.

The CNA was an enticing market, in theory.  Unfortunately, after the
Boricuan fiasco Carter Monaghan didn't have the political capital to
steer a pence of Confederation military spending to Kramer
subsidiaries in that country.  And that Liddy hombre seemed to be
supernaturally capable of identifying Kramer subsidiaries.  One hell
of a accountant, Liddy was.  [4]

If the CNA wasn't buying, then Britain wasn't buying.  Scandinavia
wasn't a big market, the Latin Americans were broke, the Japanese and
Australians didn't want to depend on a potentially hostile "power,"
and selling to Germany or Mexico would be clinically insane.

It was a dilemma.


February 8th, 1974, 9:00am

Kramer Associates HQ, Taipei, Taiwan

The Associates' Chief Financial Officer, Eric Kaplan, was a short man,
chubby and balding, usually jovial.  But not today.  "We can sell all
the weapons we we like to Taiwan or the Philippines or Korea or Outer
Mongolia.  It's all just spooning water back into a tank being drained
by a garden hose." A slide flashed on the screen.  "The investments in
developing the Sun-class destroyer, or the Superfly bomber, those are
sunk.  [4a]   We wouldn't make a return on our previous investments,
let alone cover the amount we're plowing into developing new systems."

Joseph Aquino spoke up.  "What about the Scandinavians?  They bought
those submersibles last year, and they might well be interested in
other weapons platforms."

Eric Kaplan looked over at Christopher Newman.  Blonde and blue-eyed,
and fluent in several Scandinavian dialects, Newman had negotiated the
Scandinavian deal, and could better answer the question.  "Well, the
Scandinavians made it clear that this was a one-shot deal.  They are
busily developing their own missile systems, and don't want to be
dependent on East Asian weapons for their defense.  We'll be able to
sell all sorts of things to them, now and in the future, but we can't
count on them to be a regular customer.  Certainly not large enough to
cover the sunk costs of development."

Eric nodded.  "We need a long-term customer, someone willing to commit
to large-scale procurements, enough to cover our development costs. 
The Scandinavian purchases barely covered the _marginal_ costs of
building the individual submersibles and their missile systems."

Newman added, "There are other potential markets."

Peng Ting-yi shot that idea down before it could be made more
concrete. "You," and that _you_ was, unintentionally, pregnant with
meaning, "Cannot be thinking of selling _modern_ equipment to the
Australians or Japanese."

"No, of course not," said Kaplan.  "My point is that this organization
is in deep financial trouble, and it's getting worse.  Our huge
overhead for security operations is only the start."  Kaplan clicked
through to another slide.  "Consider.  Our steel operations in the
Philippines are losing money.  Skilled labor is scarce, the unions are
jeffy, and the infrastructure is decaying, but the Philippine
government won't less us lay anyone off.  Our newer plants in the
Cantonese and Fukienese republics are profitable, but are facing
strong competition from the Japanese, the Brazilians, and the
Mexicans."  [5]

Another slide clicked into place.   

"These are figures from our consumer durables division.  They include
profits and losses incurred by companies in which we have a minority
stake.  As you can see, the only profit centers are in the Zollverein,
and those profits are slim.  Not to mention almost impossible to
transfer to Taipei.  Since the devaluation, Mexican producers have had
an incredible cost advantage."  [6]

Marcia Tseng raised her hand.  "Aren't wages still _much_ lower in
Canton?"

Kaplan nodded.  "Yes, but Mexican factories are still more efficient,
at least on average, and they enjoy lower raw material and
transportation costs.  Consider the CNA market.  Mexico allows some
trans-shipment of cargoes from our East Asia facilities, but only
some.  Combined with the recent border closures, it is the equivalent
of an additional ten percent tariff on exports from our overseas
facilities.  We can avoid some of that by going around South America,
but that imposes its own costs.  As for our North American facilities,
the recent hike in CNA tariffs has helped, but not nearly as much as
we'd like.  For obvious reasons, we can't lobby openly as long as
we're perceived as a potentially hostile power.  There are some ways
around that, but our influence is limited."  [6a]

Another slide.  "Mining is an equally large sink.  Mexico is a net
exporter of almost every major industrial metal except tungsten.  The
devaluation has also given Mexican producers a major cost advantage. 
The recent trade deal with the Zollverein only cements that advantage.
 Our mining operations are still in the black, but barely."  He
paused.  "I need not mention the impact of the Traitorious Eight."

"Something must be done, or we face bankruptcy."

There was silence around the table.


February 2nd, 1974

Dozois Golf Course, Taipei, Taiwan

Carl Salazar didn't really like golf much although he had become very
good at it.  Ironically, neither did Lin Chi-chao.  But golf was a
passion in Taiwan.  It was where and how business was done.  And so,
they played.

