THE EMIGRANTS RETURN:
In the late nineteenth century, hundreds of thousands of immigrants from China and Hong Kong braved a treacherous sea journey to come to work in America. Nearly 10,000 of them helped to build the railroads that stretched across the country, working long and gruelling hours so that they could make enough money to send back to their families. Many of these early Chinese immigrants first landed in the port of San Francisco, which they named "Gold Mountain."
Today, immigrants from Hong Kong complain about the lack of job opportunities in North America. They say that they could make twice the money in Hong Kong that they make here, and be able to speak their own language and eat "real" Chinese food. They are heading back to the territory that is now under mainland Chinese rule in droves, creating an unexpected twist to Hong Kong's "Brain Drain" story.
Communism's detractors have long pointed to the flood of refugees pouring out of China and other communist countries when given the opportunity. When many in Hong Kong began seeking residence elsewhere after the signing of the Sino-British Joint Declaration it was termed the “brain drain” - an exodus of the territory’s best and brightest. When even more sought escape routes after the 1989 Tiananmen massacre, observers again pointed to the people "voting with their feet" against communist rule.
What observers did not anticipate is that those same people who fled Hong Kong before its return to China would be flooding back again en masse as early as 1991. Of course, some of those who left had intended to return all along, after securing a "safety net" foreign passport. However even many of those who had hoped to build a new home abroad are also returning to Hong Kong. Primary among their reasons for returning is the "lack of opportunity" in countries such as Canada and the U.S..
"Many men naively believe that their skills can be useful in Canada or the U.S.," says one Hong Kong emigrant. "They end up earning half or even less overseas than in Hong Kong."
Indeed, a 1991 report by "Employment and Immigration Canada" found that the majority of Hong Kong residents who emigrated to Canada experienced a significant drop in economic gains upon moving there.i
Immigrants to Canada and the U.S. also give cultural reasons for wanting to return to Hong Kong: a sense of "not belonging" in their new home, unfamiliarity with the local customs, or with the language (especially for older immigrants). Invariably, however, they will cite the lacklustre economic environment as a prime reason for wanting to leave their new home and return to Hong Kong.
Many say that the pace of life in American and Canadian cities is "too slow," or "boring." Emigrants frequently complain of high taxes, and many simply find that the economic opportunities they would have in Hong Kong are nowhere to be found in North America.
Since 1980, some 650,000 Hong Kong residents have left the territory to seek foreign homes or at least foreign passports. Around 430,000 of these left after the Tiananmen massacre of 1989, and of this last group, it is estimated that approximately 12% have returned. According to some estimates, return rates are now up to between 20% and 30% of those who left in the early 1990s.ii It would appear that those same people who voted with their feet against communism are now using this method to vote against the mixed economies of North America.
What has changed? Why is there now less perceived opportunity in North America - historically the "land of opportunity" for people from all over the world? Chinese families would often pool all of their savings to send one family member to come here in the days when working long and dangerous days building a railroad looked like "opportunity" compared to what they had left behind in China. So why are emigrants to the U.S. and Canada now heading back by the thousands to what was once only a stopping point on the way to the lands where they would make their fortunes? The question is all the more puzzling given Hong Kong's recent return to Chinese sovereignty.
Last summer, the territory's transition from British to Chinese rule was greeted with apprehension in the U.S.. News coverage focused on the early-morning arrival of armoured personnel carriers on the day of the handover, and political cartoonists made much use of golden-goose-about-to-be-cooked images. Americans' distrust of the Chinese Communist Government is well-placed - and concurs with the prevailing attitude in Hong Kong, where over 10% of the population opted for emigration or the acquisition of a foreign passport before the handover to Chinese rule. There is an irony in this distrust, however, and in the confidence with which American editorial writers and political commentators delighted in pointing out signs of impending doom for the territory on the eve of the transition.
The irony is this: That even five months after becoming a part of the largest remaining communist nation on earth, Hong Kong remains a much freer place in many respects than does the United States. While the government of Hong Kong has maintained a policy of minimal intervention in the economy and people's lives for over a century, government in the United States has increased dramatically, both in size and in the degree to which it exercises control over the lives of its citizens.
