tim's experiment

I see Alex Lo has got a nice demagogic thing going with the suggestion that complaints about the shortage of international school places should be ignored and expat kids should go to local schools. This is a result of not understanding the problem.

The business people who complain about the shortage of international school places are not concerned about long-term foreign residents, or their children. Actually most foreigners whose kids are born in Hong Kong are quite happy to experiment with the local system and sincerely hope their kids will be bilingual. This does not usually end in complete success but that is another story.

The scenario which bothers the business people goes like this. Master of Universe George Greed is employed by an international company in New York. He is American; his kids are American. Until his employer decided it wanted his services in Hong Kong he had no connection with the place. Nobody in the family speaks Chinese and the kids are in the New York school system. Mr Greed’s posting in Hong Kong is initially for two years. Afterwards — he will not be told until much later — the family may return to New York, or be sent somewhere else in the world.  Mrs Greed is not consulted about any of this. She will continue to call New York home and loyally follow her husband whereever he goes, nurturing the profound hope that the next stop on the itinerary will not be Somalia or Syria. The kids — there is an extensive academic literature on this — are going to grow up a bit confused.

This family’s educational requirements cannot be met by telling them that they are free to use Hong Kong’s excellent public school system. Even if it has one. What they require is a school which operates the American curriculum, or one close to it, so that the kids will not be behind when they start here and will not be behind again when they get back home. If Mr Greed were British he would require a different school, one which operated the British system. And so on. This is why we have international schools in a variety of different flavours.

This is the problem which bothers the Chamber of Commerce people. Hong Kong has plenty of international schools, but they are full of locals. As a result Mr Greed and his counterparts from other countries are deterred from coming here because they must either leave the kids behind or let them drop out of education altogether while they wait for a suitable place. Local schools intended for local residents do not cater successfully for members of ethnic minorities who speak Cantonese but do not write Chinese. They do not want and could not handle an influx of gwai-jais with entirely foreign educational backgrounds.

So what is to be done? Clearly there will be bitter complaints if we try to make it harder for local students to attend international schools. The ESF is already routinely accused of racism because of its policy of giving priority to people who can be educated in English. Encouraging more international schools is a hard sell. There are no easy answers.

One of the reasons why there are no easy answers is because this topic attracts demagogues peddling populist solutions based on a misunderstanding of the problem.

A few drops of the milk of human kindness would also not come amiss. I quote Mr Lo: “The American Chamber of Commerce has reported that the shortage is most acute on Hong Kong Island. Well try Kowloon or the New Territories!” Has Mr Lo no children? However rich a kid’s parents may be, do we really want to sentence it to a return trip from – say – Repulse Bay to Shatin every day to go to school? Would you wish that on a seven-year-old: two hours, three tunnels, pollution, tedium? Of course as she gets older she will have plenty of time to read pieces in the South China Morning Post explaining that the shortage of international school places is an illusion…

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Between the time when I escaped from the UK’s university system and the time I came to Hong Kong I worked, mainly in journalism but also in sundry bars and Bingo halls, for about eight years. This, I discovered as retirement loomed, entitled me to a pension from the UK government. This can be collected wherever you are, though if you live overseas you don’t get cost of living increases. It is regarded as an owned entitlement, because it is the product of the compulsory payments made into the National Insurance fund by you and your employer when you were working. Accordingly, how much you get depends on how much was paid in. As the payments in my case only lasted for eight years the entitlement is quite small, though still welcome. As my 65th birthday approached I Skyped a nice lady in the UK Pensions office, which for some reason is in Newcastle, and she sent me the necessary forms. The money appears in my bank account every month. If your entitlement is very small you can ask them to send it less often.

The amount, as I said, is nothing to write home about. It covers, by coincidence, our monthly management fees with a little to spare. It is, however, more than twice as much as the amount our generous government, with much heaving and straining, is proposing to distribute to the deserving poor under the latest proposals. These involve a means-tested monthly payment of $2,000 or so. Our leaders have bravely announced that they will not consider any proposed changes to this plan, and less bravely also announced that if it is not approved in the original form the distribution of largesse will be delayed.

