Best Practice Vol 2 No 1 by Lion Rock

Best Practice A Public Policy Journal for Hong Kong

The state of judicial independence in Hong Kong “Breaking new ground together” is hard to achieve Policy close to home – the bilingual ban that worked The underlying question for every policy: will it benefit society? The world needs Hong Kong and Hong Kong needs competition

Winter 2010 Vol.2 No.1

Inside Best Practice Vol. 2 N0. 1 Winter 2010

21 Thinking Through the

3 4

46 The Underlying

Question for Every Policy: Will it Benefit Society? Minimum Wages reviewed by Hawkins Chin.

Odds and Ends

49 One Disney – Two Systems

From the Editor

25 The Bilingual Ban That

Stephen Vines comments on the Government’s dream of Disney.

Contributors

50 Smoking Policy Goes

The State of Judicial Independence in Hong Kong

Hans Mahncke highlights concerns on the independence of the Judiciary and traces the implications for the rule of law in Hong Kong.

12 “Breaking New Ground Together” is Hard to Achieve 群策難創新天

Shih Wing Ching maintains that an overreliance on collective wisdom has hindered upward mobility for Hong Kong’s people. 施永青指出群眾智慧不能導致創新以及解釋為何香港的向上流動力減少了。

Editor: Nicole Idanna Alpert Editorial Assistant: Michael Ying Design & Production: Firstline Limited Cover Artist: Bay Leung Best Practice is published quarterly by The Lion Rock Institute to encourage discussion of policy and current issues. Topics and authors are selected to represent a multitude of different views, and those opinions expressed within Best Practice do not necessarily reflect the views of The Lion Rock Institute. The Lion Rock Institute welcomes reproduction of written material from Best Practice, but editor’s/author’s permission must first be sought.

Worked

Heather Mac Donald vindicates English immersion in California based on rising test scores – but notes students are still struggling.

Global Perspective Policy Analysis

36 Clearing Up

The HK Freeway

David O’Rear shows that evidence from other price-fixing exercises indicate that getting it wrong can be expensive. 歐大衛指出其他的定價實例顯示，定價不當或會帶來沉重的代價。

Policy Close to Home

On Policy

Minimum Wage 徹底考慮最低工資

Copenhagen’s Confusion Deborah J. Seligsohn shares insight on the roles at Copenhagen – China looked good coming in, bad coming out.

Up in Flames

All the smoke signals from the rise of the tobacco tax show, despite some smokers saved, that the other harms cannot be snuffed out.

52 The World Needs Hong

Kong and Hong Kong Needs Competition

Neville Kennard argues that without competitors, Hong Kong will become a victim of its own success.

Leader’s Bookshelf

43 An Appraisal of What

the Proper Role of Government Ought to Be The Revolution: A Manifesto reviewed by Shane Lively.

Editorial Office: Room 1207 Kai Tak Commercial Building 317-319 Des Voeux Road Central, Hong Kong Editorial Tel: +852 3586 8102 Subscription Service: +852 3586 8101 Fax: +852 3015 2186 Advertising inquires: Best.Practice@LionRockInstitute.org Production by: Firstline Limited www.FirstlineDesign.net Best Practice Advisory Board James A. Dorn, Alec Van Gelder, Philip Stevens, Tom Palmer, Reuven Brenner, Gary Shiu, Richard Wong, Francis Lui, Shih Wing Ching, Donald J. Boudreaux

Article Submissions: All articles submitted to Best Practice must be exclusive unless permission has been sought. Articles should range between 600 and 4,000 words but may differ if editor’s approval has been sought. Please send all articles with a cover letter giving a brief summary of the articles along with the author’s fax number, day and evening telephone number, mailing address, email address and short bio. Please send articles by email to Nicole.Alpert@LionRockInstitute.org Certain images within Best Practice are published under Creative Commons licenses. We endeavor to comply fully with the terms of such licenses to ensure attribution of the author of the relevant image. For more information or details about the authors of particular images, please view our website, www.lionrockinstitute.org, or inquire.

Winter 2010

Subscribe to Best Practice Best Practice, published by The Lion Rock Institute, is a quarterly journal that sheds light on the best practices in international public policy. Published in Hong Kong, Best Practice is well positioned as a gateway to developments and recommendations in law and policy, making it the essential guide for leading developments in public policy. Subscribers receive benefits and special rates to LRI events. One year Subscription: 4 issues for $600 per year at $150 per issue Two year Subscription: 8 issues for $540 per year at $135 per issue (10% off) Three year Subscription: 12 issues for $480 per year at $120 per issue (20% off) Student Subscription: 4 issues for $160 per year at $40 per issue (73% off) (for Bulk Student Subscriptions please inquire) Bulk Subscription: HK $400 per year for 10 subscriptions or above (33% off) International Retail: US $25 per issue Delivery Address

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From the Editor Moving Hong Kong Forward

he relationship between the rule of law, incentives and policy is an intimate one. Policies cannot implement themselves, nor do they create their own outcomes. A policy, once formed and enforced, only sets in motion processes towards a desired result – the reality of which is sometimes very unexpected. Thus, how do we secure good policy and mitigate the unintended consequences? Learning from history is one method, and we have no shortage of material there. We also learn from practice, and while “practice makes perfect,” (there’s no perfect policy) it does not enhance an environment alone. It is the rule of law, and the stability of those rules, that is a necessary condition for establishing good policy. Dwight D. Eisenhower put its importance best when he said, “the clearest way to show what the rule of law means to us in everyday life is to recall what has happened when there is no rule of law.” We take a look at the relationship between rule of law and policy in our cover story by Hans Mahncke, who writes on “The State of Judicial Independence in Hong Kong.” He highlights growing concerns about the separation of powers, the legitimacy of the judiciary, and the judiciary’s unbecoming, but sizeable role, in policy decisions. In this second year of Best Practice’s publication, we present a section of bilingual content, “The HK Freeway.” We are honoured to have Mr. Shih Wing Ching and Mr. David O’Rear as our first contributors. Mr. Shih graces our pages, sharing with us his observations on Hong Kong policy today. While he certainly does not oppose the notion of a “common good,” he puts forward a healthy dose of individualism and supposes that if others did the same in their own lives, we all might be happier. Mr. O’Rear writes on setting a minimum wage level, and exposes the threat of getting the minimum wage policy wrong – a price fixing nightmare. In the section, “Policy Close to Home,” Heather Mac Donald shares the experience that California

faced with its English teaching policy. With a diverse and large number of non-English speakers, the best way to approach their language policy is still a matter of contention. However, there have been gains since a policy change in 1998 under California’s Proposition 227, which switched the focus from bilingual education to English immersion. As Hong Kong repairs its own language teaching policy, it is prudent to learn from others’ experiences. Best Practice’s “Global Perspective Policy Analysis” focuses on the Copenhagen talks, and shares insight on how significant the meeting was for different countries, in particularly China. It sheds light on a possible shift in world order and considers the way countries will be involved, committed and represented in the future, and the policy and agreements that will follow. Best Practice’s book reviews take a look at two influential books, Ron Paul’s The Revolution: A Manifesto and David Neumark’s and William L. Wascher’s Minimum Wages. Both books garnered significant attention: The Revolution because of the huge following of its author and Minimum Wages because of its assessment, breadth and depth of coverage of empirical literature on minimum wage legislation. “Odds and Ends” concludes with Neville Kennard fighting for Hong Kong, reminding the city that without competition, Hong Kong could become a victim of its own success. And he’s right. Hong Kong is a unique place for many reasons, and while competition from other jurisdictions will create further innovations, its strong rule of law lays a solid foundation for present and future success.

Nicole Idanna Alpert

Let us know what you are thinking. Letters can be sent to best.practice @lionrockinstitute.org

Winter 2010

contributors

Shih Wing Ching Shih Wing-ching was born in Shanghai and brought up in Hong Kong. He is the Chairman of Centaline Group, which involves property agency, surveying and valuation, personnel consulting service, wealth management, information technology focusing on property data management and internet mapping service. Mr. Shih also launched the free daily newspaper am730 in Hong Kong in 2005.

Heather Mac Donald Heather Mac Donald is a John M. Olin fellow at the Manhattan Institute and a contributing editor to City Journal. She also is a recipient of the 2005 Bradley Prize for Outstanding Intellectual Achievement. Her newest book, The Immigration Solution: A Better Plan Than Today’s, coauthored with Victor Davis Hanson and Steven Malanga, chronicles the effects of broken immigration laws and proposes solutions.

Hawkins Chin

Neville Kennard

Hawkins Chin is currently working as a Research Assistant at The Lion Rock Institute. He previously worked as an audit trainee at a CPA firm and an Administrative Assistant in an English language education company. In 2009, he received his undergraduate degree with first class honours in Economics from Curtin University of Technology in Australia and is now waiting to enter graduate school in Economics for further study.

Neville Kennard calls himself a “Preaching and Practicing Capitalist.” From small beginnings, he expanded his family’s business into one of Australia’s biggest equipment hire and self storage companies. Neville is semi-retired, but very active. He lives part of the year overseas in Hong Kong, and is a keen sportsman who enjoys cycling, kayaking and skiing.

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Shane Lively

Stephen Vines

David O’Rear

Shane Lively is a Mannkal Economic Education Foundation Scholar and was an intern at The Lion Rock Institute in January 2010. Shane has a BA in Politics and International Studies from Murdoch University, and also majored in Criminology. He is currently studying the Juris Doctor at Murdoch University in Perth, Western Australia.

Stephen Vines is a Hong Kong-based journalist, broadcaster and businessman. He is widely published in the region. His most recent book is Market Panic: Wild Gyrations, Risks and Opportunities in Stock Markets, published by John Wiley & Sons.

David O’Rear moved from his native California to Asia in 1980, first to Taiwan and later to Hong Kong where he lives and works. After 18 years with The Economist Group, he is currently Chief Economist at the Hong Kong General Chamber of Commerce. He manages many policy committees and drafts Chamber submissions to the government on policy issues, including the budget and policy address.

Deborah J. Seligsohn

Hans Mahncke

Deborah J. Seligsohn is a consultant based in Beijing, serving as the World Resources Institute’s (WRI) Principal Advisor on climate and energy issues in China. She has over 20 years’ experience working on energy and environment issues in China, India, Nepal and New Zealand. Her most recent position was as Environment, Science, Technology and Health Counselor on Beijing. She speaks fluent Chinese and some Hindi.

Hans Mahncke , LL.B. (Hons.), LL.M., is an Assistant Professor at the School of Law at City University of Hong Kong. His research interests include international economic and WTO law, and common law history and method. He also teaches and publishes in these areas. Hans currently serves as a contributing editor to Halsbury’s Laws of Hong Kong and is a member of the editorial board of the Hong Kong Lawyer.

On Policy

Lianqing Li

The State of Judicial Independence in Hong Kong Hans Mahncke highlights concerns on the independence of the Judiciary and traces the implications for the rule of law in Hong Kong

ecently there have been some news items which have raised concerns about the state of judicial independence in Hong Kong today. For instance, there have been some very worrying comments from Beijing regarding the role of the judiciary within a system of separation of powers. This comes on the back of the news of the impending early retirement of the Chief Justice, four years before reaching the usual retirement age. This article aims

to provide some context for these developments and concerns, and attempts to draw a picture of the state of judicial independence in Hong Kong today.

Introduction The term “separation of powers” is attributed to the 18th century French philosopher Charles de Secondat, Baron of Montesquieu. Montesquieu articulated this doctrine on the basis of the British constitutional arrangements which came about as a result of

the Glorious Revolution of 1688. While the monarch retained the role of head of the executive branch, legislative power was vested in parliament and the judiciary held judicial power. This tripartite system, whereby each of the three powers acts to check and balance the other two, has been the foundation of all western democracies since. Although the degree of separation varies from country to country – for instance, many democratic systems see the executive branch elected by the legislature – judicial power

Winter 2010

Laihiu

On Policy

The administration recently condemned similar protests, saying they went against the grain of Hong Kong â&#x20AC;&#x153;core valuesâ&#x20AC;? and have since faced strong criticism by the public and media for those comments.

is usually the most independent of the three. One manifestation of this independence is that unlike their legislative and executive counterparts, judges tend to be appointed for life, or at least until they reach retirement age. In Hong Kong, where a substantial portion of the legislature lacks democratic validation and where the executive branch is even less legitimised, the judiciary is often regarded as the last fortress of a free society, in particular by upholding democratic values such as personal liberty, freedom of speech and freedom of assembly. Twelve years after the handover of sovereignty to China, the potential erosion of judicial independence is therefore a grave and great concern for all.

