Tesla Crash… Again

May 4, 2018
Laguna Beach, California

It was just a month and a half ago that Tesla approved an eye-popping long-term pay package, worth as much as $50 BILLION to founder and CEO Elon Musk.

And on Wednesday afternoon, Tesla held its first corporate earnings call since then.

You’d think that Elon would have been gracious and professional, anxious to demonstrate that the shareholders’ trust in him has been well-placed.

Instead the call was filled with contempt and disrespect, with Elon outright refusing to answer questions that he deemed ‘boring’.

Bear in mind, Tesla’s financial results were gruesome; the company burned through yet another $1.1 billion in cash last quarter. That’s 70% worse than in the same period last year.

Even more problematic, Tesla is losing money at such an unexpectedly fast rate that they’ll likely run out within the next several months.

According to the Wall Street Journal’s analysis, Tesla doesn’t have enough cash to cover its basic debt payments and capital leases due within the next six months.

Needless to say, investors are worried.

The shareholders and analysts on the call kept pressing Elon to explain how the company was going to survive, and how he would turn around Tesla’s notorious production challenges.

But Elon completely dismissed any such questions as “boring”, “bonehead”, and “not cool”.

Pretty amazing.

I mean, this guy was given a potentially $50 billion compensation package just six weeks ago.

So the LEAST he could do was answer his investors’ completely reasonable questions.

But he didn’t. It’s almost as if he deliberately wanted to show as much disrespect as possible to the trust and confidence that shareholders have placed in him.

This is a pretty despicable attitude for any executive to have.

Yet this whole situation is emblematic of what I call ‘the new rules of capitalism.’

And New Rule #1 is: Businesses no longer need to make money.

Tesla is just one of a multitude of high-flying, hot-shot companies whose entire business models are based on burning through cash, managed by executives who don’t care.

WeWork, as we’ve often discussed, is an even more absurd example.

WeWork provides short-term office space to companies around the world, with a whole bunch of interesting perks (including free tequila).

For customers, it’s great. But WeWork loses tons of money providing all those great perks to its customers… which means that investors are ultimately footing the bill.

In other words, the suckers who invested in WeWork are essentially buying tequila shots for the office tenants.

Similarly, Uber continues to lose money; according to the company’s leaked financial statements, Uber lost a whopping $4.5 billion in 2017.

To put it another way, every time you take an Uber somewhere, the company is losing money… which means that the suckers who invested in Uber are subsidizing your ride.

Netflix is another perennial loser, having burned through more than $2 billion of its shareholders’ money last year in order to produce original content.

Remember that the next time you binge watch Stranger Things— Netflix investors are heavily subsidizing your evening’s entertainment.

I read an article in the Wall Street Journal last weekend about young people in San Francisco who receive oodles of free goodies from VC-funded startups.

One guy was able to buy a small car because a car-sharing startup offered him thousands of dollars in CASH just to sign up and use the service.

Others talked about eating dozens of gourmet meals for free, courtesy of the various meal delivery startups in San Francisco who offer free meals to new customers.

Ultimately this means that the suckers who invested in those startups are buying meals, clothes, cars, and just about everything else, for freeloading consumers.

There are so many more examples– Dropbox, Snapchat, etc.– of companies whose sucker investors are footing the bill for consumers.

Each of these companies loses money. And it’s becoming an epidemic.

In fact, more than 20% of the companies which comprise the Russell 2000 index, and nearly 10% of companies in the S&P 500 index, burn through so much cash that they have to BORROW money just to pay INTEREST on their debts.

But under the new rules of capitalism, these losses don’t matter… because there are countless investors, funds, and bankers delighted to have the opportunity to put more capital into the business.

This isn’t normal– it goes against the most basic laws of finance: businesses are supposed to make money for their investors, not the other way around.

Yet investors keep throwing capital into these bottomless pits… while (and this is REALLY bizarre) simultaneously showering the founders with blind admiration.

It’s incredible how much praise and esteem is hurled upon company founders who burn through their investors’ capital like a deranged financial sociopath.

Instead of being fired for incompetence, however, they’re hailed as ‘visionaries’.

These people are completely out of touch– both the founders who treat their shareholders with such contempt, as well as the sucker investors who continue enabling this abuse.

You don’t have to be Nostradamus to recognize that some day this stupidity will end suddenly and painfully.

