>> this is "newsnight." >> funding for this presentation is made possible by -- the freeman foundation of new york, stowe, vermont, and honolulu, newman's own foundation, and union bank. >> at union bank, our relationship managers work hard -- to use their expertise in global finance to guide you through business strategies and opportunities of international commerce. we put our extended global network to work for a wide range of companies, from small businesses to major corporations. what can we do for you? >> and now "newsnight." >> power, corruption. murder accusations.

he was the most powerful man in one of china's largest cities, but now his wife is in police custody over the death of a british diplomat. we find the communist party official president's is hidden in his own private playground. >> in china what is so shocking, it is not a crime, but the accused. >> and has the usa embraced as soviet-style rescue. >> and the worst day for the american economy since 1939. how that happened tells us a lot about the america of the future.

hello. the u.k. foreign secretary felt compelled to denominate rumors that a man thought to be murdered wasn't convoying -- was an envoy for the british government. in particular, it has cost the political career of the rising star bo xilai. our correspondent just returned from china where he found a steady state under the iron grip of beijing's rule in a way that is not -- that has not been seen since 1989. >> a death on the yangtze river.

the notorious underworld was the setting. the city for a leader in a power struggle against the mighty party machine. he was bold and ambitious and used his time in charge here to ruthlessly maneuver for a seat at china's top table. bo xilai was -- it was bo xilai's personal city-state's and stillhawa -- until hayward's death. bo's ambitions to rule the country was an open secret. his wife was like jackie kennedy.

he turned up at the u.s. consulate, trading for perfection. >> it has been a one-man dictatorship. one-man, one voice, one message. the party and the media were completely controlled. >> the body was found in this room in this hotel. hayward's death was murder, up a business deal gone wrong. the police chief wanted out. the case was too toxic to handle. the party chiefs were said to be part of the security network. reports suggest a wiretapping regime extended across the city and even the chinese premier was bob.

no one is talking. of want to ask -- did a british man die here last year? >> we do not know anything. >> did that actually happen? in the great hall of the people, a carefully choreographed message that the party rule carries on as normal, but beijing acted quickly. the husband was dramatically purged. but it was not just our murder case. there is a second explanation. china is about to appoint a

second generation of leaders. bo was using his position to challenge party orthodoxy in a way not seen since 1989. >> bo xilai was openly advocating a different line from beijing on china for all future. he had an attitude all his own. many rallied to his cause. they think he was the victim of a political struggle. ♪ >> the party it battle lines are clear. somewhat evermore market reforms. others, a return to communist got used bo xilai. -- a return to communist values. bo xilai took his fight to the

people. he talked like a maoist. >> bo helped the poor. he built a cheap housing. this woman says the charges against him were lies. he made life better for the common man and was love for it. how well this man says the ordinary people are poor and only if you earn millions. he says that he ought to bring values back. four decades ago, miller brands were purged during the cultural revolution. -- millions were purged during the cultural revolution. now, he lives in a modest city apartment, but under chairman mao, he was banished to the countryside for two years.

again, he is placed under constant surveillance. >> the clock has been turned back. it is just like the cultural revolution. the talk has been of class struggle, red guards, read souls, and a red country. bread is good, -- red is good. black is bad. >> the red referred to pride in the country's leftist past. the black -- the future, corruption. the nastia outside the city. enemies areold bo's locked up here in large numbers. this represents one of the city's biggest businessmen. after taking on the case, he

himself was visited by police in beijing. >> they drove me 23 hours, and i was put in what they call a tiger share and -- tiger chair. they kept me like that for three days and nights. date interrogated me mercilessly. when i tried to sleep, they sean -- shone bright lights in my eyes. >> he says he was personally targeted. campaigns were about winning support across china. as a lawyer, i got in the way of his political ideas and his career. >> bo looked for enemies first and evidence second. he needed enemies and to rally

his supporters, so he waved the red banner and accused others of being part of the mafia. no one expected the story to end with his own downfall. his hopes of ascending to the highest office in tatters. lower-level corruption is an open secret in china. but bo xilai was from an elite class for about this world. in china, what is so shocking is not the crime, but that the accused was so close to the heart of our. china prides itself on continuity. at the seat of beijing's politburo, many in china thing bo xilai threatened the system that values stability above all.

