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How has Hong Kong changed since Britain left? I moved to Hong Kong in June 1992. It was three years after the Tiananmen killings, two years after Next had been launched. Five years later, Britain left. Colonialism sailed off on the Royal Yacht Britannia. I did not move to China. China moved to me.

A prominent Hong Kong Chinese businessman, the kind of guy who is featured a lot in the local media, told me shortly before the Chinese takeover: “Hong Kong people don’t care about politics.” That was not true then -- but people could say that in the mid-1990s with a straight face. No one could say now that Hong Kong people do not care about politics! That is, in part, thanks to the city’s last Governor Chris Patten, who also arrived in June 1992 and who raised the bar for what it means to be a citizen.

What is better since 1997? Hong Kong people now have a voice, indeed many voices. They still do not have a meaningful vote, but they certainly have a lot of say. Hong Kong civil society, quietly growing since the 1950s, has blossomed. Environmental, social, and cultural issues all are up for public discussion and debate. Gender, diversity, and social welfare policies are all chewed over by an active and engaged citizenry.

This is a golden age for the forging of a Hong Kong identity. The Umbrella Movement rewrote the Hong Kong narrative. The Hong Kong mind is open as never before. Hong Kong people are developing their own identity, one that rejects the “growth at any cost” mentality and scoffs at the “we are all Chinese” story. The Umbrella Movement will be remembered in the history of modern China as a moment when the people of a small, improbable city spoke truth to power, literally in the shadow of the People’s Liberation Army garrison.

What is worse about Hong Kong? The no-go lines are getting brighter and being drawn ever more tightly. There is a lot less freedom of expression. The rule of law is under threat. Political leadership is absent and even administrative competence eroding. That much we know.

It is hard not to love the growing pride in Hong Kong, something that Next and Apple Daily have done so much to promote. But what do we understand of the dark side of this newfound Hong Kong identity? Pride in Hong Kong could tip into chauvinism. The pushback against mainlanders is in danger of becoming an anti-foreign backlash. Ironically, the government and the pan-Democrats are both working to close Hong Kong.

The closing of the Hong Kong mind can be seen in the decision to eliminate the government subvention for the English Schools Foundation. Who does that hurt? It hurts ESF students, whose parents are mostly Hong Kong permanent residents and who are mostly ethnically Asian. Making it more difficult for non-Cantonese to raise their children in the city is shortsighted.

This city was built not only by millions of Cantonese from Guangdong, and millions of non-Cantonese Chinese from the mainland and from Southeast Asia. It was also built by Scots and English and Americans -- and perhaps above all by those forgotten ones, Sikhs, Sindhis, Parsees, Nepalese, Tamils, and Marathis. Hong Kong was built by people like Paul Chater, an Armenian Jew who was born and grew up in Calcutta, and Elly Kadoorie, an Iraqi Jew born in Baghdad who came to Hong Kong by way of Bombay.

Great cities are open cities. To stay a great city, Hong Kong must keep the welcome mat out for the rest of the world. The world needs Hong Kong. Hong Kong needs the world even more. Please, don’t close your mind, Hong Kong.

caption:Don’t close your mind, please!

Compromise is part of life, and it comes with a democracy.  Up until 1997 it was what occurred here. No, we did not have democracy, but our overlords in London were democrats, and it was through that light hand of governance that our people negotiated life.

We were always seen as a problem by Beijing, but under prior Chinese leaders, it was a problem to be managed not crushed. With Xi Jinping's ascension, remnants of our negotiated life vanished.

Xi is not a manager of problems; he tackles problems.  He isn't content with the ambiguous state of affairs in Hong Kong.  He doesn't accept that a challenge to Chinese Communist Party's authority should hang in the air in Hong Kong - or in China.

Such is our lot. Xi is the unelected leader of China, and as such the unelected leader of Hong Kong.  Yet, while he has domain over our politics, and in many cases our livelihoods, mine included, he doesn't hold dominion over our judgment of what is right and wrong. In more biblical terms, he does not own our souls.

Unless of course we offer them up to him on a platter, as did the heads of our 10 universities.  Let me be absolutely clear, it is silly to talk of independence for Hong Kong. As with the heads of our Anglican Church and Catholic Church, I agree with the idea that we can break away from China without bloodshed is sheer fantasy.  Our future is in reform, not revolution.

But we can't have the leaders of our civil society doing the work of the communist party if we are to evolve towards a more democratic Hong Kong.  A university head can certainly take any position on any issue, but to join a Beijing-backed petition silencing free speech?

Yes, we can expect businessmen, under the threat of sanctions, to fall in line when Beijing snaps its fingers.  Yet, it's a sad commentary on the state of our higher learning institutions when they beat the Chamber of Commerce in kowtowing.

Was funding at stake?  Jobs threatened?  There's a difference between conceding under duress and mere currying favors.  I admire many in our business community who held out against boycotting us here at Next Digital until the pressure became unbearable.  But there is also a special place in hell for those who ransom the bones of our people for a buck, or a comfy academic position.

This brings us back to the Chinese Communist Party and Xi Jinping.  Had our Beijing masters not waged a war on our integrity, our learned leaders would have been spared of the urge to prostrate. Communists can tolerate neither a christian nor an atheist who refuses to kneel before them.