This has not so far inhibited the opposition, some of which has come from unexpected quarters. There is a recurring problem here. If proposals require legislators’ approval then legislators will be tempted to tweak them. Officials will be tempted to say that tweaking will not be tolerated. But if it is not tolerated then members feel they are being treated like a rubber stamp. Or the National People’s Congress. This is of course resented. I notice that even the DAB has been slower than usual to discover, as it always does, that a proposal which it initially opposed has redeeming features so the DAB will support the government. Surprise!

The substantive question presented by the government’s proposal is one which dogs all welfare systems. If the benefit is distributed to everyone then some of it will go to people who do not need it. I am, for example, the happy owner of a ticket which allows me to go anywhere on the MTR for $2. I also own a car. If the benefit is means-tested then many of the people for whom it is intended will not get it. They will be unable or unwilling to fill in the required forms, or they will reject as a matter of pride a benefit associated with poverty.  The argument is not about fairness to millionaires. It is about whether the way the benefit is offered will get it to the people who need it.

Clearly there is no final solution to this dilemma. If there were it would have been found by now. People have been struggling with the question since the days of Bismark. However a partial solution, at least, is available. That is to make the collection of the benefit sufficiently inconvenient to put off those who don’t really need it. Let us, for example, replace the $2,000 a month with $500 a week, to be collected in cash at a stated time and place in your neighbourhood. This is not difficult. It is the way UK pensions used to be distributed. You collected your weekly dollop from the nearest Post Office. Perhaps the nearest 7-11 would be more convenient in Hong Kong. Well off retirees are not going to make a weekly trip and quene up with a load of peasants for $500. It is not worth their time. For those who really need it, on the other hand, a short weekly walk is a trivial requirement. Many of them neither have nor need bank accounts. They would prefer cash.

How a person is expected to survive in Hong Kong on $500 a week is another matter. Look at it whichever way you want I do not see how this figure can be described as generous. Is there anyone on Exco who does not own fleets of flats, droves of directorships, shedloads of shares, or pairs of detached Peak houses festooned with dubiously legal additions? I thought not.

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Much discussion lately about the Mandatory Provident Fund, because of the Consumer Council’s rather unsurprising discovery that many funds charge high management fees. The basic reason for this, say some, is that the funds are chosen by the employers, not the people whose money is at stake. So the choice is done rather badly, and may be influenced by factors like the desire to get a discount on other services from the same bank. Other suggestions are that the fund managers have ways of boosting their take surreptitiously, or that in the absence of real competition they do not try very hard. The council suggested putting a cap on fees. The fund management industry queried this as an impediment to market forces and a blot on Hong Kong’s (totally undeserved) reputation as a place where such forces roam unchecked. They also suggested, hilariously, that some fundees might wish to pay more for a higher quality service.

The point totally ignored in all this is that the fund management industry is a con. Repeated experiments have proven beyond the slightest doubt that investment pickers of this kind have no actual expertise at all. You can do just as well, on average, using a pin. I am amazed that nobody seems to have noticed this small point. After all you hear occasional mutterings about chiropractic, or Chinese medicine. But customers of these cures do at least feel better. This may be entirely due to the placebo effect but at least they are getting something for their money. The fund management guys are not even making you feel good. This has been known in social science circles for some time. Some of the experiments were rather entertaining. They pitted professional stock pickers against monkeys using a pin on the Business Section, or toddlers dropping darts from the top of a step ladder. Others simply compared the results of the fund or funds with what you could have got from mimicking your local index. The result was the same. On average these people add no extra value to your investments at all, and if they trade actively – as many do – they are depleting your savings with trading costs.

That is not to say that a fund cannot beat the market. The problem is that doing this is achieved through luck, not science. The easy way to have a market-beating fund is to start 32 of them. At the end of the first year 16 of them will have beaten the average. The losers are closed. At the end of the second year you will have eight winners and at the end of the third four funds will have beaten the market three years running. No skill is required to achieve this – it is simply the law of averages. These funds can now be marketed as having an impressive track record. As they should, on average, equal the index in subsequent years their flying start should make them look an attractive prospect as long as you start you assessment of the results with the first three years.  At the end of the first five years one of your funds will have beaten the average five years running. The person running this fund will be hailed as an advisor of great sagacity and forsight. He will be showered with bonuses and interviewed in the business press. The following year his chances are exactly the same as everyone else’s.

