Hong Kong — For 18 years running, Hong Kong has crossed the finish line first in the Heritage Foundation/Wall Street Journal Index of Economic Freedom. The 2012 edition finds Hong Kong ahead of Singapore and far in front of the U.S., which came in 10th.
“Hong Kong has demonstrated a high degree of resilience during the ongoing global turmoil and remains one of the world’s most competitive financial and business centers,” the Index states. “Regulatory efficiency and openness to global commerce strongly support entrepreneurial dynamism, while overall macroeconomic stability minimizes uncertainty.”
While Americans still reel beneath an 8.3 percent unemployment rate, Hong Kong boasts joblessness of just 3.4 percent. For the fourth quarter of 2011, Hong Kong’s annual GDP-growth rate clocked in at 3 percent while the U.S. expanded sluggishly at 1.6 percent.
According to CB Richard Ellis, for the fourth quarter of 2011, office vacancies stood at 3.4 percent on Hong Kong Island, while the respective figure was 5.5 percent in the relatively subdued Kowloon and more residential New Territories areas. For the same period, the figure across the U.S. was nearly five times higher at 16 percent.
For Americans, Hong Kong’s latest economic indicators should stir nostalgia for the boom times under Ronald Reagan in the 1980s and Bill Clinton in the ’90s, before the disastrous Bush-Rove-Obama plunge into U.S. socialism.
But for some in this city-state, Hong Kong’s envy-inducing data mask what they consider creeping socialism in this Mecca of markets.
“Hong Kong is enjoying the dividends of the laissez-faire system,” Peter Wong of the free-market Lion Rock Institute told me over wonton soup at the Foreign Correspondents Club on Lower Albert Road here. Like Pan American Airlines’ gradual glide into oblivion, Wong credits Hong Kong’s current success more to its previous height than its present and decreasing altitude.
The strongest argument for this view is Hong Kong’s pace of public spending.
“Recurrent expenditures for 2011–12 will increase by nearly 8 percent when compared with 2010–11,” Financial Secretary John Tsang explained in his February 2011 budget speech. “This reflects that the government is always committed to caring for people’s livelihood.” If that last sentence does not spook free-marketeers, how about this one: “Total government expenditure is estimated to reach HK$371.1 billion [US$47.8 billion] an increase of HK$67.6 billion [US$8.7 billion] over 2010–11.” This is a one-year 22.3 percent hike in government spending!
The HK$390 billion (US$50.2 billion) 2012–13 spending plan grows a more modest 4.9 percent. However, Tsang’s February 1, 2012 budget statement hardly echoes Adam Smith’s The Wealth of Nations:
For my five budgets, I have increased government expenditure by nearly 70 per cent. This exceeds GDP growth of 21 per cent for the same period. Dedicated to education, medical services, and social welfare to cater for public needs in such areas, this spending also helps invest in the future and sustain economic vibrancy. The increase in expenditure demonstrates our commitment, and confidence in Hong Kong.
In addition to this 14 percent average annual growth in spending since 2008–09, Wong observes, “Small things add up. You see the mindset changing from our post-handover administration.”