If it seems extreme to suggest that a former colony that is now home to 4,700 of the same troops who carried out the Tiananmen massacre might be more free than the United States of America, consider the following: 615 out of every 100,000 people in the U.S. are in prison - more than twice the percentage for Hong Kong. Every year, U.S. Federal, state and local governments seize hundreds of millions of dollars in private property under asset forfeiture laws, although only a fraction of those whose property is seized are ever charged with a crime.iii While government in the United States consumes nearly 40% of the country's National Incomeiv, government in Hong Kong consumes well below 20% of the territory's GDP annually.
It is often said that the costs of economic suppression cannot be fully measured. How does one measure the loss of something that was never created: of businesses that never start because the entry costs are prohibitive; of income that mightmight be earned; of goods that be produced; jobs that might be created in the absence of restrictive regulations, corporate subsidies and high taxes?
What is worth looking at, however, are the very real differences - some measurable, some less so - between a society that is heavily regulated and taxed, and one that is taxed and regulated very little.
When Americans gained independence from British rule, they attempted to create a system that would protect its citizens' freedom and keep the powers of government to a minimum. And for a while, it did. But slowly and over time, government's role has grown to a level far beyond what the country's founders had intended. Twenty-four years after the American war for independence was fought, the United States Federal Government spent only $20 per U.S. citizen, measured in 1990 dollars. Today it spends over $5,000 per person in those same dollars. Since 1900, Federal government consumption has gone from less than five percent of GDP to more than twenty-four percent today. When state and local consumption is added to this, the total consumed by government rises to nearly forty percent of the nation's incomev.
Hong Kong also adopted the principles of minimal government intervention early on. Hong Kong, however, seems to have done a better job of living up to these principles. In 1996, the Hong Kong government took in only 16.6%, and spent 17.6%, of GDP. Taxes remain low at 15% for individuals, and 16.5% for corporations. Because of substantial personal allowances, more than half of Hong Kong's workforce pays no tax at all. The most a Hong Kong resident could ever pay in taxes would be 15% of his or her income. The National Taxpayers Union estimates that an average family in the U.S. pays 35.4% of its income in Federal, state and local taxes, and another 15% in indirect taxes, bringing the total paid in taxes to 50.4% of the family's income.vi
Some might argue that the "other side" to these figures could be found in increased benefits for U.S. citizens in the form of infrastructure, crime-prevention, social welfare, etc. The evidence, however, does not bear this out. Hong Kong has one of the strongest infrastructural bases in the world, with public transportation that is at least as good as any in the U.S. or Europe. The city was also one of the first in the world to have a fully-digitised telecommunications network. Nor does the safety of Hong Kong's streets suffer from lack of funding: Hong Kong is one of the safest cities in the world, with crime rates that put most U.S. and European cities to shame.
The level of social welfare in Hong Kong also compares favorably with that in the major U.S. cities, and is in many ways superior. For example, even conservative estimates put homelessness in the U.S. at over 400,000, or .15% of the population. More liberal estimates claim that as many as two million U.S. residents, or .77% of the population, are homeless at any given time, and a survey by the National Coalition for the Homeless found that between 1985 and 1990, some seven million Americans had experienced homelessness. This is 2.7% of the population. Shelters operated by the City of New York house close to 20,000 people each night, or .27% of that city's population (this estimate does not take into account the people housed by private shelters, or those who are not housed at all.)vii
The closest equivalent in Hong Kong to homeless shelters is the "caged-man-housing" - dormitory-style beds rented cheaply, each one surrounded by wire fencing to protect the property of the people (largely men) living there. The Hong Kong Government’s Housing Authority estimates that there are some 3,000 "caged men" at any one time in Hong Kong. Add this number to the estimated 3,000 street-sleepers, and the total is 6,000, or .095% of the city's population. Even the most liberal of estimates put the number of caged men at 10,000, which would boost the total to .21% of the population, with only .04% actually homeless.
Nearly half of the population of Hong Kong lives in some form of public housing - all financed out of the 17.6% of GDP spent by Government, and by the rents these residents pay. This enormous task is made easier by the fact that Government is the sole landowner in Hong Kong and therefore does not pay for the land it builds on, but is impressive nonetheless, especially when all other public expenditures are taken into account.
To match government expenditures between a territory with a population of only 6.3 million, and a nation of 260 million is hardly a fair comparison, especially when the smaller territory has virtually no national defense expenditure. Even when national defense is taken out of the equation, however, the U.S. government still spends substantially more money per residentviii, (see graph) with little evidence to suggest that it produces any more value for its citizens. Indeed, the growth in standard of living for the people of Hong Kong has been nothing short of astronomical.