Simon Black,

Anti-Globalism, Counter-Revolution, Economics, Education, Liberty, Nationalism, Overwhelm the System, Resistance, Russia

What’s Old is New Again…

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Class Stratifications in the Soviet Union

THE Soviet intelligentsia may be roughly divided into three groups: the small nucleus of top professional politicians who form the Presidium of the Central Committee of the Party; a much more numerous upper layer of the bureaucracy which is well paid and enjoys substantial privileges; and all other educated people, who occupy the lower posts of the Soviet apparatus. Nothing in the Soviet Union is decided by ballot, and the rank and file of citizens play no political role.
The term bureaucracy has a different meaning in the U.S.S.R. than in non-Communist countries. Every educated man in Russia is a bureaucrat. His daily bread depends upon the state, and he must take orders from the professional politicians who are its masters. Secretaries of the Party and of the Trade Unions, industrial and agricultural executives, the technological personnel, men of learning, writers, composers, artists–all are functionaries of the state, the sole employer and the sole source of income. A biologist or a physiologist must follow the theories of Michurin or Pavlov, for such is the will of the professional politicians. A composer must produce melodious music for the same reason. A university professor or a research worker must accept the conclusions suggested by the Party leaders before he even begins his research. Trade Unions are the tools of the Party, and their secretaries are expected to fulfill the orders of the employer–the state, whose voice, again, is that of the top few. The Party machine is of course their instrument. They have effective means of enforcing obedience–the drastic criminal codes, the powers of the Ministry of the Interior which can impose exile or confinement to a forced labor camp without judicial trial, censorship, discharge, demotion or refusal to promote.
Even so, the bureaucrats below the top rung are not completely helpless. They do, to some extent, share the power held by the professional politicians. The ten members of the Presidium of the Central Committee of the Party formulate the external and internal policies of the U.S.S.R., but the bureaucrats advise them and assure the correct implementation of those policies. If the bureaucrats ceased to transform the blueprints of the Presidium into governmental activities, the wheels of the Soviet apparatus would come to a standstill. Prolonged passive resistance by the bureaucrats–if that can be imagined–would bring the régime down.
Although Stalin brought about this situation by building a completely bureaucratized state, he also saw the danger. He once compared the Party to the mythological Antaeus, the son of the goddess Earth, who could be defeated only by being lifted up and severed from contact with his divine mother. Heracles, his antagonist, knew the secret and destroyed him. Stalin said that disaster could befall the Party if it lost contact with its mother– “the toiling masses.” But he was using the obsolete Communist verbiage, meaningless to everyone including himself; for the Party leaders the “toiling masses” are not a mother but a stepchild, or, more accurately, a herd of sheep. Beneath the feet of the rulers at the top there is only one earth–the bureaucracy. It has grown in strength by reason of the very fact that it is indispensable. Hundreds, no doubt thousands, could be demoted, dismissed, “liquidated,” but as a class they are the pivot of the régime. If ever they were estranged as a body, Antaeus would be strangled.
Stalin did his best to impress upon the bureaucrats that they had personal, vested interests in the régime. He abandoned the teachings of Marx and Lenin in this respect, but he was actually more realistic than they, for the nationalization of all the means of production and the concentration of power in the hands of a small group of leaders of one Party demanded the creation of such a class. In his pamphlet completed before the October Revolution, “The State and Revolution,” Lenin had written:
The following measures of the [Paris] Commune emphasized by Marx are particularly noteworthy: the abolition of all representation allowances, and of all monetary privileges in the case of officials, the reduction of the remuneration of all servants of the state to the level of “workmen’s wages.” . . . And it is precisely on this particularly striking point, perhaps the most important as far as the problem of the state is concerned, that the teachings of Marx have been most completely forgotten. In popular commentaries, the number of which is legion, this is not mentioned. It is “good form” to keep silent about it as if it were a piece of old-fashioned “naïveté,” just as the Christians, after their religion had been given the status of a state religion, “forgot” the “naïveté” of primitive Christianity with its democratic revolutionary spirit.
Lenin was addressing his sarcastic remarks to the Western Socialists, but his words are prophetic in their application to the state which he helped to found, in which Marxism is now the state religion. Stalin described his own policy clearly in an interview with Emil Ludwig in 1931: “Egalitarianism has for its source the peasant way of thinking, the mentality of sharing everything equally, the mentality of the primitive peasant ‘Communism.’ Egalitarianism has nothing in common with Marxist Socialism.” His policy produced a society with highly-diversified incomes, and with distinct upper and middle classes composed of the Soviet bureaucrats.
