It was fortunate that Hong Kong government officials never thought of calling up some elderly American academics practising the religion of the free market when a massive fire swept through the Shek Kip Mei squatter camp on Christmas Day, 1953. Had they done so, they would have been assured that the 53,000 left homeless could look to the free market to find shelter. Instead, it was decided that the state had better do something, so Hong Kong's first public-housing estate was built on the ruins of the squatter area. Now the ailing estate is about to be torn down. But public housing still provides homes for about half of Hong Kong's people - a far higher proportion of state housing than in most so-called welfare societies. The presence of such an enormous public housing stock puts the current debate on the limits of state interventionism in some perspective. Chief Executive Donald Tsang Yam-kuen caused alarm in September by declaring that the government had abandoned its long-standing policy of 'positive non-interventionism', and now favoured the principle of 'big market, small government'. As ever, the chief executive was being both honest and disingenuous. The truth is that positive non-interventionism was never practised in a place that housed half its citizens in public-housing estates; where the government held a monopoly on land ownership; and was forever devising new schemes for state investment in everything from theme parks to exhibition halls. So it was just as well that Mr Tsang came clean on this point. Yet, he only partially came clean. That's because he presides over an administration that has more big-government reflexes than most of its colonial predecessors. This is not always a bad thing. But fear of criticism from the true believers in free markets prevents Mr Tsang and his colleagues from making a coherent case for where intervention is appropriate and where it is not. The demise of the Shek Kip Mei estate provides an opportunity to review these arguments. The myth about its birth is that it grew from a genuinely humanitarian response to a tragedy. But a new work by Alan Smart - The Shek Kip Mei Myth: squatters, fires and colonial rule in Hong Kong 1950-1963 - effectively destroys this. Professor Smart shows that the government was initially reluctant to do anything about the squatters' plight. It finally acted out of concerns for political and social stability. Moreover, as the public-housing programme developed, it had the tacit support of Hong Kong's tycoons. They saw that, if the free market dictated housing prices, they would have to pay a lot more in wages. This highlights the big, dirty secret of the free-market debate: namely, that most actual market participants - as opposed to academics and think-tank members - are pragmatic enough to see the virtue of state intervention, especially where their own interests are concerned. And there is a case to be made for the state to have a role in economic development, and even more so in social stability. This is why people like me, who basically believe in the virtues of the free market, are also aware that few markets are truly free and that the absence of state interventionism is far from being a panacea. Why can't the government be proud of where it has intervened to good effect? The provision of housing is nothing to be ashamed of, even if the programme may have outlived its usefulness. Similarly high levels of health care provision are to be admired, as is universal access to primary and secondary education. Yet government leaders are coy about proclaiming the merits of anything that looks like welfare-stateism. They fear that such proclamations could provoke rebukes from well-heeled professors in American Ivy League universities. But maybe they should get out more, possibly visiting places like Shek Kip Mei - where the difference between state interventionism and inaction is the difference between shelter and home- lessness. Stephen Vines is a Hong Kong-based journalist and entre- preneur