The legal system in Hong Kong Before venturing into current events, it is instructive to recall the history 6

Best Practice

of the judicial system in Hong Kong. Before the handover of sovereignty in 1997, the legal system was very closely modelled on the English legal system. Specifically, Hong Kong had a common law system with a similar court structure to that in England and with no written constitution, just as in England. Apart from the last point, all of these factors were to remain the same after 1997 for another 50 years. One of the few

major changes to the legal system was that a written constitution, the Basic Law, was introduced. Although England does not have a written constitution, it is not uncommon for common law countries to have constitutions, the most obvious example being the United States. There are a number of reasons why a constitution was introduced in Hong Kong. From the British side, one of the main desires was to entrench certain rights of citizens. Under the traditional approach in the English legal system, rights such as presumption of innocence, due process, liberty of the individual, freedom of speech, right not to incriminate oneself in criminal proceedings, etc., were not specifically enumerated in a constitution. Instead, they were regarded as inherent rights under the common law and formed part of the common law presumptions which are applied by the courts. However, before the handover of sovereignty to China, there were concerns that the judiciary would not have the strength and independence to enforce these common law presumptions and values without the support, validation and backing of a written constitution. In a similar vein, and even before

n Hong Kong, where a substantial portion of the legislature lacks democratic validation and where the executive branch is even less legitimised, the judiciary is often regarded as the last fortress of a free society, in particular by upholding democratic values such as personal liberty, freedom of speech and freedom of assembly.

On Policy

to render their own interpretations of the Basic Law, Beijing has reserved the right to make final interpretations. Since 1997, the Standing Committee of the National People’s Congress has rendered interpretations of the Basic Law on three occasions. In 1999, there was the much publicised right of abode issue where Beijing declared that children did not have the right of abode in Hong Kong unless at least one of their parents was a permanent resident at the time of their birth. This was in contradiction to what Hong Kong’s Court of Final Appeal had earlier determined. In 2004, an interpretation was rendered which precluded universal suffrage in the 2007 and 2008 elections for Chief Executive and the Legislative Council respectively. Lastly, in 2005, after the Chief Executive had resigned, the Standing Committee of the National People’s Congress determined that the new Chief Executive could only serve for one term, in addition to the remainder of the previous Chief Executive’s term. On two of these three occasions, it was the executive branch of the Hong Kong government which requested Beijing to render an interpretation. Only in one case, the democracy case in 2004, did the Standing Committee interpret the Basic Law on its own initiative. Another provision which China was keen to insert into the Basic 1 Law is Article 23 which calls for the adoption of anti-subversion laws in Hong Kong. In other words, Article 23 states that parliament shall pass a law which prohibits any subversive activities aimed at the government in Beijing. So far, the Legislative Council has not passed such a law.

Ivan C

the Basic Law came into force, a Bill of Rights had been introduced in 1991 as a measure to entrench citizens’ rights and liberties in a written document over and above relying simply on the common law tradition. Yet, the Bill of Rights only has the status of legislation and given the supremacy of parliament in matters of law-making, parliament could abolish the Bill of Rights as easily as it enacted it in the first place. In other words, the Bill of Rights only serves to protect an individual’s liberties as long as parliament chooses to keep it. Thus, the constitutional rights enumerated in the Basic Law, as the highest source of law in Hong Kong, are more entrenched. Overall, twelve years after the handover, the desire to embed rights in the Basic Law has worked out very well in practice and the courts frequently use the rights enumerated in the Basic Law to justify their decisions, often to the benefit of the liberty of Hong Kong citizens. Some relevant examples of cases where the courts have decided against the government on the basis of the Basic Law’s constitutional provisions are recalled below. However, first, it also should be noted that China too had a strong incentive to create a Basic Law with entrenched rights and obligations. In particular, obligations were introduced which would tend to facilitate final control by Beijing over certain matters. For instance, 3 Article 158 of the Basic Law states that the Standing Committee of the Chinese National People’s Congress is the final determiner of what the Basic Law means. Thus, if there are questions on how to interpret the Basic Law, and although all the courts in Hong Kong have the right

The Legislative Council building was initially built as the Supreme Court of Hong Kong during British colonial rule. Later, the Final Court of Appeal will be moved here, reverting the building to its original intent.

In contrast, in Macau, where a similar Basic Law provision exists, parliament passed an anti-subversion law a few years ago. The executive branch attempted to introduce a relevant law in Hong Kong in 2003 but the endeavour was dropped after half-a-million people took to the streets to protest against any antisubversion law.

Recent events Given this background, what has happened to judicial independence since 1997? Indeed, as if to highlight the current significance of the topic, both the Chief Justice and the Secretary for Justice used their speeches during the Opening of the Legal Year Ceremony on 11 January 2010 to seek to reassure the public on the state of judicial independence in Hong Kong. But why was it necessary to reassure the public at all? Should judicial independence not be regarded as a given? While the fact that the Standing Committee has only interceded on three occasions could be regarded as encouraging, there have been two major recent events which have Winter 2010

On Policy

shaken people’s confidence in the stability and independence of the judiciary. One is the resignation of the Chief Justice, the other is the warning by a Mainland official that the judiciary is not co-operating with the legislative and executive powers. First, the resignation of the Chief Justice, Andrew Li, will be examined. Andrew Li was born in Hong Kong to the well-known Li family. He was educated in England, earning his law degree from the University of Cambridge. He quickly rose up the ranks as a lawyer and was appointed as Queen’s Council, the highest rank

for a barrister, in the 1980s. He later sat as a deputy judge of the High Court and was appointed to be the first Chief Justice of Hong Kong in 1997. According to the relevant laws, Andrew Li was to retire at 65 with the option of having his tenure extended by the Chief Executive. But instead he has chosen to retire now, more than four years before reaching retirement age. Publicly he claims that his resignation is for private reasons. Some have speculated that his retirement is not voluntary but a reaction to pressure he felt

hat can be said with certainty is that the Chief Justice plays an immensely significant role in the legal system. Aside from presiding over the highest court, he is instrumental in the appointment of new judges, as he chairs the relevant selection committee. He also has the power to appoint deputy judges.

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with respect to making judicial appointments. It is interesting to note that Andrew Li devoted a large portion of his speech at the recent Opening of the Legal Year Ceremony to highlight the importance of not politicising the process of judicial appointments. However, ultimately, any conjecture as to why Andrew Li resigned is mere speculation. What can be said with certainty is that the Chief Justice plays an immensely significant role in the legal system. Aside from presiding over the highest court, he is instrumental in the appointment of new judges, as he chairs the relevant selection committee. He also has the power to appoint deputy judges. Deputy judges are those who ordinarily sit on lower courts but are temporarily appointed to higher courts. This is a problematic topic in and of itself as such temporary appointments could be seen as incentivising judges to act in certain ways. Those chosen for temporary appointments not only benefit by moving to a higher court but also by receiving substantially higher salaries and other benefits. Some deputy judges have been on such temporary appointment for ten years which begs the question as to why their appointments were not made permanent and why they keep having to rely on being reappointed year after year. To avoid any suggestion of dependence, these types of appointments are banned in some jurisdictions. Without doubt, the Chief Justice’s role in appointing judges, both permanent and temporary, is one of his most significant and crucial tasks. Interestingly, the question of who will be chosen as Andrew Li’s successor remains unanswered. The logical choice, if one looks at the court hierarchy and factors

Laihu

On Policy

Currently still under construction…

such as age, is Geoffrey Ma, the current Chief Judge of the High Court. He is 53 and could thus serve for a minimum of twelve years, ensuring stability and continuity in the judiciary. Like Andrew Li, Geoffrey Ma was also educated in England and has a strong common law background. If he were chosen as the new Chief Justice, this would certainly go some way towards dispelling rumours that Andrew Li’s retirement was not voluntary. The other recent news which is cause for concern is a statement by the Deputy Director of the Hong Kong and Macau Affairs Office, Zhang Xiaoming, questioning the notion of separation of powers. In November 2009, he publicly praised Macau for having been “more constructive in coordinating the executive, legislative and judicial branches of government” and criticised Hong Kong for not being more like Macau. What he may have been alluding to is the fact that Hong Kong courts regularly overrule both the executive and the legislative branches in finding their actions unlawful. In fact, there has been a marked increase in judicial review cases in which litigants ask the courts to examine whether an action or measure undertaken by the executive branch, or a law passed by the legislature, is in fact lawful both under existing statutes and under the Basic Law. On many occasions, the courts have ruled that executive organs or that parliament had overstepped their authority. This

is an important manifestation of the doctrine of separation of powers and of the judiciary’s role in checking the authority exercised by the executive and by the legislature. The fact that a high-ranking official from Beijing is questioning the doctrine of separation of powers is a worrying development. Indeed, the Chairman of the Hong Kong Bar Association, Russell Coleman QC, strongly rebuked Zhang Xiaoming, stating that the judiciary was not part of the government team and that the judiciary’s role was to check and control abuse, illegal or excessive, of executive and legislative power. He also said that the judiciary must stay free from pressure and interference. Coleman restated these sentiments during his speech at the recent Opening of the Legal Year Ceremony. As alluded to earlier, the outgoing Chief Justice has also stressed the importance of an independent judiciary. There have also been a few other news items which have recently raised concerns about the state of the Hong Kong judiciary. For instance, one of Hong Kong’s most senior barristers, Clive Grossmann SC, wrote in the preface to Archbold’s criminal law reference book, which is widely used by students and lawyers in Hong

Kong, that “[a]ny person who is arrested on a serious or relatively serious charge is almost certain to be convicted, and since the convictions are in the district and high courts, imprisonment is almost always the norm” and that conviction rates were “approaching those of North Korea.” Indeed, conviction rates in Hong Kong stand at over 90 percent and are as high as 94.8 percent in the Court of First Instance and 92.6 percent in the District Court. As a comparison, the conviction rate in the higher courts in Australia stands at 57 percent. According to a recent study, the conviction rate in China stands about 98 percent, although the President of the Supreme People’s Court, Xiao Yang, puts this figure at 99.34 percent. Regardless of the exact numbers, the worrying fact is that Hong Kong’s conviction rates are far closer to those of China and North Korea, than those of western democracies. Why is this the case? Article 852 of the Basic Law states that “[t]he courts of the Hong Kong Special Administrative Region shall exercise judicial power independently, free from any interference.” While Grossman clarified that he was not suggesting that the judiciary itself was partial,

n many occasions, the courts have ruled that executive organs or that parliament had overstepped their authority. This is an important manifestation of the doctrine of separation of powers and of the judiciary’s role in checking the authority exercised by the executive and by the legislature. Winter 2010

Steve Punter

On Policy

he stressed that there seems to be a mindset within the judiciary whereby the fact that one is arrested and charged with an offence implies that one is guilty. In other words, where there is smoke, there is fire. Another factor which may play a role is that judges may see a correlation between conviction rates, drafting of relevant judgments and promotion prospects. But these attempts at an explanation are speculative at best. It is difficult to say with any certainty why Hong Kong suffers from such high conviction rates. The Department of Justice and Hong Kong Police could help put the speculation to rest by releasing all the data they hold relating to conviction rates so that relevant studies can be undertaken. Another issue which should be mentioned is the role and independence of the Director of Public Prosecutions. This is a very important and influential position as the director ultimately decides whether or not someone is prosecuted. The former Director of Public Prosecutions, Grenville Cross SC, was the target of some criticism regarding decisions not to

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prosecute. Most notably, the decision not to prosecute Grace Mugabe’s bodyguards, who were alleged to have roughed up members of the media, led to speculation that the public prosecutor’s office may have become susceptible to political influence. The fact that Beijing maintains good relations with Robert Mugabe does not help dispel such speculation. The recent arrest of student activist Christina Chan as she was leaving a radio interview for allegedly assaulting police officers during protest events, although currently not yet a matter for the Director of Public Prosecutions, has similarly raised concerns. Thus, the new Director of Public Prosecutions, Ian McWalters SC, will be under some scrutiny in respect of any controversial decisions to prosecute or not prosecute.

Judicial review cases One issue which was alluded to earlier is the increase in judicial review cases. One reason why there has been an increase in such cases is that the democratic process has progressively come to a halt since 1997. The last governor of Hong Kong, Chris Patten, had forced through elections in 1995 which ensured that all members of the Legislative Council were elected by the public who were afforded both geographic and functional votes. But the parliament elected in 1995 was dismantled in 1997, as were the relevant election mechanisms. As a result of Hong Kong’s severe democratic deficit, the judicial review mechanism is being used by members of the public to co-opt the courts to make what are effectively policy choices which would usually lie in the domain of the democratic discourse.

nother factor which may play a role is that judges may see a correlation between conviction rates, drafting of relevant judgments and promotion prospects.