What Aleksandr Solzhenitsyn, Pope John Paul, Nelson Mandela, and Liu Xiaobo all understood was that, to enforce their unelected rule, tyrants would not accept silent acquiescence, but insist on total submission. Obedience is not measured by what one is willing to endure, but what one is willing to inflict on others. And for that they need our souls.

Hence the focus on our young.  The impatience of youth has allowed, admittedly with some help from government, the independence idea to gain a small foothold. Its cost and impracticality have sentenced it to a fringe movement.  Its only utility is to serve as a paper tiger for the Pro-Beijing camp to justify the escalation of political controls.

Yet, outside of all of this is a message that we know what Beijing fears. The young, whether graduate students or free-agent van drivers, have not bent to Beijing's pressure nor been bought by favor.  While the vast majority of them will not rise up for independence, their political outlook and moral judgment remain independent - and free.

Their souls are intact.  And not surprisingly Beijing is scared.

Thank goodness the Chinese Communist Party has only ever held 18 national congresses, because as the 19th congress looms next month, it is already filling newspaper pages and airwaves with unrecyclable torrents of bullshit that threaten both to overwhelm and bore everyone to death.

We are treated to allegedly informed appraisals of ideological shifts, claims of new initiatives and, most frequently, mounds of speculation about who’s in and who is out.

The reality however is that what is described as a discussion, even a debate, is absolutely nothing of the kind. All the major decisions have already been taken behind closed doors; the function of the congress is to provide a rubber stamp and put on a stilted performance designed to awe and cow the citizens of the PRC plus the rabble of useful foreign idiots who line up to add their support.

Not only is there no real debate or discussion nowadays, but even in the days when the Communist Party was not in power, the congress served as a way of enforcing the leadership’s decisions. Back then, there was perhaps a scintilla of debate, but it was largely conducted in coded language and minority voices were quickly snuffed out or, worse, extinguished.

The shell that remains and is called the CCP has long abandoned any real interest in Marxist ideology; indeed it is highly questionable whether even Mao Zedong had much interest in this subject, but he shrewdly played along with his Soviet paymasters, putting up a lively show.

If there is any lingering ideology, it largely consists of ultra nationalist bluster; Karl Marx’s internationalism has long been consigned to the dustbin of history. And, as far as guiding principles are concerned, well, that’s simple; they consist in their entity of methods of retaining power for a small self-perpetuating elite.

What marks out the party’s current leader Xi Jinping is how rapidly and comprehensively he has consolidated his personal dominance over the party. This congress will merely underline in public the process that is already well underway in private.

There will however be any number of speeches where fine sounding words such as ‘progress’, ‘responsibility’ and even ‘welfare of the people’ will be uttered but, like the PRC’s constitution, these words have very little meaning.

In this sense, the CCP is like all dictatorships that operate a system of mirrors and deflections designed on the one hand to reinforce and on the other to disguise the party’s control.

Of course the dictatorship system that most influenced the Chinese Communist Party was that of the Communist Party of the Soviet Union. In this regard I still vividly recall my student days attending lectures on Russian history by Tibor Szamuely. In his broad Hungarian accent, he would regale us with detailed accounts of the Soviet constitution and how it worked. As he came to the end of his peroration he would raise his head and say ‘ladies and gentlemen, of course this has absolutely nothing to do with reality. The constitution of the Union of Soviet Socialist Republics is no more than a work of fiction’. And so it is with the PRC’s constitution.

Meanwhile, here in Hong Kong, there is a marked reluctance to even talk about the Communist Party, despite the fact that the party is the pivotal force determining the SAR’s future. Moreover, local party members still keep their membership secret. Various bigwigs nonetheless strut around proudly proclaiming their presence on a clutch of state bodies and even go so far as to claim that they have some impact on policy.

The poor dears seem gloriously unaware that they are attending the wrong parties and the only party that matters is The Party. They don’t even get a toenail in the door of influencing this party’s policy and actually pretend that what happens in the CCP has no impact on Hong Kong. Dream on suckers!

 

caption : The well-oiled rubber-stamping machine in action.

Sixteen young people are behind bars, a price they willingly pay for their love of Hong Kong. While it is debatable if the price is too high,  many of us who have made this city our home by choice can nevertheless empathize with their “localist” aspirations. Hong Kong is uniquely attractive and it is incumbent upon us all to preserve the local virtues that make us stand out.

First among these is tax. Imagine the newcomer from the “developed” world. For example, Australians earning a good salary have half of their gross wages deducted before they receive anything. On top of that they have to make compulsory retirement savings payments. There is a 10% GST on every dollar they spend. More taxes accumulate. Many other countries have similar burdens.

In Hong Kong we do things differently. The government takes nothing from your pay. The money is yours. MPF money goes into your account. The company you work for is not a tax collector. Taxes are levied later, but at rates that are not wholly out of proportion to the services delivered to you.

At the top of that list of services is safety. We are a remarkably safe city for its size. There are not the “no go” areas that can be found in almost every metropolis. Crime rates are low and the crimes that happen are rarely random acts of violence inflicted on the innocent and vulnerable. Children are safe and can travel alone on public transport.

And that transport works like in few other cities. The trip to and from the airport is swift and comfortable. Choices for transport are many and largely affordable. Cars are a wonderful luxury, but no necessity to live here. The convenience and pervasive commerce of our ever expanding business districts is probably only rivaled by Manhattan.