The eminent rôle played by the intelligentsia may be gauged by its proportionately high representation on the various soviets and congresses. At the last national congress of trade unions, held in 1949, 71 percent of the delegates had had secondary or higher education; at the previous congress, held in 1932, only 40 percent of the delegates had had an equivalent education. In the present Supreme Soviet, elected in 1950, 69 percent of the deputies have had higher or secondary education. Out of 1,192 delegates to the last Congress of the Party (October 1952) 1,016 had higher or secondary education. Out of some 73 speakers who were allowed to address the Congress, 63 were members and four alternate members of the Central Committee, two were members of the Party Central Auditing Commission, and four occupied high positions in the Party provincial organizations; none of them worked at a plant or a collective farm. The Soviet toiling masses are not permitted to be represented by genuine proletarians.
In the Soviet Union a citizen belongs to the bureaucratic class by virtue of his education, the precondition of higher income. The disparity of incomes is apparent from the meager Soviet data. The manager of an important factory in heavy industry may have a monthly income of 5,000 or 6,000 rubles or more, including basic salary and bonuses. This differs sharply from the earnings of city people, who had an average income of 500 rubles per month in the period 1946-1951. A recent Soviet handbook on the mechanical-engineering industries lists eight categories of workers whose basic wages vary from 291.20 rubles per month to 757.12. To earn these wages a worker must fulfill his monthly minimum norm of output. Skilled workers may earn more, because they work according to piece rates.
The principal of a trade school (Labor Reserve school) has a monthly salary of 950 to 1,500 rubles, excluding bonuses, while a night-watchman or a cloakroom attendant at the same school gets from 260 to 280 rubles, and the furnace man from 310 to 335. A highly-skilled worker fares much better than his unskilled fellow-proletarian, and this helps in breaking down the solidarity among the Soviet workers. The meaning of an income of 300 or 600 rubles monthly (assuming that the wife of an unskilled worker also earns her living) becomes fairly plain if one recalls the Soviet retail prices of the most essential commodities: for example, rye bread, 1.50 to 1.80 rubles per klg.; beef, 11 to 18 per klg.; sugar, 10.40 to 12.20 per klg.; men’s shoes, from 200 to 400; women’s shoes, from 150 to 500. Those prices were lowered by an average of 10 percent to 15 percent on March 31, 1953.
The disparity of incomes produces great variations in the standards of living. Housing conditions may serve as an illustration, especially in a country notorious for its housing shortages. The scale is very wide–from one room shared by several strangers or one apartment by several families to the private ownership of a five-room dwelling house and a summer cottage. A well-paid member of the intelligentsia does not need to worry about the inconvenience of sharing his quarters with strangers. Since 1948 Soviet citizens have been permitted to own private dwelling houses of five rooms, while leasing from the state the plot of land on which the house stands. The house is owned in perpetuity and may be inherited by the relatives of the deceased owner. It may be built by its owner, or bought from the local municipal soviet or from the enterprise which employs the buyer. The law forbids one family to own more than one house. But a Soviet housing specialist hurries to comment on this regulation: “The simultaneous personal ownership of a dwelling house in a town and of a cottage in a rural, summer vacation or health resort locality is not contrary to law . . . . The cottage serves by its very nature the purpose of rest or of a medical cure and promotes that type of the creative concentration of mental forces which is ensured by the atmosphere of a forest park or of a rural place far removed from the noise and traffic of the city.” These few sentences tell the whole truth about the social stratification in the Soviet Union. A dignitary who can afford to buy a dwelling house and a summer cottage needs relaxation for “the creative concentration of his mental forces;” a worker who shares an apartment with a few other families supposedly gets all the rest that he is entitled to, however.
If the citizen purchases his dwelling house, 20 percent of the price must be paid in cash and the remainder by monthly instalments within two or three years. The All-Union Central Council of Trade Unions explained on November 13, 1948: “. . . the sale of individual dwelling houses to workers, engineering-technical and other officials, will begin on January 1, 1949, as a rule for cash and in exceptional cases for credits granted by banks with the obligation of repayment within the period of two to three years and at an interest fixed by law.” Only a well-paid person can afford to buy a house on such stiff conditions.
The Soviet taxation system relies heavily on indirect taxes on goods and services. More than 50 percent of the total Soviet state revenue is provided by the turnover tax–which we would call a sales tax–charged on every product and included in the retail price of all commodities. This tax, not the cost of production, represents the major portion of the retail prices of consumer goods. This might not make a great difference to a dignitary who earns several thousand rubles monthly, but it creates a vital problem for a manual worker who pays from 48 to 62 percent tax on a pound of potatoes.
Direct taxes produce usually about 9 percent of the total state revenue. The personal income tax begins at the rate of 2 percent on any income above the minimum of 260 rubles per month; the highest rate is 13 percent, on incomes of 1,000 rubles or more. Thus a person with a salary of more than 1,000 rubles is treated more leniently than the people in the corresponding income brackets in capitalist countries. The Socialist state does not intend to cut down the salaries of its favored supporters indirectly by the imposition of a high income tax. Moreover, members of the armed forces including the troops of the Ministry of the Interior, heroes of the Soviet Union and of Socialist Labor, and holders of decorations are totally exempt from income tax payments on their salaries or wages. The Stalin prize-winners do not pay any income tax on the value of the prize, which may be as high as 100,000 rubles. It is worth while noting that the Soviet income-tax regulations include a table of rates applicable to writers and artists which exceed the usual maximum of 13 percent, providing for a 33 percent tax on incomes of 100,000 rubles per year and still higher rates for higher incomes. Evidently the incomes granted to the most successful and conformist writers and artists are high indeed. The Soviet Government reduces the purchasing power of all citizens by annual state loans, to which everyone must subscribe at a rate equal to three or four weeks’ earnings. But again, this bears far more heavily on the poor than on the rich.