On Policy

Executive decisions, such as whether or not to sell public car parks and shopping malls, whether or not to build a new bridge, whether or not to build a new railway line, etc., are being subjected to judicial review. If the executive and legislative branches were democratically legitimised, it is likely that far less people would question their decisions in this way and the courts would probably have far less patience in dealing with such cases. After all, in a democratic society, if people are not happy about HK$67 bn being spent on a new railway line, they can vote out whoever chose to spend that money. But in Hong Kong, citizens do not have that option, which is why the courts have become a proxy mechanism for checking government expenditure and other measures. This trend is anything but healthy as the judiciary is being asked to make what are in effect political decisions. Similarly, many laws passed by the Legislative Council are now challenged under the constitutional judicial review mechanism in the courts and the courts have, on a number of occasions, found legislation to be invalid. For instance, the courts found that laws restricting the activities of homosexuals were invalid, that the laws on eavesdropping were void or that freedom of speech entailed that citizens could broadcast through unlicensed radio stations (this decision was overturned on appeal). There are a number of other similar cases where the courts have ruled

s a result of Hong Kong’s severe democratic deficit, the judicial review mechanism is being used by members of the public to co-opt the courts to make what are effectively policy choices which would usually lie in the domain of the democratic discourse.

against the legislative branch.

Conclusion All this recent activity may explain why Zhang Xiaoming and his colleagues in Beijing would like the judiciary to be more cooperative. But of course that would effectively mean the end of the independence of the judiciary. Without judicial independence there would be no separation of powers, there would be no more checks and balances and without it, Hong Kong would become just another city in Mainland China. Although this may have been what Deng Xiaoping ultimately intended to happen, what he said was: one country, two systems. Almost 26 years later, it is more important than ever to remind people of Deng’s words. Hans Mahncke is an Assistant Professor at the School of Law at City University of Hong Kong. 1. Article 23 The Hong Kong Special Administrative Region shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state

here are a number of other similar cases where the courts have ruled against the legislative branch.

secrets, to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies. 2. Article 85 The courts of the Hong Kong Special Administrative Region shall exercise judicial power independently, free from any interference. Members of the judiciary shall be immune from legal action in the performance of their judicial functions. 3. Article 158 The power of interpretation of this Law shall be vested in the Standing Committee of the National People’s Congress. The Standing Committee of the National People’s Congress shall authorize the courts of the Hong Kong Special Administrative Region to interpret on their own, in adjudicating cases, the provisions of this Law which are within the limits of the autonomy of the Region. The courts of the Hong Kong Special Administrative Region may also interpret other provisions of this Law in adjudicating cases. However, if the courts of the Region, in adjudicating cases, need to interpret the provisions of this Law concerning affairs which are the responsibility of the Central People’s Government, or concerning the relationship between the Central Authorities and the Region, and if such interpretation will affect the judgments on the cases, the courts of the Region shall, before making their final judgments which are not appealable, seek an interpretation of the relevant provisions from the Standing Committee of the National People’s Congress through the Court of Final Appeal of the Region. When the Standing Committee makes an interpretation of the provisions concerned, the courts of the Region, in applying those provisions, shall follow the interpretation of the Standing Committee. However, judgments previously rendered shall not be affected. The Standing Committee of the National People’s Congress shall consult its Committee for the Basic Law of the Hong Kong Special Administrative Region before giving an interpretation of this Law.

Winter 2010

The HK Freeway

“Breaking New Ground Together” is Hard to Achieve Shih Wing Ching maintains that an overreliance on collective wisdom has hindered Hong Kong’s upward mobility

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benefits. Here, people “improve” their lives – but harvest without sowing. Normally, those people who are keen to organize mass movements like to work together because they value the image of popular consensus and democracy, by which they can mobilize the enthusiasm of the public, enabling the crowd to believe that as long as they unite together and draw on collective wisdom, a better future will be created. However, seeking a collective, better future is always harder than pursuing individual happiness. If Hong Kong people find that it is hard to seek their own individual happiness, how can it be expected that they can come together to create a better society? When my company was in difficult times, I asked the management to maneuver their own way out of trouble, as they were more likely to solve their problems following this method. After some discovered the right path, others naturally followed. If they engaged in a group (working with collective wisdom to find the right path) and if anything went wrong, everyone would have suffered the consequence. Obviously, this is not best practice. Collective wisdom seldom leads to innovation. Hong Kong’s film industry used to rely on collective wisdom for movie production:

a group of film-makers would get together and brainstorm simultaneously. Most of the time, the outcome was incoherent, nonsensical fragments. Such products cannot be said to be genuine and usually cannot stand the test of time. The reality is that collective views are usually fairly average because one’s creativity is shadowed by (according to the law of factorisation) the restriction of other people’s opinions. Opinions based on collective wisdom usually turn out to be mediocre. This is not only because of a lack of creativity; most collective views are nonsensical. If these ideas Jimmy Harris

he title of the Chief Executive’s Policy Address this year was “Breaking New Ground Together.” Although I don’t have much to comment on the content of the address itself, I have a different view with respect to the title. The word “together” doesn’t fit with the idea of “breaking new ground”; the two cannot be united. Historically, Hong Kong has long advocated individualism. This is because in a market economy, everyone can pursue their own interests; there is no need to focus on society’s general welfare. As long as we are diligent, naturally we can mutually benefit from each other, and our actions will also be beneficial to society as a whole. If we can make a better life for ourselves, the economy will also improve. In the past, people emigrated from China to Hong Kong because Hong Kong provided an environment which allowed one to earn a living; they did not immigrate to Hong Kong because the Government offered them opportunities to “break new ground.” Perhaps Hong Kong people’s ability to earn a living has declined. Nowadays, people like to turn to politicians to seek Government accountability and hope to use collective power to force the Government to give out more

For many of Hong Kong’s youth, the climb up the social ladder is too arduous and difficult.

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eeking a collective, better future is always harder than pursuing individual happiness.

are intended to achieve ground breaking improvement for society, their chances of success are minimal. From what I heard, Einstein’s theory of general relativity did not evolve from the laboratory. It was dug out from Einstein’s mind when he was still very young, a product of his diligence and long introspection. Humans are united with the universe; in solitude, we are more likely to understand the mysteries of the universe with our own efforts. The deafness of Beethoven may have made him feel isolated, but this factor also reduced distractions from the external environment. Under this condition, his thoughts – more natural as the heavens intended rather than shaped by society – could dissociate him from the common customs of his day. Thus, he had a sense of creativity from the creator; he felt the spirit of music creativity. The great creativity of humans is most often found when on an individual, solitary path of life. Innovation is hard to achieve using collective wisdom.

Why has upward mobility been declining? In recent years, Hong Kong people generally have the perception that society has offered them fewer opportunities for upward mobility. Many people feel hopeless and in these circumstances, it is easy to blame Government policy. When society is full of resentment, it hinders the Government to properly function, which has a negative impact on the long-term development of a society.

Sun Tzu said we can only know whether or not we won a battle, but we cannot turn a seemingly “unwinnable” battle from loss to victory in a short time. Likewise, we know why there are fewer opportunities for upward mobility, but we cannot create more opportunities for ourselves. In the past, Hong Kong people had many opportunities to “climb the ladder” of success because the social progression was all encompassing; all people in society could benefit. But today, our society has advanced to the highest level of capitalism – a financial society. There is no room for further development unless Hong Kong becomes the world leader of free market capitalism, leading to a significant breakthrough. Otherwise, the socalled upward mobility of society will only reflect the special talents and diligence of only a small group of people – not the transformation of society as a whole – and of those, the scale of successful cases will inevitably be smaller in proportion to the entire population. In Hong Kong’s earlier years,

The venerable Albert Einstein.

most people were refugees who had come from mainland China. They moved from a planned economy to a free market society and certainly felt that Hong Kong was full of opportunity; they could rely on their personal efforts to continually improve their lives. If North Koreans were allowed to immigrate to Hong Kong, they would likely feel similarly. A stroll around 1 Chungking Mansions in Tsim Sha Tsui reveals that it isn’t only North Koreans – people from all over the world feel that Hong Kong is full of opportunity. Otherwise, would they come to live in Hong Kong as illegal residents? Hong Kong still has its

he reality is that collective views are usually fairly average because one’s creativity is shadowed by (according to the law of factorisation) the restriction of other people’s opinions. Opinions based on collective wisdom usually turn out to be mediocre. Winter 2010

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oday, our society has advanced to the highest level of capitalism â&#x20AC;&#x201C; a financial society. There is no room for further development unless Hong Kong becomes the world leader of free market capitalism, leading to a significant breakthrough. Chinnian

own attractiveness, and Hong Kong people may take those opportunities for granted. Past economic restructuring in Hong Kong, from light industry to a service-based economy, involved society as a whole. Everyone followed the societal change and was ready for these changes. Once the transformation was completed successfully, people felt that they had moved forward and that the quality of life had improved. In this environment, the attitude of the people naturally became optimistic. They also anticipated a brighter future, and in turn, this led to fewer complaints about the Government. However, when Hong Kong moved toward a financial-based society, not every level of society was able to participate; only elites could enjoy the benefits. Statistics show evidence of wage polarization in Hong Kong. The salaries of the high income group have increased rapidly while the wages of the low income group remain stagnant. Indeed, there is a downward trend in the wages of the low income group. This phenomenon occurs because the services provided by the low income group are easily substituted. In globalization, many jobs are lost to other parts of the world where the production costs are cheaper. This in turn forces the lower paid workers to concentrate and compete in areas where the particular service can only

Chungking Mansions reputedly has the highest diversity of resident nationalities of any building in the world.

be provided locally and leads to a continual fall in wages. According to my observation, this negative aspect of globalization isnâ&#x20AC;&#x2122;t over yet. Incomes of middle and low income groups will continue to fall, and this decline will not be stopped by setting minimum

wages. People from the middle and low income groups will see the gap between them and the high income group become wider, and they will naturally feel society has treated them unfairly, leading to much dissatisfaction towards the Hong Kong Government.

n Hong Kongâ&#x20AC;&#x2122;s earlier years, most people were refugees who had come from mainland China. They moved from a planned economy to a free market society and certainly felt that Hong Kong was full of opportunity; they could rely on their personal efforts to continually improve their lives. 14

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The upward mobility of our society is weakening, not only because Hong Kong has developed into an advanced economy, but because the quality of Hong Kong’s people has generally declined. In the past, Hong Kong people were mostly immigrants. They were not necessarily very knowledgeable, but a lot of them had courage, and many were refugees from Mainland China. Crossing the border illegally was risky, and those who dared to do so were brave. When they faced difficulties, they did not easily retreat. Their state of mind was probably better than the spoiled youngsters of this generation. In the past, many illegal immigrants swam to Hong Kong. They literally embraced a basketball, watched the distant lights for direction, and using their amateur swimming skills, jumped into the sea and swam towards Hong Kong. Some of them succumbed to the sea in stormy weather, some of them were eaten by sharks, and some of them did not have the physical strength to make it all the way. Those remaining – who made it to Hong Kong – not only had physical strength, but strong willpower. The immigrants who came to Hong Kong did not come to take advantage of welfare, for there were no benefits provided by the Government in those days. What attracted them to immigrate to Hong Kong was the freedom to choose; in Hong Kong they had the opportunity to become self-reliant and their efforts to do so would be subject to protection under the law. They were willing to be what was then called “coolies,” working in manual labour

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Old immigrants worked hard, new generations are coddled

For many, the allure of Hong Kong’s potential for wealth creation and prosperity was strong enough to leave their homes, sometimes, forever.

as a start, and then accumulating their capital, bit by bit, to start their own business. At present, many successful businessmen in our society have a similar experience. In that era, people who were willing to take risks to start their own businesses were respectable; young people treated entrepreneurs as their role models. Back then, hostility towards businessmen and entrepreneurs was far less than it

is today. Very few people blamed businessmen or Government policies for their own misfortune. People tended to find problems within themselves first, and then sought to solve problems through their own efforts rather than seeking assistance from others. With this mentality, society continuously had people successfully working up – and moving up – the ladder of success. The socio-

he upward mobility of our society is weakening, not only because Hong Kong has developed into an advanced economy, but because the quality of Hong Kong’s people has generally declined. Winter 2010

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ery few people blamed businessmen or Government policies for their own misfortune. People tended to find problems within themselves first, and then sought to solve problems through their own efforts rather than seeking assistance from others.

economy at that time had the energy to continuously develop. We were considered a world leader in a number of light industries despite being a city-state with only a few million people. These miracles were created by unknown heroes – immigrants from mainland China. Unfortunately, even though the new generation of Hong Kong people enjoy a better living environment and greater opportunities to study than before, over-protection has shattered their will to survive. For the new generation of young adults, even

small setbacks make them whine and complain. Even after graduation, they still do not want to go to work, preferring to stay at home playing online games and becoming 2 “hidden youth.” With this attitude, how can the economy develop new momentum? Past economic restructuring in Hong Kong never depended on the guidance of the Government, all were explored and directed by the residents of Hong Kong. Hong Kong’s new generation does not want to take risks. They want the Government to provide job opportunities for them after graduation. They believe it is the best way to receive a wage which is higher than that paid by the market. They feel that after working for three to five years, they should be able to buy their own flats. If they cannot afford the flat, it is better that the Government build more flats under the Housing Ownership Scheme (HOS).