Education is often criticized, but with money and skill one can, after navigating the arduous admissions processes, find a huge number of choices. Education is delivered in multiple languages, with different educational philosophies by teachers who are reasonably paid and conscientious. We attract teachers from around the world who produce outcomes that rank highly internationally.

Setting up a business here is simple and low-cost, and the rules are fairly clear. There is a cornucopia of agents to assist the process. When you open your doors, you are assuming a serious responsibility and the requirements for employers are serious but straightforward compared to most countries. You can contract for labor, hire and fire – but you had better treat good employees well, because they do have choices.

Admittedly, our rulebook is growing longer, there are businesses that are hard to enter, and the licensing burden is gradually expanding to create more barriers. Yet these rules are usually simple, easily found and enforced in a “black letter” way so that you know where you stand.

Accessing health care is usually a matter of turning up to a doctor’s office or hospital and paying for service. It is an unbelievably more complex process in most countries.

These conveniences can seem prosaic and are easily taken for granted. However, they are founded on a rich vein of culture that is our real strength. The native Cantonese culture is enterprising and resourceful; it is also respectful of others and conscientious. There is an important element of trust that is built from business, civic, religious and clan associations that provide mutual aid and rarely rely on the coercive power of government for support.

And we are an emporium for every kind of food imaginable. For those from other countries, almost every comfort food is available on the shelves of supermarkets or in small specialty stores catering to every taste. Travel the world and people envy you for living in our visually spectacular city.

These local virtues are built on liberty. Those young people behind bars grew up with these virtues. In their defiance, they sounded an alarm that these virtues, hence our liberties, are under threat. We ignore this alarm at our perils.

Caption:Under threat. (Apple Daily photo)

As the anguish over the prison terms passed on some of our youthful protesters ring out from the well-padded international liberal elite, you can’t help but feel that they would do rather better looking at themselves, and their own countries’ histories.

In particular, when it comes to democratic matters, Britain has little to teach the world if it recalls the bizarre treatment that it handed out to the suffragettes, who were merely seeking the vote for women, which involved locking 1,000 of them up in appalling prison conditions, for breaches such as not paying fines, a little over a hundred years ago.

Yes, times move on and values change, but the reality is that ours is essentially a conservative society and the very muted protests in support of the sentenced individuals reflect the fact that our people respect the rule of law, abhor public violence, and believe that those who resort to public violence should be punished firmly.

We are not pre-apartheid South Africa and for those who think that their opinions are so important that they have to express them to a global audience, they should read Mandela’s brilliant speech at the Rivonia Trial, where he lucidly explained the African National Congress decision to undertake a campaign of violence and to fully accept the consequences: “This then is what the ANC is fighting for. Their struggle is a truly national one. It is a struggle of the African people, inspired by their own suffering and their own experience.”

In this remarkable speech, Mandela essentially asked the judge to sentence him to death, in accordance with the law. The life sentence that he eventually got was taken as a display of weakness on the part of the regime and marked the start of its downfall some three decades later, proving once more that the pen really is mightier than the sword.

A lesson that Mr Joshua Wong may wish to consider while he has time on his hands.

Anyway, we can be sure of one thing -  these events will fade as the city gets on with its own business and as our strongly independent citizens continue their daily routines and make their own way in the world, paying little heed to much that is outside their own sphere of activities.

And this is of course one of our great strengths.

Our institutions are generally very weak, as we were never prepared properly for the withdrawal of the colonial government. The political system here actually dissipates rather than concentrates authority, while policy formation and implementation is, at best, poor. For most elected politicians, such weak controls over the levers of power would be seen as a disaster and something that needs correcting immediately.

But here, in Hong Kong, the political mess so often bemoaned actually ensures that people live in little fear of ad hoc government intervention in their lives as they continue to be proudly self-sufficient.

It may be sacrilege to say it, but the large vacuums within our economy and society that our ineffective system of administration and decision making has created over the decades is the key to the continued success of our city and the people that make it.

The independence and entrepreneurialism needed to survive and prosper in a society such as ours is certainly not to everyone’s liking, but for those who are attracted to Hong Kong - those who want to work hard to make their way without much of a safety net - the city surely ranks alongside New York and London as being the most dynamic on the planet.

Attitude is the word.

Hong Kong has attitude and for as long as it keeps its rough, tough edge it will prosper. Whether our electoral system is ideal or not, at least our society offers everybody, unlike Mandela’s apartheid South Africa, a fair crack of the whip and the chance to become whatever they want.

Which, in a way, is what democracy is really about in the first place.

Caption:“if needs be, ... I am prepared to die.”

Payment in full does not always come in one bill. Since 1997 we have had to wait to find out the price China is willing to pay to subjugate us  –  and the price we are willing to pay to resist it.

Yes, Beijing has been manipulating our government and politics since even before the handover. Democratic activists have been harassed, pro-Beijing politicians feted with favors and cash, and advertising boycotts used to silence the media. Of late, even our borders have been violated as Lee Po and his partner booksellers, were dragged away. But by the standard of brutality Beijing has inflicted on the Chinese people, what we experienced in these early days of the handover was indeed a light touch.

But not any more. Does anyone doubt that Rimsky Yeun, along with a compliant judiciary, has executed an order from Beijing to imprison three young men for crimes that more than two years ago earned them no jail time?