>> the american vice-president joe biden was asked to sum up barack obama's residency. osama bin laden is dead. another terrorist is still alive. it was good money after bad for many. for many it represents a level of federal interference. are economics editors have been -- our economics editors have been to the seat of the story. >> detroit, michigan. the american auto industry was born here, and when the

financial crisis hit, and nearly died here. with general motors and chrysler and the government bailout of $80 billion. and it worked. the industry is back. on the worst day for the american economy since 1929, the recovery of the most iconic industry. how that happened it tells us a lot about how america will recover and how the rest of the world might, too. in 2009, brad thought his career at gm was over. he was laid off with thousands of others and production stopped. now, brad and a completely retooled factory are in full swing. >> they are going to be here to say if we are doing a good job keeping their jobs are online. everybody is doing the best job that they can. >> it may look like everything is back to normal, but it is not

keeping these workers gave away long-held writes. in return, their union pension fund got a massive state in the company. it is a total change of culture. >> we went together as a team and said, ok, what is the best way we can build a car or if we have an issue, what is the best way we can resolve that issue? but we are working together instead of management saying this is the way we are going to do it. >> with new works of working -- ways of working, at his become easier to make smaller, more fuel-efficient cars. but gm is still sitting on a loss of $24 billion. it is also a little like state capitalism. that is what the management are touchy about. >> at this point, the government

owns our stock. in the same way that individuals own our stock. they are not directing our company. they are not managing our business. they are not interfering in the industry. >> it has left america confused. the auto industry is the symbol of free-market values. but now it does look quite status. stronger unions, government ownership, and taxpayer subsidies. to some in the republican party, this looks like crony capitalism, too, a reward to voters in a key state for the election. >> we lost more jobs in the recreational video -- the local industry and in the state and were threatened. no one offered to spend hundreds of thousands of dollars per worker on them.

how was i to tell those people, you guys are not worth as much because you are not as politically connected? >> governor daniels also argues that gm's rebirth is sleight of hand. >> i do not know how you could not make money if someone reduced your obligations and excuse you from paying taxes in the future. they ought to be going strong at this point. i cannot bring myself to say that is a brilliant plan or brilliant public policy. we might have gotten to the same outcome more quickly if a bankruptcy court had wiped out the creditors and so forth. >> the city of toledo is in a key election battleground state of ohio. id has been years, but they hope a nearby jeep plant marked a new beginning.

and at the historic local newspaper, they know it is as much about politics as economics. >> what do you think about the bailout? >> locally, i think the voters would say the bailout worked. there's a heck of a lot of jobs. and with a strong financial market. >> in the political battle over what the bailout means, toledo is over the decline. >> several times the vice president has been here and the president of u times. and biden is touring the midwest and pitching the bailout. >> but there are those who call this crony capitalism. these are industries that some people think ought not to exist anymore. >> yes, that is true. there is an argument out there. i say, you know what?

you talk to the guy who was a family of four to feed you used to work on the cheap assembly line. -- on the jeep assembly line. toledo would become a wasteland. >> what the republicans have to do is persuade the american working class that the bailout was a big mistake. to do the job, they chose the man who became iconic of working-class distain for the big state. >> they sent a blue-collar worker to congress. not a lawyer. just a regular joe. >> and man who defined the term for the last election. >> it is not that i want to punish success. i just want to make sure everyone has a chance. >> as joe the plumber, he shot

to national fame. now he is running for congress in toledo. his message -- government should get out of the economy. >> this is the same government that brought the auto industry to its feet peeping through over-regulation and our current tax code system. so, let's get away from that and not let the government pick winners and losers, not decide who is going to lose their business and keep their business. >> they will argue at the very least they have delivered the working man and woman at election time. >> they can argue all they want. it is still wrong. >> america is recovering. revenues are up. but it has taken a $1 trillion stimulus and a rethink of the economy that most americans cannot get their heads around. the bailout has revived the car

industry here spectacularly, but to make it happen, they have had to do things that seem alien -- subsidies, state ownership, a partnership with the union's. is in moments of crisis that new models are born. -- it is in moments of crisis that new models are born. across the wider economy, the u.s. recovery has a long way to go. the private sector on its own is still struggling to generate growth. so what happens here could define the landscape not just in the economy, but in the election, too. and the man known as the car czar joins me in new york. and in the studio, a former economic adviser to george w. bush. first of all, it is hard to deny the auto bailout worked.