"Hang on," said Lin, as he practiced his swing.  Lin was a large man,
an unusually large man, a member of the first generation of Chinese to
grow up adequately nourished.  He towered over Carl Salazar, who was
many things, but not tall.

Thwack!  Lin hit the ball, which sailed off in the wrong direction. 
"Not terribly bad," said Lin, without irony.  They headed off on foot.
 After all, the whole point of this was to have time to talk and
reflect.

"Almost as good as Wayne Ellis," said Salazar, mentioning the
Australian golf champion.

Lin snorted.  "I hope not.  Australians.  Uncouth people.  Worse than
Mexicans, who at least have a veneer of Hispano manners left."

Salazar nodded, although he disagreed with Lin's assessment of
Mexicans.  In his experience, Mexicans had long abandoned any remnant
of Hispano style.  A nation of nacos, in his opinion.

But what Salazar said was, "Australians can be overly forward, not to
mention stubborn."

"Yes.  Very insistent."  The Prime Minister of the Republic of Taiwan
paused for a moment.  "The strange thing about Australians is that
both forms and substance seem to matter equally to them.  If the forms
are not right, they won't trust the substance.  Yet they never pay
attention to the substance, unless the forms are correct.  Very
strange people."

Salazar nodded.  "It is understandable, of course."

"Of course."  They walked in silence for a few more steps.  "There are
many Chinese who are the same way.  Especially in the legislature."

They came upon the ball, which had avoided the rough.  This time,
Salazar lined up his shot.  Thwack.  Perfect shot.  "I hit that?"
muttered Salazar.

"Yes.  Amazing.  My ball is that way.  Come."  They walked over
towards the green.  "I was in the Navy, you know."

"Really?"  Of course, Salazar knew this, but this was how Lin did
things.

"Yes.  Commander, in fact.  I was XO on a crusier.  Strangely enough,
the captain was not in the Taiwanese navy at all, but that was just
form.  The substance of our loyalty was the same."

Salazar nodded.

"Unfortunately, form can guarantee and determine substance.  In the
long run.  The Australians may have a point."  Lin looked at Salazar. 
The CEO of Kramer Associates looked completely relaxed in his
red-and-blue guayabera.

"They do.  They certainly do."  The two men stopped walking.

Lin looked at Salazar.  "It is strange, you know."  Salazar looked
back quizzically at the much-younger Lin.  "I remember when I took
this job, a year ago, after the party congress.  Those who were giving
up power seemed relaxed, almost relieved.  I and the men around me,
who had sought power and were now receiving it, felt nothing but
dread.  You, sir, you look relaxed."

Salazar smiled.  "I am.  I am very relaxed."

"Perhaps you should not be."  The reference was cryptic to neither of
them.

"Perhaps not.  But then again, were the men you took over from too
relaxed as well?  Form determines substance."

Lin nodded.  "That it does, my friend.  That it does."  They went on
with their game.


February 8th, 1974, 9:25am

Kramer Associates HQ, Taipei, Taiwan

Carl Salazar coughed.  "There is a way to cut through the knot, Eric."

"How, sir?  We're already selling off operations overseas, including
trademarks."  Kaplan looked worried.   That wasn't like him.

Marcia Tseng broke in.  "We can go back to the Taiwanese government
for another loan, sir, but their resources are limited.  We'd be using
the money to cover operating expenses, which violates our
understanding with them."

Ting-yi added, "The ruling party faces strong opposition.  It won't
look good if they have to drag out the Internal Security Act again."

"That's not it."  Salazar took a breath.  "Here's the plan.  We sell
the military operations to Taiwan.  All of them.  Most of our ships
and planes are already Taiwan-flagged, and many are under the
effective control of Taiwanese officers.  We just formalize that
reality.  In return, the Republic government assumes a large portion
of our debts."

He stood up out of his chair and leaned on his fingers, splayed across
the hardwood. "Then we cancel the R&D budget."

"What?!!" It was impossible to say who said what.

"You heard me.  We zero out the budget, and sell the physical
installations to Taiwan.  That cancels more liabilities.  But it gets
better.  We turn our _human_ capital --- and a good chunk of our
remaining physical capital --- from an economic liability into an
income-generating asset.  With our military responsibilities gone, we
can not only receive long-term weapons research _and_ production
contracts from Taiwan and the Chinese Community republics, but from
Australia and even Japan."  He looked around the table.    "On a
cost-plus basis."  [7]

Silence for two seconds.  Followed by ? bedlam.  "You can't do that!"
yelled Marcia Tseng.    "No way!"  "Impossible!" and more "What?!"s
followed. Several people around the table bolted to their feet.

Peng Ting-yi was one of them.  "You can't get rid of our deterrent! 
It's unilateral disarmament.  It's a bad choice!"

