How Hong Kong can put an end to protest chaos – it’s about the economy, so fix the deep divide

Hong Kong is a free market on steroids that serves the rich. As discontent over an unjust system boils over, it’s time to introduce easy policy fixes

Graeme Maxton

Published: 4:00pm, 5 Aug 2019

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Restoring public order in Hong Kong will not happen through heavy-handed policing. That will only make the situation worse. And it will not come from the government abandoning its extradition bill or calling for calm. Even Chief Executive Carrie Lam Cheng Yuet-ngor stepping down would change almost nothing.

The only way to restore order is through a radical change in Hong Kong’s economic policies. After decades of doing almost nothing, and letting the free market rule, it is time for the Hong Kong government to do what it is there for; to govern in the interests of the majority.

The discontent among the Hong Kong people is deeply rooted and has been growing for many years. It is not a knee-jerk reaction to recent policy decisions or a consequence of the failed 2014 umbrella movement. It is a legacy of colonial rule and the economic system that the British implanted.

Hong Kong was bequeathed the most unrestricted neo-liberal version of the free market system on Earth, and told to be proud of it. It inherited a free market on steroids and a belief that almost any sort of restriction on economic activity was wrong.

For years, most Hong Kong people, and especially the young and the elderly, could have told any politician who was willing to listen that it was always going to end like this. The rising level of injustice was always going to result in widespread resentment and anger.

It was always going to end this way because an unrestricted market economy always creates a huge gulf between rich and poor, low wages for the majority, extreme wealth from speculative investments and vast economic sectors dominated by a handful of enormously powerful companies.

This is because a free market system only serves the needs of the rich. The trickle-down effect, where the money accumulated by the wealthy is supposed to dribble into the pockets of the poor and so fortify all, is a complete myth. That is what Thomas Piketty’s best selling book, Capital in the Twenty-First Century, is all about. An unregulated free-market system actually widens inequality. Wealth flows from the poor into the deep pockets of the rich and then it stays there.

Nor does the free market system create jobs or reduce poverty. It does the opposite. Economic growth is mostly the result of improved efficiency – rising productivity. Growth comes from doing more with less. This means that growth favours mechanisation and so actually reduces the number of jobs available in the long term. The pressure to continuously cut costs also exerts an endless downward pressure on wages. This boosts profits and so helps the rich get richer.

And, for the record, free trade is not always good. The push for open markets has created a global trading system where poor countries export their raw materials while the rich countries retain control of the technology needed to produce complex goods.

Free trade means that most of the poor world can never compete in high-value goods – look at Huawei. Without trade restrictions, the poor world can only ever chop, mine and farm. Or it can try to find a role as trader, as an insecure middleman.

It is this system which has created so much misery in Hong Kong. The widespread unhappiness is not the fault of Beijing or the extradition bill. It is down to the failure of the Hong Kong government to manage its economy, the wrong-headed belief that the market alone will solve every social problem.

The result is a massive gap between rich and poor, thousands of people still sleeping in cages, a handful of mostly family-owned firms dominating the economy, a weak welfare safety net, low wages, high property prices and a generation without hope.

Supporters fear young protesters are ‘fighting on an empty stomach’

The good news is that this deeply divisive economic system can be fixed, and relatively easily in policy terms. All it needs is for the rich to be taxed properly, the powerful oligopolies to be broken up and for Hong Kong’s wealth to be much more fairly distributed. A proper welfare system should be a priority too, so that the elderly are not left collecting cardboard on the streets well into their 80s so they can get a bowl of rice.

Hong Kong’s response to this crisis matters, and not just to its citizens – it matters in many other parts of the world, too. It matters in the UK (ironically), as well as in Singapore, Brazil and South Africa. In all those places, and many more, anger is rising because the free-market economic system has been allowed to get out of control.

Without change, Hong Kong is a taste of what will come in all these places. It now has the chance to show the world that there is a better way.

Graeme Maxton is an economist and author. His latest book “Change!” is now available in English

This article appeared in the South China Morning Post print edition as: Blame the free market

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