Now, as it is in China, defiance of the regime will carry a physical price – jail. In other words, Xi Jinping has exerted a price for advocating for more democracy in Hong Kong – one's personal freedom. It is also the price Xi is willing to pay in terms of retribution and impact on China. He is broadcasting to the world that he is willing to have our world-class city in tatters if that is what it takes to make us kneel.

How to go forward? Will the people of Hong Kong, who at every chance vote for democracy, just quietly submit to the North? Certainly not the 30,000 plus that turned out this past Sunday to march against the sentences of Joshua Wong, Alex Chow, and Nathan Law.

But just as Beijing has changed the rules and increased the punishment, so too will those hoping for greater democracy in Hong Kong have to adjust to these new rules. It is time for the head to reign over the heart. The sloppiness and infighting that have become hallmarks of our democracy movement must end.

Independence from China has never been on the table, and the democracy movement would do well not to deliver a gift to Beijing by embracing it. It was heartening to hear the soon-to-be-jailed Edward Leung, of Hong Kong Indigenous, say this past Sunday, "In the past we had different strategies, different ideologies during the whole struggle – at this moment we think solidarity is the most important thing."

As important as solidarity, the democracy movement must be strategic in picking battles. Going to the barricades on every issue dilutes focus on the main concern of protecting our freedoms.

Most important, if there is a risk of jail, then make it on our terms, which is imprisonment for non-violent civil disobedience. No rock throwing, no burning of trash cans. If Beijing is to throw us in jail, make them justify it to our  people  – and the world  – why they are jailing peaceful protesters. Make Xi pay the price.

As Beijing's dark cloud of oppression descends on us, Joshua, Alex, and Nathan are known the world over for being jailed for holding umbrellas up against unelected tyrants. Part of me smiles, as I think Xi has no idea of the power he has just vested in them. But that carries forward only if the thousands who follow these brave young men match their grace under pressure and refuse to take the Commies’ bait to act out.

Peaceful, law-abiding, believers in merit, and above all freedom-loving, our people form an amazing society. The brutal tactics of the North are an anathema to our values. Yet, we have the upper hand; for it is from practicing these values that we can best advance our cause and find protection for our freedoms.

Freedom for all has always been held for ransom by tyrants. There will be no easy road to freedom under Xi, but the three young men are paying the price to show us the way.

Caption:Showing us the way.

Living in Hong Kong you sometimes feel that cynicism is an inadequate response to what’s going on and that sarcasm is not really up to the task of trying to make sense of it all.

To illustrate this feeling here are some recent random examples. Put together they constitute a pattern of behavior.

There are strict laws in place forbidding Mainland law enforcement officials from operating in the SAR, yet Democratic Party member Howard Lam alleges he was hustled over the border, beaten up and dumped back in Hong Kong after been warned not to maintain contact with Liu Xia, widow of Liu Xiabo. In a society where the police could be relied upon to thoroughly investigate this matter without fear of political meddling, confidence in the value of the investigation would be high; however following the disinterred police response to the abdication of the Causeway Bay booksellers, confidence is low.

The new Chief Executive has nothing to say here but she had plenty to say about her August visit to Beijing where wise and extremely helpful Mainland officials are, apparently, going to help us develop as an international financial center, yes, that’s what she said with a straight face.

Guangdong authorities, presumably also wise and helpful, took three days before bothering to inform their Hong Kong counterparts that a collision in the Pearl River Delta has produced a major oil slick heading to the South of Hong Kong. The new undersecretary for the environment said there was no delay here even though measures could have been taken to reduce local sea and beach pollution. Our supine officials fully understand that they are not allowed to criticize their Mainland counterparts.

The head of a Tuen Mun primary school is alleged not only to have artificially inflated the school’s registration roll to ensure higher government subsidies but also forced teachers to stand at border crossing stations handing out leaflets to attract more pupils and, bizarrely, bullied them into buying cake coupons for the school in return for being granted sick leave.

Although we have  a vast and overbearing education bureaucracy, how come none of the bureaucrats spotted any of this while doling money out to the school? And what about the schools supervisory committee, were they asleep on the job or simply complicit here? The time-servers who proliferate in the public sector underwhelm at every opportunity.

Then there are the growing allegations over abuse at juvenile detention centers. The Correctional Services Department, predictably, says that this is news to them because all previous reports of abuse have either been withdrawn, rejected or are still under review. The disciplined services are very good at protecting their own people but where is the protection for citizens who are in their custody – yes, I know that includes criminals but the strength of civil society is tested not at its strongest but its weakest points.

Meanwhile property developers are busy rolling out new plans for nano-apartments that, given the price of local property, are about the only thing many buyers and renters can afford. In allegedly prosperous Hong Kong,  people are being crammed into smaller and smaller living spaces yet the government claims that tackling the housing problem is one of its highest priorities.

The reality is that the government is largely oblivious to the housing problem as it focuses on the different issue of the property problem and addresses this with a series of consistently ineffective measures aimed at lowering prices. If the government were really interested in housing matters it would be focusing on social housing and improved home ownership arrangements.

A golden, or should I say a tattered thread, connects all these random examples of official arrogance, stupidity and a woeful lack of interest in standing up for the citizens that public servants are supposed to serve. And they wonder why Hong Kong people protest so much.

Caption:Our reward for toadying to the Mainland.