Relying on Government policy to take care of one’s life will eventually move society towards social homogeneity, which severely limits opportunities to have personal breakthroughs and move up the ladder. Political parties can only strive for minimum wages rather than salaries higher than the market rate. The Government’s housing policy cannot ensure everyone lives in luxury apartments. If Hong Kong people want upward mobility, they first and foremost must adjust their outlook. Translation by Lion Rock writers. Permission to reprint and translate from am730. Shih Wing Ching is an entrepreneur born in Shanghai, now living in Hong Kong, and is the chairman of Centaline and newspaper am730. 1. Chungking Mansions is a building in Hong Kong where many legal or illegal workers from Western Asia and Africa live. 2. Hidden youth refers to young people who do not have jobs and do not enroll in any educational institution. Shih Wing Ching (23 October, 2009). Innovation is Hard to Create When Working Together. AM730, C Viewpoint. Shih Wing Ching (27 October, 2009). Why has upward mobility been declining?. AM730, C Viewpoint. Shih Wing Ching (28 October, 2009). Old immigrants worked hard, new generations spoiled. AM730, C Viewpoint.

f Hong Kong people want upward mobility, they first and foremost must adjust their outlook.

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群策難創新天

施永青指出群眾智慧不能導致創新以及解釋為何香港的向上流動力減少了

特

要

過

去從內地來港的人，大部分是看中了香港有一個可以各自謀生的環境，而不是因為這裡的政府善於搞群策群力。

港人謀求自己的幸福也感到困難，怎可能期望他們合起來之後就可以創造出社會的美好明天？我自己在公司遇到困難的時候，一般都是叫下屬各自謀出路，這樣機會可能多一些。當其中某些成員找到生路之後，其他人自然會跟著去行。聚在一起搞群策群力，萬一弄錯了，就可能一次過死清光，絕非上策。其實，世上的創新，甚少是用群策群力的方式搞出來的。香港的影藝界，有個時候也流行搞集體創作。他們一邊飲酒，一邊「度橋」，度出來的不外是一些片段性的「無厘頭」笑話，談不

上真正的、經得起時間考驗的創作。現實是：匯集起來的群眾意見，受制於公約數的模式，求低容易求高難，不但甚少創意，而且多流於庸 Jimmy Harris

首今年的施政報告，名為《群策創新天》。我對它的內容意見不大，但對它的題目卻有點不同的想法。我總覺得「群策」是很難與「創新」弄在一起的。香港歷來崇尚個人主義；因為在自由市場裡，每個人都可以有自己的追求，無需群策群力去追求社會的整體利益；只要大家分頭各自努力，就自然可以互動互適，在自己的位置上不知不覺中做出對社會有利的事。大家把自己的生活搞好了，社會的經濟亦會同步好起來。過去從內地來港的人，大部分是看中了香港有一個可以各自謀生的環境，而不是因為這裡的政府善於搞群策群力。可惜，不知是否近年香港人各自謀生的能力低了，轉而喜歡在政黨的帶領下向政府問責，希望能夠聚合群眾的力量向政府施壓，逼政府在政策上予自己多一點優惠，那就可以不勞而獲，也可以讓自己的生活得到不斷的改善。通常，正是那些熱衷於搞群眾運動的人，最喜歡搞群策群力，以顯示自己相信群眾，思想民主。只有這樣，才容易把群眾的積極性調動起來，讓他們以為，只要大家團結起來，集思廣益，就可以為集體創造出一個美好的明天。然而，要謀求集體的美好明天，往往比謀求個人的幸福困難。如果香

謀求集體的美好明天，往往比謀求個人的幸福困難。對於很多香港的年青人，要爬到上游社會是十分困難的。

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今

天，我們已發展至資本主義社會的最高階段─金融社會，上面已沒有發展空間，除非香港可以成為全球自由經濟的領導者，令資本主義社會出現突破性的發展。

科學家愛恩斯坦

俗。靠這樣的意見為社會創新天，希望十分渺茫。據說，愛恩斯坦的相對論，並不是在實驗室裡搞出來的，而是在他還很年輕的時候，透過苦思冥想，從自己的腦子裡挖掘出來的。人腦是與宇宙一體的，人在孤獨的時候，有時會自行領悟出宇宙的奧秘。貝多芬聾了，雖然倍感孤獨，但可以減少外界的干擾；在這種狀態下，他的思維反而可以遊離凡間，因而感受到上天的創意，令他可以在音樂創作上得到種種靈感。人類的偉大創意，大部分都是個人在孤獨的人生路途上發現的，群策群力在創新上很難找到位置。

向上流動力為何少了近年，香港人普遍有個感覺，就是社會可以提供向上流動的機會少了。很多人因而對未來的生活感到無望。在這種環境下，人們很容易把自己的得失歸咎政府政策的不當，令社會上充

現

滿怨氣，妨礙了政府的正常施政，對社會的長遠發展有負面的影響。孫子說：「勝可知，不可為。」意思是說，我們只能知道這場仗能否打得贏，但不能在短時間裡把一場打不贏的仗變成打得贏。正因為如此，我們可以知道，為何社會向上流的機會少了，但亦沒法創造出更多的機會。過去，香港之所以有這麼多向上爬的機會，是因為當時我們的社會進步是全方位的，社會的上上下下都能得益。但今天，我們已發展至資本主義社會的最高階段─金融社會，上面已沒有發展空間，除非香港可以成為全球自由經濟的領導者，令資本主義社會出現突破性的發展。不然的話，所謂社會的向上流動，其所反映的，亦只不過源自個別人士的特殊智慧與分外努力罷了，而非源自社會的整體性的轉型，前者的規模一定小於後者。早年的香港，大部分是從大陸來港的難民。他們從計劃經濟的社會來到一個市場經濟的社會，當然覺得香港社會充滿機會，可以憑個人努力不斷改善自己的生活。如果我們容許北韓人移民來香港，他們一樣會覺得香港充滿機會。不要說北韓人，你只要去尖沙咀重慶大廈走一個圈，就知道全世界有很多人都覺得香港充滿機會，否則他們何苦千里而來，留在香港做非法居民？香港對他們依然充滿吸引

實是：匯集起來的群眾意見，受制於公約數的模式，求低容易求高難，不但甚少創意，而且多流於庸俗。

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力，只是香港人習以為常罷了。香港過去的轉型，無論是走向輕工業還是走向服務業，都是全社會的，人人有份參與，大家都得跟著社會一齊變，亦有條件跟著一齊變。一旦轉型成功，大家都會覺得自己在進步，並在生活得到實質上的改善。在這種環境下，人們的心態自然顯得樂觀，對未來亦充滿期盼，對政府的施政自然較少怨言。然而，當香港走向金融業的時候，則並非社會上所有的人都可以參與，得益者只是一部分社會上的精英。統計數字顯示，近年香港的工資趨勢有兩極分化的跡象，高收入者的工資增長得很快，但中低收入者卻停滯不前，甚至有往下移的趨勢。出現這種現象的原因，是香港中低收入者所提供的服務其可替代性甚高，在全球化之下，很多工種都流失

Chinnian

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重慶大廈是世界上最多元文化的大廈。

香

港社會的向上流動能力弱了，除了因為香港在經濟上已發展至國際一級水平外，還因為香港人的質素亦比前下降。

去其他工資更低的地方，以至他們不得不集中在一些本地需要的服務上搶工作，令工資的水平每況愈下。依我觀察，這種全球化的負面影響至今尚未完成，即是說中低收入的工資水平還會下移，非訂定最低工資之後就可煞停。在這種情況下，中低收入者眼見高收入者與自己的生活差距日漸拉闊，自然覺得社會對他們不公平，對政府很多不滿。

的。偷渡是要冒風險的，敢偷渡的人，通常都得有勇氣，在困難面前不會輕易退縮。他們的心理質素應該比嬌生慣養的新一代青年人好。當年偷渡的人，不少是游水過來的。他們抱住個籃球，望著遠處的燈光，以不太熟練的泳術，就一躍而下游向香港。中途有被水流沖走的、有被鯊魚吃掉的、有體力不繼的；能抵達香港的，不但要有體力，還要有堅強的意志力。

當年來港的移民，並不是看中政府提供的福利(當年其實甚麼福利也沒有)，而是看中香港有更多的自由選擇。他們知道，在香港，他們有機會自力更生，他們的努力所得，會受到法治制度的保障。他們願意從做苦力開始，死慳死抵，積點資本，將來自己做生意。現時不少社會上的成功商人，都有這樣的經歷。在那個年代，願意拋身出來做生意的人是被尊重的；社會上的青年人，多喜歡以成功的商人，作為自己的學習榜樣；仇商的情緒，遠沒有今天那麼嚴重。甚少有人會把自己在生活上的不幸，歸咎於商人的奸詐或政府政策的失誤。人們傾向先從自己身上找原因去解決問題，而不是一味尋求外界的援助。在這種心態下，社會上反而不斷有人成功地往上流動，而社會經濟亦因而不斷有發展的動力。以香港一個人口只有幾百萬的城市，我們在輕工業生產上，有不少都是處於世界領先地位的。這些奇蹟，很多都是由名不見經傳的內地移民創造出來的。可惜，新一代的香港人，生活環境雖然比上一代大有改善，讀書的機會也比前多了，但嬌生慣養卻令他們的求生意志也退化了。新一代的年青人，受小小挫折就怨天怨地、要生要

移民發奮下代嬌生香港社會的向上流動能力弱了，除了因為香港在經濟上已發展至國際一級水平外，還因為香港人的質素亦比前下降。過去的香港人，大部分是外來移民，他們不一定很有學識，卻不乏膽識。他們中不少是從內地偷渡來港

早

年的香港，大部分是從大陸來港的難民。他們從計劃經濟的社會來到一個市場經濟的社會，當然覺得香港社會充滿機會，可以憑個人努力不斷改善自己的生活。 Winter 2010

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反對遷拆尖沙咀百年巴士總站

甚

少有人會把自己在生活上的不幸，歸咎於商人的奸詐或政府政策的失誤。人們傾向先從自己身上找原因去解決問題，而不是一味尋求外界的援助。

死，讀完書仍不想去工作，寧願留在家裡上網打機，做隱蔽青年，試問在這種心態下，社會的經濟發展何來新的動力。香港過去的經濟轉型，皆不是靠政府去指引的，而是由民間自己去探索出來的。但新一代的香港人卻不想去冒風險，他們希望畢業後，政府可以幫他們提供工作機會，最好規定給他

香

們比市場更高的工資。他們覺得出社會工作三、五年後，就應該有條件買樓。如果買不起的話，政府就得多建一些廉價的居屋。然而，靠政府政策照顧的生活，只會走向公平齊一，不可能有個人的突破與向上。政黨只能為我們爭取齊一的最低工資，而不是高人一等的報酬。靠政府的房屋政策，也不可能讓

港人要向上流動，先要調整自己的目光。

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人人入住豪宅。香港人要向上流動，先要調整自己的目光。

鳴謝AM730給予轉載施永青是一位出生於上海的企業家，現居於香港。他是香港中原集團及報紙AM730的主席。施永青（二零零九年十月二十三日）。移民發奮下代嬌生。AM730，C觀點。施永青（二零零九年十月二十七日）。向上流動力為何少了。AM730，C觀點。施永青（二零零九年十月二十八日)。群策難創新天。AM730，C觀點。

The HK Freeway

Thinking Through the Minimum Wage David O’Rear shows that evidence from other price-fixing exercises indicate that getting it wrong can be expensive 阿野

In the second quarter of this year, when the Census and Statistics Department conducted its most comprehensive wageand-employment exercise in history, 278,000 full-time employees earned less than $4,000 per month. A further 40,000 part-time workers earned less than that amount, for a total of 318,000 out of 3.35 million. Add 199,900 unemployed people (a 5.4% unemployment rate) and the total reaches 518,000 people who either have no job (and wish they did), or earn less than $4,000 per month for either full- or part-time work. That is equal to 14% of the labour force, and is the worst-case scenario for the impact of a $4,000 a month ($22.50/hr) statutory minimum wage. In the worst case, all employees below a (presumed) $4,000 wage rate are declared to be illegally employed. Rather than raise their wages, their heartless employers simply fire each and every one. This is perfectly legal, and immediately increases the unemployment rate from 5.4% to 14%, and sends the CSSA caseload soaring. Obviously, the worst-case scenario needn’t be the most likely scenario, but when considering comprehensive new legislation, it can be a really good idea to know what the downside might be, and who will be most effected. After all, if the

unemployment rate is going to nearly triple, it might be useful to budget for more welfare spending.

