THE STRUGGLING AND THE SPOILED: WHY I WANT THE OCCUPY CENTRAL MOVEMENT TO FAIL
By Yifan Ye
It was a wet, overcast summer day in 2013 when I arrived in Hong Kong. The 300,000-persons strong July 1st protest was in full strength, rumored to be the biggest one in its decade-long history. As I forced my way through the crowd of people taking pictures on an overpass, I glimpsed an amazing image: an endless mosaic of umbrellas of seemingly infinite colors and sizes - slightly rippling in the wind, broken up only by the occasional flag and protest sign - completely covering the streets of Causeway Bay. It was a mesmerizing sight, one that mere words cannot even begin to convey my emotions at the time. Do you hear the people sing? In that moment, I did.
I had taken up an internship offer with the Hong Kong Monetary Authority, the local central bank. Despite being better suited to work on Mainland China policies, I insisted that I wanted to do domestic, real economy research in Hong Kong. The months that followed put me nose-in-dirt with Hong Kong, in a way perhaps only a central bank research position could. I examined datasets on government expenditure, unemployment, by-industry performance, banking regulations and crime and eventually completed an independent project on housing policy. The experience was exhilarating, and I felt like a sweet-toothed child who had just walked into the world’s best candy store.
Yet as my understanding of the city-state developed, my support of Hong Kong political movements, including for the (then well-underway) Occupy Central protests, waned. Granted, part of my opposition was my being a target of the protests; people didn’t seem to care about the difference between the investment bank intern who, admittedly, is part of the problem and the intern for the de facto central bank who aspires to be the solution. But as I tried my best to communicate with the protestors, I realized how little they knew about their own condition and the social-economic dynamics of Hong Kong in general, as well as how discorded and impractical their demands were. While some of their concerns no doubt have some weight, the bulk of it made so little sense in economic and political terms that they border on the politically impossible. If Occupy Central 2013 is any indicator of what is happening in Hong Kong right now – and I suspect that this is all too true – then I can neither support the protests themselves nor their goals.
From a hard-line Austrian neo-classist, Ayn Rand cult-libertarian perspective, Hong Kong might be the best place on earth. The city-state stands out from its competition because of its unbridled economic liberty and extreme hands-off approach of the government. The HKSAR government is committed to a fixed exchange, free trade regime: by definition, letting go of control over monetary affairs. Taxes are among the lowest in the world, and must be augmented with income from land sales and sovereign fund investments to balance the budget. This is obviously a city designed for those who believe that you get to keep what you earn by fair means and is highly geared towards the so-called “self-made man”.
This laissez-faire tradition is complemented with amazing transparency, regulatory prudence, and accountability at the macro level. Small as the Monetary Authority and Financial Secretary are, they have solid policy guidelines backed by a collage of smart, able technocrats. It is difficult to appreciate how efficient and functional the HKSAR government is in general unless one has conducted research there. Replies for email inquiries can be expected within the day, budget and accountability reports for all major government branches are released annually, and recruiting is conducted on the open market at competitive wages. Extensive records exist of Legislative Council deliberations, and anyone can track the implementation or termination of a certain policy from the initial proposal to the signing into law. During the two years of doing researching on Hong Kong at Duke, the dozens of authorities I have dealt with have been, without exception, pleasant and helpful.
On top of that, Hong Kong provides excellent public infrastructure to its citizens. Over 40% of Hong Kong citizens live in apartments with rent subsidies by the government, and a further 15% own property subsidized by the Hong Kong Housing Authority. The medical system is inclusive, one of the best in Asia, retirement plans are managed by the government in a subsidized “mandatory provident fund,” citizens receive nine years of free education, and local colleges are reasonably generous with scholarships. While these benefits often exclude mainland residents with authorization to work in Hong Kong, a local citizen can essentially enjoy world-class infrastructure while paying minimal taxes.
Taking all of this into consideration, the question becomes quite perplexing: What on earth are the protestors fighting for? Living costs? The entire Hong Kong social-economic system is designed in a way that the market normalizes prices and wages. Whatever inflationary pressure exists is likely grounded in the economic bedrock of rigid supply-and-demand relationships, contingent on the fact that Hong Kong is an overpopulated island nation with natural constraints on resources, factors that the HKSAR government has absolutely no control over. Any attempt to artificially subsidized consumer markets could very likely distort prices in unforeseeable directions. Housing prices and private education costs are subjected to similar constraints, and thus far initiatives to provide support or state involvement in these markets have appeared to be, if not unsuccessful, highly problematic. I suspect that public programs such as the Direct Subsidy Scheme and Home Ownership Scheme, while ultimately benefiting the target demographic, created perverse incentives and price distortions in their respective markets. The very same people that complain about the lack of government subsidies in the housing market as of 2013 probably protested about too much involvement in 2001.
How about democracy? While I am somewhat more appreciative of the call for democracy in Hong Kong, the following question needs to be asked: What exactly can a democratic system in the form of, for example, general suffrage actually bring to the region? Democracy is a good tool, at least on paper, to fix defective governments and public institutions, but if the system isn’t broken in the first place – as is the case for Hong Kong – the need to repair it does not exist. It is difficult to imagine, democracy or not, how the HKSAR government could become even more accountable and transparent than it already is. That is, the benefit of a practical pursuit of democracy in Hong Kong is most likely limited to having democracy in and of itself per se.