Another way of looking at the question of skill is to consider whether in fact some people do get better results than others. This can be tested qite simply by comparing the results from one year with the results in the next, and repeating this for a large number of years and people. Do some poeple consistently get better rankings, as they do in, say, golf or poker? No they do not. At all.

Investors should also be warned that the pretence that some funds are riskier than others is based on a flawed model which understates the risk in both categories. Modern portfolio theory was more or less invented by a bunch of economists who founded Long Term Capital Management to show everyone how it should be done. The company achieved one of the most spectacular bankruptcies in financial history. People are free to overlook the obvious implications of this episode, but do you want them in charge of your money?

So what is to be done? People with money in the MPF do not need a range of funds to choose from. They would be better off if the money was all just put in the Tracker Fund, or – politics permitting – in a group of similar funds including overseas ones. The fees for running index funds are commonly a fraction of those for fancier investments and the returns, on average, are the same or better. The MPF, as originally designed, was just another of those lucrative gifts from the last government to its business friends. People do not need the assistance of fund managers if they wish to lose money. Those who wish to do that can go to Macau and at least have fun in the process. The rest of us should not be delivered up bound hand and foot to a bunch of legalised financial vampires.

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Reporting from China is still a funny game. People doing it can travel much more than they used to when foreign correspondents needed permission to leave Beijing. There is much more access to mainland media, including a lively if heavily censored internet. Chinese people are, I suppose, much more outspoken than they used to be about “sensitive topics”. Yet still you get the impression that in reporting about China a great deal of speculation is perching on a rather skimpy foundation of established fact.

The irritating consequence of this is that some items appear in many stories as catch-all explanations for almost everything. The latest addition to this list goes by the label of “China’s once-in-a-decade leadership change”, or some shorter version of the same thing. This has been cropping up in news stories for the last 18 months and apparently has a couple of months, at least to go. China’s political system does not have the calendrical regularity of the American one, so we could still be reading about the upcoming leadership change next year.

The interesting thing about the leadership change is that it can be adduced in a speculative, non-verifiable sort of way to explain anything. It appears in stories about crackdowns and loosening-ups, about officials being prosecuted and officials getting away with it, about economic initiatives and about economic non-initiatives. It adds nothing to these stories. It is included, I surmise, simply to tell readers that the reporter concerned is an observant and omniscient China hand, who knows what is going on and has read all the latest rubbish produced by his peers.

Of course we cannot object to people writing about the leadership change itself. After all this is an important and interesting topic by any standards. Unfortunately as the number of people actually making the decision is in single digits it is quite likely that they will succeed in keeping their collective thoughts to themselves.  Under these circumstances it is as well to bear in mind that you can produce a pretty accurate weather forecast by saying that tomorrow’s weather will be the same as today’s.  The new leadership will be pretty much like the old one.

Boring.

Sorry.

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Let us consider, as calmly as we can, whether it is a good idea for the Chief Executive – any Chief Executive – to turn up at the scene of accidents and disasters and “take charge”. Our present leader has not been in the job very long and has not had time to give much thought to this matter. Perhaps we should not blame him if he errs on the side of hyperactivity.

Now, there is certainly a role for a regional or national leader in moments of crisis. There may be a need to override departmental boundaries, to abandon cherished practices in haste, to knock heads together and ensure that large egoes are subdued by a common  purpose. There may also be a need to seek external help. But these are things which can, and perhaps should, be done by phone.

The idea of the CE, or his counterpart in other places, actually arriving at headquarters and taking charge is rather more controversial. No CE since the hand-over has had any relevant expertise. Mr Leung’s many qualifications do not include any tuition or experience in maritime rescue, traumatic surgery or post-catastrophe counselling. As a controller of rescue operations he would be as much use as any citizen pulled in off the street for the purpose. I hope he has the sense to leave the decision-making to the professionals, but that does not entirely eliminate the drawbacks of his presence. If the CE, or some other bigwig, turns up on occasions of this kind then he or she has to be met, greeted, catered for and found a place to hang out. He will wish to be briefed, and protocol will probably require the briefing to be done by some very senior person who might better be employed on more urgent matters. The over-eager leader will also probably bring the political press pack in his wake, and something will have to be done about them.

