Written by Priscilla Roberts.

Image Credit: Hong Kong 2 – Passerelle by D. Julien/Flickr, Licence CC BY-NC 2.0.

Neoliberal economists, notably Milton Friedman and Friedrich A. Hayek, frequently lauded Hong Kong as the model of a free-market society where individuals could pursue their economic ambitions untrammelled by government restrictions or directives. In September 1978, Hayek’s Mont Pèlerin Society (MPS) of like-minded economists and businessmen even met in Hong Kong to honour their founder’s eightieth birthday.

One journalist covering this gathering rather hyperbolically described the territory as ‘the most libertarian major civilised community in the world today’. More prosaically, at an earlier Mont Pèlerin meeting in 1974, the Stanford political scientist Alvin Rabushka celebrated how, due to its ‘exposed and dependent situation’ Hong Kong – where he studied Chinese in the 1960s – was forced to provide ‘an environment conducive to profitable investment’.

As the historian Quinn Slobodian perhaps sardonically stated in his excellent study Globalists: The End of Empire and the Birth of Neoliberalism (2018), Hong Kong was ‘a non-majoritarian market economy that limited popular sovereignty while maximising capital sovereignty with a much-touted free trade policy, a robust bank secrecy law, and a low corporate tax rate’. Most ‘admirable’ of all, for its neoliberal admirers, ‘in fact, was its solution to the disruptive problem of democracy’. The absence of universal suffrage meant that no great pressure existed to tax the wealthy or business profits to fund massive social welfare programmes, nor indeed to regulate living and working conditions.

In the twentieth century’s later decades, Hong Kong people made great sacrifices to ensure that their children received an education, anticipating that they would have more opportunities than their parents and join the city’s growing middle class

Neoliberal plaudits for the Hong Kong government’s policies of highly restricted electoral politics and what it termed ‘positive non-interventionism’ were perhaps hyperbolic. From the 1950s onwards, in response to successive popular riots sparked as much by inadequate basic economic living standards as by political discontent, the British authorities cracked down sharply on disorder but subsequently greatly expanded affordable public housing and heavily subsidised mass healthcare and education. Monopolistic companies, the suppliers of water, gas and electricity, were subject to public regulation.

From the 1970s onwards, Hong Kong businessmen played a crucial interstitial role in mediating and facilitating mainland China’s burgeoning economic relationship with the outside world, especially the United States. It remains an open question just how far their fervent adherence to the neoliberal outlook that became increasingly dominant in Britain and the United States in the 1980s influenced their Chinese communist associates in dismantling the social security provisions that had guaranteed at least minimal subsistence to most of China’s population. Hong Kong, meanwhile, prided itself for decades on its invariably high standing in annual rankings of the world’s most free markets.

But just how far markets were genuinely open to free competition became increasingly problematic. Beginning in the late 1940s, Hong Kong boasted many entrepreneurs – quite often refugees – who started with little and became tycoons. By the 1980s, however, these new oligarchs had established sprawling conglomerates that effectively dominated major economic sectors, including real estate, construction, major supermarket and retail chains, shipping, transport, telecommunications and finance.

Most enjoyed close relations with government officials, effectively benefiting from what might plausibly be termed cronyism. Sons and daughters of wealthy founding tycoons enjoyed numerous opportunities to amass new entrepreneurial fortunes, but – talented entertainers and creative artists excepted – interlopers from outside these charmed circles faced sharply limited options. Despite poorly conceived and implemented government-backed efforts to encourage technological innovation, entrepreneurship and start-ups, stock market speculation and playing the property market offered the most lucrative prospects.

Starting from an admittedly low base, in earlier years the economic growth delivered substantial benefits to the poorest in Hong Kong. In the 1960s, real wages in Hong Kong rose by 50 per cent, and the proportion of the population living in acute poverty declined from 50 to 15 per cent. In the twentieth century’s later decades, Hong Kong people made great sacrifices to ensure that their children received an education, anticipating that they would have more opportunities than their parents and join the city’s growing middle class. Yet ultimately progress stalled.