The differentiation of incomes naturally produces its social effects. One may hardly expect a well-paid dignitary with higher education to invite to his home a manual worker with low wages, poorly dressed and having practically no topic of conversation in common with his host. The Soviet practice duly registers these social divisions. If one glances, for example, at the ticket prices of the Trade Union movie theaters, one finds out that there are six categories of prices ranging from six to two rubles. An unskilled worker earning some 300 rubles per month cannot be expected to buy a six-ruble ticket; even an average wage-earner could hardly spend six rubles to go to the movies. Thus the upper stratum of the intelligentsia is well protected against unpleasant promiscuity with ordinary proletarians.
The disparity of incomes also influences educational opportunities. All Soviet citizens are expected to acquire an elementary education within the program of four grades. Wherever the seven-grade junior high schools are available (mostly in cities), children can continue their education up to and including the seventh grade. Within the limits of these seven grades, education is free. The delegates to the last Party Congress claimed that the seven-grade education had become universal in urban and rural districts. This claim may be accepted with a grain of salt, because previous Soviet data of recent years indicated that education through the seventh grade was generally available only in cities and towns and that education to the fourth grade only was the prevailing rule in the villages. Moreover, a peasant child is compelled to begin work on the collective farm at the age of 12.
Elementary education begins at the age of seven and is supposed to end at the age of 14. One may legitimately wonder whether a peasant youngster who has to work at the age of 12 can simultaneously attend classes of the upper grades of the junior high school. The urban child has no such problem, because the junior high school would probably be available, and his labor duty begins only at the age of 16. Because of the meager earnings of his parents such a child might be compelled to start working for his livelihood at the age of 14, with the permission of the labor inspector; but this should not prevent his graduation from the junior high school which takes place usually at the age of 14. There is in fact discrimination against rural children.
The discrimination against poorer town youngsters begins with the eighth grade of the secondary school, where free education ends. Beginning with the eighth grade of the secondary school, through the ninth and the tenth and through the whole university, students must pay fees unless their scholastic records are high enough to win them a state scholarship. The annual fees for the eighth, ninth and tenth grades range from 150 to 200 rubles. But poorer parents who want their children to rise in the world must find the money, for the secondary school certificate is the precondition of admission to a university, and the university diploma is the key to careers.
The existence of three types of schools–“elementary,” “junior high school” and “secondary”–produces further discrimination. Each begins with the first grade, and theoretically the corresponding grades should offer equivalent programs; elementary schools have only four grades, but the fifth, sixth and seventh grades of the “junior high school” should be interchangeable with the corresponding grades of the “secondary” school. But pupils at the secondary schools are the favored ones. These are urban schools, and the teachers of the first four grades are quite certain to be better qualified than the rural teachers of the elementary schools. Moreover, a child lucky enough to be admitted to the first grade of a secondary school has a greater chance of passing through all the grades of the same school. A youngster graduated from the junior high school should be able to transfer to the eighth grade of the secondary school; but Soviet regulations allot only 15 percent of the vacant places at the eighth grades of the secondary schools for the boys and girls who have graduated from the junior high schools; 85 percent of places are reserved for students already enrolled in the secondary school. Moreover, the compulsory draft of boys and girls for the trade schools (Labor Reserve schools) does not extend to students of the upper grades of the secondary schools.
The problem of gaining access to the highest careers and the best incomes begins at the age of seven for a Russian child. Soviet sources do not explain how these lucky children who begin their education at the secondary school are selected, but one may be quite certain that the school authorities do not refuse to admit children of influential parents. Members of the intelligentsia enjoy hereditary opportunities–corrected to some extent, as in other countries, by scholarships granted to outstanding students of poor parents. The fees exacted at the universities or similar schools range from 300 to 500 rubles, depending on the location and type of school, and such schooling involves other expenditures, especially for attendance at a university away from home. Such tuition fees are high in proportion to Soviet incomes, save for those in the upper strata.