Price fixing A statutory minimum wage is nothing more than a form of price fixing: no transactions are permitted below the legal minimum price for an hour’s labour. Without such a law,

wages are set by the market every time a willing employer agrees to hire a willing employee. Evidence from other price-fixing exercises indicate that getting it wrong can be expensive. In Europe, lakes of surplus milk and mountains of cheese were the legacy of a mispriced policy some years back. The consequences for the families Winter 2010

Laihiu

The HK Freeway

Beware – objects in the mirror may be closer than they appear. What will the minimum wage impact be on wet markets?

of workers priced out of the market are more severe, and must be taken into account when fixing the price of labour. Having disposed of the worstcase scenario, what might be a more likely outcome? Clearly, there will be some workers earning less than the minimum wage who will not be laid off, and just as clearly there are others who will lose their livelihoods. To gauge a more likely scenario, it is necessary to guesstimate the ratios of these two groups. Scenario 1 assumes (without any basis, but purely as an exercise in methodology) that two-thirds of all employees earning less than $3,000 a month are fired, and one-third of

those earning between $3,000 and $4,000. The extra 126,000 people added to the existing 199,900 unemployed would, by simple math (and, by law), increase the unemployment rate from 5.4% to 8.4%. Scenario 2 assumes, on the same basis, that the minimum wage is set not at $4,000 ($22.50/hr), but at $5,000 per month ($25/hr). At that level, it stretches credibility to assume that anyone earning less than $3,000 will remain employed. That adds 154,000 to the ranks of the unemployed. If we apply our arbitrary two-thirds / onethird rule to those earning $3,000 to $4,000 and $4,000 to $5,000

(respectively), the price in terms of newly unemployed rises by 418,000, to 11.4% of the labour force. The three scenarios sketched above use cold data and simple math to show what might be the consequences of getting the price of labour wrong. As is the case with almost all economic models, no consideration is given to the lives of the people affected, or the cost to the public purse to provide them with some form of assistance. One may rant and rave against the stone hearts of employers unwilling to drive their businesses into the ground in order to pay workers 30% or 60% more, but one also might hope that those responsible for setting the legal minimum price for an hour’s work also take into consideration the possible effects on those unable to command a higher wage. Did I mention that between 63% and 66% of the newly unemployed would be women? And, that equally high proportions would be less well educated, less skilled, less experienced and generally less fortunate than the average worker? (c) Hong Kong General Chamber of Commerce, 2009. Reprinted by permission. David O’Rear is Chief Economist at the Hong Kong General Chamber of Commerce.

ne also might hope that those responsible for setting the legal minimum price for an hour’s work also take into consideration the possible effects on those unable to command a higher wage. 22

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The HK Freeway

徹底考慮最低工資

歐大衛指出其他的定價實例顯示，定價不當或會帶來沉重的代價阿野

今

年第二季，當政府統計處進行歷來最全面的工資及就業調查，278,000 名全職僱員每月賺取少於4,000元，另有40,000名兼職員工賺得更少，即在總勞動人口的3,350,000人之中，合共318,000人的每月收入少於4,000 元。再加上199,900名失業人士（5.4% 失業率），令無業（但願只是失業）或每月收入4,000元以下的全職/兼職人士總數達到518,000人，相當於勞動人口的14%，而這正是法定最低工資設於每月4,000元（每小時22.50 元）可能造成的最壞影響。在最壞的情況下，月薪低於（假設）4,000元的所有僱員均屬非法聘用。無情僱主只會把他們一一解僱，卻不會增加他們的工資。此舉是絕對合法的，而且會即時把失業率由5.4%提高至14%，綜援個案亦會急增。顯然，最壞的情景未必是最可能出現的情景。但當全面考慮到新法的實施，事先了解可能發生的負面情況及誰會最受影響，也不失為一個好主意。畢竟，假如失業率將上升至現在的三倍，則或許需要預留更多福利開支。

定價法定最低工資只是定價的一種形式：任何交易都不可少於勞動時薪的法定最低價格。如果沒有這條法例，則每次均由一名僱主願意聘用一名僱員時由市場自由釐定工資。其他的定價實例顯示，定價不當或會帶來沉重的代價。在歐洲，多得有如排山倒海的過剩牛奶和芝士是

幾年前定價失誤的政策後果。大量勞工因身價過高而被逐出市場的後果將會嚴重影響他們的家人，因此在設定勞工價格時，必須考慮這個因素。撇除最壞的情景，會有甚麼更可能出現的結果？無疑，部分賺取少於最低工

資的工人將不會被開除，但也有其他工人將會失去生計。要推算一個更有可能出現的情景，我們需要估計這兩班人的比例。情景一假設（沒有任何基礎，純粹以方法論的角度分析）三分之二每月賺取少於3,000元的僱員及三分之

Winter 2010

The HK Freeway

Laihiu

一每月賺取3,000至4,000元的僱員被解僱。失業人口會由現時的199,900 人，額外增加126,000人，以簡單的數學（和法律）角度來看，失業率會由5.4%上升至8.4%。在相同的基礎下，情景二假設最低工資並非設定於每月4,000元（每小時22.50元），而是5,000元（每小時25元）。在這個水平上，相信所有賺取少於每月 3,000元的人都不會繼續受到僱用，即是有154,000人會加入失業行列。如果我們把上述那三分之二/三分之一的標準（分別）套用於那些賺取

也 24

3,000至4,000元及4,000至5,000元的人士，代價會是額外增加418,000人失業，推高失業率至11.4%。以上三個假設情景利用冷數據和簡單運算來顯示工資定價錯誤或會導致的後果。正如幾乎所有的經濟模型一樣，這未有考慮到受影響人士的生計，或為他們提供援助所涉及的公帑成本。有人可能會斥責僱主的麻木不仁，不願為員工多付 30%或60%的工資，也有人或會希望那些負責設定法定最低時薪的人，能夠考慮到最低工資對沒有能

力支付更高工資的僱主可能造成的影響。我有否提及過有63%至66%的新失業大軍將會是女性？我又有否說過，那些學歷較低、技術較低、經驗較少和普遍較為不幸的工人同樣會佔較高比例？

有人或會希望那些負責設定法定最低時薪的人，能夠考慮到最低工資對沒有能力支付更高工資的僱主可能造成的影響。

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The Bilingual Ban That Worked Heather Mac Donald vindicates English immersion in California based on rising test scores – but notes students are still struggling D. Sharon Pruitt

widen the achievement gap. Unless Hispanic children were taught in Spanish, the bilingual advocates moaned, they would be unable to learn English or to succeed in other academic subjects. California’s electorate has been proved right: Hispanic test scores on a range of subjects have risen since Prop. 227 became law. But while the curtailment of California’s bilingual-education industry has removed a significant barrier to Hispanic assimilation, the persistence of a Hispanic academic underclass suggests the need for further reform.

How to teach English learners has been a point of controversy for decades – from the passage of the 1968 Bilingual Education Act, which required schools to offer bilingual education, to Proposition 227.

As Hong Kong “fine-tunes” its own mother tongue teaching policy, it is advantageous to gleam insight from other jurisdictions’ experiences.

n 1998, Californians voted to pass Proposition 227, the “English for the Children Act,” and dismantle the state’s bilingual-education industry. The results, according to California’s education establishment, were not supposed to look like this: buttoncute Hispanic pupils at a Santa Ana elementary school boasting about their English skills to a visitor. Those

same pupils cheerfully calling out to their principal on their way to lunch: “Hi, Miss Champion!” A statewide increase in English proficiency among all Hispanic students. Instead, warned legions of educrats, eliminating bilingual education in California would demoralize Hispanic students and

Linguistic theory as a political agenda The counterintuitive linguistic claims behind bilingual education were always a fig leaf covering a political agenda. The 1960s Chicano rights movement (“Chicano” refers to Mexican-Americans) asserted that the American tradition of assimilation was destroying not just Mexican-American identity but also Mexican-American students’ capacity to learn. Teaching these students in English rather than in Spanish hurt

he counterintuitive linguistic claims behind bilingual education were always a fig leaf covering a political agenda. Winter 2010

Policy Close to Home

oung children are not language sponges,” asserts McGill University psychology professor Fred Genesee, defying centuries of parental observation. “

their self-esteem and pride in their culture, Chicano activists alleged: hence the high drop-out rates, poor academic performance, and gang involvement that characterized so many Mexican-American students in the Southwest. Manuel Ramirez III, currently a psychology professor at the University of Texas at Austin, argued that bilingual education was necessary to ensure “the academic survival of Chicano children and the political and economic strength of the Chicano community.” The role of American schools, according to this nascent ideology, became the preservation of the Spanish language and Mexican culture for Mexicanorigin US residents. Novel linguistic theories arose to buttress this political platform. Children could not learn a second language well unless they were already fully literate in their native tongue, the newly minted bilingualed proponents argued. To teach English to a five-year-old who spoke Spanish at home, you had to instruct him in Spanish for several more years, until he had mastered Spanish grammar and spelling. “Young children are not language sponges,” asserts McGill University psychology professor Fred Genesee, defying centuries of parental observation. Even more surprisingly, the advocates suddenly discovered that the ability to learn a second language improved with age – news to every adult who has struggled through do-it-yourself language recordings. 26

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Such ad hoc justifications rested on shaky scientific ground. Psycholinguistics research supports what generations of immigrants experienced firsthand: the younger you are when you tackle a second language, the greater your chances of achieving full proficiency. Children who learn a second language early in life may even process it in the same parts of the brain that process their first language, an advantage lost as they age. Only one justification for bilingual education made possible sense. The bilingual theorists maintained that children should be taught academic content – physics, say, or history – in their home language, lest they fall behind their peers in their knowledge of subject matter. But this argument applied most forcefully where bilingual education has always been the rarest: in high school, where, one would hope, teachers use relatively sophisticated concepts. In the earliest grades, however, where bilingual education has

always been concentrated, academic content is predominantly learning a language – how to read and write B-A-T, for example. Moreover, most Hispanic children who show up in American elementary school have subpar Spanish skills to begin with, so teaching them in Spanish does not provide a large advantage over English in conveying knowledge about language – or anything else.

The bilingual-education crusade The bilingual-education crusade also contained patent inequities that never seemed to trouble its advocates. If teaching a nonnative speaker in his home tongue was such a boon – if it was, as many argued, a civil right – bilingual education should have been provided to every minority-language group, not just to Hispanics, who have been almost the exclusive beneficiaries of the practice. If instructing non-English-speaking students in English was destructive, it would damage a school’s sole Pashto speaker just as much as its Hispanic majority. But minority rights, usually the proud battle cry of self-styled progressives, invariably crumpled before brute political power when it came to bilingual ed. “If it could benefit 82 percent of the kids, you don’t have to offer it to

f teaching a nonnative speaker in his home tongue was such a boon – if it was, as many argued, a civil right – bilingual education should have been provided to every minoritylanguage group, not just to Hispanics, who have been almost the exclusive beneficiaries of the practice.

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hey publicly promote bilingual education as a pedagogically superior way to teach Hispanics English and other academic subjects, even as they privately embrace the practice as a means for ensuring that Hispanic students preserve their Spanish. opposed Prop. 227 in 1998, when he was directing the education school at the University of California at Davis – hates it when proponents of English immersion in America point to the success of French immersion in Quebec. The English-speaking Quebecois don’t risk losing English, Genesee says, since it remains the predominant Canadian tongue and is a “high-prestige language.” Whereas if you start American Hispanics off in English, Genesee maintains, “they won’t want to speak Spanish” because it is a “stigmatized, low-prestige language.” Genesee’s argument exposes the enduring influence of Chicano political activism on academic bilingual theory. Hispanic students do risk losing their home tongue when

S.G.

everyone,” says Robert Linquanti, a project director for the governmentsupported research organization WestEd. Nor did bilingual-education proponents pause long before counterevidence. In 1965, just as the movement was getting under way in the United States, the Canadian province of Quebec decided that not enough Quebecois children were learning French. It instituted the most efficient method for overcoming that deficit: immersion. Young English-speaking students started spending their school days in all-French classes, emerging into English teaching only after having absorbed French. By all accounts, the immersion schools have been successful. And no wonder: the simple insight of immersion is that the more one practices a new language, the better one learns it. Students at America’s most prestigious language academy, the Middlebury Language Schools, pledge not to speak a word of English once the program begins, even if they are beginners in their target languages. “If you go back to speaking English, the English patterns will reassert themselves and interfere with acquisition of the new grammatical patterns,” explains Middlebury vice president Michael Geisler. McGill professor Genesee – who

taught in the majority language. Such linguistic oblivion has beset secondand third-generation immigrants throughout American history – not because of the relative status of their home languages but simply because of the power of language immersion and the magnetic force of the public culture. But bilingual-ed proponents know that most Americans don’t view preserving immigrants’ home tongues as a school responsibility. So they publicly promote bilingual education as a pedagogically superior way to teach Hispanics English and other academic subjects, even as they privately embrace the practice as a means for ensuring that Hispanic students preserve their Spanish. The early Chicano activists sought the “replacement of assimilationist ideals . . . with cultural pluralism,” writes University of Houston history professor Guadalupe San Miguel, Jr. in his book Contested Policy. Bilingual education was the activists’ primary weapon in fighting assimilation because, as they rightly understood, Englishlanguage teaching is a powerful tool for encouraging assimilation. In a country as diverse as the United

Twelve years after California voters approved Proposition 227, test scores show improvement but some teachers say the law has not worked and needs to be changed.