In late 2014 then Hong Kong Chief Executive Leung Chun-Ying told the international press that half the people of Hong Kong earned US$1,800 a month or less. Open elections would, as he explained, raise the risk that poorer residents would win a dominant voice in politics and then press to create a welfare state, something that Hong Kong big business – which, broadly speaking, backs Beijing – has for decades adamantly resisted.

Twenty years after the handover, wealth gaps in Hong Kong were reaching new records, with Hong Kong attaining a record 0.539 Gini coefficient in 2016, the city’s highest income inequality rating in four decades. The population of Hong Kong is ageing, with extremely high longevity, but retirement provisions are often inadequate.

In practice, the absence of democracy has permitted Hong Kong to function as an oligopoly, dominated by a relatively small number of politically influential large businesses that control major portions of the local economy, profit astronomically from an inflated housing market and property sector and stock market speculation, and benefit from low personal and corporate tax rates.

Through a mechanism termed ‘functional constituencies’, the complicated electoral system introduced in Hong Kong in the later twentieth century was deliberately weighted in favour of business interests. The supposedly ‘democratic’ reforms which Governor Chris Patten initiated in the 1990s and which Beijing subsequently rolled back were in reality minor cosmetic twiddling, a triumph of political symbolism over genuine substance.

Under neither the British nor the Chinese administration has the Hong Kong political system ever been democratic, but for at least half a century and perhaps more it demonstrated an appreciable readiness to respond to popular sentiment. That pattern continued during the early post-handover years.

About half-way through his second term, opinion poll ratings of Tung Chee-hwa, Hong Kong’s first post-handover chief executive, dropped dramatically, probably reflecting the economic difficulties resulting from the SARS crisis, but also in reaction to the government’s failed attempt to introduce Article 23 national security legislation.  Beijing never abandoned overt support for him, but the authorities up north began to feel great concern that the stress of continued office might be detrimental to Mr Tung’s continued good health.

In 2005 he therefore resigned the onerous duties of chief executive, accepting instead an honorific but prestigious appointment to the Chinese People’s Political Consultative Conference, China’s top advisory body. Citing family difficulties, Tung’s successor but one, the deeply unpopular Leung Chun-ying, likewise announced in late 2016 that he would not seek a second term.

Such ad hoc responses have nonetheless proved inadequate to address deeper systemic problems, many of them stemming from an absence of genuinely strong institutions that might counter the prevailing pro-business outlook. Indeed, there are indications that within top government echelons, elite figures are in the pocket of business interests. Both Donald Tsang Yang-kun, the second chief executive, and his former chief secretary, Rafael Hui Si-yan, are currently serving jail terms for accepting extremely substantial financial payments from leading local businessmen.

Special favours and accepting substantial financial payments from leading businessmen within the top-most ranks of Hong Kong’s rather amply remunerated government servants are disturbing. They can only encourage cynical suspicions that at the highest levels too many of Hong Kong’s top people are motivated primarily by short-term personal and financial self-interest, with little understanding of – let alone respect for – the purportedly fundamental principles of the system that they are administering.

Such practices are also symptomatic of a broader short-sighted arrogance and sense of entitlement that pervades much of Hong Kong’s bureaucratic and business apparatus, which is too often run by individuals who work on the blithe assumption that their operations are not subject to scrutiny and that policies, regulations and the law exist only to be ignored. Or, on the kindest interpretation, it is run by individuals who believe that the boss must be kept happy at all costs, even when this requires defending the indefensible.

Equally insidious and deep-rooted problems afflict many institutions within Hong Kong. Across much of the tertiary education sector and notably in the city’s oldest and supposedly premier university, maladministration, corruption, favouritism, victimisation and deep-rooted and systemic sexism are pervasive – even run-of-the-mill in at least some institutions – compounded and facilitated by an authoritarian management style that focuses on covering up rather than tackling abuses.

Post-war Hong Kong was never a workers’ paradise, but it offered its largely immigrant labour force stability, a certain level of security, and the hope of a better tomorrow

Breaches of official government ordinances are routine, as is a blatant disregard of the institutions’ own internal policies and stated commitments to ethical and liberal core values. Despite some shining exceptions and the presence of many admirable individuals, Hong Kong’s academic sector is fundamentally deeply flawed, in ways that far transcend – though they may well facilitate – political meddling.

