The dark side of Hong Kong's prosperity

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Hong Kong is a metropolis located on the warm shores of the South China Sea. Now it is one of the largest financial centers and transport hubs in the world.

In 2017, the seaport of Hong Kong ranked fifth on the planet in terms of cargo turnover, handling more than 20 million cargo in twenty-foot container equivalent. The value of shares traded on the Hong Kong Stock Exchange in 2019 exceeded 4 trillion US dollars, ranking 5th in the global financial system. The Hong Kong Exchange is at the forefront of progress: in 2017, it finally switched to electronic trading, abandoning physical trading. Numerous skyscrapers testify to the wealth of the city. Within Hong Kong, there are 355 buildings over 150 meters high. This is more than in any other metropolis in the world.

Meanwhile, just two centuries ago, on the site of modern Hong Kong, there were only rare villages of fishermen and coal burners. The first stone in the history of the metropolis was laid by the British, who seized the territory of the island of Hong Kong during the First Opium War. Immediately assessing the strategic position of the island, they set up an outpost there, which quickly grew into a busy trading port. Already in 1861, 20 years after the establishment of the British colony, more than one hundred thousand people lived in Hong Kong, and in 1911 the population approached half a million. Now the metropolis accommodates almost 7.5 million inhabitants.

Laissez-faire advocates often cite Hong Kong as an example of the success of free markets and libertarian ideas. At first glance, they seem to be right. Since 1995, the conservative research fund Heritage has been compiling the Index of Economic Freedom, designed to assess the state regulation of capitalist countries. During the entire existence of the Index, Hong Kong ranked first in it, which means minimal constraints for capital. Milton Friedman, one of the leading ideologues of neoliberalism, came out as an apologist for the Hong Kong policy of free capitalism as opposed to "socialism", into which, in his opinion, Israel and Great Britain plunged. As libertarians believe, it was the non-interference in market relations that led to the explosive growth of the economy of the Asian metropolis. Right-wing ideologues often cite Hong Kong as the best example of a successful combination of political and economic freedom. And at first glance it seems that they are right.

Over the past half century, the economy of the metropolis has grown at a fantastic rate. After World War II, Gongong was a rather poor city. According to calculations by Angus Maddison, Hong Kong's per capita GDP was four times smaller than the American one and in line with the indicators of Peru, Hungary and Mexico. And in the 1990s, it has already reached the level of developed Western countries. After 1997, when Hong Kong came under Chinese sovereignty, its pace remained the same. Now the per capita GDP of a metropolis exceeds any major Western country, including the United States. The health indicators also testify to the well-being of the townspeople. Life expectancy in Hong Kong is over 84 years, the second largest country in the world. The metropolis is among the countries with the best schooling according to PISA scores. The quality of the work of government structures is evidenced by the Corruption Perceptions Index, in which Hong Kong is traditionally among the fifteen least corrupt countries.

Market democracy or plutocratic dictatorship?

But behind the glittering façade lies a dark reality. The reality in which a prosperous democratic state turns into a plutocracy that sucks all the juices out of its subjects. To begin with, Hong Kong has not historically been a democratic state. It emerged as a foreign colony, and its political institutions were designed to protect the interests of the European minority. The colonial governor, who was appointed by the king, wielded tremendous power. He presided over the executive and legislative councils and appointed its members. Even the right-wing commentator, Andrew Morris, noted the grave "lack of democracy" and the reluctance of the British to develop a representative system in Hong Kong. Only in the second half of the 1980s, shortly before the transfer of the city to the Chinese authorities, Great Britain went to democratize the administration of the colony. According to Morris, "the democratic deficit has served Hong Kong well, as people like Cowperthwaite and Patten, driven by the ideas of classical liberalism and economic freedom, refrained from the measures necessary to win public support." Simply put, free market policies were the product of an authoritarian regime that could ignore the demands of citizens. Often this turned into uprisings, and the colonial authorities did not hesitate to take harsh measures to deal with the troublemakers.

