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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Foreword: Tung Chee Hwa
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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 integra-tion” is the key. On one hand, Hong Kong must preserve its celebrated and cherished seamless integration with the world economy. On the other hand, ...
Foreword: Gary S. Becker
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Since the communist revolution in 1949, Hong Kong’s economy has been greatly aff ected 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. As a result, it became a ...
Foreword: Liu Pak-wai
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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 ...
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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. Th e opportunity allowed me to more systematically put to paper my thoughts about Hong Kong’s economy and the challenges and opportunities of our times. Collected in this volume is a selection from those essays that attempts to ...
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 con-tradictions that needed to be addressed. But what are these contradictions? Premier Wen did not off er any specifi cs, 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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Th e annual budget speech is the most authoritative statement of the govern-ment’s economic policy framework. Our administration has stated its com-mitment to a limited government and to allowing markets to guide economic activities. Th is commitment was reaffi rmed in the budget delivered on February All activities—whether business-or non-business-related—require deci-...
3: Growing as a Part of China: A Historical Perspective
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Th e historical development of Hong Kong has, in my opinion, always been defi ned by its relationship with the Chinese Mainland. Th e changing perme-ability of the “border” between Hong Kong and the Mainland symbolizes the changing dynamics of the relationship. Th is fundamental factor has shaped Hong Kong’s development for over 2,000 years and especially the recent past. ...
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 fi xed against the UK sterling and since October 1983 it has been fi xed against the US dollar. During the interim period, it was initially linked to the US dollar but from November 1974 to ...
5: Why the Present Budget Policy Is Still the Most Sensible
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Since the time of John Cowperthwaite, fi nancial secretary from 1961 to 1971, Hong Kong’s basic economic policy framework has been a commitment to a limited government. Th is still shapes our budgetary policy. In his fi rst speech as fi nancial secretary, Cowperthwaite revealed his world view, and some would say his wisdom. He stated: “In the long run, the aggregate of decisions of indi-...
6: Looming Population Challenges
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Hong Kong has inherited confl icting legacies from John Cowperthwaite and Philip Haddon-Cave’s economic policy framework and Governor Murray MacLehose’s socio-political policy framework. Th e former emphasizes indi-vidual responsibility and freedom, limited government, and a competitive free market. Th e latter justifi es promoting social responsibility and stability, an ...
7: Economic Competition and Structural Change
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Th e 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). In terms of their shares in real GDP, the service sector ...
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. It is only possible to combine any two of the three ...
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 fi rst became aware of her work in a mathematical economics class taught by Robert E. Lucas Jr. at the University of Chicago in 1975. Jacobs’ fi eld observations of economic life in the big cities were briefl y mentioned as illustrations for Lucas’ highly abstract paper, “On the Size Distribution of Business Firms.” Little did I realize, and I ...
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. If China continues at this rate, then it will have achieved in 50 ...
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? Th is essay presents the intellectual case for selective inter-vention toward that end. It proposes a general approach that might have the ...
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 incom-patible with the democratic principle of equal political rights. Th e other, larger issue related to the commitment to uphold the core values that Hong Kong ...
13: Simple Ideas in Political Economy
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Universal suff rage exists in almost all democratic societies, providing every adult with equal political rights at the ballot box. Th ese societies invariably have market economies. Th e distribution of income among working adults is always dispersed and typically skewed to the right-hand side. Th is is because the income of individuals at the lower end is bounded below at zero, but the ...
14: Taxation, Regulation, and the Rational Politician
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In all societies, governments intervene to control and infl uence market deci-sions 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 ineffi ciencies are much greater.Regulations eff ectively take private resources from one group to pay another. ...
15: Why Is Housing So Expensive?
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Th ere are many voices in Hong Kong proclaiming unanimously that the city is in the middle of an aff ordability crisis in housing. Another set of voices proclaims that Hong Kong has a poverty problem. Th e latter is sometimes described as a gaping inequality between the haves and the have-nots. Poverty of course makes housing unaff ordable, but this is a result of poverty, not its ...
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. Th e 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 Income inequality can be studied from three diff erent perspectives....
17: On Public Health Care Finances
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In this essay I discuss the cost of fi nancing 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, Public health care services have declined and I believe the main reason has been the low supply of health care professionals, mainly doctors and nurses. ...
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. Infl ation during this decade averaged 0.37% annually. Th e annual return was therefore only 4.7% aft er infl ation. Th ese are poor results and the public knows it all too well. An early change to an individual portable MPF scheme would improve yields for all. It would help ...
19: Can We Aff ord 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. Th e proposal was withdrawn due to widespread opposition, including that from economists who pointed out that such a scheme was fi scally unsustainable and its redistributive provisions would have perverse work incentive eff ects. In its place, the Mandatory Provident ...
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 means-tested 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: the Comprehensive Social Security Old Age Assistance Scheme (CSSA) and the ...
VI: Resolving a Critical Deep Contradiction
21: How Can We Get out of the Housing Quandary?
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In these fi nal two essays, I will analyze housing and domestic property in Hong Kong. Th is area best illustrates one of the deep contradictions between the policies of Cowperthwaite–Haddon-Cave and MacLehose, and their legacies.Public pressure on government to reintroduce the Home Ownership Scheme (HOS) reappeared when negative interest rates and rising home prices ...
22: Why Reforming Subsidized Housing Makes Sense
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In my previous essay, I suggested resetting the unpaid discounted premium on fl ats under the Home Ownership Scheme (HOS) and Tenants Purchase Scheme (TPS) at the original sale price, when they were fi rst sold by the Housing Authority. I also proposed presetting the selling price fi ve years down the road for “My Home Purchase Plan” fl ats at the prevailing market price when the fl ats ...
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 is the founding director of the Hong Kong Centre for Economic Research and a senior fellow at the National Center for Economic Research, Tsinghua University. He was a visiting fellow at the National Opinion Research ...
Page Count: 208
Publication Year: 2013