Hong Kong – land of capitalism? Only if you’re poor
High rents and property prices benefit only a few; it’s time for the government to reorder its priorities
Our ruling elite has always professed a horror of the European-style welfare state. Yet, they only seem to advocate capitalism for the poor and middle class. For the rich and well-connected, the government’s decades-old, though unofficial, high land-value policy has served as a de facto, almost socialist, guarantee of private profits for the housing and infrastructure industries while suppressing wages and labour rights.
These have created a group of oligarchs who have a lock on the entire economy, making it difficult to start a new business because of high rents and killing job opportunities and upward mobility due to a dearth of diversification in the job market. High rents and flat prices are the real tax we pay, not to the government, but to the oligarchs.
Is there a way to change that? I am not smart enough to redesign the whole system. But it doesn’t seem impossible for the next chief executive, beset by angry mobs and discontented millennials, to make some significant readjustment to government priorities without upsetting the ruling class too much.
The government raises about 20 per cent of revenue from land sales every year. Yet, in a practise dating back to the colonial era, the cash is locked up and cannot be used for any other purposes other than future infrastructure projects. This has effectively created an endless profit cycle for the government and the big developers and construction giants. This practise should be scrapped.
Instead, there is no reason not to divert the 20 per cent from land revenue to enhance, as a recurrent budget, social services, education, health care and welfare. We are getting the Zhuhai bridge, the high-speed rail link between Guangdong and Hong Kong, and the third airport runway. Critics have suggested slowing or halting altogether future infrastructure projects that don’t generate obvious social benefits or easy returns. If we do need to build, we have more than HK$1 trillion of fiscal reserves.
The old oligarchs and their families have enjoyed this socialist gravy train for far too long. That has contributed to social tensions and contradictions today. It’s time to use land sales to benefit everyone and return the “private tax” of high property value to the people.
The land belongs to us, and its value should therefore accrue to all of us, not just a privileged few.