Integrating the Pearl River Delta to form a Greater Bay Area conurbation is founded on the compelling logic that the largest urban area in the world, with high incomes, leading manufacturing and education facilities, and a stock of accumulated human capital unmatched in any emerging market can only bring about greater prosperity. We are at the center of this and can buttress this mix with a greater degree of liberty and the rule of law.

The economic benefits of faster transport, more efficient linkages between airports, and continued regional specialization are real. Professor Richard Wong of Hong Kong University’s School of Economics and Finance has shown that our “soft skills”, not least a common law system that allows for efficient contracting and adjudication of disputes, provide the region a soft power that is world class.

Yet the Pearl River Delta is not the only region in the world to have these advantages, and we can learn from successes – and failures – elsewhere. Perhaps the greatest urban and industrial center of the last century was the Tri-State Region, which includes New York City and large parts of New Jersey and Connecticut, with a population of around 23 million. We do not need to dwell on the positives of the region,  a world-class center of industry, commerce, education, and culture. However, we should learn from its mistakes.

I have visited this region for 30 years and observed at first hand its ups and downs. Right now, greater New York is in eclipse. Minor repairs to Penn Station have been billed as delivering the “summer of hell” for commuters. The tired infrastructure is showing more stress than ever. The homeless are returning to Manhattan’s streets. Shop vacancies are increasing as taxes make services and goods less competitive. Favorite diners and haunts are closing. Friends that have seemed fixtures there for decades are moving away.

Much of this comes from failures of governance. As it had evolved in the late 19th and early 20th centuries, the Tri-State Region had the best infrastructure in the world. Private companies competed and built the railway networks that linked the region as well as New York’s famous subway. The enterprising boroughs and cities of the region would compete to attract talent and business.

However, from the New Deal onwards, the role of the governments in the region grew. In the name of efficient coordination across state lines, the Port Authority of New York and New Jersey, a bureaucracy, came to own or operate much of the port, rail, road, and air transport infrastructure in the region, thus sowing the seed for its present miseries.

Bureaucratic and political management stifled commercial and economic incentives. The result is deplorable. The three states of the region all rank in the highest 10 for state tax burden, and New York is at the top of most lists. The region is beset by problems such as unfunded pension liabilities for public employees. Projects across jurisdictions have been hotbeds for corruption, delays, and union power, driving up costs.

The Greater Bay Area –  and Hong Kong –  should take heed by privatizing the airports, bridges, and railways owned by governments. Privatization will improve management, lower costs, and reduce the scope for corruption. The private sector will keep its assets well maintained and promote regional linkages on business terms.

The most intractable problems of the Tri-State Region come from the involvement of the Federal government, states, and unaccountable regional authorities. The Greater Bay Area should therefore encourage jurisdictional competition to foster governance. Not only is our autonomy vital, so is the ability of our neighbors to look after their own interests –  region-wide authorities of any kind, with the inevitable bureaucracy – and corruption –  that they entail, should be resisted at all cost.

Taxes must remain low and liberties high. The great regions of the world are created by people, not bureaucrats, and people are attracted and retained by keeping the fruits of their enterprise.

Caption:A giant bureaucracy in the making?

A month or so in and Carrie Lam, our new Chief Executive, already seems to be a step up from any of her predecessors, as she seems to have a bit better grasp of what leadership is about.

And, most encouragingly, she seems to have a sensible and refreshing approach to making actual decisions, rather than hiding under the futile charade of public consultation process, which is an apparent sop to some skew-eyed version of democracy.

I loved her reply to those calling for a public consultation on the immigration arrangements at West Kowloon Station, a rebuttal which seemed to be rather Thatcher-like – determined yet not without some personal charm.

Under the Basic Law, it is the government’s role to lead rather than launching some nonsensical public consultation every time it wants to implement a policy – a process that solicits the same tired views from the same tired vested interest groups that sheds neither policy insights nor adds value whatsoever.

And what is the big issue with West Kowloon anyway?

In 30 years we become part of China and the British left 20 years ago. So what is all the fuss about having some small part of Hong Kong effectively ceded to the PRC. This type of ambiguity in the Hong Kong-China relationship has been a key to our success, and one need look no further than Kowloon City to be reminded of this.

People are waiting to be led and given a sense of purpose. And whether you like either project or not, I have to admit that Lam started well with the Lok Ma Chau Loop initiative and the Palace Museum announcements, both of which had the squealers squealing for more public involvement. The manner of the announcement of these projects started to build a sense of determined momentum.

And how grateful we should be.

The discredited democrats in the Legislative Council may kick and squeal as they stop getting their beloved public consultations, but maybe they will finally realize that it is their job to help implement and adjust policy within the framework of the Legislative process. That is what they have been elected to do. They have not been elected to run public opinion polls.

Well, now the democrats are the ones under pressure.  After the removal of the more juvenile members of their team in the Legislative Council, they are faced in Carrie Lam a leader who is competent and confident. They need to wake up and realize that they could well become an irrelevance if Lam also starts to deliver on some of the social issues that impact everybody’s day-to-day life.

And maybe her timing is fortuitous, as she comes on board at a time when land income is at record highs and high-value commercial sites on the harbor front are coming on line.  While she can look to huge, relatively secure, revenues into the Capital Works Reserve from commercial site sales, Hong Kong is also finishing spending hundreds of billions of dollars on projects that represent dreadful returns on our money and the worst of vanity projects, such as the Macau Bridge and the speed train line.

