Diversity and Occasional Anarchy
On Deep Economic and Social Contradictions in Hong Kong
Publication Year: 2013
Published by: Hong Kong University Press, HKU
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Title Page, Copyright
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Richard Wong’s scholarship, perspective, and concern for Hong Kong are all manifested in this collection of essays. He examines Hong Kong’s changing economic role aft er the opening up of China. In this new role, “dual integration” is the key. On one hand, Hong Kong must preserve its celebrated and cherished seamless integration with the world economy. ...
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Since the communist revolution in 1949, Hong Kong’s economy has been greatly affected by what was happening in mainland China. During the Korean War, the Cultural Revolution, and other periods until the late 1970s, Hong Kong was essentially cut off from the Mainland, so that its economy had to depend mainly on its trade with the West and Japan. ...
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Among contemporary Hong Kong economists who have a broad perspective and deep understanding of Hong Kong economic issues, no one surpasses Professor Y. C. Richard Wong. Professor Wong studied economics at the Department of Economics of the University of Chicago and carried on that department’s tradition of rigorous theoretical reasoning, positive analysis, and empirical testing. ...
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A year and a half ago, I started to write weekly essays on political economy issues in Hong Kong and China for the Hong Kong Economic Journal. The opportunity allowed me to more systematically put to paper my thoughts about Hong Kong’s economy and the challenges and opportunities of our times. ...
Part I: Introduction
1: The Panama Syndrome and the Origins of Deep Contradictions
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When Premier Wen Jiabao met with Hong Kong SAR Chief Executive Tsang Yam-kuen in Beijing in 2005, he diagnosed Hong Kong as having deep contradictions that needed to be addressed. But what are these contradictions? Premier Wen did not offer any specifics, although in a 2010 press conference he elaborated on challenges and solutions that relate to the contradictions. ...
2: Contradictions in the Policy Environment
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The annual budget speech is the most authoritative statement of the government’s economic policy framework. Our administration has stated its commitment to a limited government and to allowing markets to guide economic activities. This commitment was reaffirmed in the budget delivered on February 23, 2011 by Financial Secretary John Tsang. ...
3: Growing as a Part of China: A Historical Perspective
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The historical development of Hong Kong has, in my opinion, always been defined by its relationship with the Chinese Mainland. The changing permeability of the “border” between Hong Kong and the Mainland symbolizes the changing dynamics of the relationship. ...
Part II: Starting Points: Monetary Policy, Population Policy, and Economic Change
4: External Shocks and Price Stability under the Linked Rate
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For most of its monetary history, Hong Kong has issued its own currency under a currency board system backed 100% by a highly liquid international currency. Until June 1972, the HK dollar was fixed against the UK sterling and since October 1983 it has been fixed against the US dollar. ...
5: Why the Present Budget Policy Is Still the Most Sensible
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Since the time of John Cowperthwaite, financial secretary from 1961 to 1971, Hong Kong’s basic economic policy framework has been a commitment to a limited government. This still shapes our budgetary policy. In his first speech as financial secretary, Cowperthwaite revealed his world view, and some would say his wisdom. ...
6: Looming Population Challenges
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Hong Kong has inherited conflicting legacies from John Cowperthwaite and Philip Haddon-Cave’s economic policy framework and Governor Murray MacLehose’s socio-political policy framework. The former emphasizes individual responsibility and freedom, limited government, and a competitive free market. ...
7: Economic Competition and Structural Change
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The industrial composition of Hong Kong’s economy has undergone a very rapid structural change over the past three decades. Between 1980/81 and 2010/11, the share of service sector employment in Hong Kong grew from 47.1% to 87.5%, while the share of manufacturing employment fell from 41.3% to 4.0% (see Table 7.1). ...
Part III: Conditions Affecting Growth and Innovation
8: Global Economic Integration and the Distribution of Housing Wealth
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Harvard Professor Dani Rodrik has for many years presented an important argument on the inescapable trilemma of the world economy, which he calls an “impossibility theorem.” According to him, global economic integration, national sovereignty, and democracy are mutually incompatible choices in ordering the world economy. ...
9: Diversity and Occasional Anarchy: The Key to a Great City
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Jane Jacobs (1916–2006) was a writer, thinker, and activist. I first became aware of her work in a mathematical economics class taught by Robert E. Lucas Jr. at the University of Chicago in 1975. Jacobs’ field observations of economic life in the big cities were briefly mentioned as illustrations for Lucas’ highly abstract paper, “On the Size Distribution of Business Firms.” ...
