Why you should march for democracy
25 June 2004
If you are a market professional, a lawyer, accountant, regulator or investor, wavering on whether to spend a few hours this coming July 1st holiday demonstrating a call for democracy, and wondering whether it is a waste of time, then this article is for you.
Hong Kong has always held itself out to the World as a free market, with a level playing field in which participants compete for economic resources and fight for the legitimacy and success of their ideas, within the framework of the rule of law, freedom of speech (including a free media), freedom of belief and freedom of association.
Indeed, Hong Kong does have many of the characteristics of a free market. But there is a key element missing, an omission which may ultimately provide Hong Kong's downfall. At the highest level of the governance structure, there is no free market. Citizens cannot choose between competing sets of policies by electing leaders who would carry those policies into office. And it is those policies which determine the laws and framework within which we compete in the semi-free market.
In any ecosystem, the Darwinian process of "natural selection" or "survival of the fittest" can happen only if there is competition. Without this, we are unlikely to get an optimal outcome, and the success of the system in competition with others is at risk. So we need competition between policy makers for the right to implement their ideas by gaining elected office. Think of Hong Kong has just one of hundreds of economic ecosystems competing in the world economy, and you will see why it is crucial that we have the best policies implemented by the best policy-makers we can choose, if we are to win in international competition.
In recent months, the Central and HK Governments have urged the population to "focus on the economy rather than politics". But what they fail to acknowledge is that the economy is itself a product of policies, and politics is, literally, the art of policy making.
In a competitive democracy, politicians would campaign for election on the basis of their policies, and the public would weigh up their merits. Even once elected, the checks and balances between an elected executive and legislative branch would provide a continuing "ecosystem" in which policies would continue to evolve by natural selection.
Take, for example only, the following policies which might be advocated by pro-market (as opposed to pro-tycoon) politicians, if they were to win elected office:
- A competition law, overseen by a competition authority with investigative powers, to prevent abuse by monopolies or cartels such as price fixing, restraints of trade or predatory pricing, thereby creating a level playing field in which small businesses could enter and compete in markets dominated by larger firms. Most modern countries have such a law, but Hong Kong does not.
- An end to market-distorting subsidies - taxpayer money dolled out by our unelected Government to special interest groups or as a way of supporting small and medium enterprises (SMEs) to make up for the lack of competition law. SME Funding Schemes amounting to HK$7.5bn include the SME Loan Guarantee Scheme, the SME Training Fund, the SME Development Fund and the SME Export Marketing Fund. Other schemes which squander tax money include efforts to push the economy in a certain direction, such as the $5bn Innovation and Technology Fund, the $750m Applied Research Fund, and the $100m Film Development Fund.
- A reform of land policy, away from the up-front land premium system which lends itself to a cartel of dominant developers with massive balance sheets. This results in an inefficient feudal "tax farming" system in which developer "lords" collect the tax from property buyers (embedded in the price of a flat) and in turn pay land premiums to the crown, taking a big cut along the way. The system also produces volatile Government revenues. A replacement might be a land rental system in which bidders for land commit to make payments over the duration of the land lease, which would provide a more predictable Government revenue stream from ground leaseholders.
- A change in transport policy, to stop destroying the harbour front with new road systems on reclaimed land, and start charging users for the real cost of using existing roads. For example, franchised buses are currently exempt from fuel duty and pay only a nominal road tax of about HK$4,000 p.a., yet are among the heaviest road users and air polluters, and motorists in general get to drive on land in Central that would fetch a small fortune as office or retail space, yet comes at no incremental cost to motorists as roads (other than the fuel duty, which is the same on a countryside road). It's no wonder that rail systems find it hard to compete when they have to recover the cost of their own tracks.
- A change in public housing policy, to remove tenants whose incomes and assets have risen to a level where they can afford to rent private housing, and a shift away from government construction of public housing in favour of rental subsidies for the most needy, which are far easier to remove than are people from flats.
- And on the investment front, the introduction of class action rights for shareholders to recover damages from abusive and criminal controlling shareholders; an end to a system in which a listed company regulates listed companies; and a unified regulator to cover the overlapping areas of banking, insurance, pensions and securities.
We could go on to numerous other policy areas, but you get the idea - you may not agree with any of the above proposals, but at the moment, you have no choice, because you cannot vote in favour or against a person proposing them, unless you are one of the 800 privileged few who select the Chief Executive.