And it is not only the asset side that looks healthy. On the liability side, the civil service pension liability, the notional liability of which John Tsang managed to increase by accounting magic by HK$400 billion, will quickly dissipate given that the scheme was closed to new members in 2000, as it passes its peak liability in coming years.

So, having been an optimist on Hong Kong’s future for all my time here, I can start, in my own mind at least, to point to some very early signs that we now have a leader who can gain the respect of those who agree or disagree with her, and accept her leadership as being considered and firm and to the benefit of the greater good.

Maybe we also start to see why so many opposed her candidature.

Caption:Thatcher-like? (Apple Daily photo)

In December of 2009 the Far Eastern Economic Review, the journal of record for Asia, closed its doors.  At a lunch several years earlier my boss, Jimmy Lai, told the top management of Dow Jones they should sell the Review. It didn't go over well. Last week, our parent company started the process of selling Next Magazine.  As we saw from the last issue of Next, which blistered Mr. Lai, it too was not a decision that went over well with Next's senior editorial team.

Multiple people, including many journalists, asked me how Mr. Lai could let his own magazine attack him.  I explained, as one of our senior managers explained to me.  "Next is Next, and if they drag Jimmy off to jail we report it."   I make no bones about my love for that attitude.  Yet I also understand the business rationale for the sale.

Magazines the world over are in trouble. No one owns a story for more than a few hours as aggregators steal weeks of reporting in minutes.  That Next lasted as long as it did, with the indulgence of an ownership that gave Next every chance to turn it around, is remarkable.  Yet in the end Next could not overcome a fierce China-inspired advertising boycott and online competition with our flagship, Apple Daily.

The latter first.  CNN on cable has CNN and Headline News (HLN), but online, it is only CNN that prospers. Same applied to Next. Its readers came to the Apple site over Next by a ratio of 35 to 1 in terms of page-views.  Magazine giants, Time Inc, Conde Nast, and Der Speigal all suffer the same conundrum, and all are moving towards a central platform.  Not every title survives such move.

But that does not mean Next is at an end either as a brand or a platform.  Some have taken issue with the idea that advertisers would return under new ownership, but there would be no pratical or politial  reason to continue with the boycott.

Our company is cut off from nearly 60% of all advertising in Hong Kong. HSBC, Standard Chartered, Hutchinson, Sun Hung Kai Properties, all China companies, and even small retailers are chased from our pages and platform.  If Next can turn out a decent product advertising will go to it.  It might be fair to give a prospective buyer credit for recognizing this market fact.

As for Apple,  with nearly 38m page views per day, we are benefiting from a scale that does bring advertising and the shift to programmatic favors us,  even with lower rate.

Emotions are high in our office, but selling is the right thing to do. It's right for our shareholders, for our staff who will retain their jobs, and for senior staff who can join Apple should they wish.  Another Jimmy Lai is not on the horizon as a buyer, that ship has sailed.

It is also a fallacy to say that Next is dead.  Is Ming Pao dead? Is HKEJ or even the SCMP out of the game? Yes, they are not Next, but there are hundreds of journalists all over Hong Kong who are doing good work.  Whether sneaking things by their owners or the owners simply looking away, publications owned by those not on Beijing's blacklist often do good work.  The future is not locked in.

We are in a political standoff with our unelected masters up north.  It's actually a bit thick to think that there is no fallout for the media.  Nor is it realistic to think that print media can escape the fallout of the Internet.  If Time is considering a branding change away from its iconic name and a complete reorganization of its magazines to compete online, then how does Next escape?

Nothing stays the same.  Times change.  Selling Next is an unwelcome change, but it is not in anyway the end of the story of our group.  Apple is strong, our readership loyal, and in true Dunkirk spirit our major shareholder will go on with the good fight.

Caption:Next being Next.

As the Nobel Peace Laureate Liu Xiaobo was facing his last excruciating days the usual suspects busied themselves trying to blacken his name, pointing out his flaws as a human being and disparaging his importance as a freedom fighter.

A special place in hell reserved for these people but as they do their worst they also, inadvertently, highlight something about Liu and indeed all the other people who have the courage to stand up to tyranny.

A ‘normal’ person will, quite understandably, seek to avoid the horrendous consequences of defying tyrannical governments. Authoritarian regimes have a habit of punishing their opponents -- along with their families -- and it takes a very special mindset to accept these consequences.

Liu Xiaobo could have been under no illusions that his defiance would weigh heavily on his family. His wife Liu Xia has gone through the hell of house arrest and continual harassment, which brought on depression. Her brother Liu Hui was also jailed on highly dubious fraud charges. This method of terrorizing families of dissidents is well known in China.

Those who defy the authorities therefore have to appreciate that their defiance will cause great pain to those closest to them. A so-called ‘normal’ person will think very carefully before going down this path.

However if no one stands up to the bullies of authoritarian regimes, nothing will change. The extent of the sacrifice that this requires can be seen even when the dissidents succeed in their efforts.

Take the example of Myanmar’s Aung San Suu Kyi, who was forced to leave her two sons in England while she returned to her country to fight the ruling military junta. She was also forced to abandon her terminally ill husband, who desperately needed her,  but he supported her efforts to end the dictatorship. When she succeeded, after a long struggle, her relations with her children deteriorated to a state of estrangement.

