By William Pesek
It's taken Donald Tsang, Hong Kong's leader, six years to say something genuinely interesting, but better late than never.
Few would characterize his tenure as successful. Despite steady growth, a fast-widening wealth gap, exacerbated by accelerating inflation, is fueling public anger and eclipsing all else. So pervasive is the dynamic that Hong Kong may be on the cusp of doing what pundits long feared: becoming Chinese.
When Hong Kong was returned to Chinese hands in 1997, it pledged to remain an economic Mecca. Yet in his final annual policy speech since becoming chief executive in 2005, Tsang allowed that being the world's freest economy has its drawbacks.
"Over the years, we have been administering Hong Kong under the core principle of 'Big Market, Small Government,' giving precedence to a free market with the government assuming a subsidiary role," Tsang said. Now, though, "this approach is being challenged."
The Ayn Rand set love Hong Kong for its financial philosophy of low taxes, keeping expenditures within the limits of revenues and giving markets room to roam. Libertarians who see Hong Kong as their Utopia can't be happy about Tsang's evolving views about how a widening wealth gap "has given rise to the demand for income redistribution."
Ditto for Tsang saying that "when the market fails, the government should intervene as appropriate. The introduction of subsidized housing and the statutory minimum wage, for example, highlights the importance of appropriate government intervention." In May, Tsang buckled to public discontent and introduced a minimum wage of HK$28 per hour ($3.60).
Tsang is absolutely right that Hong Kong's wealth gap has become a structural cause of social tension. He's also correct to admit what those with romantic notions about the magic of capitalism rarely do: Markets aren't always right and the public sector needs to offer them guidance. It's just too bad he's waited until now, the twilight of his leadership, to focus sufficiently on this pervasive and growing problem.
It's a stark sign of the times when Hong Kong's leader seems to be reading more from Beijing's playbook than New York's.
(William Pesek is a Bloomberg View columnist.)-0- Oct/14/2011 14:14 GMT