These are not isolated problems; much the same is true of many other public institutions in the territory. Too often they are bedevilled by sclerotic bureaucracies, incompetent management and bad practices; a heritage derived from a combination of colonial paternalism and bastard Confucianism. An uncomfortably high number of public bodies are shining examples of the Hong Kong fake, an ostensibly high-quality designer rip-off that superficially resembles the real thing but cannot bear close inspection.

It is small wonder that young people in Hong Kong are confused and discontented. From kindergarten upwards, civic virtues and values are drummed into them. Hong Kong is plastered with posters encouraging every aspect of good citizenship, be it environmental sustainability, public hygiene, reporting corruption or undertaking volunteer work. The disconnect between these exhortations and what happens in the dog-eat-dog real-life world is often a gaping chasm. And young people currently face a future of limited and contracting opportunities, with many seeing little prospect of ever owning their own home or enjoying a middle-class lifestyle.

The authoritarian Mainland Chinese approach to Hong Kong in the wake of the 2014 protests has done little to address these fundamental difficulties. Almost daily, Hong Kong people are exhorted to participate in the economic development of the Greater Bay Area of the Pearl River Delta, which is presented as the ultimate panacea that will solve the city’s problems. This is one bandwagon onto which Hong Kong’s business elites are more than happy to jump. But it remains unclear whether more business-as-usual will remedy the city’s pervasive uneasy malaise.

As the economic wheels just keep rolling along, increasingly draconian measures are taken to repress dissent, with most of the top leaders of 2014 receiving jail sentences following their prosecution for breaching statutes which earlier had been considered obsolete. Whereas once business elites sought to exclude dangerous leftists from real political power, today Beijing officials seek to debar from the electoral process those politicians they consider insufficiently malleable to Mainland control, scrutinising their past utterances for any hint that they might have ever contemplated the possibility of independence, and invalidating elections on the pretext of irregularities in the taking of oaths and other behavioural issues.

An expansive and controversial bill permitting the extradition of Hong Kong residents to other jurisdictions has been introduced, raising fears that locals may face potential prosecution in China for actions within Hong Kong. Recurrent suggestions that long-deferred national security legislation may soon be introduced once more indicate that this would be only the beginning.

Meanwhile, displaying disrespect towards the Chinese national anthem is to be criminalised: an open invitation to disaffected soccer fans or students to take up the challenge. In the hope of eventually eradicating such overt demonstrations of disloyalty, Beijing officials also regularly exhort the Hong Kong government to instil patriotic sentiment towards the Mainland through the education system and to provide instruction in Chinese history.

For decades, Hong Kong was the much-admired poster child for neoliberals, who viewed its lack of democratic institutions as the epitome of a system that maximised profits while minimising political pressure for social welfare provisions. Yet this arrangement was the product of very specific circumstances: the result of effective cooperation between the British colonial authorities, business interests within Hong Kong and not least, if at first only tacitly, the Beijing government. It also rested on the capacity of the system to function at a level that permitted the delivery of tangible, if modest, prosperity and the promise of additional future incremental improvements to the majority of the population.

Post-war Hong Kong was never a workers’ paradise, but it offered its largely immigrant labour force stability, a certain level of security, and the hope of a better tomorrow. The fundamentals of that implicit bargain have now dissolved, leaving Hong Kong polarised and bitter, with many of its once famously pragmatic residents harbouring sullen resentment towards the status quo.

Winning hearts and minds and instilling enthusiastic loyalty are tasks that seem beyond the capabilities of Hong Kong’s current rulers, be they homegrown or from over the border. Present-day Hong Kong seems trapped in a blind alley. One is left wondering whether the state of Hong Kong foreshadows the ultimate outcome of the free-market, anti-regulatory paradigm of globalisation that has become a virtual economic mantra around the world for the last several decades.

Dr Priscilla Roberts is an Associate Professor at City University of Macau.

*Articles published by The Asia Dialogue represent the views of the author(s) and not necessarily those of The Asia Dialogue or affiliated institutions.