It was a heavy personal price to pay and it has been paid time and again by dissidents, even those who managed to escape. This is seen very clearly among the exiled Chinese dissident community, many of whom have survived torture and imprisonment only to discover that exile is another kind of torture, marred by bitter factionalism, sour personal relations and, for many, an existence shrouded in restlessness and a sense of hopelessness.

Some years ago during a Singaporean election I interviewed, Chee Soon Juan, one of the government’s most articulate opponents. The price for his defiance was dismissal from a good job at the National University of Singapore followed by the typical Singaporean method of jailing and bankrupting opponents by use of defamation suits. They also face a barrage of media abuse.

At the time I saw him he was running for election. He cheerfully admitted that the rigged system would ensure he could not win but as he was saying this, prayers ended at a mosque opposite the outdoor coffee shop where we were sitting.

Young men poured out of the mosque, spotted Chee and started chanting ‘Dr Chee, Dr Chee’ as they waved enthusiastically. ‘You certainly seem to have some support’, I said. He sighed and replied, ‘yes, they all support me but not one of them will dare to vote for me, they want me to do the fighting but they are not going to take a risk I don’t blame them’.

‘Normal’ people simply cannot take the risks that ‘abnormal’ dissidents take even though they wish them well and may occasionally engage in their own small acts of defiance.

The result is that dissidents are left to do the heavy lifting and end up leading complicated, often harrowing lives that may well produce less than saintly human beings who carry the burden of inflicting awful damage on those closest to them. But in a world without Chee Soon Juans or Liu Xiaobos, tyranny always wins.

Caption:Not a ‘normal man’ (AFP photo)

In the west,  country after country, government budgets have spiraled out of control, creating persistent deficits and leading to rapidly rising debt. The United States is not known internationally for its extensive welfare state, although that is a misnomer, but government debt that was 30% of GDP in 1980 had risen to 60% by 2005 and now sits at 104%. By similar measures, China’s general government debt rose from 20% in 2000 to 46% in 2016.

Despite the natural prudence and caution of Hong Kong people, because the government has no net debt, we can be complacent about our capacity to increase government spending. To avoid the spiral, we need to understand what causes debt to get out of control and have a good understanding of where we are starting from.

Although Hong Kong is not a large issuer of debt, the government does have substantial liabilities. The largest of these is government pensions, which are not funded at all by a separate pool of investments to meet those obligations. Financial liabilities of the government are now 43% of GDP, up from 30% a decade ago. In the five years that Leung Chun-ying was Chief Executive, government pension liabilities grew at a compound average rate of 9.9%.  Those liabilities are valued using a defensible 4% discount rate, but with 10-year US government bonds yielding just 2.4%, those liabilities could prove to be much higher. Indeed pension liabilities have been revised higher in 11 of the past 13 years.

We have become accustomed to thinking of the HKMA-managed investments in the exchange fund as a surplus just waiting for a rainy day or to be spent.  Look at our government’s balance sheet, and you will find that the exchange fund investments of HK$853bn are not even enough to cover the HK$875bn value of the pension liabilities. There is no pot of gold at the end of the rainbow.

Former Financial Secretary John Tsang was often criticized for parsimony, but the accrual accounts of the government paint a different picture. During the five years to March 2016, operating expenses grew rapidly at a compound rate of 7.7% per year, more than the 7.1% growth in revenues and far more than the 5.7% growth in nominal GDP.

Where did the money go? Health spending grew at a compound average rate of 11.8% each year over five years and social welfare spending 9.4%. Those growth rates are under current policies. How much room for new policies is there when demographics are pushing those costs ever higher? With these costs rising and expenditure growth higher than revenue growth, we are already on a path that without changes will lead to budget deficits. We are just one policy error (say a universal pension commitment) away from a spiral toward real fiscal problems.

Policymakers inevitably confront the law of the golden goose. Operating revenue growth has been higher than GDP growth over the last 13 years. Non-operating revenues like land premiums and investment returns have also grown rapidly. Under our current low-rate tax system, revenues have grown faster than the economy. Raising tax rates to boost revenue is likely to kill the goose that lays that golden egg.

One of the key reasons that revenue grows faster than the economy, is that we attract businesses managing activities from other countries and increasingly those from China. Nothing can turn Hong Kong into “just another Chinese city” more forcefully than removing our taxation and rule-of-law edge over the mainland.

Surpluses from past fiscal prudence have been absorbed by rising civil servant pension liabilities. Contravening Article 107 of the Basic Law, spending is increasing faster than revenues or GDP. Public clamor and politicians’ promises are accelerating this trend. Though not known for keeping his policy pledges, the former Chief Executive did –  to our detriment – deliver on his promise to increase the role of government and public spending. Time to check our spiral-down towards fiscal disaster.

 

caption : Taking the knife to the golden goose? (Apple Daily photo)

There is an old saying along the lines that if you continue to do the same things you can only expect the same results. And therein lies the story of our various administrations over the last twenty years.

It really is very difficult to see where there have been any major changes over this period in either the quality of the people who govern us, namely middle-class career civil servants, or how we are governed, as the early attempts to inject vitality into the economy by privatizing state-owned housing and companies ran aground on the reefs of the vested interests.

Carrie Lam at least holds out the hope of being able to take on the civil servants that, according to my sources, are one of the key obstacles to progress, as she has a reputation internally for challenging the civil service codswallop that usually stifles any new initiative. And underpinning this codswallop previously was the key fantasy that John Tsang promulgated, namely that we do not have any money and cannot afford to do anything anyway.

