Australian account of events in February are the first indications of a deep rift in the Chinese Communist party. In contrast, the normally current Chinese Business magazine, Caixin Online, did not publish the story until this last week after Bo Xilai had been removed from his Politburo position as covered first by the Xinhua, the Communist Party’s official news agency. This gives a feel for how carefully managed political news is in China. So it was not a surprise that the news came first from Xinhua relating the possible murder of British businessman Neil Heywood by Bo’s wife Gu Kailai. This broke the “official” silence in China. Since then the BBC has been following the story closely and reports that with 500 million internet users, state control of news in China is becoming ever more precarious but also subject to massive state hack attacks.
The BBC see this as both a legal and political challenge for China. The legal challenge is will the rule of law apply to the wealthy and party political elite. As seen in the Caixin Online report the Party has pledged to do that. But as Bloomberg has pointed out the Party leadership with its great and fast accumulating wealth is now part of the problem as its legal hegemony and highest members’ huge accumulation of wealth [the 70 leading Communist legislators have a total wealth equal to the GDP of Slovakia] . There are echoes to what happened in Russia after the breakup of the Soviet Union saw a tiny political elite fast emerge as the dominant corporate chieftains and government leaders. Dissent in Russia like in China is bearly tolerated [from time to time protesters and reporters get mauled badly].
The Bo Mirror Images in the US
But the parallel with US politics is quite striking as well. First, the growing disparity of US incomes has seen the top 1% accumulate up to 30% of of the total wealth in the US while top executives at major US corporations earn 200-300 times the average pay of the workers [see here for data]. This echoes the accumulation of wealth in China [see here also]. These US 0.1 percenters are now defending their gains by buying access to power with the US Supreme Court’s blessing. This includes approved access to the political power brokers with unlimited campaign and lobbying funds. Compare this to China where state run banks and companies now get special access to financing and legal advanatges because the State enterprises have been folded back into government and Party control. And finally just as Communist Party officials are exempt from many legal restriction, the US Congress has seen fit to exempt its members from conflict of interest and financial information limitations that every other American has to observe.
Now many will argue that China is a one-party system while the US has one of the longest running democracies in the world. But there are signs of clear detrioration in the US Democracy. Government is not being allowed to work with the interference of the lobbying groups and the current GOP Congress holding up budgets and executive appointments across the board. 60 votes are now required to get any legislation passed in the Senate. The Presidential elections in 2000 and 2004 are both tainted badly. For the past 12 years the Supreme Court has been voting in many cases on strict party lines. And the once non-partisan, unbiased Press has an official TV media representative in the form of the Rupert Murdoch’s Fox News as virtual spokepersons for the GOP.
Now both US and China face immense World challenges. Nuclear arms are leaking out to ever smaller or sometimes unstable States like Iran, North Korea, Pakistan, Israel, and even India. World resources are becoming ever more scarce and /or costly to find and produce [not just oil but reaching all the way to basics such as forests, fisheries, arable land and water supplies]. The disturbing fact is that if the newly developing world consumes as the developed world has consumed for the past 60-70 years, there is simply not enough resources to go around. And this leaves the environment as an open wound.
China is taking the approach that because the developed world caused the current environmental crisis it should not be penalized by carbon, ozone and many other environmental restrictions. The US is paralyzed on many environmental issues because the same people who brought you uncertainty for dozens of years on weather smoking causes cancer are now working their same magic on enviromental concerns But for China this environmental policy has turned out to be self-defeating. Now after 30 years of breakneck 10% annual economic growth China faces enormous basic environmental problems – loss of arable land, polluted rural watershed, and ever widening air pollution. China is a mini case of what not to do in the face of environmental degradation. this is one of the prime issues that make Bo’s replacement of interest.
But the biggest common problem that China and the US face is that there is not enough work to go around. The International Labor Organizations World Report for 2012 shows how 4 years after the World financial crisis, “there is still a sharp decline in the employment generating capacity of the global economy”. And ILO cites youth unemployment being a worldwide phenomenon. Currently 32% of Chinese 2010 college graduates are unemployed or underemployed. This more than doubles the US numbers. Two factors are contributing to this problem – automation and continuing imbalance in incomes as the executive suite continues to take the lions share of earnings. Automation may nip the bud of growing employment as the big Chinese electronic and other manufacturers are looking to replace workers with machines. logistics has flattened the world so that jobs can go anywhere the base cost+shipping is lowest. Automation will reduce both blue and white collar jobs worldwide . So a job and work are becoming scarce commodities causing wages to be bid down. Hence US Family incomes have been stagnant since 2000 and are not expected to rise until 2021 as reported by the Wall Street Journal. Prospect for college students in the US have also seen wages decline while indebtedness increases. This joblessness is the fundamental problem that the US election campaign has been able to avoid debating so far. Will it do so thorough the election in November? Two $1billion dollar war chests and the GOP’s new found aversion to policy debates say unfortunately yes.
Summary
So the Bo Xilai affair has legs . It has strong implications for the US and will not just disappear because the Chinese leadership now has exposed fundamental political and economic problems that cannot be swept under the rug. The fact that the very wealthy Chinese are moving to the US and the official news agencies in China are saying that This Is Not a Policy Problem means that it is. Stay tuned.