ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter

Hong Kong's Ayn Rand fantasy hinges on just $5

Carrie Lam's ill-timed return to austerity will widen city's rich-poor divide

| Hong Kong
Carrie Lam speaks to media on Feb. 22: Hong Kong chief is probably the least coveted job in global politics.   © Reuters

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

After a truly dreadful 2020, Hong Kong's leaders are signaling the political equivalent of "hold my beer."

COVID-19 made last year just about everyone's least favorite 12 months. Hongkongers, though, lost more than the freedom to leave overpriced flats. China used the fog of pandemic disruptions to strangle the last hopes that Deng Xiaoping's "one country, two systems" formula might survive the Xi Jinping era.

Chief Executive Carrie Lam seems happy to get in on the strangling with an ill-timed return to austerity. Hong Kong plans to run a much lower budget deficit in the coming fiscal year -- about $13.1 billion, down from a $33.2 billion gap for 2020-21.

The downshift is predicated on coronavirus vaccines powering a global recovery. In the short run, though, it may add to the economic pain Hong Kong's 7.5 million people hoped would not stalk them into 2021. It could be disastrous in the long run, should new COVID-19 variants shake global confidence anew.

Looking at the Lam government's latest budget, you almost would not know that unemployment was 7%, a nearly 17-year high. Or that Hong Kong's status as one of the globe's least egalitarian societies was not imperiling the city's future.

It all comes down to the U.S. equivalent of $5. Somehow, Lam and Financial Secretary Paul Chan think now, coronavirus-cursed 2021, is a good moment to rein in spending just as basic wages stall. Hong Kong is freezing the minimum wage at 37.5 Hong Kong dollars ($4.83). Labor groups are calling out for HK$40. But $5.15 in U.S. terms would be too generous, it seems, for laborers on the front lines of COVID-19.

A COVID-19 testing site in Hong Kong, pictures on Jan. 21: $5.15 would be too generous for laborers on the front lines.   © Sipa/AP

The $645 vouchers Hong Kong plans for residents could so do with some topping up, too. Xi would be wise to empower Lam to go the other way, lest trust in Hong Kong's government sink lower than basic wages in one of the world's priciest cities.

Granted, Hong Kong chief is probably the least coveted job in global politics. It pits you between illiberal overlord Xi, an Ayn Randian obsession with staying in the good graces of the free-market Heritage Foundation, and millions of locals falling behind.

The obvious answer to Hong Kong's plight is higher taxes. This latter step has been endorsed by none other than real estate legend Li Ka-shing. Chan's proposal to raise the stamp duty on stock trading to 0.13% from 0.1% is a nice starting point. What is next?

This would require political courage, which is not in Lam's leadership DNA. Lam is more concerned with putting off a near-impossible balancing act: Hong Kong's determination to narrow the deficit, protect local business leaders from demands for a 32-cent per hour raise in U.S. terms and, at the same time, set the stage for Xi's next assault on the city's democratic aspirations.

All roads lead to a worsening of Hong Kong's already dismal Gini coefficient. This inequality measure should be the bane of Lam's existence. Hong Kong's was already at a 45-year high of 0.539 when the pandemic hit. It means a city famed for luxury high-rises, larger-than-life billionaires and chauffeur-driven Bentley's trails Guatemala and Paraguay. History will not look kindly on Hong Kong's hold-my-beer moratorium on basic wages hikes.

Nor will posterity comprehend Hong Kong's obsession with the Rand set. If the Russian-American patron saint of libertarians could have conjured up a system worthy of her protagonists in The Fountainhead and Atlas Shrugged, it would be Hong Kong.

Yet Xi's demand that only "patriots" govern Hong Kong explains why the city is now No. 2 on the Index of Economic Freedom, behind Singapore. By the end of 2020, Barings and Deutsche Bank were among household-name companies eyeing moves from Hong Kong to Singapore's more predictable political environment.

The irony, of course, is that Xi's latest moves to curb autonomy lean on Deng's era. Specifically, to a 1984 statement about Hong Kong's eventual return to Chinese rule in 1997.

Deng talked of the need for "patriots" to run the city. Yet Xi is clearly forgetting the rest of Deng's explanation, which held that Hong Kong needs a governing system that "wishes not to impair its prosperity and stability." Lam's team prioritizing austerity over helping workers in need runs directly counter to broad prosperity. Standing in the way of the slightest of wage bumps could also risk stability in the longer run.

Consumer psychology is a confidence game. And workers sensing their personal situations are moving in the right direction, even just marginally, matters. Instead of pent-up demand, the gang leading Hong Kong may be fueling even more pent-up anger.

Xi's team used COVID-era confusion to tighten the screws on Hong Kong's autonomy. Yet once the city's masses feel safer taking to the streets, they may again do just that. Lam and Finance Minister Chan could head off that risk by opening Hong Kong's wallet much wider to economic reality.

A once-in-a-century health crisis widening the rich-poor divide is no time to think more of Randian ideology than stressed out Hongkongers. If Hong Kong stays on this counterproductive course, angry members of Generations Y and Z might soon be working up Carrie Shrugged protest placards.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more