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Clara Ferreira Marques

Hong Kong Must Tackle Its Worsening Wealth Gap

The territory is among the most unequal globally, and a post-protest, post-pandemic welfare fix is possible and affordable.

Milton Friedman wouldn’t live here.

Milton Friedman wouldn’t live here.

Photographer: Anthony Wallace/AFP via Getty Images

To mark China’s national day last month, Beijing’s man in Hong Kong dropped in on the crowded, working-class district of Sham Shui Po. Luo Huining, director of the central government’s Liaison Office, was photographed in shirt sleeves, perched on a metal bunk in a tiny subdivided flat, chatting side-by-side with Xu Tianmin, an unemployed resident. 

The visit was intended to celebrate patriotic citizens. More unusually, the charm offensive also turned the spotlight on the territory’s poorest. And Luo’s message to Hong Kong’s tin-eared officials and tycoons was clear. Beijing does not want to see such obvious failures of governance.

For decades, pockets of penury have been seen as an unavoidable cost of the city’s long-lucrative wild capitalism. One in five people sit below the poverty line (before taking government aid into account), many of them old; Hong Kong has one of the worst inequality rates among developed nations. Months of violent street protests last year, followed by a pandemic, hit the precariously employed hardest, widening that chasm. Meanwhile, the end of the globalization surge that turned Hong Kong into a powerhouse isn’t helping either. State support is derisory.

A stronger, fairer welfare system can no longer be put off. Certainly, there’s a global opportunity to rethink the balance between economic growth, taxation, welfare and community after 2020. But few societies need the debate more urgently than Hong Kong, traumatized and economically weakened, with deep levels of distrust in government, particularly after a sweeping national security law was introduced at the end of June. Beijing has already signaled, most recently in President Xi Jinping’s speech in Shenzhen last month, that the “miracle” of development there risks eclipsing its southern neighbor. Hong Kong’s Chief Executive Carrie Lam chose to be in Shenzhen to hear that message, rather than to deliver the most important speech of her political year across the border.

With her postponed economic policy address due next week, Lam has the chance to show that the home front still matters to those ostensibly representing it, and to push for much more of the change that’s needed. It would be all the more significant if she chose to do so after opposition lawmakers were ousted or resigned from the Legislative Council.

An overhaul of the welfare system would require forging a social consensus that Hong Kong’s current leadership has so far not shown that it can achieve. It would mean challenging a homegrown philosophy that has stigmatized poverty as familial and personal failure, rather than acknowledging it as the product of poor administration. Hong Kong would also need to redesign its fiscal system. Less ambitious efforts have failed before. Yet with regular budgetary surpluses until the first deficit in 15 years in 2019-20, plus healthy fiscal reserves even after the current crunch, Hong Kong can do more. With the global economy shifting and its population ageing so fast that almost a third will be 65 or older by 2038, Hong Kong can’t afford not to change.