The Hong Kong government has often ignored the basic needs of its citizens. So, due to the resistance of the financial secretary Cowperthwaite, the authorities for a long time abandoned such an elementary measure as universal schooling. Only in 1971, after his resignation, did the state guarantee all children free access to primary school. As the influential South China Morning Post noted, due to Cowperthwaite's stubbornness, Hong Kong is home to a generation of working-age illiterate people who are now supported by massive government subsidies. Liberal doctrinaire has resulted in tragic loss of human potential and social damage.

With the light hand of Milton Friedman, there is a popular story among libertarians that Cowperthwaite refused to collect detailed economic statistics in order to block bureaucratic inclinations for economic planning. In reality, this position was not conditioned by ideological firmness, but by the desire to strengthen the position of power and weaken the control of the metropolis over the local authorities. These games played a bad joke with the economy. For example, during the 1965 banking crisis, Cowperthwaite, lacking GDP statistics, mistakenly believed that the economy had recovered quickly from the turmoil. As a result, he raised taxes and cut government spending, which sharply slowed economic development for two years. Another motive for voluntary statistical blindness was the desire of the authorities to hide the serious socio-economic problems of the metropolis from public attention.

Although a lot of time has passed since the 1960s, it cannot be said that Hong Kong became a completely democratic entity after the liquidation of the colonial regime and the transition to the jurisdiction of the PRC. According to an expert assessment by the Economist Intelligence Unit, in terms of democratic freedoms, the metropolis is located between Mexico and Senegal, far behind such flagships of democracy as South Africa, the Philippines and Colombia. The 2008 report generally categorized Hong Kong as a hybrid regime with Russia, Pakistan and Venezuela. It is not surprising that the city, contrary to the fine-minded reasoning of the libertarians, has become a hotbed of plutocracy, where the largest businessmen and the state apparatus are intertwined into a single oligarchic mechanism. According to the British magazine The Economist, in 2014 Hong Kong ranked first in the development of crony capitalism, far ahead of Russia, Ukraine and the Philippines.

Cum Capitalism Index 2014

This suggests that behind the rhetoric of the free market there is an authoritarian oligarchy that does not hesitate to use political mechanisms in its own interests. Big business, contrary to popular misconception, does not oppose government regulation per se. He opposes only those forms of regulation that meet the interests of the broad masses and are aimed at increasing their well-being. For example, in the 1950s, the Hong Kong government removed control of monopolies in utilities and public transportation. This sparked widespread public discontent with the energy companies, and outrage over the poor quality and cost of public transport erupted into public unrest in 1966. At the same time, the ideology of classical liberalism did not prevent the Hong Kong authorities in the 1960s from introducing a moratorium on the creation of new banks and approving a cartel agreement designed to keep interest rates high. These measures strengthened the position of the local financial oligarchy. The ban lasted until 1981, and the cartel survived until 2001.

The policy of double standards, in which big business gets all the benefits, and the bulk of citizens are deprived of the necessary social benefits, leads to extremely high inequality. Back in the 1970s, the Gini coefficient, the standard measure of inequality among economists, was over 43 points in Hong Kong, which is considered high. In 2018, it came close to 54 points, and the income of 1/10 of the richest city dwellers is 44 times higher than the income of the poorest 10% of Hong Kongers. According to the Gini index, Hong Kong is ahead of Brazil, Mexico, Honduras and other Latin American states with pronounced social inequality.

Hong Kong's housing nightmares

The influx of private wealth, coupled with a shortage of land, has led to an extraordinary rise in property prices. A square meter in an apartment of the minimum size will cost a resident of Hong Kong an average of $ 22,000. An ordinary apartment in a metropolis costs about 19 median annual income, which is much higher than in the richest cities in the West with high real estate prices. In Kowloon, a 430 square foot (40 m2) apartment is priced at HK $ 4.34 million. For this amount you can buy an old castle in Italy or France, equipped with all the amenities.

Housing affordability index for Hong Kong and some of the largest metropolitan areas 2010-18

Of course, ordinary citizens cannot afford such costs. The housing problem has spoiled not only Muscovites for a long time. In Hong Kong, it acquired its darkest outlines at the beginning of the twentieth century.

