Why Hong Kong fails and how it can be saved
- The city has become a classic rentier society; only China’s mixed economy, industrial policy and state capitalism can break the spell
A rentier is someone who lives on income from property or securities, that is, unearned income. A rentier society is one where vast business activities are unproductive, but whose appearance of productivity is down to parasites preying on public resources, or resources that ought to have been public goods, and exploiting them for private gain.
Hong Kong is, in many respects, such a society. That is its real and underlying failure. Democratic decline and loss of freedom are more apparent than real. The rise of democratic norms only started in the last decade of British rule and the first 1½ decades of “one country, two systems”. They failed because economic advances and political development were out of sync.
Once, Hong Kong’s business really was business. It used to be the place in Asia to start and grow a business. This had meant the provision of public services to maintain or subsidise ease of business and reasonable costs of living, including heavily subsidised public housing, schooling and public health.
Over the years, though, all such “public goods” subsidies have shifted to benefit the monopolists, the big landlords and the financiers. It’s increasingly difficult for the middle class to live comfortably, and for the lower middle class to avoid falling into poverty.
The obverse of public provisions in housing, healthcare and schooling are stratospheric land prices, and uncontrolled medical charges and school tuition – all of whose owners, professionals and practitioners are directly or indirectly subsidised by the government, at public expense.
The world has become collateral damage of Western sanctions
As a result, in the past two decades, most worker productivity gains ended up benefiting bosses, not employees; and the ease of business and standard of living worsened catastrophically.
A well-run society and efficient economy provide for upwards mobility and valuable life/work experience. The post-1997 demographic makes sure the city is full of well-educated youngsters – at least in terms of academic diplomas – not so much deprived of democratic freedom as career opportunity and valuable work experience.
Economically and technologically, Hong Kong is the hare that has lost the race to the tortoise that is mainland China. With less and less to bring to the table, its democratic demands were bound to be frustrated.
Is there a way out? Well, yes, phasing out Hong Kong’s “rentier economics” by rapidly integrating with southern China’s economic engine. For all their flaws, China’s mixed economy, industrial policy and state capitalism work. But that’s for another column.
