City needs to jettison its outdated ‘positive non-interventionism’

Since time immemorial, the way Hong Kong has been governed is variously characterized as laissez-faire, “light-touch administration”, “hands-off governance”, “small government, big market”, or, most popularly, “positive non-interventionism” (PN). 

The common denominator of these appellations is a limited government, a government that is minimally involved in economic and social affairs, allowing the market and social norms free rein in the functioning of Hong Kong. However, the involvement of the government in economic and social affairs is much deeper than that commonly portrayed or implied by PN, as business and professional monopolies are legion, and Hong Kong is a “quasi-welfare state” in the realms of education, healthcare, social welfare and housing. Be that as it may, PN has been tirelessly and obstinately upheld and trumpeted by government officials, businesspeople and liberal economists as the timeless formula for Hong Kong’s economic success and the recipe for good governance. The doctrine of PN has often been adduced to defend the government’s abstention from taking on more responsibilities to resolve difficult and deep-seated social and economic problems, such as Hong Kong’s narrow industrial base, wealth concentration, weakening economic vitality, the widening gap between the rich and the poor, the housing shortage, and insufficient upward mobility opportunities for the younger generation.

Once, the then-acting governor of colonial Hong Kong, the late Sir David Akers-Jones, on one occasion disclosed to me that PN was widely misunderstood in Hong Kong. He said that PN provided the flexibility to the colonial government to choose flexibly and expediently between the “positive” and the “non-interventionism” components of PN, i.e., to choose the extent and depth of involvement in social and economic affairs based on its understanding of the exigencies of the political situation. By and large, in Sir David’s view, the colonial government would lean on the “non-interventionism” side as far as possible, but it also meant that it would be “active” from time to time when it reckoned that colonial rule was under threat.

Concomitant with … abandonment (of “positive non-interventionism”) is the need to delineate the enhanced functions of the government in the economy and society, change the attitudes and behavior of the officials, … and strengthen policy and strategic studies within and without the government

Contrary to what Sir David had in mind, many true believers in PN, even to this day, have a stubborn and doctrinaire addiction to limited governance and are opposed to expanding the socioeconomic role of the Hong Kong Special Administrative Region government. They tend to see PN as the principal factor in Hong Kong’s past economic success and believe that it still has relevance today. In their judgment, jettisoning PN will jeopardize Hong Kong’s prosperity and stability by allowing the clumsy hand of the government to wreak havoc on society and the economy. In their narrow and peculiar interpretation of the Basic Law, PN has been solemnly enshrined in this constitutional document. This interpretation is patently off the mark, as the frequent resort to deficit financing by the HKSAR government, notably in the past few years, has never been legally challenged.

However, a more accurate reading of Hong Kong’s history would cast doubt on the significance of PN as a factor in Hong Kong’s economic success, let alone treating it as an indispensable and sacrosanct political principle in Hong Kong’s economic success. For one thing, before the 1970s, Hong Kong’s economic performance could not be billed as impressive even though the laissez-faire dogma was closely observed. On the contrary, despite the “heavier” intervention of the government in areas such as public housing, labor and social welfare since the late 1960s, Hong Kong’s economic growth did pick up rapidly. For another thing, Japan and three out of the “Four Little Tigers” (Taiwan, Singapore and South Korea) do not owe their economic achievements to limited governance, whereas just the opposite is true. Compared with the several decades before Hong Kong’s return to the motherland, Hong Kong’s economic performance after 1997 is by and large less splendid notwithstanding the continual sway of PN in the governance of the HKSAR.

From a historical perspective, there is a set of unique and rare factors that allowed Hong Kong to attain economic development since World War II without the heavy involvement of the government in the economy, factors that were absent in many other successful economies. In the first place, the Chinese entrepreneurs of Hong Kong had laid a solid industrial base in Hong Kong well before the onset of the Pacific War notwithstanding the colonial government’s favoritism toward the financial sector. Second, the civil war in China after World War II and the founding of the Communist regime in 1949 triggered a huge influx of capital, entrepreneurs, and skilled labor into Hong Kong. This, together with the capital provided by the banks of Hong Kong, enabled Hong Kong to swiftly build up its manufacturing sector. Third, the economic revival of the West and its practice of free trade in the postwar period provided an enormous market for the industrial products of Hong Kong. Finally, the support for Hong Kong’s economy and people’s livelihoods, largely in the provision of affordable food and daily necessities, by the Chinese mainland was indispensable in reducing the cost of living and production in Hong Kong.