For example, in 1933, about one hundred thousand people huddled in fishing boats and did not have housing on land.36 In 1961, a third of Hong Kong's population lived in unacceptable conditions: 511 thousand in slums, 140 thousand - on an area equal to the surface of one bed, 69 thousand - on open verandas, 56 thousand - on roofs, 50 thousand - in shops, garages, on stairs, 26 thousand - on boats, 20 thousand - on sidewalks, 12 thousand - in basements, and 10 thousand people even remembered the skills of primitive people settling in caves.

The housing problem provoked social tensions and unrest, and the colony government was forced to abandon the principles of non-intervention and tackle the issue closely. In 1954, the city established the Hong Kong Housing Administration, and in 1961, the Housing Society. They moved hundreds of thousands of people from the slums to high-rise buildings with comfortable apartments, and by 1979, 40% of the metropolitan's inhabitants lived in public housing. However, housing standards remained extremely modest. Until 1964, residents of state houses were supposed to have 2, 2 m2 of living space, after that - 3, 3 m2.

Currently, about 29% of Hong Kong's population lives in public housing, and another 15.8% in apartments purchased through government subsidies. Thus, in 2016, the state provided housing for about 45% of the urban population, or 3.3 million people. But the problem remains serious, especially since in the last decade the share of public housing has slightly decreased: in 2006, the state directly or indirectly provided a house for 48.8% of the population of Hong Kong. Housing queues are moving slowly and now applicants have to wait an average of more than five years to move into a long-awaited apartment.

Typical array of public housing in Hong Kong, Kwai Hing Estate

The situation is exacerbated by the decline in housing construction. If in 2001 99 thousand new apartments appeared in the city, then in 2016 - only 37 thousand. True, the living area per person has grown somewhat. In 2000, an inhabitant of a state apartment lived on an average of 10.4 m2, and in 2010 already by 12.9 m2. In 2018, the standard exceeded 13 m2. Unfortunately, this is not due to an increase in the size of apartments, but to a decrease in the size of households from 3.5 people in 2000 to 2.9 people in 2010. At the same time, the average area of public housing has remained practically unchanged. And the decline in household size, in turn, is caused by a decline in the birth rate. In the last twenty years, there were from 0.9 to 1.2 newborns per woman in Hong Kong, which is half the rate of sustainable reproduction.

Unfortunately, not everyone can get a state apartment. The median salary of a Hong Kong resident in 2018 was 17.5 thousand Hong Kong dollars per month. Such a person cannot hope for social housing. The maximum income at which a Hong Konger can qualify for renting a public apartment is $ 11,540 for singles and $ 17,600 for married couples. The rest, at best, can get subsidies for affordable housing, and at worst, they can turn to the free market.

And this market is rather harsh. About half of all apartment rental offers start at HK $ 20,000. The median rent for a private apartment in 2016 exceeded 10,000 local dollars, while the median household earned about 25,000. Thus, about 1/3 of the earnings were spent on rent. Considering that another 27% of the average household's spending is spent on food, 8% on transportation, and 3% on utilities, 52 the average Hong Kong resident has very little spare money left.

However, not everyone can afford this rather modest income. According to government figures, 1.35 million Hong Kongers (about 1/5 of the urban population) live below the poverty line. This line is very strict: HK $ 4,000 for singles, HK $ 9,000 for a family of two and HK $ 15,000 for three. Based on these numbers, a loner earning HK $ 12-15,000 would not be considered poor and would not qualify for public housing. But such a person is also unable to give more than half of his earnings for a private apartment. What is left? One of the options is subdivided flats. This is an analogue of renting apartments in the corners, which was practiced in pre-revolutionary Russia: dwellings are cut into small fragments. The rooms are fenced off, and each of them is ready to receive those Hong Kongers to whom the god of the free market was not very merciful.

Typical subdivided apartment in Hong Kong. Photo by Reuters.

There are many such people. According to the latest data, more than 210 thousand city dwellers are huddled in subdivided apartments. According to government data, there is a little more than 5 m2 of living space per inhabitant of such cages. And these are still optimistic figures. According to non-governmental organizations, in the subdivided dwellings they surveyed, there are 50 square feet per person - 4.65 m2. This is in line with local prisons. Only 12% of those surveyed have more space than the official housing minimum of 7 m2, 2/3 do not have a separate kitchen and 1/5 do not have a toilet. More than half of the residents said that water seeps through the walls and cement peels off from them.

