Wednesday, July 21, 2010

Hong Kong's Populist Turn: Milton Friedman Wouldn't Approve

The Wall Street Journal, July 20, 2010

The WSJ has published an editorial criticizing the establishment of the minimum wage law in Hong Kong, echoing the sentiments that Lion Rock has propounded for the past months. The article delineates the following:

  • The competition policy proposal and the minimum wage law are part of a broader pattern that flies in the face of the Hong Kong free market traditions; this is evidence of the imminent shift toward a more bureaucratic state and politicized economy.
  • Tsang's calculations in these matters are a result of "misguided populism," according to the WSJ; he seems to think that these laws are a way to assuage the dissent of a "small but noisy" group of people.
  • The article warns that the government has thus far been fortunate enough to be able to fund the many subsidy programs it engages with - youth internships, for example - despite its relatively low tax rates for households and businesses. However, low taxes "aren't inevitable," according to the WSJ, and expansion of labor legislation could drastically change the situation as it stands.
  • Milton Friedman is quoted as writing: "At the end of World War II, Hong Kong was a dirt-poor island with a per-capita income about one-quarter that of Britain's. By 1997, when sovereignty was transferred to China, its per-capita income was roughly equal to that of the departing colonial power, even though Britain had experienced sizable growth over the same period. That was a striking demonstration of the productivity of freedom, of what people can do when they are left free to pursue their own interests."

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