Hong Kong's government leaders and politicians are giving new meaning to the term 'voodoo economics'. As our economy rapidly turns Siberian in the wake of the global financial crisis, our leaders are tripping over each other to offer prescriptions for our sagging economy. Taking a cue from Taiwan, the Liberal Party advocated issuing coupons to boost domestic consumption. The Democratic Alliance for the Betterment and Progress of Hong Kong recommended setting aside public funds to organise regular raffle draws to boost consumer spending. It also recommended using public funds to subsidise the monthly wages of this year's college graduates to the tune of HK$5,000 per person.
Not to be outdone, the chief executive, ministers and sundry politicians went on shopping sprees to set a good example. 'If every citizen chips in to buy a pineapple bun or bowl of wonton noodles, that would make a difference,' the chief secretary is reported to have urged. Do our citizens need encouragement to eat buns and noodles? All signs to date are that, although business at high-end restaurants has withered, at the low end, noodle shops and fast-food restaurants are holding up well. We do not know how long that will last. What we do know is that the biggest boost to domestic consumption remains the tens of thousands of mainland tourists who fill our restaurants and shops. We are also sure that consumption by local citizens is bound to shrivel as layoffs and wage cuts increase. 'Pineapple-bun economics' works only if the local economy can be insulated from the possibly prolonged and severe global downturn.
The late US president Ronald Reagan's 'supply-side economics' was decried as 'voodoo economics' for hypothesising that an adjustment in marginal tax rates and capital gains tax rates would be sufficient to increase supply and spur growth. The sad part of the Hong Kong version of 'voodoo economics' is that it is not even underpinned by any economic theory, no matter how suspect. They can only be described as public relations exercises and knee-jerk responses to crumbling demand. The only conclusion is that those who have spoken so far are really clueless as to how to sustain growth in the face of a global recession.
So, we are back to square one in our search for economic solutions. Among the prescriptions for growth put forward so far, reliance on financial services is reduced to bids for more yuan business, as financial powerhouses struggle for survival. The 10 major infrastructure projects remain the top priority, but the timelines for some are drawn out, while others are mired in environmental controversy.
Private sector projects are not faring any better. The scaled-down Hopewell development in Wan Chai continues to face stiff opposition. Even if the government and private developers could sprint into action, they would bring salvation only to construction and related sectors. As Hong Kong matures into a developed society and the middle class displays increased environmental awareness, it is increasingly clear that our government can no longer build its way to prosperity.
In a replay of the economic stimulus packages put together in response to the Asian financial crisis and the severe acute respiratory syndrome outbreak, the mainland is again the answer: more tourists, more yuan business, and the Closer Economic Partnership Arrangement, part VI - except that, this time, the mainland faces real threats to its hitherto unstoppable growth. Our government should realise there is no quick fix to our economic impasse, and that a lot of our fundamentals need fixing.
