Illustration by Sam Island
Billionaires Make Killing Amid China Murder Tale
It’s the rare scandal that involves murder, corruption, Harvard University and comparisons to Jacqueline Kennedy. The Bo Xilai kerfuffle now mesmerizing China offers all this and perhaps more: It could forever change an entire political system.
Until March 15, Bo was the top official in the southwestern megacity of Chongqing and a political rock star. The 62-year-old was poised to join the Politburo Standing Committee, the nine- member group that exercises supreme power in China. Then, poof, his political fortunes vanished amid charges of “serious discipline violations” and a variety of racy rumors.
The most explosive involve Bo’s wife, Gu Kailai, and her ties to a murdered British business associate last November. It’s quite a stunning turn of events for a couple once dubbed the Jack and Jackie Kennedy of China. Gu, along with her Harvard-student son, had a dispute over economic interests with Briton Neil Heywood, Xinhua News Agency reported.
The scandal is creating a bull market in Beijing whispers. The conventional wisdom: Behind the scenes there was a concerted effort to halt Bo’s meteoric rise based on the “Chongqing model” -- a top-down push for social equality, with a strong role for government and huge infrastructure projects. Many saw Bo’s strategy, which employed songs and slogans from the era of Mao Zedong, as nurturing a cult of personality. The day before Bo’s ouster, Premier Wen Jiabao said that China risked a return of the Cultural Revolution -- when millions were persecuted by Mao’s Red Guards -- unless the country continued to pursue political change.
We’re missing the true story here, though. It’s really more evidence that China’s political system is trapped in the past, while its economy races ahead. This dangerous mismatch is often dismissed by pundits and investors, and yet Bo’s ambitious rise and fall, as well as the opacity surrounding it, embodies much of what’s wrong in the fastest-growing major economy.
China is iPad central, with state-of-the-art factories, modern office towers of mirrored glass, six-lane highways, high- speed rail, expanding WiFi networks and state wealth that’s the envy of Washington and Tokyo. China’s nouveau riche are so vital to Prada SpA, Louis Vuitton and Mercedes-Benz that they have been called the “Middle Blingdom.”
Yet China’s political system dates to the days of Mao and Josef Stalin. As democracy takes root from Egypt to Myanmar, China is still mired in closed-door deliberations, backroom deals and purges. This murky world is bumping up against a burgeoning Internet culture that makes it impossible to contain and control the news.
It turns out that China isn’t as governable as it might seem. Wen makes hopeful comments about moving toward democracy, but China is still in the grip of its history -- both recent and ancient. To avoid repeating mistakes, a nation’s people must know what that record entails. Remember that a picture of Mao still towers over Tiananmen Square, the site of events the Chinese can’t even talk about.
China bulls cite the five-year plans Beijing puts forth. This year’s power shift will bring great expectations that the next one will reform the economy so that it relies less on investment and exports and more on consumption. Laying out a grand scheme doesn’t immediately make its tenets fact -- especially now.
Political risk can’t be ruled out as the focus turns to greed. How could Bo, with his modest government salary and a wife he claims doesn’t work, live so well and afford to send his son to a string of pricey schools in the U.K. and U.S.?
All this light shining on high-level misconduct might pose a threat to the Communist Party’s legitimacy by drawing renewed attention to the yawning gap between the elite and the poor.
Stop the Transfers
To continue to thrive, China must stop transferring vast amounts of income from households to the state. That means more power for consumers, and less for China’s ultra-rich. The question is, as China tries to reform, will the nation’s 1 percent fight it? And when we talk about this select group, we’re really referring to the political leadership.
In 2011, the richest 70 members of China’s legislature were worth more than the annual gross domestic product of Slovakia. The $90 billion concentrated among them is both emblematic of how China’s model is failing the masses and why Communist Party bigwigs will stonewall any change that crimps their income.
Because the extremely wealthy are often politicians, China may have a truly difficult time retooling its economy and narrowing the rich-poor divide. The hurdles to reform increase the odds of a hard landing in China that breeds social unrest.
We can marvel over Bo’s downfall. We can go on about how China’s leadership refuses to countenance rising political stars who challenge its clubby world. We can engage in whodunit fantasies about the wife and the dead businessman. But more than anything, this tale shows how an antiquated political system imperils a nation’s future.
(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)
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