Winter 2010

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States, fluency in the common tongue is an essential bond among citizens, and the experience of learning it alongside classmates of different ethnic origins reinforces the message that Americans share a common culture. Bilingual-ed proponents often accuse immersion advocates of opposing multilingualism or wanting to stamp out Spanish. This is nonsense. But it is true that maintaining students’ home language for the sake of strengthened ethnic identity is no part of a school’s mandate. Its primary language duty, rather, is to ensure that citizens can understand one another and participate in democracy.

The spread of bilingual education Despite its conceptual contradictions, bilingual education spread inexorably through the federal and state education bureaucracies. The National Education Association, undoubtedly whiffing a jobs bonanza

for its unionized members, produced a report in 1966 arguing that teaching Hispanic children in English hurt their self-esteem and led to underachievement. In 1968, Congress passed the Bilingual Education Act, which provided federal funds for bilingual teaching. When not enough school districts applied for the funds, advocacy groups sued, claiming that the districts were violating Hispanic children’s civil rights. The federal Department of Education agreed, issuing rules in 1975 that penalized schools for not establishing bilingual programs for their non-Englishspeaking students. Though the Reagan administration cut back on several bilingual-education mandates from the Ford and Carter years, the federal bilingual bureaucracy remained firmly entrenched for decades. In California, which contains the vast majority of the country’s so-called English learners – students from homes where a language

hough the Reagan administration cut back on several bilingual-education mandates from the Ford and Carter years, the federal bilingual bureaucracy remained firmly entrenched for decades. 28

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Eric James Sarmiento

ilingual-ed proponents often accuse immersion advocates of opposing multilingualism or wanting to stamp out Spanish. This is nonsense. But it is true that maintaining students’ home language for the sake of strengthened ethnic identity is no part of a school’s mandate.

other than English is regularly spoken – the rise of the bilingual machine was swift and decisive. The 1976 Chacon-Moscone BilingualBicultural Education Act declared that bilingual education was the right of every English learner. Elementary schools had to provide nativelanguage instruction if they enrolled a certain number of English learners; bilingual education in the lower grades became the default mode for anyone with a Hispanic surname. (Hispanics have always dominated the “English learner” category. In California, they make up 85 percent of all English learners; the nextlargest language group – Vietnamese – constitutes just 2.4 percent.) Even after Governor George Deukmejian refused to reauthorize the Chacon-Moscone bill in 1987, the bilingual establishment in Sacramento continued to enforce the law’s mandates. The state’s department of education sponsored numerous conferences and reports alleging that bilingual education was necessary for Hispanic success and showered an additional $5,000 a year on bilingual teachers. Administrators and teachers in heavily Hispanic areas often saw themselves as part of the Chicano empowerment movement. “You weren’t worthwhile if you didn’t speak Spanish,” recalls a Santa Ana teacher. “The attitude was: ‘No one should teach our kids but native language speakers.’” Bilingual-education theory posits a carefully calibrated, multiyear

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any low-skilled native Spanish speakers were lured into the education profession by the generous stipends available to bilingual teachers, but they didn’t speak English well enough to make the transition into English teaching. transition from all-Spanish to allEnglish classes, with the proportion of each language changing every year. An exacting realization of that theory with highly qualified teachers would likely not do irremediable harm – precisely because children are language sponges. But the reality of bilingual education in California was very different. Many low-skilled native Spanish speakers were lured into the education profession by the generous stipends available to bilingual teachers, but they didn’t speak English well enough to make the transition into English teaching. English instruction, when it happened at all, was haphazard and unsystematic, recalls Jane Barboza, director of Student Support Services for the Green Dot Charter Schools. “It was left to the end of the day or to the playground. You’d sing ‘Old MacDonald,’ accompanied by a guitar,” she says. Jose Hernandez, the elementary education coordinator for District Six in the Los Angeles Unified School District, admits: “We never implemented bilingual education with the idea of moving kids into English; we weren’t great at delivering the dual-language aspect of it.”

Opposing the bilingual movement Such problems were not lost on parents. In 1996, a group of them

in the Ninth Street Elementary School in downtown L.A. tried to remove their children from allSpanish classes and place them in English immersion. When their letters and petitions produced no response, 63 families, organized by poverty advocate Alice Callahan, pulled their children out of classes in protest. The school was jeopardizing their children’s futures by not teaching them English, these poor Central American garment workers maintained. Case in point: after six years in Ninth Street’s “bilingual” program, reported Jill Stewart in New Times LA, a fifth-grader wrote the following passage for his English class: “I my parens per mi in dis shool en I so feol essayrin too old in the shool my border o reri can grier das mony putni gire and I sisairin aliro sceer.” (In fairness to bilingual education, whole-language theory should probably share the blame for that gibberish. Whole language, then dominant in California schools,

holds that children should not be instructed – and by no means corrected – in phonics, grammar, or spelling.) The Ninth Street boycott caught the attention of Silicon Valley software entrepreneur Ron Unz. Stunned to learn that schools were imprisoning children in Spanish classes against their parents’ will, Unz, along with Santa Ana teacher Gloria Mata Tuchman, drafted a ballot initiative that mandated that all children be taught “overwhelmingly” in English and integrated into mainstream classes, following one year of specialized English instruction. Waivers for bilingual education would be granted only on an individual basis, following a parental request and a school certification that the child had “special . . . needs” that made a bilingual setting more appropriate. Unz could not refrain from an ironic jab at bilingual theory: “All children in California public schools shall be taught English by being taught in English,” announced the English for the Children Act. The national bilingual-education establishment reacted with fury. Unz was a nativist who wanted to eradicate Spanish and drive out immigrants, it charged. Dismantling bilingual education would put “generations at risk,” as the title of a 1998 educrat conference convened

hen their letters and petitions produced no response, 63 families, organized by poverty advocate Alice Callahan, pulled their children out of classes in protest. The school was jeopardizing their children’s futures by not teaching them English. Winter 2010

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nz could not refrain from an ironic jab at bilingual theory: “All children in California public schools shall be taught English by being taught in English,” announced the English for the Children Act.

M. & J. Hensdill

by the University of California at Riverside proclaimed. Joseph Jaramillo, staff attorney for the Mexican American Legal Defense and Educational Fund, told the Los Angeles Times that the proposition “would send many California schools into crisis because they would be stripped of the very tools necessary to bring children into the mainstream.” The establishment pointed to studies that showed that bilingual education produced better results than English immersion – and it still points to them whenever challenged. But according to Russell Gersten, an expert in educational-research design, most evaluations in the bilingual-ed field are “poorly constructed and utterly unpersuasive, consisting of makeshift, descriptive research open to multiple interpretations.” Manhattan Institute senior fellow Jay Greene conducted a meta-analysis of the extant studies in 1998. After winnowing out the vast majority on quality grounds, he found a slight edge to bilingual education in conveying academic content. But the programs he reviewed were irrelevant to California’s version

of bilingual education, Greene says: “Most were highly resourceintensive pilot programs from the 1960s that resembled French écoles or Jewish day schools. They attracted high-quality teachers and were accountable for results.” Furthermore, most comparisons of bilingual and immersion methods have an inherent bias, since bilingual regimes exempt the lowestperforming English learners from taking tests in English until the teacher deems them ready, whereas immersion regimes test a far greater percentage of English learners. The establishment marshaled President Bill Clinton and California’s political elite from both parties against Prop. 227. Unions lined up in opposition. The California Teachers Association contributed $2.1 million to defeat the initiative; the American Federation of Labor also pitched in. Jerrold Perenchio, chair of Spanish-language media conglomerate Univision, gave $1.5 million, perhaps out of a sincere belief that bilingual education was the best means of teaching his audience English. All told, those opposed to 227 spent close to $5

million, while the pro-227 forces spent less than $1 million, most of it from Unz’s own account. The vote wasn’t even close. The initiative passed, 61 to 39 percent. Though preelection polls showed 60 percent of Latinos supporting Prop. 227, only 37 percent voted for it in the end. Many may have been moved at the last minute by claims that the measure was anti-immigrant. Lawsuits to invalidate or water down 227 began the day after the vote and have continued ever since. Outside the courthouse, efforts to torpedo the initiative were hardly more subtle. The Los Angeles County Office of Education ruled that teaching “overwhelmingly in English” meant teaching in English for 51 percent of the school day; the Riverside and Vista school districts made that 60 percent. Soliciting waivers from parents to put their children back into bilingual classes became so successful a crusade in some districts that the bilingual teaching load barely budged.

Changed for the better The bureaucratic resistance wasn’t able to suppress the good news, however. In Los Angeles, young Hispanic pupils placed in immersion were absorbing spoken English far more quickly than expected and were starting to read and write in English as well, their teachers told the Los Angeles Times. The Oceanside school district, on the Pacific coast north of San Diego,

oliciting waivers from parents to put their children back into bilingual classes became so successful a crusade in some districts that the bilingual teaching load barely budged. Best Practice

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ou’ve got to see what’s happening down here,’ they said. I thought: ‘I guess it’s true, the sky has fallen.’” “‘

became the emblem for the new English immersion. Superintendent Kenneth Noonan, a former bilingual teacher himself and cofounder of the California Association of Bilingual Education, had opposed Prop. 227, but once it passed, he determined that Oceanside would follow the law to the letter. He applied the criteria for granting bilingual waivers strictly and ended up creating no Spanishtaught classes. He then sat back with considerable trepidation and waited. “Trained bilingual teachers started calling me,” he says. “‘You’ve got to see what’s happening down here,’ they said. I thought: ‘I guess it’s true, the sky has fallen.’” But when Noonan visited their classrooms, he found that these new converts to immersion were “glowing with a sense of success.” The first four months were difficult, Noonan recalls, but then the students took off. Second-grade test scores in reading rose nearly 100 percent in two years – with the average student moving from California’s 13th percentile to its 24th – after staying flat for years. These accomplishments didn’t stop protesters from holding candlelight vigils outside the Oceanside school board’s offices and from filing federal and state civil rights complaints challenging the district’s strict waiver policies. Those complaints were eventually rejected. Oceanside and its inland neighbor, the Vista Unified School District, formed a natural experiment of sorts. Advocates in Vista actively solicited waivers, and Vista officials granted

them to everyone who asked, so that half the eligible students remained in bilingual education. Oceanside’s testscore increases from 1998 to 2000 were at least double those of Vista in nearly every grade, reported the New York Times, despite the districts’ similar English-learner populations – low-income, largely agricultural Spanish speakers. Critics dismissed Oceanside’s test-score gains as nothing remarkable. But today, the Vista Unified School District has shrunk its bilingual program to minimal proportions, and its coordinator of English-language development – Matt Doyle, another former bilingual teacher – speaks like an immersion true believer: “Almost all our students come at such an early age that it’s the perfect opportunity to develop English.” Two broad observations about the aftermath of Prop. 227 are incontestable. First: despite desperate efforts at stonewalling by bilingual diehards within school bureaucracies, the incidence of bilingual education in California has dropped precipitously – from enrolling 30 percent of the state’s English learners to enrolling 4 percent. (Bilingual proponents love to cite the “low” 30 percent figure as proof that the 1998 reform was unnecessary – but that figure includes all grades from kindergarten through 12th. Bilingual

ed was always concentrated heavily in the elementary grades and rare in high school; in some districts, nearly all young Hispanic pupils were enrolled in it.) Second: California’s English learners have made steady progress on a range of tests since 1998. That progress is all the more impressive since school districts can no longer keep their lowest-performing English learners out of the testing process. In 1998, 29 percent of school districts submitted under half of their English learners to the statewide reading and writing test; today, close to 100 percent of the state’s English learners participate. Despite this, the performance of English learners has improved significantly, from 10 percent scoring “proficient” or “advanced” (the top two categories) in 2003 to 20 percent in 2009. Similarly, on the English proficiency test given to nonnative speakers, the fraction of English learners scoring as “early advanced” or “advanced” (the top two categories) has increased from 25 percent in 2001, when the test was first administered, to 39 percent this year. If the critics of Prop. 227 have the burden of proof to substantiate their warnings of catastrophe, they clearly haven’t met it.