But why isn’t democracy in and of itself enough of a worthy goal? Because elections and the political conflicts that are associated with them carry a hidden cost. The appeal of Hong Kong as a finance center is highly dependent on the long-term consistency of economic and social policies, particularly those related to the currency and financial systems. Compared to a system where the central bank and financial secretaries answer to politicians catering to public demand, the current, largely technocrat-managed system is better equipped to deliver such consistency. Consider Hong Kong’s HKD 3 trillion sovereign fund (its “foreign exchange war chest”) and its thirty-year-long stable dollar peg. Designing a suitable democratic alternative to the system that has provided such confidence to investors and businesses is an arduous task.
This is a point that, in my experience, protestors either fail to understand or choose to ignore: that in the absence of a formal, informed deliberation on how a majority-vote democratic system in Hong Kong ought to be structured, any such attempt will likely result in at least the partial loss of Hong Kong’s comparative advantage as a city-state and damage its long-term development potential. It is far easier to simply point a finger at cracks in the existing system and rally for its demise than to actually reflect on such weaknesses in the hope of providing revisions or improvements. The favorable situation of modern-day Hong Kong as an international finance center and commerce hub is in no small part thanks to the non-democratic, but nonetheless meritocratic, regulatory institutions established by the British and maintained by the HKSAR government. The same institutions have succeeded in navigating Hong Kong through multiple massive shifts in social-economic structure and core competitiveness over the past decades. The process of renovating or replacing such highly functional institutions must therefore be approached with extreme caution.
Whatever the Occupy Central protestors demand – be it price ceilings, subsidies, government reform, or participatory democracy – can only come with tradeoffs. Hong Kong is not Somalia or Syria; it is not a dysfunctional society but one operating under high efficiency and a specific model of growth, quite likely one of the real-world societies closest to a hypothetical production frontier. It’s current system may not be the best one. However, improving on it will no doubt require far more than slogan-shouting in the streets. Social reform ought to be initiated by intellectuals with policy experience and clear, unified, and justifiable objectives. Change certainly should not come from protestors who call for sweeping social changes, yet turn a decidedly blind eye towards the real and not insubstantial costs of the policies they advocate.
Most often, experienced intellectuals who do pursue social reform find their efforts eroded by movements such as Occupy Central, which aggravate social tensions and damage Hong Kong’s investment and tourism appeal. The story of Hong Kong’s development – from the poverty-ridden, hyperinflation-plagued city of the early post-Japanese occupation period to the Asian economic powerhouse of today – is every bit as, if not more, amazing than that of mainland China. Easily forgotten, however, are the people that made this happen: inspiring individuals who put together enormous social projects, researchers that provided them with empirical and theoretic support, entrepreneurs who fought against changing tides and, of course, hardworking Hong Kong citizens in general. These are the people who struggled to make the region a better place, and the blind, across-the-board criticism of current Hong Kong society often observed during events such as Occupy Central seems to me an insult to these efforts.
In the summer of 2010, I met Dr. Li, an elderly businessman who was operating a small stereo and audio equipment shop in North Point. This was the third business he had started; he had closed his stereo factory once in the late 1970s because of cheap Japanese imports and closed another audio equipment dealership in the 1990s, this time because of cheap imports from mainland China. We talked again during my last visit to the city, and I asked him about his decision to start his current business.
“Your generation is spoiled; not you, but a lot of local kids. They’re never satisfied with what they have and are afraid of competition,” he told me. “Sure, students are coming from the mainland. That means you need to get better. The same goes with my business; sometimes you’re unlucky, things change and leave you behind. I was, twice. You can either sit down and complain or work harder to catch up. And I don’t like people who complain.”
What does Occupy Central look like? A lot of people who sit down and complain. People who could otherwise offer solid contributions towards the challenges modern Hong Kong face have chosen to immerse themselves in poorly constructed, borderline-impossible dreams of a new society where their real-life problems magically disappear. Many, perhaps most of them, have benefitted immensely from the success of Hong Kong’s economy, brought by the very system they seek to reform at a fundamental level. All the while, the individuals they ought to be deeply appreciative of continue to struggle for Hong Kong’s future. Democracy and wealth redistribution are, of course, worthy ideals, but one must understand what it is exactly that is desirable about them. These broad claims can only be legitimate unless it has been subjected to a comprehensive cost-benefit analysis.
As one begins to investigate such questions beyond the glaringly obvious, it becomes increasingly difficult to sympathize with any social movement that stops at such a level of inquiry. For ailments of a city-state as developed and complex in structure as Hong Kong, any remedy that is short enough to be written on a sign or flag is guaranteed to be a miserable one. Too many times in history have the rebels feasted in the name of victory only to realize that they have no clue about what should happen next. I do not want this to happen to Hong Kong. I love Hong Kong too much – and therefore desire nothing else than the complete failure of anything similar to Occupy Central.
Yifan Ye is a senior at Duke University.