[Viewpoint] Basement-gate points to shaky Hong Kong politics

Washington had Watergate, Italy Bunga Bunga-gate and London Murdoch-gate. Now, Hong Kong brings us Basement-gate.

It’s a scandal that many of us outside the city of seven million might find hard to fathom. Henry Tang, the favorite to be Hong Kong’s next leader, has an illegal basement.

In my mind, that’s only a problem if you are storing drugs, trafficking humans or evading taxes. For Hong Kong residents squeezed by surging rents and rising living costs, Tang’s underground aerie, which he built without a government permit, is outrageous enough.

Even as poverty in Hong Kong rises, Tang’s hidden wonderland contains a Japanese-style sauna, a well-stocked wine cellar, a dance studio and a theater, according to local media.

Tang’s claims that the basement is just storage space - one that’s twice the size of more than 90 percent of private homes in the city - and that it’s all his wife’s fault didn’t help. The basement is really a metaphor for the tensions pulsing below Hong Kong’s surface. Its people are pushing back as Beijing foists an unpopular chief executive on the city.

Tang personifies one of the biggest gripes among locals: how China and the city’s elite lord over the place and ignore growing social, political and economic fissures 15 years after the U.K. handed Hong Kong back to China.

Chinese Proxy

The city’s 99 percent deserve more consideration from the billionaires who tower over the place, Li Ka-shing included. Predictably, Hong Kong’s richest man and his vast business interests support Tang ahead of the March 25 coronation, errr, election. Billionaires don’t tend to bite the hands that feed them, like the billionaires in Beijing.

We often think of China’s 1 percent as business moguls running energy and real estate companies. But there’s money in politics, too. The wealthiest 70 members of China’s legislature added almost $90 billion to their bank accounts last year, according to Hurun Report, which tracks the country’s wealthy.

The 2011 increase is more than the combined net worth of all 535 members of the U.S. Congress, the president and his cabinet and the nine Supreme Court justices. Really, if this value-investing stuff doesn’t work out, Warren Buffett could always see about getting a Chinese passport and entering government.

China believes that Tang is the best guy to make sure the city stays in line, while keeping the democracy movement under wraps, pesky environmentalists quiet and Hong Kong’s coveted image as a free-market Mecca intact.

The way that laissez-faire fans gush over Hong Kong has always been a bit surreal. It’s routinely ranked the freest economy anywhere thanks to its low taxes, unrestricted entry of foreign capital and rule of law.

The Ayn Rand set tend to ignore some of Hong Kong’s other qualities, including a pegged currency, a state-backed Disney theme park, an oligarch economy ruled over by a handful of billionaires like Li and a leader anointed by officials in Beijing.

Top-Down Rule

The nontransparent methods in selecting the committee of 1,200 that will name Donald Tsang’s successor contrast sharply with Hong Kong’s reputation as a great place to do business.

How free can the economy be when the vested elite get to cook the policy-making process? Isn’t that the very definition of an uncompetitive market? Oddly, the recent elections in the mainland Chinese village of Wukan seemed more democratic than Hong Kong’s.

Arguments that Hong Kong was better under U.K. rule miss the point that Chinese control isn’t going away and the city’s residents aren’t about to get the chance to choose their own leader.

But Hong Kong’s free press is beating a tattoo over Tang, and public discontent could morph into Arab Spring-like protests.

The controversy over Basement-gate shows why Hong Kong needs to move its politics above ground. Is China listening?

by William Pesek

* The author is a Bloomberg View columnist.