| |
The
'freest economies in the world'
By John Berthelsen
In the late 1990s, Hong Kong's consumers were thrilled by news that Carrefour,
one of the world's most efficient food purveyors, was going to establish a
series of hypermarkets in the territory and drive down prices. For decades,
Hong Kong's supermarket business had been dominated by two companies -
Wellcome, owned by the venerable British trading company Jardine Matheson, and
Park'N Shop, a unit of Hutchison Whampoa, controlled by Li Ka-Shing, the Hong
Kong-based tycoon.
Today, however, the French retailer is gone, and Hong Kong's consumers are
continuing to pay prices well above those in the rest of Asia for their produce
as well as products in health, beauty and pharmaceutical shops owned by the two hongs.
This comes up because each year the Cato Institute, a US-based conservative
think-tank, and 50 other libertarian organizations rate Hong Kong and Singapore
the two freest economies in the world. Like Groundhog Day, this has just
recurred. On a 10-point scale, Hong Kong was ranked at 8.6, Singapore at 8.5
and the United States at 8.3. New Zealand and the United Kingdom were at 8.2
(see
HK, Singapore, top 'economic freedom' index, July 10).
Both the Cato Institute and its libertarian fellow travelers see the two Asian
economies' free ports, where there are few tariffs and where currencies are
freely convertible. Taxes are low, and Hong Kong's flat-tax scheme is a
libertarian vision that conservatives would like to see instituted in the
United States. These fit comfortably into the criteria apparently used for the
survey - small government, enforceability of contract, free trade, and a
stringent attentiveness to the deregulation of the business, credit and labor
markets.
But, while both Hong Kong and Singapore have incrementally liberalized in
recent years, neither the Cato Institute nor its allies apparently has ever
heard of Singapore, Inc, or understand Hong Kong's domestic economy. Between
Singapore's government and Hong Kong's oligarchs, the two own almost enough of
the means of production to qualify their economies as socialist - or perhaps
"market socialist", as the confused Chinese Communist Party a few years ago
attempted to label its transition away from a command economy. (This is a
phrase difficult to find on Google without a comma between the words "market"
and "socialism".) The fact is, certainly in Hong Kong, that Adam Smith has no
hidden hand agitating competition. The hidden hand is on the consumer's wallet
and squeezing hard. There is a big difference between "free" and
"business-friendly".
Carrefour, the poster child for the primacy of Hong Kong's oligarchs, never
knew what hit it. What hit it was a combination of government policy and
ruthless capitalism. Prices couldn't come down in Hong Kong because the cartel
made sure that suppliers were not going to sell produce or foodstuffs subject
to the harsh winds of market economics. The company was unable to find prime
locations to site its stores. Ultimately, Carrefour provided Hong Kong's
Consumer Council with a list of 22 companies that it said had pressured it not
to cut prices. Carrefour eventually quit Hong Kong. The Hong Kong government of
Chief Executive Tung Chee-hwa, just as the British colonial government before
it, turned a blind eye. There will be no big-box bargain barns like Wal-Mart or
COSCO in Hong Kong.
Nor are Park 'N Shop and Wellcome alone. Mannings and Watson's, the two health,
beauty and pharmaceutical chains owned respectively by Jardine's and Hutchison,
likewise do not compete, and if any competing chain raised its head, it would
get it shot off just as Carrefour did. In fact, Jardine's and Hutchison each
own a wide range of companies from cars to cafes. In none of them is it
possible to find anything remotely approaching competition. Gasoline stations
do not compete for motorists' business through the price of fuel. In fact,
anyone who has ever owned a car in Hong Kong can testify that prices are
probably double anywhere on Earth - probably not a bad thing, considering the
increasingly jammed highways.
Under British rule, Hong Kong's government rigorously protected Cathay Pacific,
the patrician flag carrier owned by Swire, from competition by slots at the
terminal, the most convenient flight times, and by keeping out any startup that
had the temerity to try to set up shop. Today, no matter how the People's
Republic of China seeks to squeeze Hong Kong's citizens over such as the right
of abode or sedition and press restrictions, "one country, two systems" is
alive and well in the marketplace. The post-1997 government has
enthusiastically perpetuated the system put in place by British colonials.
Ten property companies dominate Hong Kong, among them the descendents of the
British trading companies that ran the colony from its founding, although some
have since fallen into the hands of the local Chinese. These conglomerates
include Hutchison and its associate, Cheung Kong, under the control of the
tycoon Li Ka-shing; Jardine's, Swire, Wharf and Wheelock, and others. The other
dominant corporate entity in Hong Kong is HSBC, now one of the world's biggest
banks.
The colonial government and its successor, throughout the 1980s and 1990s, made
these property companies unimaginably wealthy by metering the amount of land on
which housing could be built. By restricting its supply, the developers in the
mid-1990s were bringing home annual returns of 400 percent and making Hong Kong
briefly the most expensive place on Earth. Its merchants, once famously willing
to bargain on any sale, were forced by high rents to raise their prices to the
point where they could no longer compete with other, more consumer-friendly
cities. And, when the inevitable property crash finally happened, it left
enormous numbers of the territory's citizens in negative equity - their houses
worth considerably less than their mortgages.
Nor was Hong Kong's share market any more subject to free-market economics.
When currency speculators went after the Hong Kong dollar in 1997 and
accompanied this with a twin drive to short-sell shares, the Hong Kong
government stepped in to buy any and all shares on the Hang Seng Index to prop
up the oligarchs. In a single day, the government bought US$15.2 billion in
private shares. Its Tracker Fund is still dealing with the overhang.
Singapore is a different case. Its shops and its groceries are a good deal
freer. But Singapore was not built by competition. Its industrial base was, and
to a great extent still is, run by the Singaporean government. The government
either wholly or largely owns six of the island republic's top 10 listed
companies. They include Singapore Telecom, Singapore Airlines, DBS Group
Holdings, ST Engineering and Chartered Semiconductor. A special case in point
is Singapore Press Holdings, which in turn owns Singapore's media - the Straits
Times and the pilot fish that surround it. While the editors and reporters at
the Straits Times take umbrage at being described as government poodles, in
fact the papers do not print anything that the government does not want
printed, a fact that the Cato Institute and its 50 libertarian colleagues
apparently do not find important enough to include in the factors that make up
a free economy.
And, while their groceries may be cheaper, the minority shareholders in
Singapore Inc are hardly treated as first-class citizens. Singapore has for
decades tried to widen its commercial base by using its companies to buy into
corporate entities in other countries, sometimes with disastrous results and
sometimes with just lackluster ones. DBS Group, the banking arm, paid an
exorbitant 3.2 times book value to acquire Dao Heng Bank in Hong Kong in 2002,
which caused its share price to sink. Singapore Telecom paid 50 times 2001
earnings to acquire Australia's Cable & Wireless in 2001, only to run into
the world telecom glut. Its share price fell by 25 percent in the ensuring
months. Singapore Inc has lately been buying into Indonesian companies. The
jury is still out. In fact, most of Singapore Inc's forays into other countries
have been problematical. The country's businesses tried to be first into
Myanmar, building hotels and other facilities, only to discover the opprobrium
in which the rest of the world holds Myanmar's pariah regime.
Taken together, the governments of the two territories thus make it easy to
believe that the Cato Institute's criteria for economic freedom do not include
a category for a country's common citizens and consumers.
(Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact
content@atimes.com for information on our
sales and syndication policies.)
|
| |
|
|
 |
|
