Even in Hong Kong, free markets need a guiding hand

Ranked the world's freest economy and characterised by "big market, small government", an increasing number believes our government should be more hand-on with economic policy

PUBLISHED : Monday, 17 August, 2015, 1:41am
UPDATED : Monday, 17 August, 2015, 1:41am

Hong Kong is the darling of conservative think tanks to whom government intervention in the economy is anathema.

They rank the city the world's freest economy, characterised by the catchphrase "big market, small government".

The sentiment is not shared by an increasing number who believe our government's hands-off economic policy needs updating. They say markets fail, and cite as evidence unaffordable housing, growing poverty and the plight of the elderly.

One of them is Chief Executive Leung Chun-ying.

He has sought to move on from the divisive debate on electoral reform with proposals for a bigger government role in the economy, which also is controversial. He chose an interview with Xinhua to restate an interventionist philosophy flagged during his 2012 election campaign, when he dismissed "positive non-intervention" as outdated.

This is a term coined by a colonial financial secretary in the 1970s for restricting government to creating regulatory and physical infrastructure that would allow markets to function efficiently.

Few would disagree that the concept has helped the city prosper beyond imagining at the time, but for whatever reason it also has failed to prevent unforeseen social inequity.

Leung says the laissez-faire approach has been overtaken by a changing global economy and increasingly intense competition from the likes of Singapore and South Korea, whose governments "have been very proactive" in economic and livelihood issues.

He says the Hong Kong government has no choice but to respond by adopting the role of proactive leader and co-ordinator with the business sector.

This rang alarm bells in the business sector, with Liberal Party chairman Felix Chung Kwok-pan warning that "severe" intervention would mean "Hong Kong would no longer be Hong Kong".

More government intervention in the economy is a global trend, given impetus by the fallout from the global financial crisis.

Free-market principles may remain at the heart of our competitiveness, but Hong Kong needs to adapt to changing times.

That means striking a balance with a maxim that has served the city well - that where the market leads, the government facilitates.

The government needs to be more proactive on long-term structural issues that impact on social harmony and economic stability - such as housing, poverty, the elderly and the environment.