Then there is a danger that underlings will try too hard to be seen to be doing their bit. Consider the news, after last week’s tragedy, that seven seamen had been arrested. It transpired the next day that this was in fact the entire crew of both the boats involved in the collision. This was clearly an abuse of power. Arrest is a major infringement of the rights of the detained person and it should be reserved for occasions when said person is plausibly supposed to be guilty of a crime. It should not be deployed on a basis of “arrest them all and sort out the legal details later”. Clearly on the night of the accident the police had no idea who, if anyone, might be supposed to have committed a crime. Accidents happen. Lay persons obstinately suppose that if there is a fatal accident then someone must be proportionately to blame. People in the law and order business should know better.  Actually the police do not have a great deal to do with marine disasters. The firemen do the rescue work and the Marine Department does the inquiry. Well we all want to look busy.

No doubt Mr Leung will reflect on these things. Naturally one wishes to show one’s concern and sympathy for the victims of unhappy incidents. On the other hand the appearance of a large number of high-ranking amateurs was one of the factors in the Manila bus tragedy, to which we feel so superior. A good compromise is to turn up a bit later when the situation has stabilised and the urgent work has been done. Senior colonial officials used to turn up in their wellies the following morning. Nobody complained that this was too late.

We can come to a crisper conclusion about the merits of turning up with a senior official of the mainland’s liaison office. I do not understand how anyone could have such a tin ear for Hong Kong politics that he thought this would go down well. Mainland practices for dealing with accidents and disasters do not inspire confidence. People like to think that some decisions are made in Hong Kong and the sort of decisions which this situation required are on that list. If Mr Leung is going to turn up at important occasions with a mainland official at his side people will begin to wonder who in this partnership is Ratman and who is Bobbin. I am not a huge fan of Mr Leung but the urge to make comforting noises in moments of tragedy is a nice urge. It would be a pity if Mr Leung’s observations on such occasions met with the response that we want to hear from the organ grinder, not the monkey.

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One of the easy ways of writing a column or a think-piece is to announce that some people are pursuing a new idea, and then spend a few hundred words explaining why the idea is crazy. If nobody happens to have announced a crazy idea recently, you can make one up.

This explains the recent rash of writings explaining why agitating for independence for Hong Kong is a bad idea. Actually, nobody has been agitating for independence for Hong Kong. This obstacle can be overcome by combining some academic musings on the distinctive qualities of Hong Kong culture with the fact that some people wave the old colonial flag, or even the Union Jack, at demonstrations. Neither of the two groups involved in these phenomena have any connection with each other. The academics do not demonstrate, the demonstrators do not read learned journals. But taken together they can launch a thousand words.

Now let us take the flags first. People do not wave British or colonial flags because they wish Hong Kong were independent, or because they wish it was a colony again. They wave them because the flags symbolise Hong Kong’s distinctive history, values and traditions. What other flag could you use for this purpose? The Bauhinia eyesore was designed in Beijing.  No doubt the old colonial flag is better for this than the flag which still symbolises Britain. But the Union Jack is much easier to get hold of.

Now let us take the cultural thing. Hong Kong people do not want Hong Kong to become just another mainland city. This is not because they are unpatriotic but because mainland cities, on the whole, are squalid, corrupt and lawless. This does not amount to a wish for independence. The whole point of “one country two systems” is that Hong Kong can be different. The local problem is that the left-wing fraternity, having brainwashed themselves into believing there is a “China model”, now want to brainwash the rest of us into believing it too.

The point which is lost in this talk of independence is that there is a great deal of variation in the way relationships between regions and central governments are handled. In federal countries the regional governments have their own legislatures, elections and leaders. In more centralised ones they may have an appointed representative of the central government. In some places there are calls for these arrangements to be changed. A region, or some people in it, may look for independence, as in Catalonia and Scotland. Or they may have no aspirations to statehood, but wish to preserve a characteristic language and culture, as in Wales and Brittany. There is a continuous spectrum between direct rule from the capital and outright or virtual independence. People may legitimately hope to move along it in one direction or the other, without automatically being accused of wishing to go to the extreme.

