Shadow Government

Bo Xilai and coming changes in China

In the last couple of days, Western media has been abuzz with rumors sourced from Chinese social media websites, Falun Gong-sponsored news outlets, and analysts in Hong Kong of an attempted coup in Beijing. The only thing lending credence to these rumors is the seeming existence of a power struggle that resulted in the sacking of Chongqing Party Secretary Bo Xilai. This is the most significant removal of a government official since 2006 when Shanghai Party Chief Chen Liangyu was fired during a corruption probe.

The recent string of events have made for exciting political drama, but let's remember that only nine men in China know what is really going on. This holds true in the case of Bo Xilai and his deputy Wang Lijun, as well as the current status of security chief Zhou Yongkang (some of the recent rumors are swirling around him). Given the uncertain political environment, those nine will not be talking much anytime soon.

While we do not know why Bo was removed and other bits of "Zhongnanhaiology," recent incidents have revealed some useful information about the respective roles of power and ideology in China. And these, in turn, show that change is coming to China, even if we don't know what that change will look like. 

First, Bo Xilai's ouster was about power, rather than ideology. From the central leadership's rhetoric, especially Wen Jiabao's statements about the need to avoid another Cultural Revolution, one would think that Bo's fall from grace had mostly to do with his embrace of some form of Maoism. Indeed, it's a convenient picture for the central leadership to paint for an international audience -- that they ousted Bo to prevent China from making a "left turn." While there may be a kernel of truth to this, the "red songs" were more of a means to an end for Bo. Likewise, Bo's supposed "red ideology" provided Chinese leaders a good pretense to remove a threat to central power. 

Bo was aiming for a place in the Standing Committee to increase his own power. And his real "crime" according to the leadership is not what he did in Chongqing, but how he did it. In executing his dual "sing red strike black" campaigns, Bo established a separate center of power around himself that did not rely on the central leadership. Bo was establishing his own power base and as a result became somewhat of a national sensation (some Chinese citizens were even writing songs about him). His power resulted from his own self-promotion, and not because he was favored by the leadership. He was a populist, but more importantly he was a populist operating as the face of the party and demonstrating a way of governing that was different from the central leadership.     

Second, power is what is propelling Chinese politics during this time of transition. China is now run more like a mafia state with a dozen or so powerful families in charge. Bo's was one of them. The rules of the game are as such: "If you go after us, then we will go after you." This might be another contributing factor to Bo's demise. His deputy was allegedly probing Bo's own family for corruption, and Bo responded by allegedly interfering in the investigation and attempting to sideline his once powerful chief. Unfortunately for Bo, his power struggle with Wang was not as important as Beijing's struggle with him. The leadership's longtime reservations about Bo's political style combined with his sudden vulnerability made for an excellent pretext to "go after" him.

While Bo's story is about power, it should not obscure the fact that there is an ideological struggle going on inside China. The struggle is a competition of ideas pitting those aligned with Chinese reformers and the "real" Chinese private sector against very powerful state owned enterprises and the party bosses who benefit from them. The former know that Beijing's growth model will come to an end unless serious capitalist reform is enacted. The latter know that if those reforms are enacted the party (and party) is over for them.

Even more so than the sacking of Bo and the evident tension it is creating, the existence of a struggle over the future of the Chinese economy demonstrates a lack of consensus in China, notwithstanding the intellectual faddishness about the "Beijing Consensus." This intellectual fad -- a battle between Beijing's model of state-led economics and Western liberal economics -- is a creation of the West. But the real battle is inside China -- will it become more capitalist and grow or will it sputter? 

This lack of consensus shows that while it is impossible to predict what will happen in China (muddling along, collapse, stagnation), one thing is becoming clear -- China will change over the next decade. As the economic model comes increasingly into question, other internal problems will come home to roost, including disastrous population policies, widespread corruption at the highest levels of government, and inert political leadership.

As we watch these events unfold, it behooves us to remember that one of the reasons outsiders are paying attention to the idea that there may be a coup in China is that the military is the only institution that can keep the country together. Political crisis in China could pave the way for a PLA-led China. If anything, the downfall of Bo tells us is that the transition in China is not as smooth as it seems. Power struggles are real as party leaders fight over an inverted Golden Rule -- in China, he who makes the rules gets the gold. While the particulars of the Bo case are uncertain, two things are clear: The leaders are no longer all powerful and reform is badly needed. The question is, will China make the kind of changes it objectively needs or will it become a stagnating PLA-led state?

Nelson Ching/Bloomberg via Getty Images

Shadow Government

Why Jim Yong Kim will be a good World Bank president

Jim Yong Kim is the American candidate for the World Bank president. The U.S. supported the European candidate for the IMF and the Europeans will support our candidate for the World Bank. I had assumed it was going to be Hillary Clinton. I was wrong and so were many others.

Overall, an out of the box pick and a clever pick in terms of responding to the expected lines of attack to a U.S. candidate. At the end of the day, the Europeans owe us this one after we helped them with the IMF, so ignore any manufactured "drama" about his candidacy being in question.

An initial set of thoughts:

1) Dr. Kim is a dual national both Korean and U.S. He helps respond to the criticism that the U.S. "holds" the World Bank. Perhaps Indra Nooyi's dual nationality was an issue for the White House because putting an Indian in such a role would have likely been "vetoed" by the Chinese.

Also, Dr. Kim's family will have experienced the power of prosperity and development in their own lives through the success of South Korea. South Korea and Ghana famously had the same GNP per capita in 1960. South Korea is now a donor nation and one of the world's largest economies. Dr. Kim's life experience is an asset.

2) Dr. Kim, as a College president has to manage a fractious board, a tenured faculty and deal with donors who want constant attention while also trying to provide thought leadership. The World Bank's staff are (too) pampered with many many privileges -- just like a tenured faculty. The World Bank's board is like a college board of directors -- only larger and more of a micro-manager than a college board of directors. The World Bank's donors -- including the U.S. congress demand constant attention -- just like college donors do. From that standpoint, he also is an interesting pic.

3) Dr. Kim, as a global health expert, answers the criticism that past World Bank Presidents "do not come with development expertise."

4) Tim Geithner is a prominent alum of Dartmouth and thus knows Dr. Kim, and the Treasury Department is the lead agency when it comes to the World Bank for the U.S. Government. This is how Dr. Kim would have been put on the table.

5) Dr. Kim's challenge is that the big opportunities for the World Bank are not in the global health arena and the World Bank will not be the leader in global health going forward. He will need to pick lieutenants who bolster him in three areas. First, in terms of bolstering the World Bank's work in the private sector, a strong banker with development experience would be a good pick for the IFC job (which is also open) -- my recommendation would be someone like the Dutchman, Michael Barth, former head of FMO (the Dutch OPIC) and former World Bank and IFC Director (if an American could get that job, I would nominate the American Elizabeth Littlefield, the very highly regarded CEO of OPIC for the top job at IFC). Second, Dr. Kim needs to elevate the role of governance in the World Bank with a new Vice Presidency for Governance. He should pick someone such as the prominent Chilean economist Dani Kaufman for such a role. Third, he needs to strengthen the World Bank's ability and processes to work in conflict zones and post conflict zones regardless of the vocal objections of the World Bank staff. He should pick a former staffer for that and create a Vice Presidency for Conflict and Fragile States and make it a fast track career path. I would recommend he names someone like the American Dennis De Tray, former Bank Country director and former adviser to General Petraeus, for this role.

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