Jake's View

There’s nothing wrong with a 2pc growth rate, in fact it’s good for us

Hong Kong remains the world’s fifteenth wealthiest economy, and that means it is a pretty good time to say that there is more to life than making even more money

PUBLISHED : Sunday, 26 March, 2017, 1:34am
UPDATED : Sunday, 26 March, 2017, 4:46pm

“I love Hong Kong ... We used to be proud of Hong Kong but today our GDP growth has slowed down to around 2 per cent. Why can’t we do better?”

Li Ka-shing,

SCMP, March 23

Let’s put some historical perspective on this complaint that 2 per cent a year, a rate of growth that would double the size of Hong Kong’s economy in just 35 years, is a poor rate of economic growth.

In the year 1000 the world’s gross domestic product was approximately US$120.3 billion in constant 1990 dollar terms, according to the most definitive study I could find on the web. The finding is disputed but then academics live by stirring up tempests in each other’s teapots. We shall let this one stand.

Now let us apply an annual 2 per cent compound growth rate to this GDP figure.

How large would the world economy now be if such a poor rate of growth were the world average since the year 1000?

Your answer is US$65,815,053,912,524,200,000, give or take a few trillion but what is a few trillion in the context of US$65 quintillion?

Put another way, the world economy in 1990 dollar terms is at present about US$57 trillion. An annual compound growth rate of 2 per cent since the year 1000 would have made it more than a million times as great.

Looked at differently again, the actual US$57 trillion says that the average annual rate of world economic growth since the year 1000 was in fact only about six-tenths of 1 per cent.

It thus seems to me, Mr Li, that a growth rate of 2 per cent in the broad historical context is actually something to be rather proud of.

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Now, I accept that 2 per cent is lower than we enjoyed at one time and is not particularly good for a modern emerging economy seeking to establish itself among the world’s more developed ones.

But Hong Kong’s is not an emerging economy. We now have a developed one that in fact stands high among the world’s other developed economies.

The World Bank, for instance, has us listed as the world’s fifteenth wealthiest on a GDP per capita basis, tied with Canada and sandwiched between Germany and the Netherlands. This is also roughly where the International Monetary Fund and the United Nations place us.

If fifteenth is not good enough for you, however, bear in mind that we have been pushed down the scale by dots on the map named Lichtenstein, Luxembourg and San Marino (where that?), the Qatar oil sheikdom and two gambling dens, Macau and Monaco.

Is someone really trying to tell me that ordinary people in that sinkhole just west of us are better off than we are?

And this introduces what in my view is the real question. How long must we work ourselves to the bone to achieve a worthwhile standard of living? If once we have achieved it, do we truly need to keep working ourselves to the bone?

Our status as the world’s fifteenth wealthiest economy, in the top 10 really if we take into account that we have at least five anomalies above us, is a pretty good time to say that there is more to life than making even more money to grow even wealthier yet.

I think that this is what many Hong Kong people have now in effect said to themselves and it is one reason that we now have a lower rate of economic growth than we once had. I rate this a good thing, something to be proud of.

But even if Mr Li is right and it is not so, the easy routes to economic growth of pouring vast amounts of concrete and submitting to menial labour at slave wages would no longer work at our present standard of wealth. Slower growth may now in fact be the only avenue to continued growth.

Like it or not, it is time to slow down.