Hong Kong is NOT a free market: Introduction

Hong Kong is famous for having the freest market in the world. Indeed, that is one major reason why I moved here, and the reason for everything good in Hong Kong. Despite everything, the government here still cares about its ranking on the Fraser Institute and Heritage Foundation indexes of economic freedom.

But actually (perhaps obviously), Hong Kong is not a perfectly free market. While it is indeed freer than the rest of the world, there are exceptions to this freedom that I will argue are not minor, and are even a significant cause of Hong Kong’s instability right now. (I believe the economist Richard Wong argues along the same lines, although probably much more rigorously than I will).

Let's try and change this.

As we enter 2015 and my fourth year of living in this special city, I have made a resolution to post a series of articles that show where and how Hong Kong diverges from the philosophy of the free market (or “non-interventionism” in Hong Kong policy jargon) and how in every case this is a mistake that harms ordinary people at the expense of not only their freedom of action, but directly impacts their wealth and their livelihood. These seemingly obscure interstices in the free market are actually the direct and exclusive causes of all the cronyism and much of the authoritarianism that Hong Kong is suffering from. (I think the dysfunctional and undemocratic governance structure is to blame for the rest, but that problem already has enough focus!)

With too many ordinary (disenfranchised) people openly blaming the free market for their economic problems (along with the dysfunctional and undemocratic governance structure), I must forcefully disagree and try to persuade everyone that it’s the deviations from the free market that are to blame.

I will try to argue in good faith, so if you still disagree with me please point out any mistakes you think I have made in my logic or assumptions and I will do my best to correct them!

Lastly, please do tell me now what you consider to be the most egregious violations of the freedom of Hong Kong residents, to make sure I don’t miss any out.

Of course Hong Kong isn’t capitalist!

As a follow-up to my last post, Tom Holland nails it in the SCMP today (surprisingly so, given my current expectations of the quality of the logic in that publication’s opinion pieces). The article is free to non-subscribers, so you have no excuse not to read it… but here are the best bits anyway (with my emphasis):

中文: 香港特區政府行政會議非官守議員召集人梁振英主講香港樹仁大學新聞與傳播系每周名人講座 ...
He might not be kidding

Too much market, too little government? Is CY kidding?

American think tanks might like to dub the city the world’s freest economy, but local residents know better. Government in Hong Kong is neither small, nor hands-off. On the contrary, the government is expanding, and its tentacles extend into a whole range of unlikely economic sectors.

“For my five budgets, I have increased government expenditure by nearly 70 per cent,” boasted Financial Secretary John Tsang in February. “This exceeds GDP growth of 21 per cent for the same period.”

[He’s not lying… This graph from the article (though not through the link above, weirdly) confirms that (while being ironically thrifty with the x-axis labels): ]

The government sells us our water. It owns and operates our railways. It runs the airport. It even owns the city’s theme parks, via controlling stakes in both Ocean Park and Hong Kong Disneyland.

The government hosts business conventions through the Trade Development Council. It dabbles in stocks and shares via its stake in Hong Kong Exchanges and Clearing. It sells insurance through the Hong Kong Export Credit Insurance Corporation. And it structures asset-backed securities through the Hong Kong Mortgage Corporation.

And of course the government is the dominant player in the city’s all-important property market. As monopoly owner of all land in Hong Kong, it controls the market’s supply of building plots. And it is by far the city’s biggest landlord, renting out around half of all the homes in the city.

Lately, the government has also gone into property development in a big way. Its controlling stake in the MTRC and its ownership of the Urban Renewal Authority make it one of the largest developers of private residential and retail premises in the city. It owns and operates dozens of shopping centres through the Housing Authority. And its Hong Kong Science & Technology Parks Corporation develops and manages industrial estates.

QED, sadly. But it’s still freer than most places… for now…