With Tsang out of the way, we can start to spend our money to help our society to get ahead. Whilst a vexed youth is not unique to Hong Kong, we are one of the few societies in the world that can actually afford to tackle the poverty of opportunity and hope that seems to afflict this particular generation.

The pernicious penny pinching of the Tsang years, recognized by Beijing as a key reason why the generally decent Leung Chun-ying found himself hamstrung when it came to major policy changes, is seen as a key cause of social discontent.

One senior Leung appointee long ago explained to me the ridiculous economics that their bureau had to operate under in those years. Although they were an active bureau with a very significant impact on our lives, and the public patently wished to see them play a more important role, they were saddled with an annual spending increase cap. Normally it was one per cent.

Well, that is sensible, it may be argued, as we do not want our government to waste money. But wait for the kicker.

In fact the increase included the amounts that had to be paid to civil servants in their annual pay rise. So if that was, say, 4 per cent, it meant that the cash available for providing – let alone expanding and upgrading – services actually fell. This is what happened year on year. Requests for money, just to maintain services, fell on deaf ears as the mantra that the administration had no money echoed through the halls of power.

Indeed, I was interviewing a young former civil servant who wanted a new career a little while back. When the discussion came around to public services, this young woman, after only five years in the service, vehemently repeated the mantra that they had no money.

So, Carrie, let’s get over the illusion that we have no money. We are rolling in it.

Fortunately, the Financial Secretary laid some of the groundwork for change in this direction in the last Budget when he upped the projected income from Land Revenue to 3.3 per cent of GDP and now we just need to abolish the Capital Works Reserve Fund. Then, with the surplus on recurrent revenue we would show on this accounting convention let’s put in purposeful long-term initiatives on housing, healthcare, and education with a view to running down the reserves over time to the levels needed just for the monetary base.

And this is not socialism. There is sensible self-interest as we make sure that all members of society enjoy the fruits of their work while it is equally vital, in an ageing society, that we make sure that we maximize the opportunities and skills of all generations.

And for those who criticize, just ask them what they expect to happen to the US$300 billion in reserves that we have, in today’s money, when it comes to 2047.

Puff, I guess.

 

caption : The sinkhole of our reserves.

Our people are amazing. For 20 years Beijing has pulled every dirty trick, bought off every available toady, and even exerted force, but still has failed to bring our great city to heel. The bravery and sheer force of will to defy our overlords in the north is a story of true courage and resistance by a people who have largely kept intact the freedoms and rights granted in 1997.

Yet, twenty years on, I fear we are losing our greatest strength in resisting China’s constant effort at eroding our freedoms. Economic freedom. Or more precisely, the freedom to choose.

If we own our homes or rent from a private landlord, if our incomes are not dependent on government, and if we can freely do business without needing a government chop, how can we ever truly be controlled by Beijing? Can a regime completely control those who have the ability not to depend on government?

It is our freedom not to bow to Beijing for our livelihoods that is our greatest defense against its control. With our economic independence intact, we are ruled by President Xi not because we worry about our homes and jobs, but because he has tanks.

Now Xi will always have tanks and Beijing will always have coercion through force. Yet what they do not have in a free and lightly-regulated economy is the ability to control our economic outcomes. If they cannot control our income they cannot fully control our politics. And in Hong Kong, while not easy, ours is the long game. Every part of the economy the government does not control is a building block for keeping our political freedom and individual rights.

Not surprisingly, Beijing knows this, which is why since the time of Old Man Tung, getting us hooked on the opioids of government money has been the preferred means of political control. In terms of favors for property tycoons, taxpayer money for an industry, or even pay for pro-Beijing protesters, Beijing has set a world-class patronage system attempting to buy our political acquiescence.

Now, our new Chief Executive, Carrie Lam, intends to take the assault on our economic freedoms to new heights as she openly calls for intervention in the economy by picking industries to support, providing subsidies for small business, and growing a government bureaucracy to “help” us.

Is there any question a government grant or special permit will not come with political strings attached? Few bite the hand that feeds them, and just as the great tech giants in China such as Tencent and Alibaba bow to Beijing, so too will Lam’s favored industries.

Since 1997, the attack on the colonial policy of positive non-interventionism has been underway, as the idea of government staying out of our business has never been part of Mao's little red book. Yet, let’s not blame Beijing alone for the turn away from economic freedom.

Many in our democratic camp are at heart European leftists: our student activists prefer Jeremy Corbyrn and Bernie Sanders to Margaret Thatcher and Ronald Reagan, and our well-meaning NGO expat and academic communities think Hugo Chavez did a good job in Venezuela. If not for the struggle for democracy, be assured I would lay down on the tracks to derail our democratic camp from getting its hands on the levers of public finances.

Free people require free markets, and free markets thrive in a low-tax environment where government exercises a light regulatory touch. As we head towards 2047, what stands between us and political surrender to Beijing is the free market and the economic freedoms it enshrines.

Lam may well be the wolf in sheep’s clothing as she sets about destroying our open market via handouts and picking winners among our industries. Free money is hard to refuse. But then again, it is not really free, as it means our tax dollar and, worse yet, the diminishing of our strongest tool in keeping “one country, two systems” to its true and original form.

Caption:Wolf in sheep’s clothing