Per capita income in Hong Kong is $24,750 – the 15th highest in the world (the U.S. is 6th. ***2002***). What makes this remarkable is that as recently as 1960, per capita GDP was only $2,247 (in 1985 dollars) - comparable to such countries as Mexico and Argentinaix, and less than a quarter of that of the U.S. Between 1966 and 1976, real per capita GDP increased by 5.7% per yearx. Real GDP in the U.S. only grew by 2.7% during the same period. In 1996, U.S. GDP grew at a rate of 3.4%, compared to Hong Kong's 4.7%.
Unemployment in Hong Kong has remained well below 3% for the 1990s with the exception of 1995, during which there was an unusually large influx of (returnees). The economy quickly adjusted, and unemployment was back down to below 3% within a few months. Average unemployment in the U.S. for this period was 6.12. During the past two decades, manufacturing’s share of employment in Hong Kong has fallen from over 40% to 15.3%, and well over 500,000 manufacturing jobs have been lost. Yet during this period, the highest unemployment rate recorded was only 4.5%, and this was an unusual and short-lived high.xi
For over a hundred and fifty years, Hong Kong has had few of the regulations and government programs that dominate economic life in America. While the territory does have minimal welfare assistance schemes, these are genuine safety-net programs, aimed at helping those who are truly in need. The level of welfare payments in Hong Kong historically have not encouraged dependence, nor have they been attractive enough to compete with work and business opportunities. Likewise, the level of regulation in the name of employment discrimination, zoning and the environment is bare-bones, compared to the United States.
In America, many believe that the high taxes we pay are necessary to fund needed programs and provide services that can't be provided privately; many of us believe that the more money a government spends on social and economic problems, the more likely it is that these problems will go away; and activists for social justice believe that more regulation will help the disenfranchised and the powerless.
Hong Kong's experience suggests otherwise. In the absence of high levels of taxation and regulation, the economy has been able to flourish, and it's success is widely recognized as that of a "miracle economy." Equally important is the fact that the Hong Kong people have been able to achieve this success without becoming dependent on the government for handouts, or finding themselves at the mercy of large corporations for employment: Hong Kong's real success stories are the hundreds of thousands of small, owner-operated businesses that form the bulk of the economy. It is the territory's relatively free environment that allows for this kind of opportunity for people to create their own success.
Hong Kong's new government seems willing to depart from the policies that have made the territory one of the most successful in the world. Chief Executive Tung Chee Hwa's plans, announced last October, include increased government spending, subsidising hi-tech industry, and other forms of official "guidance" for the economy.
Should Tung succeed in doing away with the territory's traditional "laissez-faire" policy, the results for Hong Kong will be unfortunate. The lessons for the U.S., however are still there for anyone who cares to look at them. Anyone who believes that more government is the answer to the problems facing this country should take a close look at Hong Kong.
A CITY OF EXTREME CONTRASTS:
One of the most oft-quoted clichés about Hong Kong is that of the extreme contrasts between rich and poor. No travelogue is complete without its reference to images of impoverished hawkers plying their trade alongside wealthy tycoons in this bustling city.
Indeed, shabby dai-pai-dongs sit next to banks and jewellery shops in the island's Central District - the territory's banking and financial center. A glance down a busy street nearly anywhere in the city reveals images from all points along the economic and social spectrum: fishmongers and butchers shout out as they move their goods past suited men and women wielding cell-phones, middle-aged housewives stand on the sidewalk with their eyes glued to stock prices flipping across T.V. screens, and high-priced luxury cars share the streets with the territory's taxi cabs, buses, trams, and minibuses.
On the surface, to someone visiting from New York or Los Angeles, Hong Kong would appear to have the more dramatic gap between rich and poor. Statistically, in fact, income inequality in Hong Kong is one of the highest in the world, according to such widely-used measures as the gini coefficient, which has risen from 0.430 to 0.518 in the past 20 years.xii (The higher the gini coefficient, the greater the inequalities in income.) The average gini coefficient for industrial countries and high-income developing countries is 0.338. In the U.S. it is 0.425, according to the U.S. Census Bureau. What the visitor will not find, however, are the inner-city ghettos, the alphabet cities and East L.A.s that are a feature of nearly every major U.S. city.
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