The régime does its best to enhance the prestige of its bureaucracy in other ways. Titles of rank are freely bestowed. The process of restoring titles began in the armed forces, where all the traditional Tsarist military ranks have been reëstablished, including those of major-general, lieutenant-general, colonel-general, general of the army, and two ranks of marshal. Several branches of the civil administration have been provided with uniforms, emblems of rank and titles. A recent Soviet textbook on administrative law acknowledges frankly the reasons for this return to the imperial tradition: “The introduction of personal titles and uniforms for the aforesaid categories of the state officials aims at a further intensification of service discipline and at increasing the prestige of those officials.” The Soviet diplomats not only wear embroidered uniforms but are adorned with all the traditional titles (Ambassador Extraordinary and Plenipotentiary, Envoy Extraordinary and Plenipotentiary, Counselor, etc.). The titles of the state procurators are topped by the terrific accolade of Actual State Counselor of Justice, which is bestowed upon the Procurator General of the U.S.S.R., and descend progressively through the State Counselors of Justice of three classes, the Counselors of Justice (also of three classes), down to the lowest ranks of Jurist (again three classes). The young man who begins his career in the procurators’ hierarchy has the title of a Junior Jurist; the Soviet regulations make it clear that his rank is equivalent to that of a second lieutenant in the army. Peter the Great would have been pleased because he was the first in Russia to establish the equivalence between military and civilian ranks.
The Party does not make any secret of its intention to reserve privileged treatment of the intelligentsia. For instance, on September 4, 1946, the Central Committee of the Party severely censored a film called “The Great Life,” which tried to depict the reconstruction of the Don basin, heavily damaged during the war. The authors of the film interpreted the events of the reconstruction in the romantic spirit of the early post-revolutionary years, showing several cases of ordinary manual workers being promoted to the commanding posts because of their unusual intelligence, vigor and initiative. The Central Committee did not like it. Promotion to higher positions nowadays requires a diploma of formal university education. The Central Committee expressed its displeasure in these indignant words:
The film–“The Great Life”–propagates reaction, lack of culture and ignorance. It is completely unfounded and incorrect to show, as the authors of the film have done, the mass promotion to the leading positions of technically illiterate workers with reactionary views and attitudes. The producer and the author of the libretto have not understood that we highly esteem and boldly promote in our country only cultured people who are modern and who know their profession well, that we never promote people who are reactionary and deficient in culture, and that the Soviet authority has produced its own intelligentsia.
In October 1952, G. M. Malenkov, the spokesman of the Central Committee, told the Party Congress: “Cultured people, experts on the problems with which they have to cope, must be placed at the helm in industries and agriculture, in the Party and state apparatus.” One of the aspects of this policy is now visible in agriculture. An ordinary peasant can no longer become the chairman of a collective farm; this highest managerial post is reserved for the agricultural specialists with secondary or higher education. The peasants are still conceded the innocent pleasure of “electing” (unanimously, by show of hands) an educated man who has been selected in advance by the Party or the Ministry of Agriculture and whom the peasants may never have seen before.
Soviet industries are run on the principle of one-man command, which simply means that the manager of the factory is the boss who directs operations without interference by the employees and takes the whole responsibility for the fulfillment, or over-fulfillment, of the plan of production. The workers must comply with orders which are contrary to the regulations, when the management insists that they are necessary to achieve greater production. For instance, the Criminal Division of the Supreme Court of the U.S.S.R., on April 1, 1943, convicted a worker who had not reported for work on a day of rest when told to do so, although the worker claimed, rightly, that the order was irregular, since it had not been concerted with the factory trade union committee. The Plenary Session of the same Court convicted another worker in similar circumstances on February 10, 1944, declaring that workers must report for work on an official day of rest when ordered to do so, even if the management has failed to substitute another day of rest as required by law. The Court acknowledged that such orders would be incorrect, but said that they were nevertheless binding on the employees, whose disobedience should be punished as wilful absence.
In short, the intelligentsia have developed their own esprit de corps. Of course the Soviet Government, like any other, would like to have at its disposal an honest, devoted and scrupulous bureaucracy, but it finds misappropriations, embezzlements and abuses of all sorts, especially in the provinces where control by the central authorities is least effective. The local administrators form cliques. The secretary of the Party, the manager of the factory, the chairman of the collective farm, the secretary of the district soviet and of the local trade union, the procurator, and so on, now have similar educational backgrounds and comparable incomes. They are friends, and they try to “take care” of each other. This infuriates the Party leaders, who endlessly investigate and denounce. Malenkov told the last Party Congress:
