The Bo Xilai and Gu Kailai scandal masks the battle for
China's future

The melodrama of Bo Xilai's fall has been used to press
for privatisation, but the global crisis demands an
alternative

Seumas Milne
guardian.co.uk
Tuesday 14 August 2012 17.20 EDT
http://www.guardian.co.uk/commentisfree/2012/aug/14/bo-xilai-scandal-masking-chinas-future

The murder trial of Gu Kailai and downfall of her husband
Bo Xilai has lurched from Shakespearean tragedy to
Victorian melodrama. All the essential elements are there:
overweening ambition, a poisoning, a sink of corruption,
treachery and blackmail.

Add in the alleged British spy Neil Heywood's rendezvous
with death at the Lucky Holiday Hotel in Chongqing and
Gu's reported comment to investigators to "write up
anything they'd like" she couldn't remember for her
confession, and China's greatest political scandal for a
generation seems like a cross between an airport thriller
and a Stalinist show trial.

There's no reason to believe we'll be any the wiser as to
what actually happened when the court gives its verdict
and sentence - or if Bo himself, sacked as Chongqing's
Communist party secretary, is put on trial for "serious
disciplinary violations".

The evidence suggests at least that Bo's family, like
those of other Chinese leaders, enriched themselves on the
back of his position - and that Heywood was up to his neck
in that. What's much clearer is that the fall of Bo, who
attempted to use his left-leaning Chongqing administration
to secure a commanding place in the party's Beijing
leadership, has been seized on to change China's political
direction.

As the scandal erupted earlier this year, powerful forces
out for full-scale privatisation made a concerted bid for
decisive "reform". In February, a World Bank report,
backed by elements in the government, demanded sweeping
deregulation and a "complete transition to a market
economy". The call was taken up at the National People's
Congress. Corporate interests that had chafed against a
system in which they claimed "the state advances, the
private sector retreats" launched a neoliberal offensive.

As the Chongqing crisis came to a head in April, Premier
Wen Jiabao declared that the state banks' monopoly had to
be "broken". After Bo's police chief tried to defect to
the US embassy, the backlash intensified. Wen linked
Chongqing with the taboo Cultural Revolution and a string
of Maoist and leftist websites were banned.

The basis for the politicisation of the scandal isn't hard
to find. Bo himself was a populist politician on the make,
not a Maoist. But the policies he championed gelled into a
Chongqing model which appealed to China's "new left" and
created a political pole for those looking to overcome the
ballooning wealth gap and social costs of China's
breakneck development.

His "sing red" revival of revolutionary songs and culture
and "smash black" campaign against organised crime grabbed
the most attention, and have now been closed down. But it
was the huge expansion of low-cost housing and welfare
provision from the profits of a burgeoning state-owned
economy, combined with 3m "hukou" urban residence permits
handed out to migrant workers, which explains why Bo
remains popular in Chongqing even after his disgrace.

Chongqing's departure from government policy can be
exaggerated - its private sector has expanded even faster
than the public sector and foreign investment boomed. But
the gap between Chongqing and the Guangdong model - where
party secretary, Wang Yang, has hailed the role of private
enterprise and growth rather than distribution, under the
slogan "small government, big society" - is clear enough.

In the aftermath of Bo's fall, the triumph of Guangdong
was duly declared. But, as Kevin Lu of the World Bank's
foreign investment agency argues in Foreign Policy
magazine, "the Chongqing model worked" - by mobilising
state resources to boost collective consumption.

And it is the decisive role of publicly owned banks and
companies in China's hybrid economy that has delivered the
fastest growth per head of any major economy in history
over the past decade, the most rapid consumption growth
and the largest-scale poverty reduction programme ever.

In particular, the Chinese government's ability to
instruct state banks and enterprises to drive up
investment during the global crisis is the main reason why
its economy has grown by 40% over the past four years,
while the US's grew by 1%, the EU's shrank by 1.5% and
Britain's by 4.3%. Within that expansion there have of
course been inefficiencies and speculative bubbles - not
to mention the environmental degradation, corruption and
gross inequality that has disfigured China's rise.

Nevertheless, as western economies continue to stagnate or
worse, it's hardly the time to hand over the reins to the
private sector - as demanded by China's corporate class
and the US government (US treasury secretary Tim Geithner
grumbles that Chinese state enterprises have an unfair
advantage because they don't pay "market-based
dividends").

But in the climate of "reform" and liberalisation earlier
this year, the Chinese government held back from the kind
of direct investment needed to offset stagnating global
markets - and the private sector failed to respond. The
result has been falling growth - and Beijing is now again
having to shift back to a state-driven stimulus.

In the next few weeks, China's highest level leaders will
be chosen for the next decade. What course they take won't
just be settled by what goes on behind closed doors but by
what happens on the ground in a country where there are
now 180,000 "collective protest incidents" a year.

Resistance to neoliberal pressure is "very strong in both
society and government", Tsinghua University's professor
Wang Hui argues. But how the political struggle over the
lessons of Chongqing and Guangdong is resolved will help
to determine China's future.

___________________________________________

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