Discussion Point: Hong Kong is not a productive place

At the Occupy London Stock Exchange protest we got a brief opportunity to rehearse libertarian arguments on economics with people who activly disagreed with us. We made some progress in a few cases, and in others we met entrenched resistence, of most interest though are the arguments that didn’t work because we were out-debated at the time. These are the opportunities to improve our debating expertise.

For example, Michael Saxon reports on our escapade to St Paul’s thusly:

We were asked where free markets had been tried so we brought up North vs South Korea and the fact that the North was separated by true communist supporters while the South adopted free markets. The South is obviously more prosperous. For some reason they wouldn’t accept this so we went to Hong Kong which they argued was a regurgitator, not a producer of wealth. This point is arguable but I forgot to mention what would have been a perfect and current example. Estonia

The same group of people argued to me, separately, that Hong Kong is basically a repository of wealth produced in China and elsewhere in the region and owing to Hong Kong’s geography and port status. Michael agreed however, with the protestors and with Wikipedia that:

Hong Kong has a major capitalist service economy characterised by low taxation and free trade.

So, what is really going on here? Is Hong Kong a productive trading and manufacturing centre or is it a service economy wealthy thanks it’s role in managing the productivity of an exploited Chinese population? Has Hong Kong changed over time?

Also, an economics question. Is a financial service company not productive in it’s own way? If so, how exactly?

History lessons (with links) in the comments please.

 

 

  2 comments for “Discussion Point: Hong Kong is not a productive place

  1. James Rigby
    Nov 4, 2011 at 11:09 am

    I used to visit Hong Kong a fair bit (pre-handover). Back then it was a capitalist’s dream – and friends who’ve visited since have said that not much has changed. There are still many Brits there in senior positions running major financial services organisations. They were sometimes known as FILTH (Failed In London, Tried HongKong) – which was partially true. But they were all generally very successful. The lack of regulation and barriers to groeth was what spurred the economy. This was starkly pointed out to me by one Chinese local who said, quite rightly “We decided to build a new airport, planned it, built it, and opened it in less time than it took you [the UK] to hold a public enquiry into building one new runway at Heathrow”.

    Following pressure from western governments post-handover, some regulation of financial services was introduced. But it is still very light-touch compared to western regulators like the FSA and the US Federal Reserve Bank.

    On the streets too, the place is a hive of commercial activity – whether it’s electronics, suits, glasses, or food, there is an abundance of competition that drives down prices. A walk down Nathan Road is testament to this – you can buy pretty much anything cheaper there than in Europe or the US. Of all the places I’ve done business, Hong Kong is the closest to pure capitalism, and it works.

  2. Tim Carpenter
    Nov 4, 2011 at 5:35 pm

    Hong Kong was a trading outpost but more importantly a coaling station and, vital and rare if not unique for the area, a vast natural typhoon shelter for shipping.

    It was, for the most part, relatively sleepy trade-wise vs, say, Singapore or, possibly Canton up the Delta.

    This changed in 1949 when the Nationalists fled to Taiwan. Hong Kong became the place to flee to[1]. Some say Communist China saw it as a pressure valve, enabling otherwise troublesome individuals to exit and distract themselves with making money and not politics.

    The influx of people, often families who had been previously wealthy or at least entrepreneurial, kick-started a boom.

    To say Hong Kong is not a producer disregards its decades long state as a manufacturing base. It also shows peoples age (or lack of!), as they appear to have no memory of “Made in Hong Kong”, being cheap and cheerful products, toys etc., much as Germany did in the later half of the 19th Century as it expanded and brought itself into the modern era via production. Hong Kong was a massive producer at the time of Cowperthwaite, the Financial Secretary who imposed a very light touch, intentionally starving the bureaucracy of data to prevent it interfering.

    To describe with a sneer, Hong Kong as a “service centre” is to display basic economic ignorance. Hong Kong has a legal system, a talent pool, communications, Minarchism (thanks to Cowperthwaite) and other advantages that means it can provide efficiency and value to the process of doing business. Services of the nature that HK provides, if done efficiently, save money and smooths the process. it is not a zero sum game here. If it were, the financial services and other industry would not use those talents. We are not talking hairdressers and telephone sanitisers, here.

    Of course, some people like the idea of inefficient processes, bureaucracy, friction, delay with all the attendant fake job creation that that entails.

    [1] although the dominant dialect in Hong Kong is Cantonese, many households in the 1960s and 1970s had adults who spoke dialects from all across China, being those who fled Communism

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