Some leaders recruit the personnel not according to political and professional qualifications, but according to such criteria as family relationship, personal friendship or origins in the same part of the country. Frequently honest and expert employees, who have assumed a severe and impatient attitude toward defects in work and who have caused thereby some uneasiness to their superiors, are squeezed out. . . . In consequence of such distortion of the Party line in regard to the recruitment and the selection of the personnel there are being formed at some institutions small “family” circles of people who support each other and are bound by a kind of mutual protection system; they place the interests of their own group above those of the Party and the state.
The privileged position of the bureaucracy in the Soviet system intensifies the shortcomings of human nature.
At the bottom of the social pyramid are the unskilled workers of the cities and the peasants–the forgotten men of the régime. The peasants are at the very bottom. Even an unskilled worker at least has the benefits of state social insurance and firm wages, which do not change according to the profits or losses of the plant or institution which employs him. But the peasants, or collective farmers, lack even these safeguards. They are excluded from the state scheme of social insurance. Each collective farm has its own assistance fund, whose assets are provided by annual contributions, limited by law to 2 percent, from the yearly income of the collective. These incomes vary according to many factors–the acreage of land placed at the disposal of the collective, the fertility of the soil, the kind of products harvested, the weather and all the natural factors affecting agriculture. But if the collective cannot provide for the sick and the aged out of its own fund, they are left to the charity of their families and neighbors. Moreover, the state refuses to underwrite farmers’ incomes as it does for industrial or office workers, and they vary as the fortune of each collective farm varies.
Because of the fluctuating and uncertain rewards, peasants could be tempted to abandon the collectives and try their luck at factories, and the state has established a system of passports to prevent this. Every resident of a town must possess a passport, and no man or woman who lacks one can be given employment or lodgings. Heavy penalties are inflicted on persons who attempt to live in a city without such an identifying document, on police officials who tolerate it, and on the house managers and owners who rent lodgings to these unfortunates.
The October Revolution was presumably made for the benefit of the workers and the peasants. The present Soviet Government has a different objective: to use every means to increase the economic power of the state, whatever the consequences. The Communist politicians are as fascinated by the idea of building a highly-industrialized state as the Pharaohs were by the idea of building pyramids. The cost to the laborers who pile stones on stones to produce the structure means nothing. And in the shadow of this industrial pyramid a comparable stratification has developed in the Communist society. It is crowned at its top by the ruling politicians and the upper layer of the bureaucracy; its middle stratum is the lower layers of the intelligentsia and skilled workers; it stands on a vast base formed by the neglected masses of unskilled workers and peasants. The professional politicians who form the Central Committee with its inner ring of the Presidium (formerly the Political Bureau) cannot come in touch with the lower strata of the pyramid without making their way through the upper layer of the high bureaucracy. They are, in fact, cut off from the masses in whose name they pretend to address the world. They have no choice in the matter. A totalitarian government must be composed of these two elements–the professional politicians who form its brain, and the bureaucrats who are the skeleton of the structure. Industrialization at such a pace requires cutting home consumption to the bone. But the bureaucrat cannot be neglected. He must enjoy better living conditions than the “toiler,” and he must be surrounded with prestige. Those are the conditions of his active support of the régime, and this is the inescapable logic of the régime.
Are there any cracks in this imposing bureaucratic structure? One possible source of dissatisfaction is insecurity, since anyone may be fired out of hand and the whole hierarchy is from time to time wracked by purges. The severity of the intellectual censorship may be another. In the prewar days censorship was mainly political, and did not prevent an educated Soviet man from enjoying atonal music, for example, modern painting, or a Western play or novel. In the postwar years the control of thought and taste of educated men has gone to absurd lengths. But we must not forget the offsetting factors. The bulk of the bureaucracy is composed of Russians whose nationalistic feelings have been greatly flattered by the constant praise of the talents and achievements of the Russian nation, of her pre-revolutionary past and her heroes like Ivan the Terrible, Peter the Great, General Suvorov and General Kutuzov, and the dominant rôle she enjoys among the Soviet nationalities. Many bureaucrats are, indeed, non-Russian and must avoid showing attachment to their native lands–the Ukraine, the Baltic States, the Central Asian or Caucasian republics; despite their high incomes and honors, the rabid nationalism of their Russian colleagues must affront them. Even so, the bulk of the Soviet bureaucrats, especially in the higher brackets, are Russian or Russianized. They live without freedom of thought, but are otherwise pampered; and they doubtless find a powerful consolation in seeing their country become one of the two greatest World Powers, its frontiers stretched beyond the imagination of Tsarist imperialists, in control of one-third of Europe and with great influence over the policy of one of the largest Asian nations. What would happen if their allegiance were tested by an open struggle among their bosses–the members of the Presidium of the Central Committee–no one knows.
Economics, Invasion, Liberty, NAFTA