A typical picture in subdivided apartments is a kitchen combined with a latrine

These slums are mostly populated by low-paid workers and migrants. The annuity often exceeds 3 thousand. But even that amount is out of reach for 1/10 of the poorest workers, earning an average of HK $ 2,070. For such people, the richest center of world capitalism leaves only one choice - the street. Some sleep in catering establishments, others build huts from scrap materials. 21 thousand Hong Kongers live in such dwellings.

One of the self-built structures of Hong Kong

However, enterprising businessmen can provide housing for the poorest. For them, for a modest fee, they can provide a metal cage, perhaps much smaller than a prison cell. The exact number of inhabitants of such dwellings is unknown. In 2007, the government estimated their number at 53, 2 thousand people.

One of the Hong Kong apartments with residential cages

As you can see, the housing situation in Hong Kong is extremely unenviable. In general, if we take the estimates of the secretariat of the legislative assembly, in 2016, there was 15m2 of living space per inhabitant of the metropolis. This is not enough not only in comparison with the states of the West, but also with mainland China, where there is about 37 m2 per city dweller. This already bleak picture is compounded by extremely uneven access to housing. Those who can rent a private apartment have 18 m2 per person, while the middle class, which buys apartments at subsidized prices, has to be content with 15.3 m2. The tenant of social housing accounts for an average of 11.5 m2. Worst of all, apart from the homeless, the inhabitants of the subdivided apartments live: they are content with 5, 3 m2 per person. At the opposite end of the housing hierarchy are the richest owners of penthouses and private houses with an area of more than 500 m2. There is a real abyss between these people.

Live and die at work

In addition to its grim housing situation, Hong Kong has a long history of appalling working conditions. In colonial times, arbitrariness reigned in most of the enterprises.

A 1955 survey showed that: "87% of workers worked on Saturdays, 73% on Sundays, only 12% had a working day limited to 8 hours, and 42% worked daily for 11 hours or more."

Later, the authorities introduced some restrictions on the duration of working hours, but the situation is still far from favorable. Until now, Hong Kong laws do not regulate the length of the working day for most citizens. Only for young people between the ages of 15 and 18, there is an 8-hour working day with a 48-hour work week. The local Labor Relations Ordinance establishes mandatory leave for permanent employees. But its duration is extremely short. After working for a year, an employee can only claim a week's rest. And to get the maximum possible vacation - 14 days - you need to work in the company for at least nine years. The luxury of a 28-day annual paid vacation is something Hong Kongers can only dream of.

In 2015, Hong Kong residents worked 2,606 hours, according to a study by UBS. Hong Kongers were ahead of Tokyo by 551 hours, and those of Seoul by 672 hours. According to the OECD, no developed country has worked so much. Even South Koreans, which are known for their brutal exploitation of workers, averaged 2,083 hours in 2015.68 That's 523 less hours than Hong Kongers. For comparison, the Germans in the same year worked almost two times less than the residents of Hong Kong - 1,370 hours. The French had to work 1,519 hours, and the Russians 1,978 hours.

The average number of hours worked and the number of holidays and holidays in a number of world megacities in 2015

Why do the inhabitants of one of the richest cities in the world work so hard? The obvious, albeit seemingly paradoxical, answer lies in low wages and high cost of living. As of May 2019, the minimum wage for Hong Kong residents is 37.5 local dollars per hour. By working 48 hours a week at this rate, a person will receive about $ 7,200 local dollars a month. Meanwhile, according to experts, a lonely Hong Konger needs 10,494 - 11,548 Hong Kong dollars to ensure a minimum adequate standard of living. With an 8-hour workday and five days off a month, he needs to earn at least $ 54.7 an hour, half the official minimum. And less than 50 dollars per hour earns a quarter of the workers in the metropolis. However, about 1/5 of Hong Kong residents do not even reach the official poverty line, which is only a third of the required subsistence level.