10: Cities, Human Capital, and Economic Development
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Understanding economic development is the Holy Grail of all economic studies. No theory has yet explained the rise of real incomes per capita in Britain by a factor of about 16 from the eighteenth century to the present and, in contrast, the remarkable increase in China by a factor of 6 within a span of just 30 years. ...
11: On the Creative and Innovative Economy
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Like most people, I believe Hong Kong’s long-term economic growth depends critically on the creativity and innovation of its people. But is there a role for the government to promote policies and build institutions to foster creativity and innovation? This essay presents the intellectual case for selective intervention toward that end. ...
Part IV: Politics and Regulation
12: Core Values, Functional Constituencies, and the Democratic Principle
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Two related issues surfaced in the 2012 public debates for the post of chief executive of the Hong Kong Special Administrative Region. One was whether functional constituencies in the legislature should be abolished as being incompatible with the democratic principle of equal political rights. ...
13: Simple Ideas in Political Economy
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Universal suffrage exists in almost all democratic societies, providing every adult with equal political rights at the ballot box. These societies invariably have market economies. The distribution of income among working adults is always dispersed and typically skewed to the right-hand side. ...
14: Taxation, Regulation, and the Rational Politician
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In all societies, governments intervene to control and influence market decisions and their outcomes. Governments usually intervene in two ways: taxation and regulation. Economists believe the burden of regulation on society is much greater than taxation because the economic inefficiencies are much greater. ...
15: Why Is Housing So Expensive?
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There are many voices in Hong Kong proclaiming unanimously that the city is in the middle of an affordability crisis in housing. Another set of voices proclaims that Hong Kong has a poverty problem. The latter is sometimes described as a gaping inequality between the haves and the have-nots. ...
Part V: Contradictions in Quality of Life Issues
16: Education for Equality and Growth
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Income inequality in Hong Kong has risen over the last three decades, as it has in the US, the UK, and many other advanced economies. The question is, why? Understanding the causes and implications of this is important because it can show us what needs to be done to reduce inequality and alleviate poverty in our society. ...
17: On Public Health Care Finances
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In this essay I discuss the cost of financing public health care in Hong Kong assuming the present health care system remains largely unchanged. I will make some simple projections of the public cost involved, interpret the results, and discuss the consequences. ...
18: Mandatory Provident Fund Needs Reform
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Hong Kong’s Mandatory Provident Fund (MPF) has achieved an annual return of 5.1% since its establishment in 2000. Inflation during this decade averaged 0.37% annually. The annual return was therefore only 4.7% after inflation. These are poor results and the public knows it all too well. ...
19: Can We Afford Old Age Social Security?
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Before 1997, the last British Governor Chris Patten proposed to introduce a pay-as-you-go social pension scheme. The proposal was withdrawn due to widespread opposition, including that from economists who pointed out that such a scheme was fiscally unsustainable and its redistributive provisions would have perverse work incentive effects. ...
20: Economic Consequences of Universal Old Age Social Pensions
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In my previous essay, I calculated the long-term costs of various meanstested old age social security support programs proposed by Mr. Leung Chun Ying, Mr. Henry Tang, and Professor Chow Wing-sun. I compared their proposals against the present arrangement that combines two programs: ...
Part VI: Resolving a Critical Deep Contradiction
21: How Can We Get out of the Housing Quandary?
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In these final two essays, I will analyze housing and domestic property in Hong Kong. This area best illustrates one of the deep contradictions between the policies of Cowperthwaite-Haddon-Cave and MacLehose, and their legacies. ...
22: Why Reforming Subsidized Housing Makes Sense
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In my previous essay, I suggested resetting the unpaid discounted premium on flats under the Home Ownership Scheme (HOS) and Tenants Purchase Scheme (TPS) at the original sale price, when they were first sold by the Housing Authority. I also proposed presetting the selling price five years down the road for “My Home Purchase Plan” flats ...
About the Author
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Yue Chim Richard Wong is Professor of Economics and Philip Wong Kennedy Wong Professor in Political Economy at the University of Hong Kong, where he was former Deputy Vice-Chancellor and Provost. ...
Page Count: 208
Publication Year: 2013