NAFTA is a sham

Let’s be crystal clear about this.  NAFTA is a sham.  What it really sets out to do is to funnel Chinese goods into the US with no tariffs via Canada and Mexico.  Additionally, the Canadians and Mexicans have no desire to increase their domestic manufacturing base.  They are content to act as middlemen and brokers for the Chinese… at the expense of their populations and ours.

President Trump… Get us out.

Sundance does a nice job of outlining the specifics below.

NAFTA Watch – No “Agreement on Major Issues” After Three Days of Discussion Between Principals…

After three days of discussions between U.S Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo they were not able to develop any consensus on the major issues within the North American Free Trade Agreement, NAFTA.

The likely outcome of the upcoming Mexican national election on July 1st brought the principals together for non-scheduled talks, as U.S. President Trump instructed Ambassador Lighthizer to explore whether the three nations could find common ground on the ‘big picture’ issues behind the largest schism.  The auto sector and rules of origin is the epicenter of the biggest difference between the U.S., Mexico and Canada.

The U.S. auto-sector NAFTA position is that North American content of vehicles made in NAFTA countries be increased to 85 percent from 62.5 percent.  The Canadian and Mexican position is for lower North American content.

Canada is not arguing for higher Canadian content.  Mexico is not arguing for higher Mexican content… Instead both Canada and Mexico are arguing for higher imported content (China and Asia).  Honestly, I cannot fathom why more people don’t see the inherent ridiculousness of NAFTA against the reality of Canada and Mexico arguing for more Chinese imports.

The reason Can/Mex are arguing for more imported material content is because both of their trade economies exploit the NAFTA loophole that allows European and Asian parts to be shipped into Can/Mex, assembled, and shipped into the U.S. market without duty.

It’s bizarre; yet this is the reality.

NAFTA is so completely flawed, it is against Canada and Mexico’s financial interest for them to agree to a North American trade agreement that is structured around North American trade.

When you ask a pro-NAFTA advocate why Canada and Mexico are arguing for less Canadian and Mexican manufacturing in their NAFTA position the advocate cannot answer with any intelligence…. because their pro-NAFTA entire premise is ridiculous, and based on structural falsehoods.  Very frustrating.

Depending on which ideological broadcast or print media you review, there is a massive disconnect in their projected framework of optimism that a deal can be reached. Canadian media are desperate to find hope that any deal can be reached. Mexican media is ambivalent; and U.S. media is mostly driven by the position of multinational corporations who demand the exploitative nature of NAFTA be retained.

My gut, and the ongoing deep reviews of nuance therein, still lean heavily toward the inability of any deal to be possible because the underlying dynamic is so structurally flawed. It is against U.S. interests to stay in NAFTA. It is against Mexico and Canada’s interests to exit NAFTA. There is a massive amount of media manipulation between those polar opposite positions.


Growing the Economy with no Labor…

Despite the article’s assertion, my home State of Iowa is not the only place this is happening.  This same phenomenon is occurring in rural Virginia in my shop and others.

I believe a strong, American, manufacturing base is necessary for national survival and subsequent prosperity.  And, the Trump Admin has businesses excited about the nation’s economic future.  But, without workers to staff companies, it is going to be very difficult to grow.

Per normal, no need to open the link below.  The entire text of the article is in italics.

Kevin Johnson, 60 years old, teaches welding to new hires at commercial truck equipment-maker Stellar Industries in Garner, Iowa. But the company has a backlog of orders because, like many companies in the region, it doesn’t have enough workers.

“By Shayndi Raice and Eric Morath


MASON CITY, Iowa—Manufacturers in northern Iowa are begging Terry Schumaker for freshly trained workers for their factories. The problem is he doesn’t have enough students to train.

“It’s not like we have the people beating down our door to apply,” said Mr. Schumaker, a dean at the North Iowa Area Community College in Mason City.

It is a problem playing out in many parts of the Midwest, a region with lower unemployment and higher job-opening rates than the rest of the country. Employers, especially in more rural areas, are finding that there are just too few workers. That upends a long-running view in Washington, D.C., and many state capitals, where policy makers often say the unemployed simply lack the skills to get hired.