Results But the bilingual advocates have a number of ways – some valid, others specious – to dismiss or complicate the significance of these broad trends. Drawing unassailable, detailed statistical conclusions about the consequences of 227

f the critics of Prop. 227 have the burden of proof to substantiate their warnings of catastrophe, they clearly haven’t met it. Winter 2010

Policy Close to Home

f you wanted to devise conditions that would make it impossible to resolve definitively the immersion-versus-bilingual-ed debate, California’s school policies are what you would create.

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implemented after 227, and all have been changed or replaced at least once since they were first developed. No test spans the pre- and post-227 period. Finally, after 227, California and the federal government introduced educational and accountability reforms that changed how schools interacted with students. California began measuring schools’ performance through test results in 1999 and progressively developed more sophisticated means for holding schools accountable. Soon thereafter, the state developed standards for what children should learn in each grade. And it began shifting from whole-language ideology toward phonics instruction for teaching reading. In 2002, the federal No Child Left Behind act

Richard Phillip Rücker

may be impossible, given a host of shortcomings in the data. If you wanted to devise conditions that would make it impossible to resolve definitively the immersion-versusbilingual-ed debate, California’s school policies are what you would create. The largest obstacle is California’s failure to keep longitudinal information on students. Thanks to pressure from teachers’ unions, the state cannot track a cohort of students or a single student over time. (Such a capacity would be necessary if California were to start awarding teachers merit pay, a bane of unions.) From one year to the next, all data about a specific student – his test scores, say, or whether he was taught in English or Spanish – disappears. Further, even if you could track students’ progress, you would have to account for the fact that students who enrolled in bilingual education after 227 have tended to enter school with weaker language skills than immersion students. This means that test scores that appear to show a clear advantage to immersion – in 2009, for example, only 19 percent of bilingual-ed students scored “advanced” or “early advanced” on the Englishproficiency test, compared with 43 percent of immersion students – can be dismissed by bilingual advocates as comparing apples with oranges. Second, all the tests currently used to measure students’ skills were

(NCLB) imposed even more stringent demands on schools, requiring that they improve the test scores of black and Hispanic students and English learners; the result was an intense focus on English learners, accompanied by new programs and funding. Bilingual proponents argue that English learners’ rising test scores in the 2000s reflect these other developments, not the switch to English instruction. One cannot defeat that claim statistically, since no control group exists not taught under the new federal and state standards. But a key fact weakens the bilingual advocates’ case: school districts have cut back on their waivered bilingual programs in order to meet their annual test-score targets. In 2006, for example, the Lennox School District, near the Los Angeles International Airport, announced that its persistent designation under NCLB as underperforming had prompted it to stop promiscuously handing out waivers for bilingual education. To bilingual backers, among them the California Association of Bilingual Education, this change of policy –

Since the passage of Proposition 227, students across all language classifications in all grades have experienced performance gains on state achievement tests.

Policy Close to Home

his grassroots move to English immersion was a repudiation of the claim that the best way to teach nonnative speakers English skills is to teach them in Spanish. repeated elsewhere throughout Southern California – illustrated how destructive NCLB was. But the schools may know something about the efficacy of bilingual education that the advocates do not. This grassroots move to English immersion was a repudiation of the claim that the best way to teach nonnative speakers English skills is to teach them in Spanish. The schools that have abandoned bilingual education have not regretted it. Every school that has done so in Los Angeles’s District 6 has improved its rating on California’s 800-point Academic Performance Index at least 150 points, says district elementary coordinator Hernandez.

Debunking arguments The bilingual industry also argues that Prop. 227 has failed in its mission because the gap between English learners and native English speakers on statewide reading and math tests hasn’t closed. “The 227 advocates weren’t saying: ‘Children aren’t learning English’; they were saying: ‘Look at their reading and math scores: they’re failing,’” asserts Shelly Spiegel-Coleman, director of Californians Together, the state’s most powerful bilingualeducation advocacy group. But Spiegel-Coleman is engaging in revisionist history here. Unz and others were clearly decrying Hispanic students’ lack of English proficiency. Moreover, the distinction between

learning English and showing proficiency in reading and math is undoubtedly far subtler than most voters were making. But the “persistent test-score gap” argument has a more fundamental flaw. California defines English learners as students who are less than fluent in English and who occupy the bottom rungs of reading and math achievement. To be reclassified out of English-learner status, a student must score well not just on the test of English proficiency but also on statewide reading and math tests. As soon as a student becomes more capable academically, he leaves the English-learner pool and enters a new category: Reclassified Fluent English Proficient, or RFEP. By fiat, then, the English-learner pool contains only the weakest students, whereas the native-speaker pool contains the entire range of students, from the highest achievers to the lowest. Eliminating the gap between English learners and native speakers (known as “English only” students) is logically impossible. A fairer test of how English learners are performing in relation to English-only speakers would combine English learners and RFEP students into one category and compare them with the English-only students. Yet this the state does not do. The test-score gap between English learners and Englishonly students is so large that even narrowing it significantly would take Herculean efforts. In 2003, recall, 10 percent of English learners scored

“proficient” or above in a statewide reading and writing test. By 2009, 20 percent of them did, a 100 percent improvement. During the same time, English-only students improved their performance on the same test only 32 percent, from 44 percent proficient or above to 58. The gap between the two groups nevertheless grew from 34 to 38 percentage points, because gains in the English-only category started from such a higher base level than those of the English learners.

Extraordinary gains Notwithstanding the complexities and inadequacies of the data and the persistence of the achievement gap, the steady advance of English learners on both English proficiency and academic tests vindicates Prop. 227. Had the near-elimination of bilingual education been the disaster that the bilingual advocates predicted, the state and federal accountability measures that they now tout as responsible for English learners’ improvement could not have made up for the loss of bilingual instruction. Prop. 227 changed the debate in California; widespread bilingual education is no longer on the agenda. To be sure, some die-hard districts are quietly trying to increase Spanish-language classes without attracting attention, but they are in the minority. In public, the bilingual industry finds itself reduced to fighting rearguard actions, such as demanding NCLB tests in Spanish or separate textbooks (in English) for English learners. Californians Together does not even mention bilingual education in the statement of purpose posted on its website. Asked if students should be back in Spanish classes, Spiegel-Coleman demurs: “I’m not suggesting that Winter 2010

Policy Close to Home

John Bolland

t is extraordinary, for example, to observe elementary school teachers in Santa Ana, once a bastion of bilingual education, talking to their young Hispanic students exclusively in English about the Great Wall of China. teaching them in Spanish would solve the problems.” And the transformation in the classroom has to be seen to be believed. It is extraordinary, for example, to observe elementary school teachers in Santa Ana, once a bastion of bilingual education, talking to their young Hispanic students exclusively in English about the Great Wall of China. It is just as extraordinary to see those students eagerly raising their hands to read English workbooks aloud in class. The main sign that the students are not native English speakers is an occasional reminder about past-tense formation or the pronunciation of word endings, but plenty of English-only speakers in the state need such assistance, too. Schools are not universally following the time frame set out in Prop. 227: a year of separate instruction in English followed by integration with English-only students. In some schools, English learners remain cloistered for a longer period. But regardless of classroom composition, English learners are being taught “overwhelmingly in English,” which is the most important goal of 227. Self-esteem seems fine. “I didn’t know how to speak English in first grade,” says a husky fourth-grade boy at Adams Elementary School in Santa Ana. “I just figured out at the end of the year and talked all English.” The boy’s classmates, who are sitting next to him at a picnic table under 34

Best Practice

a pepper tree for lunch, jostle to get in on the interview. They are fluent in schoolyard insults. “He’s a special ed!” one boy says of another. “I am not a special ed, you liar!” retorts the target. The fifth-grade girls at a table nearby complain that the boys are lazy. A slender girl has recently arrived from Mexico. Her translator for that day, a tiny blue-eyed girl named Lily, drapes her arm lovingly around the new immigrant and will sit next to her in all their classes, explaining what the teacher is saying. The pair and their fellow pupils amble back into the school after lunch, any signs of psychological distress well concealed. No one reports unhappiness at speaking English in class; on the contrary, they brag that it’s easy.

Conclusion Such students are clearly better off liberated from California’s inept version of bilingual education. But though test scores have risen, the educational situation for Hispanics remains troubling. Bilingual ed has come and gone, but the conditions that provided the pretext for it – Hispanics’ low academic achievement, high drop-out rates, and gang involvement – live on. The academic problems afflicting

many so-called English learners do not necessarily result from speaking Spanish at home. Students who were born here, who speak little or no Spanish, and who have been taught in English all their lives continue to be designated English learners in middle and high school because of poor test scores. They sound fluent in English, yet may read at a secondgrade level. Their vocabulary is highly constricted. As a result, the term “English learner” has taken on an unofficial new meaning: a student who knows English but whose academic skills are extremely low. (Indeed, the state bureaucracy has started referring to some black students whose academic struggles resemble those of Hispanic English learners as “standard English learners.”) A 2006 report by the National Literacy Panel concluded that the literacy problems of many officially designated English learners reflect “underlying processing deficits,” such as “difficulties with phonological awareness and working memory,” rather than languageminority status. The math skills of long-term English learners are as shaky as their reading and writing abilities, also suggesting that their academic shortcomings stem from

hough test scores have risen, the educational situation for Hispanics remains troubling.

Policy Close to Home

he math skills of long-term English learners are as shaky as their reading and writing abilities, also suggesting that their academic shortcomings stem from something other than hearing a second language at home. something other than hearing a second language at home. It is easy to find such students in Southern California: at ease in spoken English but at sea in what the education profession calls “academic English” – the conventions of writing, logic, and argument. A 17-year-old with lustrous auburn hair hanging below his shoulders and several lip studs is performing skateboard tricks outside Locke High School in Watts. Though his father’s family is exclusively Spanish-speaking, he speaks with the intonations of a black rapper and avoids Spanish. “Spanish is hard, man!” he explains. He failed ninth-grade English: “I didn’t do the homework; I’m not a baby no more.” Manny, a ninth-grader in Santa Ana, remains designated an English learner even though he has never been taught in Spanish and was born in the United States. He failed English last year, he says, “because I would mess on some problem; I didn’t do my work.” California schools could do far more to improve the performance of such students. Progressive pedagogy continues to handicap their chances of academic mastery. Though the California school system has, in theory, renounced whole-language ideology in favor of phonics instruction, long-term English learners’ phonemic awareness remains weak, high school teachers say. Grammar is not taught

systematically or explicitly enough. Separating students by ability levels is taboo, so English learners and RFEP students with academic potential stay tethered to the low performers. This summer, I observed some excellent teaching in Southern California classrooms. Santa Ana High School’s Brian Lilly stands out for his enthusiastic presentation of the joys of grammar (“Do you see how useful prepositional phrases are, people? They add detail to sentences”) and for his carefully controlled colloquies with students (the antithesis of progressive “student-centered learning”). Yet in other classrooms, I saw mindless collaborative learning exercises and lethargic traditional instruction, with teachers mechanically copying phrases into their PowerPoint projectors or asking students to alphabetize vocabulary lists. The culture that many Hispanic students bring to school, especially as they age, also hinders progress. Many high school teachers have a sense of futility about assigning homework. “I give them silent reading time in class because they’re not reading at home,” a teacher at Los Angeles’s Oscar De La Hoya Animo charter school tells me. Some

students who unself-consciously speak English in elementary school start using Spanish again in middle and high school. Gangbangers use Spanish in class to issue threats in teacher-proof code; other students take up Spanish again as an assertion of Hispanic identity. Under pressure from the No Child Left Behind act, California school districts are ramping up this year for another costly assault on the English-learner test-score gap – sending specialists to work with middle school students, establishing separate academies for Hispanic males, and increasing outreach to parents. Whether those efforts will achieve the act’s goal of closing the achievement gap remains to be seen. The fact remains, however, that the English for the Children Act has swept away a misguided drag on assimilation and routed a oncepowerful educrat interest group. The significant rise in English learners’ test scores since 1998 demonstrates that bilingual education is not necessary for Hispanic progress. Proposition 227 represents a triumph of common sense over one of the more counterintuitive pedagogical theories to emerge from the sixties’ political agitation. Reprinted with permission from City Journal Autumn 2009. Heather Mac Donald is a contributing editor of City Journal and the John M. Olin Fellow at the Manhattan Institute. Research for her article was supported by the Arthur N. Rupe Foundation.

hether those efforts will achieve the act’s goal of closing the achievement gap remains to be seen. Winter 2010

Global Perspective Policy Analysis

Clearing Up Copenhagen’s Confusion Deborah J. Seligsohn shares insight on the roles at Copenhagen – China looked good coming in, bad coming out Rainmaker

important gains in both process and substance, and that China will continue to move ahead on policies to curb energy use and carbon emissions, because such policies serve the nation’s broader developmental goals. But the public-relations black eye that China suffered shows that Beijing still has a big task ahead of it in adapting its diplomatic methods and tactics to its newly enlarged place in the global decision-making arena.

