tim's experiment

If you only plan to read one book this year, please consider Poverty in the Midst of Affluence, by Leo Goodstadt. This is not happy reading. In fact reading it made me extremely angry. Mr Goodstadt is to be commended for getting through the whole book without resorting to the violently abusive prose which his information would have inspired from a less respectable writer, like me.

The book sets out to answer the question why, as Hong Kong has grown richer over the last 20 years, the social problems associated with poverty have become more conspicuous. The answer is not pretty. He records how, in the closing years of the colonial administration, the civil service reluctantly, with much back-sliding and occasional sabotage, created a welfare state, in which medical help was virtually free at the point of delivery, large numbers of needy families were provided with public housing at reasonable rents, decent education was available to all and a start had been made on meeting the needs of the indigent elderly. He goes on to show how this structure was surreptitiously dismantled, mainly though not only in the period of Donald Tsang’s tenure as CE. This was accompanied by recurring criticism of the whole notion of “welfare” and the deliberate demonization of anyone who needed to receive it.

It is distressing to recall that many of us simply did not realize that this was going on. Mr Goodstadt notes that constitutional matters were taking a lot of attention, but that is really no excuse. What were our media doing, for example, when the government dismantled the public housing building programme, disbanded the teams who knew how to do it, and handed over the Housing Authority’s land bank to private developers? Was nobody connecting the dots and seeing what was going on here? We now find ourselves in a situation where it will take five years to produce any new public housing. This is one of the areas where defenders of CY Leung say he inherited a mess. But do not waste your sympathy on weasel-face: it’s his mess. He was the Convenor of the Executive Council at the time.

The frightening thing to me is the way in which it has now become possible to advance in public arguments not taken seriously since the 18th century. For example we are told that the erradication of poverty is impossible. Now this does, it is true, depend on how you define poverty. If your poverty definition is the bottom 10 per cent of the population then some people will always be there. But Hong Kong’s definition is a percentage of the average household income. There is no iron law of economics or anything else that says there have to be some people below this line, unless of course the percentage is 100. In fact some countries which measure poverty as a percentage of average income have virtually eliminated it. In Sweden, for example, the poverty rate is three percent.

Nor is it true that, as one appalling letter writer put it the other week, poverty has to be painful because otherwise people would not work. People work for a variety of reasons and countries where the fear of actual starvation has been eliminated do not find that work stops. Actually this is a red herring, although one of great antiquity. Back in the time of the first Elizabeth people who did not want to contribute to poor relief complained that their money was going to “sturdy beggars”.  Officials and politicoes, including Mr Leung, have been happy to encourage the impression that Hong Kong’s modest social security offerings were seducing the workforce from their proper allegiance to underpaid employment. Actually most unemployed people in Hong Kong (it varies a bit from year to year – about 80 per cent) do not claim social security and most of the people who do claim it are not available for work because they are too old, too sick, disabled or children in families headed by people who are disabled, sick etc. This is another area where a vigilant media might have done a better job. Some of the official statements on this topic were grossly misleading. On the strength of them the proportion of government expenditure devoted to social security payments was halved between 2001 and 2011.

Another newly popular antique is the notion that any interference in the terms under which people are employed is a distortion of the labour market, a threat to economic efficiency and destructive of jobs.  As far as destroying jobs are concerned this is a lie masquerading as a prejudice. The point has been extensively researched. Minimum wage laws do not result in lower employment rates. Probably this is because in the real world the job market is very different from the much-simplified (but useful) model developed for the purposes of classical economics. As for regulating the terms of employment, we should not forget what employers are capable of if greed is given full rein. The argument that employment conditions should be left to the benevolence of employers and market forces was, I think, first advanced against an act passed in 1788 to regulate the chimney sweeping industry. It prohibited the employment of children under eight for this purpose and also stipulated that they should not be sent up a chimney while the fire was lit, a precaution which was apparently often overlooked. Employees need protection. This should no longer be disputable.

In closing may I welcome Mr Goodstadt’s critical look at what has been going on in the field where I still occasionally work, higher education. Before the hand-over successive governors had sought to expand the proportion of the school population going to university by increasing the size and number of the UGC-funded institutions. After the handover the expansion of higher education consisted of making the degree a four-year course instead of three years. The only increase in student numbers was the launching of the Associate Degree, a new qualification, unloved, unwanted, unsubsidised and unclear in its purpose. All the local universities started offering ADs as a money-making enterprise. Many of them keep the AD students on a different campus to avoid any possible contamination. Moving from the AD to a real degree is not encouraged and under the new four-year arrangement the lucky student who makes the change will take five years to get a degree which used to be offered in three. Education generally has become increasingly expensive, with the predictable result that children from poor families rarely reach local universities, which have become a semi-compulsory finishing school for the middle classes.

Some months ago I wrote in this blog that government of the rich, by the rich and for the rich was continuing. Readers of Mr Goodstadt’s excellent book will discover how true this is.