Today is the day of Hong Kong’s annual Policy Address – a contrived ritual that is no less a colonial hangover since Chief Executive CY Leung moved it from October to January. Leaked mutterings suggest that we will see more movement towards a comprehensive, welfare-based approach to tackling poverty.
Past administrations have only reluctantly acknowledged the growing gap between rich and poor, and God forbid that officials should try measuring or analyzing it to find out the causes. (Best guess: partly plain everyday globalization, amplified by a massive amount of artificial economic distortion via land, fiscal and migration policies.) Officials’ usual response has been to launch PR campaigns, such as (to dream one up on the spot) a Jockey Club-funded pilot scheme to give 200 families in Tin Shui Wai a free goat each to encourage self-sufficiency.
CY came into office promising to get (relatively) serious. Despite extreme hostility from tycoons demanding their customary privileges, pro-democrats who cared only about abstract political structures, civil servants stuck in the 1970s and activists refusing to accept anything less than a ruinous universal pension, he pushed through a lightly means-tested allowance for the elderly poor that boosted recurrent welfare spending by 14%.
The word is that CY today will announce a subsidy for poor families – one that apparently exceeds Oxfam HK’s careful and sensible pre-Policy Address proposals. This could help correct one of those bizarre anomalies everyone takes for granted, namely the fact that the rich get a handout for each child (via tax allowance), while the poor don’t.
Even without anything like European-style cradle-to-grave protection, Hong Kong’s welfare and broader economic systems are already riddled with hidden cross-subsidies and warped incentives. For example, without a higher statutory minimum wage, employers may be able to grab higher allowances for the working poor through pay cuts; meanwhile, cartelization and land policy impose automatic subsidy of the rich by the poor. No-one wants to gauge the impact of structural factors like open-ended immigration of less-skilled Mainlanders or the barriers to advancement and opportunity erected by the education system.
By coincidence – presumably – the Heritage Foundation chooses this time to declare the Big Lychee the Freest Economy in the Solar System for the 20th year running. The Hong Kong government greets the news with its usual enthusiasm, but the days when everyone else jumped up and down with excitement are over.
How do you manage to meet the criteria for Freest Economy when your domestic markets are cornered and manipulated by half a dozen property moguls who crush competition and exploit consumers? Answer: ‘Freest Economy’ means the economy with the government that gives such parasites the most leeway. Which leads to the obvious question: why be ‘Freest Economy’ if it makes most of the people poorer?
The South China Morning Post looks at how Hong Kong-style economic freedom has delivered less prosperity than some variants that stray from the Heritage Foundation’s dogma. Behind its grave warnings about Singapore snapping at our heels, the Heritage Foundation itself has become irrelevant. There was a time when the think-tank offered practical market-based solutions to political and economic problems. In the late 80s, it proposed a way out of the USA’s growing healthcare dilemma, through compulsory universal insurance. The principle was developed by Republican governor Mitt Romney in Massachusetts and purloined by Barak Obama. Since then, the Foundation has pretty much reversed itself and become the sworn enemy of the idea – now known as the Socialist Kenyan Obamacare Menace. It launched an activist arm, hijacked by a rabid rich-kid called Michael Needham who has cost the Republican Party dearly by getting Tea Party extremists to harass GOP lawmakers into trying to shut down the US Government to derail the policy.
Somewhere along the line, dependable old Anglo-Saxon pragmatic empiricism (‘go with whatever works’) gave way to a fanatical Continental devotion to ideology (‘yes, but does it work in theory?’). The Heritage Foundation has lost it. A pity, given that Hong Kong’s Policy Address could use such ideas as a negative income tax or school vouchers.
The Foundation still has a hard-headed, down-to-earth, no-nonsense approach to foreign policy: warnings of Beijing-produced political-military turbulence ahead, scrutiny of how Chinese rhetoric on nuclear weapons is becoming increasingly provocative, and the need for regional democracies to unite against the Mainland’s unreasonable territorial claims via a Pacific version of Mr Rogers’ Neighborhood. Not sure what CY would think about these, though.