gm has its biggest profit since 1999. >> yet, it is easy tonight -- easy to deny that the bailout work. the question is what would have happened if they went through a normal bankruptcy process? that is the tradition in the united states. would declare a company bankrupt. a goes for sale for $1. in addition, there are other factors that have led to investment. for example, the chinese stake in general motors, which i am not convinced is dependent on a bailout. >> the criticism was that the dollars were poured into gm. you were the architect of that plan, that bailout. but was it for a political reason? as much for the car worker, the democratic constituency, i you need to get them on your side?

>> remember the first architect of the bailout was george w. bush. he was the first president to put money into general motors and chrysler, because he saw as president obama saw after him that this was a case of market failure. a case where markets have failed. the government must step in. the alternative would not have been someone coming in and buying the assets for $1. the alternative would be all the workers losing their jobs peeping at the end of 2008 and early 2009 when this rescue occurred, there was no one interested in investing in this industry, and i know that because i was there. >> there was no one there -- you had the president of the toledo newspaper saying thousands were out of work. >> my personal view as part of

that team was not necessarily the correct decision at that time. >> is there no industry you would have saved in that way? >> i have to say i leaned against bailout even for wall street. i think we would have seen the collapse of many more institutions than lehman brothers, and actually the economy would have been able to manage that process. that will never be tested. we will not know. i stand by that. the problem is now we have created an environment under both democrats and republicans where private businesses believe if they really get it wrong, they will be bailed out. >> so, actually what you have got now, steven adler, a situation where the markets is in a permanent new deal, and

change the u.s. economy? >> i actually respectfully disagree with that. first of all, while this cannot be proven, the bailouts or rescues -- during be no functioning u.s. economy today. the entire economic system would have collapsed in a panic. i cannot prove that, but i fervently believe that. i believe what president bush and president obama did was the exception that reinforces the rule. that the u.s., quite different from parts of europe, the u.s. does it stay out of the industrial sector. i do not think anybody who was involved with these rescues in 2008 and 2009 believed they were setting a precedent and wanted to set a precedent or had any desire for the government to be in this business one second longer than necessary. >> you say that, but do you think there's a possibility that actually the situation could be

a fundamental shift? the thing the u.s. economy has become more interventionist? >> i think you could go back to this moment in history and say we have a tradition of bailing out significant sectors continuously since the 1970's, when we had major banks go bust. when we had lgcm hit the wall. our tradition in the u.s. is we tend to prefer going into bankruptcy procedures. steven is right. when a sector is subject to a loss function, that is when politics that sign and. >> do you think spending can be highlighted as being the key to america's recovery. -- recovery? >> first of all, we make -- we

let many companies go bankrupt. many suppliers in this industry. >> does this create resentment because you are selective in what you are saving? >> we saved the two on these -- two companies for which private capital was not available. there was no possibility of that happening with general motors and chrysler. to your other question about spending and government spending -- yes, i believe that government spending and all the actions taken by president bush and president obama were instrumental in preventing a far deeper recession and economic collapse. >> it is interesting -- there is a tradition as the was in europe, that the american model might be one that helps europe, which has had a harder time getting out of the doldrums? >> yes, that is a much bigger

subject. is hard to draw an immediate parallel between what we have seen in your today and the u.s. i will say that the politics to this day in the united states -- when it comes to the issue of the bailout -- the issue really is a bailout for wall street. and the perception remains in the middle of the country that wall street got lots more money than any other economy sector. i think that is the fundamental issue democrats and republicans are having to fight over. >> thank you very much indeed. that is all we have time for on "newsnight" if this week. from all of us here, goodbye.

>> funding for this presentation is made possible by -- the freeman foundation of new york, stowe, vermont, and honolulu, newman's own foundation, and union bank. >> >> at union bank, our relationship managers work hard to know your business, offering specialized solutions and capital to help you meet your growth objectives. we offer expertise and tailored solutions for small businesses and major corporations. what can we do for you? >> "newsnight" was presented bykcet >> "newsnight" was presented