Therefore, on the eve of Hong Kong’s post-WWII industrialization and economic takeoff, Hong Kong was prolifically blessed with the requisite capital, entrepreneurship and labor. The states in the other three “Little Tigers” had to struggle to obtain these critical resources for their respective economic takeoffs, but the colonial government of Hong Kong was fortunate enough to be able to continue its “positive non-interventionism”, enjoy Hong Kong’s economic bounty, and be given tribute for Hong Kong’s economic success.

There are several reasons why PN is adopted as a sacrosanct governance doctrine in Hong Kong since it became a crown colony of the United Kingdom. None of which, however, has to do with the colonists treating it as instrumental to Hong Kong’s economic development. In the first place, limited governance and the free market as political dogmas were already in vogue in the UK at the time that Hong Kong was grabbed from China after the Opium Wars. Second, a major theme of the UK’s colonial policy was that each colony had to be financially self-sufficient and should not become the metropolitan country’s financial liability. Accordingly, the colonial government of Hong Kong had to practice financial prudence or even stringency, one of the results of which was to minimize as far as possible expenditures on economic and social matters. Third, compared with other imperial powers such as France, the “civilizing mission” was less important to the British colonists in Hong Kong. Instead, the priority was to set up Hong Kong as a free entrepot serving British commercial interests in the “Far East”. Hence, the need for untrammeled capitalism took precedence over other socioeconomic concerns. Fourth, PN, by minimizing government intervention in economic and social affairs, allowed for “peaceful coexistence” with a subjugated Chinese community with its entrenched and resilient culture. Occasional attempts by the British colonists to tamper with the Chinese customs and traditions did without exception stir up resistance and were deleterious to colonial rule. Fifth, there was no moral imperative on the part of the colonial officials to cater to the well-being of the colonized. Public service and social welfare were provided basically to prevent social and political turmoil by alleviating the suffering of the underprivileged. Lastly, the colonial government, with its focus on governance and administration, simply did not have the talent and expertise to play an interventionist role in Hong Kong’s social and economic development.

By and large, PN is a shortsighted as well as an “amoral” if not “immoral” political doctrine befitting an unsentimental colonial government living in a “borrowed time and borrowed place”. Its coincidence with Hong Kong’s post-WWII “economic miracle” should not be interpreted as PN being the cause of Hong Kong’s economic success, but instead should be seen as the limited need for the government to provide the necessary conditions for Hong Kong’s economic takeoff at the critical and peculiar juncture of Hong Kong’s history.

Over time, however, the prolonged dominance of PN as the political doctrine in Hong Kong has left a lot of social and economic issues festering, seriously impairing Hong Kong’s prosperity, stability and development. The conditions that previously enabled the government to abstain from intervening in socioeconomic affairs are no longer here today because of the turbulent and grim external environment, the dangerous social divisions, the narrow industrial base, and the unabated erosion of Hong Kong’s competitive advantages. The intervention of the government is desperately needed to create a more competitive business environment, a more knowledge-based and diversified economy, a more sustainable development model, a more just and fair society, and better quality of life. Even more important is that as a government responsible to both the nation and Hong Kong, the HKSAR government should practice “people-oriented” governance, provide visionary leadership, conduct long-term planning, and actively take part in the motherland’s development.

By now, PN as a political doctrine has no place in the HKSAR and has to be abandoned for good. Needless to say, concomitant with its abandonment is the need to delineate the enhanced functions of the government in the economy and society, change the attitudes and behavior of the officials, recruit the necessary talent inside and outside Hong Kong into the government, engage in long-term economic and social planning, promote joint efforts of the government and the community, increase joint planning between Hong Kong and the Chinese mainland, and strengthen policy and strategic studies within and without the government.

One must recognize that notwithstanding its inevitability, jettisoning PN is not a simple and easy matter. The reason is that a lot of vested interests are deeply connected with it materially or psychologically. To them, a more activist and interventionist government is detrimental to their interests or harmful to Hong Kong’s freewheeling capitalism. It is to be expected that they will mount resistance to any departure from the “right” or “time-honored” mode of governance. To overcome this resistance, the HKSAR government has to rally the people behind it by taking on its critics robustly, explaining clearly the need for an alternative governance approach, and demonstrating the utility of the non-PN approach through concrete and positive policy achievements.

The author is a professor emeritus of sociology at the Chinese University of Hong Kong, and vice-president of the Chinese Association of Hong Kong and Macao Studies.

The views do not necessarily reflect those of China Daily.