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Oerdin
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of Internet Music.
Sep 2001
time: 21:19
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The right wing Heritage Foundation loves Hong Kong and Singapore and it routinely puts both cities on the top of their list of the "world's freeest economies". The problem is their economies aren't the laissez affair dreamland they're being made out to be. The Asia Times says the Heritage Foundation's rankings are just laughable.
quote:
HONG KONG - In 1997, chief executive Tung Chee-hwa ushered in the era of Hong Kong people ruling Hong Kong after 150 years of colonial rule - sort of. Tung was born in Shanghai; educated in the United States and the United Kingdom; his sinking shipping empire was bailed out by Beijing; and he was hand-picked by China's then-president Jiang Zemin.
Tung resigned last month and has been replaced, at least temporarily, by Donald Tsang. Tsang was born and raised in Hong Kong and spent his entire career in its civil service, with a detour to Harvard for a master's degree in public administration. Finally, Hong Kong people ruling Hong Kong! Except for one thing: Donald Tsang is actually Singaporean.
No, Tsang's parents aren't from Singapore; his trademark bow-ties aren't sewn there; indeed, it's possible that Tsang has never even visited Hong Kong's rival as Asia's international business center. Tsang's rise doesn't necessarily signal a resurgence of the creeping Singaporization - "shut up, behave, and listen to Poppa" - that took root after the 1997 handover. but receded in the wave of massive protests since 2003 against Poppa Tung. But Tsang's record in government exhibits the father-knows-best style capitalism practiced in Singapore, now run by Lee Hsien Loong, son of national patriarch Lee Kwan Yew.
The United States' Heritage Foundation annually declares Hong Kong and Singapore numbers 1 and 2 in its ranking of the world's freest markets. Those grades are dead wrong, laughably so, but for different reasons.
Nothin' ain't free
Hong Kong, as the Heritage folks trumpet, boasts minimal government regulation of business. That isn't the same as a free market, though. Lack of regulation has fostered cartels that control the most profitable niches of Hong Kong's economy with a wink from the government.
In property, the root of most Hong Kong fortunes, the government calls the tune, as it has since colonial times. The government owns the land, controls the market in it (and, contrary to the old saying "buy land - God ain't making any more of it", decides when to make more land through reclamation), and evaluates development plans case-by-case, rather than following set regulations. Whatever you think of the system - which has produced a soaring skyline and stratospheric property prices - there's no invisible hand or level playing field characteristic of free markets.
Hong Kong people don't care about politics, only business, according to mythology. But rather than ignore government, Hong Kong's business leaders join it. Tung and Hutchison Whampoa chairman Li Ka-shing, Asia's richest man, served on the Executive Committee (ExCo) of policy advisers to British governors, and ExCo still teems with tycoons. The Legislative Council (LegCo) still reserves half its seats for representatives of business and professional groups. The Election Committee that endorsed Tung as chief executive in 1997, and reelected him in 2002 (despite his 20% approval ratings), isn't a cross-section of Hong Kong's public, but a who's who of business elite and mainland loyalists chosen by Beijing.
In government, big-business representatives don't promote free markets but suppress threats to their supremacy. Tycoons prefer their own iron grip on the economy to the invisible hand of the market. So Hong Kong has no antitrust laws to prevent unfair competition, allowing incumbents to collude against challengers and dooming consumers to some of the highest living costs on earth.
The apparent paradox of Hong Kong capitalists' love affair with Beijing's communists is no mystery at all. Hong Kong's tycoons got where they are by playing footsy with political leaders. That works for Beijing. The unity of its political and economic elite also suggests why Hong Kong has been so slow to recover from the 1997 Asian crisis that burst its pre-handover property and stock market bubbles. Tycoons get their status from the status quo; they abhor economic innovation and creativity.
Socialist success
Singapore has staged a far stronger recovery from the regional crisis, perhaps because it does things differently. But if you think Singapore is a free market, try to start a newspaper there.
Along with its strict regulation of personal freedom, Singapore's government long ago staked out strategic sectors of the economy, financed their development and kept control of them. The Heritage Foundation shouldn't call Singapore the world's second-freest economy, but give the city-state its due as the world's most successful socialist state, right down to the virtually unchallenged rule of the People's Action Party.
There's even a genuine Singapore Inc: Temasek Holdings, an arm of the Ministry of Finance run by Ho Ching, the prime minister's wife (and Lee Kwan Yew's daughter-in-law), investing taxpayer money at home and overseas. Even publicly traded companies such as Singapore Telecom (run by Prime Minister Lee's younger brother), have controlling stakes safely in government hands. Lee Kwan Yew's model - state ownership plus political domination and Confucian wisdom - ensures that market forces have less influence than government in Singapore's economy.
Donald Tsang's policies veered toward Singapore's hidden-in-plain-sight interventionism, rather than Hong Kong's more subtle style, during his 1995-2001 tenure as financial secretary. Two cases stand out:
In the summer of 1998, Hong Kong faced a potential financial crisis. Emboldened by the regional economic wreck, speculators reportedly aimed to break the Hong Kong dollar's fixed exchange rate to the US dollar. These speculators shorted both the local currency and the benchmark Hang Seng stock-market index. Hong Kong monetary authorities raised interest rates to boost confidence in their dollar, but that battered the stock market and gave the speculators profits to continue their scheme.
It was Tsang who devised a strategy to beat the game: the government spent HK$118.1 billon (US$15.2 billion) in taxpayer money on a one-day stock market shopping spree, buying bargain-priced shares. That step, which left the government as the biggest shareholder in many blue chips, indicated that Tsang trusted the market's wisdom less than his own.
Buying flying elephants
Then, in 1999, Tsang spearheaded Hong Kong's effort to counter economic gloom by bringing Disneyland to town. Due to open this year, the theme park wasn't the usual case of a developer getting the government's nod to build what it wanted without public input.
Disneyland Hong Kong received unprecedented "input" from the public. That's because Hong Kong taxpayers, not Disney, fronted most of the money for the project: US$417 million for a 57% equity stake in the park. In addition, Hong Kong has spent nearly US$3 billion in related infrastructure costs, 65% above initial estimates. Make your own joke about Hong Kong being a Mickey Mouse town, but until the Disney project, you'd have been more likely to see elephants fly than the government taking a stake, let alone a majority holding, in a private project.
To justify this radical step, Tsang cited the partners' different objectives for the project. Disney hoped to make money from park attractions, while the Hong Kong government took a wider view of its investment. "The return to us cannot be limited [to] the amount of money we derive from profit sharing in the company itself - but rather the whole economy gains," Tsang explained. "Our hotels will benefit. Our tourist industry will benefit. Our airline will benefit. And all the retail shops will benefit as the result of more tourists coming to Hong Kong." Lee Kwan Yew couldn't have said it better himself.
There's nothing necessarily wrong - or right - for Hong Kong about these Singapore-style economic interventions. Calling Hong Kong laissez-faire was never fair anyway. What matters more than free-market purity is whether Tsang's Hong Kong Inc can match the success of the Lee family business in Singapore. |
http://www.atimes.com/atimes/China/GD30Ad04.html
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05-05-2005 15:55
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