CY Leung’s new economic theory comes right out of the Monkey House. Especially for innovators like Uber.
In Kurt Vonnegut’s Welcome to the Monkey House, the tale Harrison Bergeron tells of an equal America where the beautiful are masked, the strong bound with weights and the intelligent fitted with ear-splitting headphones to render them of ‘average’ intelligence at the lowest common denominator (dunce level). The government official responsible, the Handicapper General, has an army of agents to ensure that everyone is held back to an appropriate level.
In Hong Kong, the handicapping is of innovation in business starting, but not ending, with Uber.
CY Leung is now the de facto Handicapper General, having declared the philosophy of ‘positive non-interventionism’ dead in an interview with Xinhua. For the uninitiated, this was the idea that less is more, and the government should leave well enough alone and only step in when it must. FS Sir John Cowperthwaite introduced the concept and implemented it. The succeeding FS Haddon-Cave coined the term.
Uber is the poster-child of this conflict today, but it won’t be the last.
Donald Tsang stepped away from the term somewhat in his 2006 policy address, but at least had his own version, “Big Market, Small Government” and stressed “Both Sir Philip and I are committed to open competition, free market and small government.” Of course, those who know Hong Kong’s market know that it may be relatively free market, but the government dominates healthcare, education and other sectors. It enforces monopolies and stifling licensing systems – just like every other government on Earth (please, prove me wrong).
The rhetoric does matter however. One of the rare checks on politicians is the deep seated human need to ‘look good’, primarily by matching rhetoric to action, words to deeds. A government that proclaims a commitment to ‘positive non-interventionism’ or ‘big market, small government’ can be called to task when they depart from that principle. They must have extraordinarily good reasons for doing so.
If the CE has killed positive non-interventionism then something else must arise in its place. A government must be committed to something and the new guiding principle may perhaps best called negative interventionism.
Committed to what exactly
This government has previously declared commitment to something: promoting innovation. More and more, however, that seems to be a dead letter.
Innovation needs freedom to flourish. But now, the freedom and growth inclined descendents of Cowperthwaite are having to scramble to cover up for the negative interventionism of other branches of government. Uber is the poster-child of this conflict today, but it won’t be the last. InvestHK had to erase Uber’s successful introduction to Hong Kong from their website after the government vigorously attacked the business this week through the police.
Innovation needs freedom to flourish.
Indeed, the whole sharing economy made possible by the latest generation of internet innovators is vulnerable. Airbnb is the next likely target with the short term accommodations network provider facing a situation identical to Uber. Old school incumbents, forced to invest in complying with government regulations, are gearing to fight service providers currently outside the government’s ambit.
In less similar situations, e-cigarettes, a means of reducing harm for the tobacco addicted, are next in the government’s sights for no good reason. Hong Kong’s status as a centre for modern Chinese medicine development and trading is hobbled by regulations around certification. The Privacy Commissioner shut down “Do No Evil” in 2013 over debatable issues (debate here) that saw privacy considerations win the day against technology. When it came time for the pro-government forces to pass the ITB, they stymied it (not the pan-dems – read here).
Bitcoin seems to be one neutral spot, according to our analysis, perhaps because it falls under the purview of FS John Tsang and Professor KC Chan (Sec. for Financial Services and Treasury).
The Chief Executive’s interview was only in a simplified Chinese mainland publication and not an official statement. There was neither an official statement in traditional Chinese nor English. It comes during the seemingly quiet summer, but actually a time of in-government budget negotiations. Vincent Wong, a former AO, thinks the talk may be running a flag of increased government spending up the flagpole to see how people react. Perhaps. If so, reaction has been tepid, with only Felix Chung Kwok-pan (鍾國斌), Chair of the Liberal Party taking to the media including unfamiliar territory (Apple Daily) to protest.
The CE suggested that government could be guided by “appropriately proactive” (適度有為) philosophy. But what government official doesn’t think their guiding hand is eminently appropriate?
The new rhetoric frees an energetic class of bureaucrat who will marshal their more reluctant comrades into bureaucratic overreach. The new standard they will be held to is not the ‘do no evil’ of positive non-interventionism, but will have carte blanche to meddle wherever possible, claiming to be appropriate and proactive.
A better way
If the government was truly interested in proactively improving Hong Kong’s economy and promoting innovation, it would be proactively and creatively attacking government barriers to innovation – not protecting special interests.
The CE used a term perhaps translated as “appropriately proactive” (適度有為). But what government official doesn’t think their guiding hand is eminently appropriate?
If Uber drivers have an insurance issue, why not lift the cap on registration of non-taxi cars for hire from a paltry 1,500 to a number that frees the market, say 1,000,000? No cap would be best, but this administrative change could be achieved through the simple negative vetting process, avoiding lengthy debate. It could give honest drivers a break until a solution is found to accommodate an innovative and popular service.
The government could provide an amnesty to people operating not strictly industrial businesses in industrial buildings. It could just leave e-cigarettes alone. It could move to find a solution to the Airbnb situation before it is a front page scandal like Uber, with honest people in the dock.
Words and deeds
The government cannot commit to innovation without committing to the freedom to innovate. It cannot mushily declare appropriate proaction while crushing a wide variety of up and coming industries. If the government’s old structures demanded investment, as in taxi medallions, it may need to buy people out. But it shouldn’t be persecuting honest entrepreneurs and smothering new business models. If it applied the same vigour to freeing the markets for innovation as it does to unpopular prosecution of honest brokers, amazing things could happen in Hong Kong.
Our Chief Executive can choose to the be General Handicapper, or the Great Enabler. Welcome to the Monkey House!