Salazar was a phlegmatic man, but this was too much.  "We CAN'T AFFORD
IT, Ting-yi!"  He took a breath.   "It's not a question of choice.  We
can't pay for our military machine.  What would you have us do?  Sell
our factories?  Offices?  Mines, real estate?  That would work for a
while.  But it would leave us nothing more than a roving military
machine.  How would we pay for it?  Extorting tribute from the peoples
of the Pacific under the threat of atomic annihilation?  Turn into
everything Mexican propaganda says we are?"

No one had ever seen Carl Salazar lose his temper before --- they were
shocked into silence.  "History forced us into a role that no company
should ever have had to play.  That idiot at the university, he writes
all sorts of fine stuff about how K.A. is really a country, blah blah.
 [8]  We're not.  We're a goddamned company.  We've forgotten that
because our stock has been worthless for so long.  We've forgotten
that because  politics has forced us to take more responsibility for
our employees and their families than any sensible company ever would.
 We've forgotten that because history has insured that none of us here
have much loyalty to any particular nation."  He paused again for a
moment.

"But we're NOT a country.  We could try to become an empire, but why? 
For what?"  Carl Salazar sagged for a moment.  "I don't see any other
options.  If anyone else does, I want to hear them, but I don't see
any other options." He collapsed back into his seat and rested his
forehead on his forefingers for a moment.  Then he looked up.  "Well,
sit down people!  We still have work to do."

As the surprised board members sat back down, Salazar added, almost
beneath his breath, "And we aren't giving up the spooks."  [9]


[1]  Hey, the company's origin is Mexican, after all.  

[2]  In 1934 the CNA's entire GNP amounted to 120.6 billion pounds. 
World GNP would unlikely be more than five times that number (more
like three) so let's say 600 billion pounds.  Let's say growth and
inflation push the CNA's GNP up to 300 billion by the end of the
Global War.  That still means _40 billion_ pounds is a hella lot of
money.

[3]  Kramer liquidated British and CNA assets to pay for Pacific
military spending.  The North Americans might not have cared much, but
Kramer's sales blew a big hole in Britain's balance-of-payments.
British nationalists still, rightly or wrongly, blame the nation's
dependence on the CNA and loss of empire on Kramer Associates, almost
as much as they blame Germany.

[3a]  Sadly, it looks like FANTL's space programs will be outgrowths
of ICBM development, with all the assorted problems.  This isn't going
to be an accelerated-space-technology timeline.  But it probably won't
have atomic-powered spaceplanes leaving leukemia trails either, so
things could be worse.

[4]  Salazar is making a joke to himself.  He knows that Liddy isn't
identifying Kramer-linked companies by reading balance sheets,
although the CBI does employ far more accountants than its OTL
equivalents.

[4a]  "Yo, yo, check it out.  Wazzup.  Dude, I'm so wasted."

[5]  The Cantonese Republic consists of the territories of the old
British South China Protectorate and covers the OTL provinces of
Kwangtung, Kwangsi, Yunnan, and a good chunk of Szechwan.  The
Fukienese Republic consists of Fukien and portions of Kiangsi. 
Together with Taiwan (and any other states anyone wishes to throw in)
they form the Chinese Economic Community.

[6]  Yeah, but the Mexican economy was in lousy shape for most of 1971
and the first few months of 1972 anyway, and still faces some
long-term problems which its government may or may not be capable of
handling.

[6a]  Illegal campaign contributions?  In the CNA?!  Never.

[7]  The final touches are being placed on the agreement that will
create the Canton Treaty Organization, or Canton Pact, under which
Japan, Australia, Taiwan, the Philippines, Korea, and some of the
Chinese republics will coordinate their military activities and
procurement.  The Australians and Japanese would not even consider a
treaty, despite its myriad advantages, unless they could be convinced
that K.A.'s military assets were firmly under the control of the
Taiwanese elected government.

[8]  This probably refers to Stanley Tulin.  It might also refer to
Sobel. Neither are particularly respected by Salazar, who thinks of
them mostly as company flacks rather than insightful analysts.  Both
are famous.  Many aspiring Ph.D.s in economic history will base their
careers in the 1990s on shooting down arguments drawn from their work.

[9]  Instead of a country influencing a company (Taiwan and K.A.),
we're back to the more traditional situation of the company
influencing the country.  Salazar figures Kramer has done as good a
job of institution-building in Taiwan as it's going to.  He doesn't
completely trust them, or anyone else for that matter, and so he's
decided to keep Kramer's covert branch separate from the Taiwanese
intelligence services.

Thoughts?  We're always open to suggestions.  

P.S.  Any interest on the NG in seeing a draft of the USM
constitution?