Hong Kong's economy could do a lot better with a little less laissez-faire

By Henry Lui, Sha Tin College
By Henry Lui, Sha Tin College |

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Avant-garde, coup d’etat, laissez-faire, fromage baguette … what do all these darned French phrases even mean? One of them has been the topic of much discussion recently – and no, it’s not the one which translates to “over-priced pastry”.

Our divine omni-benevolent leader Leung Chun-ying recently called for the city to abandon its – you guessed it – laissez-faire, or “hands-off,” economic policy in favour of tighter interventionist policies (though a cheese baguette policy does sound rather appealing). This would likely lead to lower prices of goods and property, improving the general welfare of the people.

Some were quick to brand it as a move by the Central Government to “communise” Hong Kong. Others believed that stricter control would immediately turn the city into a planned economy. As anyone with as little as a GCSE in economics would tell you, this would certainly not be the case.

All nations, save for North Korea, are mixed economies; economies which have “some resources allocated through the price mechanism and some by the state”, as the lovely Edexcel mark-scheme would say. In layman’s terms, it means that private businesses are allowed to function independently, but the government provides the public goods and has some interference in the market. Hong Kong, being the world’s freest economy, is a far-right, conservative economy, one with very little government intervention. Introducing regulation would only shift it to the left a wee bit.

Shirley Yuen, CEO of the Hong Kong General Chamber of Commerce (HKGCC), says businesses “[do] not need bureaucratic interference,” and that they “need a government that articulates a vision of who we are and what we strive to be.” In plain English, it means that they need a government that will give in to their demands.

The HKGCC is comprised of multi-billion dollar corporations such as Jardine Matheson, Caltex Oil, and Standard Chartered. It’s no surprise that big businesses are incredibly vocal about Leung’s new ideas as they would have adverse effects on the companies’ bottom line if they ever materialised.

Although it is definitely true that our free economy has brought our city a lot of prosperity, it is high time we give the working class a bit of help, too.

Raising the minimum wage is one method we could use, but some are afraid that doing so would directly cause cost-push inflation. However, it has been shown that the main driver of inflation in recent years is rent and property costs, rather than labour.

George Cautherley, vice-chairman of the Hong Kong Democratic Foundation, says that there is evidence to suggest that a raise to HK$36 per hour would be affordable; as Hong Kong’s GDP is expected to increase at around five per cent year-on-year; the increase would only amount to a 2.6 per cent increase in wage bills for small businesses. Therefore, the old “oh-my-god-the-inflation” fallacy is invalid.

Despite the recently introduced “cool-down” measures, property prices are still floating at a high level. Direct intervention, such as limiting the number of flats a single person can own, would be a great help here.

There are many other methods, such as increasing profits tax, that would help alleviate the long-running issue of income inequality, but they may be even riskier for the government to attempt. Whether or not Leung’s words are true, it is important that the government starts catering to the needs of the people, rather than the needs of the businesses. In a perfect world, business operations should be mutually beneficial for both the businesses and the people, and that’s not what’s happening right now.