Ready WorkersNumber of unemployed and job openings inJanuary 2018, by regionSource: Labor DepartmentNote: Seasonally adjusted
UnemployedOpeningsNortheastMidwestSouthWest0.0 million1.02.03.0

Mr. Schumaker said Iowa has plenty of free programs to train workers. And Iowa Gov. Kim Reynolds is poised to sign Tuesday legislation that would provide an estimated $18 million for worker-training programs. But shrinking high-school classes leave fewer potential trainees.

Other states, like Indiana and Wisconsin, are undertaking similar moves. President Donald Trump has touted worker-training programs, and his daughter Ivanka visited Iowa in March to highlight the efforts.

Morgan Steenhard, 19, is in the tool and die program at North Iowa Area Community College.
Morgan Steenhard, 19, is in the tool and die program at North Iowa Area Community College. Photo: Shayndi Raice/The Wall Street Journal

The U.S. labor market is the tightest it has been in nearly two decades. The national unemployment rate held at a 17-year low of 4.1% for five straight months, and the number of job openings is at a record.

In the Midwest, the worker shortage is even more pronounced.

If every unemployed person in the Midwest was placed into an open job, there would still be more than 180,000 unfilled positions, according to the most recent Labor Department data. The 12-state region is the only area of the country where job openings outnumber out-of-work job seekers.

“The crux of the problem is that we don’t have the people here,” said Dave Zrostlik, president of commercial truck manufacturer Stellar Industries Inc., based in Garner, a rural city of about 3,000 people near Mason City.

Available LaborUnemployed persons per job openingSource: Labor DepartmentNote: Seasonally adjusted

The shortage of labor is hurting Stellar’s bottom line. “We’ve got the biggest backlog of orders ever,” said Mr. Zrostlik, as he walked past an assembly line sitting unused because he can’t find the workers to staff a second shift. Normally, his 450-employee company fills orders in about eight weeks. Today, it takes 18 weeks or more.


With about 28,000 residents, Mason City is the largest town in about a 100-mile radius. It supports industries like manufacturing, construction and agriculture. A sign at an Arby’s restaurant on the highway from Mason City to Garner proclaims, “If you’re smiling, we’re hiring.”

Firms in rural areas are more likely to report their applicant pool is limited, Federal Reserve Bank of Atlanta said. Controlling for other factors, such as the size of a business or education level required for a job, 68% of rural firms reported too few applicants for open jobs, versus 57% of employers in urban areas.

The Midwest has seen an outflow of people. A net 1.3 million people living in the Midwest in 2010 had left by the middle of last year, according to census data. The area also attracts fewer immigrants than the rest of the country. As a result, Midwest employers are more dependent on filling jobs with workers who already live there.

Fewer JoblessThe unemployment rate in most Midweststates was below the national average inFebruary 2018.Unemployment rateSource: Labor DepartmentNote: Seasonally adjusted

David Swenson, a regional economist at Iowa State University, doesn’t believe Iowa suffers from a skills gap. More job training programs are a “solution to a problem that doesn’t exist,” he said. “Thinking that it’s going to solve rural labor issues is misguided.”

Beth Townsend, head of Iowa’s department of workforce development, said Iowa has an abundance of low-skilled workers but is facing a gap when it comes to jobs that require some specialized training.

“We’ve got a lot of adults who could be easily upskilled,” she said. In particular, she is trying to get more disabled people or ex-convicts into the workforce because they often face more hurdles in finding employment.

Iowa’s 2.9% unemployment rate has already drawn thousands of workers off the sidelines. The share of Iowa adults working or seeking work was 67.9% in February, nearly five percentage points higher than the national average, U.S. Labor Department data show. North Dakota, Minnesota, Wisconsin and Kansas similarly have a relatively high rate of adults in the labor force.

Dave Zrostlik, CEO of Stellar Industries, works one of the cranes the company makes.
Dave Zrostlik, CEO of Stellar Industries, works one of the cranes the company makes. Photo: Shayndi Raice/The Wall Street Journal

That suggests many potential workers on the fringe of the labor market have come back. And those who aren’t working now may not be for other reasons, such as staying home with children or a lack of transportation.

“If someone needs to buy a car and commute 60 miles to take a job in a rural community, they may find it’s not worth taking the job,” said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University.

Eric Sauey, CEO of Seats Inc. in rural Reedsburg, Wis., says that as his business making seats for commercial vehicles has grown, it has become harder to find the workers he needs. He is competing with other industries in his town of 9,200, like health care and carpentry, for the same pool of workers.

His company trains employees internally. In fact, Mr. Sauey said he would rather his employees weren’t trained externally when they get to his factory.


“We’d rather people not have any experience because then they’re not bringing bad habits with them,” he said.

Write to Shayndi Raice at and Eric Morath at