The high cost of living forces people to work hard. But high income inequality also creates huge differences in the duration of work. Highly paid citizens can afford rest, while the poorest 580,000 workers are forced to work more than 60 hours a week. This is about 15% of all Hong Kong employees. In mainland China, according to OECD statistics, there are only 5.8%, among the Japanese - 9.2%. Among the developed countries, only South Korea is ahead of Hong Kong in this dubious championship. There, 22.6% of workers work more than 60 hours per week. For the most part, such processing is typical for the countries of the Third World - India, Indonesia and Trutsia, where 13.6%, 14, 3% and 23.3% of workers work more than 60 hours a week, respectively. As noted by the Confederation of Trade Unions of Hong Kong, one in four workers in the metropolis is forced to work overtime.

Even worse situations are not uncommon. So, the chef Chi Fai (Ng Chi-fai) in an interview with the Hong Kong Free Press noted that he worked 13-14 hours for 15 days in a row. It turns out to be a 91-hour work week, and in extremely difficult conditions! Of course, this is an exceptional case, but quite typical for this city of free capital. However, hard work does not help everyone. As I have already noted, about 1/5 of the inhabitants of the richest metropolis on the planet live below the poverty line.

Even in old age, people cannot take a break from the hateful work. The standard age for receiving a public pension in Hong Kong is 65, but under certain conditions you can retire sooner or later. The government benefits are very small: a universal benefit of 1,000 Hong Kong dollars, social assistance of 2,500-4,500 and a lump sum related to the amount of social contributions during the period of employment. Considering the high cost of Hong Kong life, these amounts are completely insufficient. And in the absence of private savings, old people are forced to work until their death. In 2017, 363 thousand old people aged 60 and over were employed - 1/5 of the age group. Moreover, a third of this mass of workers crossed the 65-year mark. According to official statistics, in 2016 about half a million people of retirement age - 44.8% of their total - lived in poverty. By some estimates, poverty among Hong Kong older people is far more prevalent than in other developed countries. Since the official poverty threshold is severely underestimated, the real picture is much worse. And poor old people are doomed to work until their death, so as not to end up on the street and die of hunger.

As you can see, it would not be an exaggeration to say that Hong Kong's strong economic performance is based on the most severe exploitation of the population. Having become the center of world capitalism, the center of unprecedented wealth, the megalopolis cannot provide a decent life for the masses of its citizens. Poverty, a miserable existence in squalid closets, wear and tear to a ripe old age - this is the lot not of lone individuals, but of hundreds of thousands of residents of one of the richest cities in the world.

Temptations and dead ends of the free market

As a center for trade and financial transactions, Hong Kong risks being held hostage to success. Large sums of money are needed to tackle the social problems created by the concentration of capital and enormous inequality. Otherwise, the city will remain fertile ground for riots similar to those that are shaking the metropolis now. But tax hikes, especially in the face of competition from the growing metropolitan areas of mainland China, could fuel capital flight and stall Hong Kong's economic development. There are no easy solutions to this dilemma.

The example of Hong Kong is interesting not only in itself, but also as a demonstration of political delusions that have spread over great distances from southern China. Libertarians often cite this metropolis as a model for the realization of their dreams: a free market, unrestricted competition and the movement of capital. Ignorance of the social and political realities of Hong Kong does not prevent them from campaigning for the implementation of local recipes in other countries, and, in particular, in Russia. Libertarians believe that drastic tax cuts, cuts in social programs and labor laws, and free capital flows will lead the state to wealth and prosperity. Their promises are tempting, but lacking in substance. Even in Hong Kong, which by its very nature is destined for transit trade and financial transactions, prosperity is very relative and has not touched everyone. The objective conditions of our state do not allow us to specialize in these areas of activity. Second in a row, but not in importance: copying the Hong Kong experience in practice means only tightening the oligarchic regime, which has already led our state to a dead end. It is into a plutocratic dictatorship that capitalism degenerates, which is not opposed by democracy and a powerful social state.

In ancient times they said: "Timeo Danaos et dona ferentes". Translated, this means: "Fear the Danes who bring gifts." So one of the priests warned the Trojans not to accept a horse as a gift, in which the enemy soldiers were sitting. Now this warning is just right to rephrase: “Beware of the libertarians who bring gifts. Their promises are tempting, but the fruits are full of poison and deadly."