The tycoons who currently call the shots have expressed fears that democracy would lead to a "social welfare state" in which an elected Government squanders public resources and drives us into deficit. Wait a minute - don't we have an unelected Government which squanders resources on corporate welfare schemes such as the SME Funding Schemes or the Cyberport? And have they not presided over the most massive deficits in recent history? We are talking about a government which also indulged in salaries tax and rates rebates at various times since the handover in an attempt to keep the middle classes happy, further exacerbating the deficit. Who's making the hand-outs here?
To be sure, democracy is no panacea. It is not the solution to our problems, but it is the means by which solutions are most likely to be found. With the powers of an elected Government comes responsibility and accountability at the next election. Any Government which indulged in a social welfare state and ran up massive deficits would drive the economy into the ground and get voted out of office for its performance. The unfit policies would fail, and that's what makes a free market in policy making.
Tycoon scare-mongers have suggested that we could end up like certain African "democracies" which are in economic ruin and run by quasi-dictators. Zimbabwe might be a good example. But these economies normally lack the institutions needed for successful democracy, including a low level of corruption, an independent judiciary, freedom of speech and assembly, freedom of the press and free and fair elections. Other failed democracies suffer from an illiterate electorate whose votes are easily manipulated or bought. Hong Kong does not suffer these problems.
It has also been argued that some quasi-dictatorships or one-party states have presided over successful economies. To be sure, that is always a possible outcome if, by random chance, you have an unelected but optimal government with optimal policies, but it is far less likely than an economy with the checks and balances of elected government and democratic institutions. There are no guarantees that democracy will produce the best outcome, but it has a higher probability than a non-competitive process, or one in which the majority of economic participants are excluded.
So if you are a market professional or an investor living in Hong Kong, and if you want the highest probability of a prosperous and stable economy in future, then you should be in favour of a democratic system which allows us to choose the best policy-makers and policies that Hong Kong can offer.
The mainland Government recently usurped the reform process set out in the Basic Law by making a pre-emptive ruling (the "three No's") that in any reforms in Hong Kong, there would be:
- No universal suffrage for electing the Chief Executive and Legislature (as allowed for in the Basic Law respectively from 2007 and 2008 onwards);
- No change in the 50:50 relative proportion of "special interest" functional constituencies to geographically elected constituencies; and
- No change to the requirement that Bills proposed by members of LegCo must have the approval of a majority of the functional members and a majority of the geographically elected members.
What you can do
Of course, whatever an authoritarian Government decides, they can also change. But in our view, the only way they are likely to change their minds is if they recognise that Hong Kong's stability will be assured if the people are allowed to choose their policy makers, and jeopardised if they cannot. A Government that has a popular electoral mandate will find it far easier to govern and to make the difficult decisions that a responsible and accountable government must make.
To achieve democracy now, the people of Hong Kong must make this the "path of least resistance" for the mainland decision makers. It must be clear that if the people are not granted universal suffrage, then they will repeatedly join peaceful mass demonstrations until they get it, and they will elect legislators who are likely to do what they can to improve Government policy through legislative veto.
There is nothing unpatriotic about marching on July 1st. It is a celebration of your rights under the Basic Law to freedom of speech and assembly, rights guaranteed under the "One Country, Two Systems" formula. It is a demonstration of the "need for change" and that Hong Kong people are ready to fulfil the stated goal of "Hong Kong people ruling Hong Kong" by universal suffrage. Nobody is calling for sovereignty or independence from the mainland. A city should be able to elect its Mayor and Council without electing the country's President. New York City, for example, is not a sovereign state, and as our leaders have often said, we strive to be the Manhattan of Asia. Indeed, New York shows that a tycoon can win elected office, as do Thailand and Italy, both of which have multi-party democracies.
What mainland leaders may fear most is the prospect of having a successful, prosperous and stable democracy within their sovereign territory, because of the implications for their own system. But they should not fear this, but embrace it as a test-bed for future change in China. The transition from centrally-planned authoritarian economy to a market-driven liberal competitive economy will take many more years, but ultimately the mainland will have to adopt similar change to its political structure if it is to attain long-term success as a free market economy.
Now you must make a choice. Either join the call for democracy, or suffer the lack of choice of Government for years to come. A low turn-out on July 1 would be a significant set-back to the democracy movement. Your presence will count, but simply claiming that you were in moral support will not.
The march begins at 3pm in Victoria park, Causeway Bay, and goes to the Government Offices in Central. If you can't get into the park, join the march along Hennessy Road. Wear white - it's this year's theme. It also reflects more heat. Bring your friends, family, and plenty of water.
© Webb-site.com, 2004