The problem for Hong Kong is that we were promised a high degree of autonomy. There are too many people around who would like to see that promise broken, for one reason or another. So Hong Kong people are sensitive. They do not like to see mainland officials turn up at the scene of local disasters. When top national leaders instruct the Hong Kong government to pull all the stops out in rescue operations, people do not think “how nice of national leaders to worry about us”. They think “this has nothing to do with defence or foreign affairs; mind your own business”.

Of course (platitudes, platitudes) Hong Kong cannot wish the mainland away and sail off by itself. On the other hand there is no need for us to delude ourselves into thinking that the benefits of interaction with the mainland are a benevolent gift for which we should be grateful. Chinese citizens are allowed to visit Hong Kong and do business here. That’s a favour? Chinese citizens in Hong Kong are allowed to do business in other parts of their own country. Thanks very much.

The increasingly frantic efforts to persuade Hong Kong people to love their leaders are no doubt in preparation for another big disappointment when the next instalment of electoral reform comes along. I do not accept that the democrats were punished in the polls for doing a deal with the liaison office over the last electoral changes. They were punished because they did a bad deal. They were so excited to be doing a deal at all that they left vital details up in the air. So instead of a great step forward we got another variation on elections designed by people who don’t like elections.

In the end China is an authoritarian state which tries, despite its size, to be centralised. Under these circumstances one cannot hope, as one can in a federal state, that the central government will control itself because it knows its place and accepts the limits on its powers. A region which wishes to remain autonomous to any extent will have to be constantly alert to infringements. Those who are alert will be accused of all sorts of things by political purveyors of the “did you enjoy it?” school of rape counselling. But still. The price of freedom is constant vigilance, as a great man once said. Or as another great man said, all that is necessary for the triumph of evil is that good men do nothing.

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It is disconcerting for military historians to find the Duchess of Cambridge in the news. There are two egregiously excessive and unjustified equestrian statues in London. One commemorates the Duke of York (1763-1827: there have been many others. The title is traditionally bestowed on the King’s second son). This is the one who in the old song marched them up to the top of the hill and marched them down again. The other commemorates the Duke of Cambridge (1819-1904) another Royal sprig, who servcd without distinction in command of the Guards and Highland Brigades in the Crimea, was made commander-in-chief because of his aristocratic status and spend 39 years in that post opposing military reform of any kind. I must in fairness add that he did found the School of Military Music.

Now the title belongs to the young man formerly known as Prince William, who became the Dook on the day of his wedding. He also became Earl of Strathearn and Baron of Carrickfergus. These Royal types need large business cards.

Anyway the fuss about the Duchess stems from some topless pictures, snapped with a lens the size of a bazooka while she was staying in a remote house — according to some accounts a chateau — in France. There is no suggestion that she was doing anything controversial, pornographic or whatever. This has provided an opportunity for Brits to pose self-righteously, for journalists to add to the already excessive mountain of words devoted to the late Princess Di, and for spectators in more boring countries to revel in a “Royal scandal”. And meanwhile the happy couple departed for a world tour, winding up in the Solomon Islands where lots of ladies appear topless and think nothing of it. Indeed the Economist found a news picture in which two breasts (not the Duchess’s) were clearly visible at the welcoming reception.

This all strikes me as a little weird.  I can remember a time when female breasts were rarely seen. Boys who were curious had to seek out the National Geographic magazine, which occasionally covered topless Stone Age tribes, or nudist magazines in strange European languages. When the first bikini hit the beaches the appearance of the naked female navel in public was a sensation.  Times have changed. There is nothing noteworthy about the Duchess sunbathing topless in the South of France. This is what everyone else does down there. In many European cities a sunny day brings out the bosoms in public parks. The media are a riot of naked nipples, although not in Hong Kong, and as for the internet … So what’s the fuss about? All right the lady is a princess but if her bare Bristols are seen in public her husband is not going to turn back into a frog. There has never been a problem with men going topless. Isn’t it time for a bit of equality here?

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