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Conclusions - A Political Deficit Hong Kong's economic ‘miracle' was not based on abrupt breaks with the past or ‘revolutions' in production processes and business techniques. The miracle lay in the surprising quality of its performance by comparison with other Chinese cities, British colonies and the rest of the Third World. Hong Kong's enduring feature between 1935-85 was its success as an ‘enterprise' economy. The underl抖ng business model for Hong Kong society was so resourceful and resilient that trade and production prospered even under the most adverse circumstances. Growth was largely incremental, and previous chapters have shown how each period of turbulence facilitated an economic surge in the years that followed. The flood of refugees in the 1930s seemed far beyond the colony's capacity to provide for them - even at a subsistence level - but investment con日dence was buoyant and industry boomed. A similar immigrant influx after World War 11 was followed by another boom which began with heavy investment in modern mills to meet the demands of textile factories set up before the war. Meanwhile, during the ]apa即se occupation, local Chi肘se­ owned banks had turned to new sources of profit, and banking was probably the first business to resume normal operations when peace returned. Then, the Cold War separated the banks from their Mainland hinterland and seemed to threaten their survival. But Hong Kong was able to develop a new offshore financial market in the 1950s to serve China's development needs, despite a US embargo and Sterling Area exchange controls. Mter 1978, Deng Xiaoping's ‘open door' policies could have made Hong Kong's Mainland role redundant. Instead, Hong Kong became the nation's leading source of capital and expertise to modernise southern China. This ‘enterprise' economy survived through a process of constant adaptation. But institutions and individuals differed in the speed and success of their adjustments because the changes required were rarely comfortable and not always immediately obvious. This book has shown how often the optimal strategy and rational decision were postponed and how much 214 Profits, Politics and Panics depended on the relationship with clients and constituents. Factories and trading houses were direct1y linked to overseas markets, which compelled them to adopt whatever production or business practices their customers preferred. For bankers, the relationship was not so close. Until the arrival of the large family conglomerates in the 197郎， the Hong Kong borrower was too small to be able to exert much power over a bank, and bankers could remain isolated from radical changes in Hong Kong's economic conditions. In the end, however, they were subject to market forces: failure to adapt would be penalised by lost profit opportunities. The government displayed much the same pattern. For the most part, bureaucratic rule by colonial mandarins and the absence of an elected legislature meant that there was litt1e direct link between government policy and the community's preferences. The colonial administration could pick and choose its constituents among the business éli間， and, in the case of banking, officials had considerable discretion in applying the law. There were no elections to penalise political failure or bureaucratic blunders - in marked contrast to business where bankruptcy could follow customer dissatisfaction and incompetent management. But a threat of public protests on the colony's streets was a powerful incentive for ofticials to discard their usual disdain for depositors and to reform financial regulation. This book illustrates，的0 ， that the colony's political arrangements meant that the government was free to make the community pay the costs of mistakes in managing monetary affairs. Thus, the government regularly bailed out insolvent banks after 1965 for fear of public indignation if depositors were left to lose their sa吋ngs. The colony's Exchange Fund financed these rescue operations with money that could have been spent direct1y on the community's well-being. Causes of Complaint Economists are divided about the contribution which banks make to economic modernisation.1 The banking industry's role in Hong Kong's growth has been portrayed in mainly negative terms. An influential view is that, because of its colonial status, Hong Kong's financial resources were diverted from investment in the local economy and devoted, instead, to protecting the British currency.2 However, the claim that reserves were held in London as a form of colonial tribute is not supported by the evidence revie，、Ted in Chapter 10,‘Colonial Money and Its Management'. The real costs of maintaining large overseas reserves were...

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