Kris Krüg

How serious would the ramifications be if binding agreements were broken?

Since the publication of this article, China and India have further acted on the Climate Pact, both giving their approval to the Copenhagen climate accord calling for voluntary limits on greenhouse gas emissions.

he “Copenhagen Accord” that emerged from December’s global climate meetings in Denmark received rather mixed reviews, and China shouldered much of the blame for the supposed failure to reach a more detailed and ambitious agreement. Accurately assessing the merit of the agreement, and whether China played a constructive or obstructive role, was difficult because of the volume of political rhetoric and blame shifting that occurred during and immediately after the talks. (Simply keeping track of the day-to-day movements of negotiations among dozens of countries, at an event attended by 45,000 people, was an almost impossible task.) Now that the dust has settled, it is clear that the Copenhagen talks did produce

Best Practice

Most activists at Copenhagen hoped for a faster timeline, but progress was made.

Kris Krüg

Global Perspective Policy Analysis

The Copenhagen talks represented a shift in world order among some of the G-8 and BASIC countries.

Nature will not compromise, and neither are some governments.

What the Copenhagen Accord says

Moreover, several big countries made large and unprecedented emissions commitments before the Copenhagen meeting started. The United States for the first time publicly pledged to reduce its annual greenhouse gas emissions, and major developing countries including China, Brazil, Indonesia and India made strong commitments to reduce the rate of growth in their emissions. It is therefore inaccurate to say that the Copenhagen process as a whole failed to produce specific emissions targets from key players. That said, the Accord leaves plenty of unfinished business. The key outstanding issues are: • The emissions targets set so far by the US, Europe, Japan and the major developing countries do not add up to the total amount of reductions most scientists believe are necessary to keep global warming within 2 degrees Celsius. • The Accord requires countries to make emissions commitments by January 31, but we do not yet know how far these will go. Developed countries must submit quantified emissions targets; most likely these will be directly connected to their pre-Copenhagen

It is true that the Copenhagen Accord fell short of the binding international agreement that most hoped would arise from the Action Plan adopted by the 2007 Bali climate summit (although in fact that plan did not call for a binding agreement – just an “agreed outcome and decision”). But climate negotiators made plain for several months before Copenhagen that only a political pact was achievable, and that much detail would have to be filled in later. The Copenhagen Accord was a crucial political breakthrough: it marked the first time that major world leaders directly negotiated and came to an agreement on this issue. The significance of this political understanding should not be underestimated. But the Accord went beyond a general agreement in principle and included several substantive results: • a commitment to keep global temperature increase within 2 degrees Celsius (though without specifying what this would mean in terms of emissions); • a mechanism for all countries – in particular the major nations that either were not party to the Kyoto Protocol (the United States) or had no mitigation obligations under Kyoto (major developing countries) – to make commitments to curb or reduce emissions; • a framework for monitoring and review of compliance with those commitments; and • significant new financing commitments. Developed countries pledged US$30 bn in the years 2010-2012, and pledged to mobilize an additional US$100 bn per year by 2020 to help cover developing countries’ costs in implementing climate policies.

he Copenhagen Accord was a crucial political breakthrough: it marked the first time that major world leaders directly negotiated and came to an agreement on this issue. Winter 2010

UK Department of Energy & Climate Change

Global Perspective Policy Analysis

Ed Miliband and He Yafei, the Chinese Vice Foreign Minister, take the opportunity for an informal bilateral at COP-15, Copenhagen.

statements. Developing countries have a somewhat looser requirement to submit “mitigation actions.” We don’t know if these will be the same as their prior announcements of emissions growth rate reductions, or more targeted programs. • The Accord is not a binding agreement. Many issues – such as international support for efforts in developing countries to curb emissions, adapt to climate change impacts, and prevent deforestation – will require binding language to become operational. • The lack of a binding treaty also makes it hard to govern a global carbon market. The Accord makes it unclear whether we are moving towards a structured global carbon market, or if carbon markets will be administered on a national or regional (e.g. European Union) basis.

Where does China stand? China committed to two important policy changes in the weeks surrounding the conference. The first is widely known: before Copenhagen opened, China committed to a 40-45% reduction in carbon intensity (carbon emissions per unit GDP) between 2005 and 2020. This pledge builds on the target in the 11th Five Year Plan (20062010) to reduce energy intensity per unit GDP by 20%, and on the renewable energy law which aims to increase renewables to 15% of the nation’s energy mix by 2020. The explicit carbon pledge entails a suite of policy actions far more sweeping than required by the earlier energy-efficiency and renewables targets. China will have to build systems to track carbon dioxide emissions (rather than just energy content); expand existing policies such as those compelling industrial energy 38

Best Practice

efficiency; impose efficiency or emissions targets on additional sectors such as buildings and transportation; and resolve implementation programs in existing programs. One example of the latter is an amendment to the renewable energy law, passed after Copenhagen meetings, that mandates power grids to buy all electricity generated from wind and solar projects. The second new commitment, which has received far less attention, was China’s agreement at Copenhagen to publish more information and data about its progress on curbing emissions. The Accord requires that all countries publish their climate change mitigation activities “with provisions for international consultations and analysis.” It also requires countries to publish information on their climate change programs, including greenhouse gas inventories, every two years. This will be a challenge for many developing countries, including China, which have not found it easy to assemble this data and report it regularly. China has published only one official greenhouse gas inventory, and began work on the second over two years ago. Producing this data more frequently will require great logistical effort both in China and in other developing countries. But the payoff will be greatly improved international understanding of what developing countries are doing to mitigate climate change, and improvements in developing countries’ ability to manage their own processes.

Let’s ‘do the math’ Much of the debate about the success or failure of Copenhagen, and whether China was helpful or hurtful, revolved around numbers. Three statistics caused particular conflict: China’s own carbon intensity target; US negotiator Todd Stern’s claim that developing countries account for 97% of new carbon emissions; and Europe’s proposal for a 50% reduction in global carbon emissions, and an 80% reduction in developed country emissions, by 2050.

uch of the debate about the success or failure of Copenhagen, and whether China was helpful or hurtful, revolved around numbers.

Global Perspective Policy Analysis

S negotiator Todd Stern attracted international press attention by asserting that 97% of additional carbon emissions in future will come from developing countries, and urging his audience to “do the math.”

Matthew McDermott

Before the conference, the biggest question was whether China’s target of reducing carbon intensity per unit GDP by 40-45% between 2005 and 2020 was really a big deal. Critics said the target simply continues China’s historic trend of gradually reduced carbon intensity, and noted that even if it were met, China’s absolute emissions could double in the 15year period, thanks to fast GDP growth. However, the expert group that has studied China’s energy structure the most systematically and for the longest time – the China Energy Group at Lawrence Berkeley National Laboratory – believes the goal is a strong one that will require substantial new action. “Achieving the goal,” the group wrote in a statement, “will require that China enhances and expands programs and investments in energy-efficient and low-carbon technologies and measures at the national, provincial, and local levels.” Once the conference got underway, US negotiator Todd Stern attracted international press attention by asserting that 97% of additional carbon emissions in future will come from developing countries, and urging his audience to “do the math.” His implication was that simple arithmetic demonstrated that developing countries should bear the major burden for reducing emissions. The number sounds compelling, until we “do the math.” Stern’s calculation takes each country’s current emissions as a baseline, and considers only emissions above that baseline. This conveniently ignores that almost 50% of current emissions come from the developed world, which accounts for less than 20% of the world’s population. Since virtually all developed countries have committed to absolute reductions in carbon emissions, Stern’s arithmetic declares that virtually none of developed countries’ future emissions count as “additional” emissions. This is technically true – but also irrelevant. All emissions affect the

global environment equally – regardless of whether they are current or “additional.” So the focus should be on total emissions, not “additional” emissions above some arbitrary baseline. Many in developing countries as well as in the climate justice movement argue that since the problem is a global one, the whole world’s population should share the burden of controlling carbon emissions. Just how that burden should be divvied up is a matter of debate. At Copenhagen, China reiterated its position that developed countries should reduce their emissions by 40% relative to 1990 – the high end of the 25-40% range that the Intergovernmental Panel on Climate Change (IPCC) calculates is needed to ensure the global temperature rise is held to within 2 degrees. My colleagues at the World Resources Institute (WRI) estimate the developed country pledges at Copenhagen would reduce those countries’ emissions by 13-19% below 1990 levels – well below the IPCC minimum. Among major countries the US is the furthest from the IPCC minimum. Chinese officials calculated that Obama’s pre-Copenhagen commitment of a 17% reduction from 2005 levels works out to a reduction of just 1% from 1990 levels by 2020. Stern responded that the true figure was 6% – higher than the Chinese figure but still well short of the IPCC minimum. Neither government specified which gases or sectors they counted. My WRI colleagues estimate that, excluding reforestation and changes in land use patterns, Obama’s pledge amounts to a 3% reduction from 1990 levels by 2020.

Reporters watch China’s Wen Jibao’s speech at Copenhagen.

Winter 2010

Global Perspective Policy Analysis

hina, however, has always based its own opposition to this formula not on per capita emissions calculations but on a claim about historic responsibility derived from the 1992 climate change treaty: that because most of the CO2 now in the atmosphere was put there by developed countries, developed countries should bear the burden of reduction.

This leads to the third numerical dispute, around the European proposal that the Accord enshrine two hard targets: a 50% reduction in global emissions in 2050, from the 1990 level; and an 80% reduction in emissions by the developed countries during the same period. Since these targets place a much heavier burden of reduction on developed countries, why did China object so strenuously to this formula? Again we need to do the math. In 1990 global emissions of CO2 were approximately 21m metric tons. Thus a global reduction of 50% would give the world a total allowance of 10.5m metric tons in 2050. In 1990, developed countries emitted 15m metric tons of CO2, so an 80% reduction would give them an allowance of 3m metric tons in 2050, or almost 30% of total emissions. Fair? Not necessarily. Today the developed world comprises less than one-fifth of the world’s population, and by 2050 that share is projected to fall to one-eighth. Thus the 50/80 proposal means that, on a per capita basis, developed countries would still be allowed to emit more than double the amount of CO2 permitted to developing countries in 2050. Developing countries have opposed this formula for years, because it locks them permanently into lower per capita emissions. China, however, has always based its own opposition to this formula not on per capita emissions calculations but on a claim about historic responsibility derived from the 1992 climate change treaty: that because most of the CO2 now in the atmosphere was put there by developed countries, developed countries should bear the burden of reduction. China’s reluctance to focus on per capita emissions is understandable: its own are rising rapidly. In 1990, China ranked 101st in the world in CO2 emissions; today it ranks 66th. (By contrast India moved from 117th in 1990 to 121st today.) The International Energy Agency projects that China’s per capita emissions will exceed the global average by 2020. 40

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A new world order? The most dramatic image to come out of Copenhagen was the picture of who was in the room when the deal was cut. The New York Times front page photograph of Barack Obama with the leaders of China, India, Brazil and South Africa (the self-labeled BASIC countries) crystallized a shift in the dynamics of global decision making. As recently as July 2009, these latter four countries (along with Mexico) were relegated to the second tier in the “G-8 plus five,” where they were the “plus” not the “G.” The G-8 then officially disbanded when the September 2009 G-20 summit in Pittsburgh agreed that all 20 countries would act as the world’s core coordination team. Twenty, however, is too large a number for effective negotiation. In practice a smaller group will be required, and the parties in the deal-room at Copenhagen are likely to be core members of that smaller group. The odd one out was Europe, which contributed half the members of the old G-8 but was absent from the final table at Copenhagen. In reality, Europe was deeply involved in the negotiations that led to the Accord – there were many rooms, so it was often hard to say who was “in the room” – but the final impression that Europe was left on the sidelines is significant. This sequence suggests several conclusions about global power relations. First, contrary to the claim that Obama allowed himself to be bullied by the Chinese, at the end of the day it was Obama who made the deal happen. Next, while the Europeans played a large role

he most dramatic image to come out of Copenhagen was the picture of who was in the room when the deal was cut.

Global Perspective Policy Analysis

he climate summit pushed China into a far more visible position than it is used to, and forced it to negotiate rapidly and to move beyond prepared positions in a way that it had never done before, causing visible discomfort in the delegation.

A final issue is why China looked so good coming into the meeting and so bad coming out of it. In the six months before the summit, China’s public relations strategy looked deft. Its aggressive demands for strong commitments by developed countries alternated with announcements of the Chinese government’s energyefficiency policies and Chinese companies’ investments in clean energy technology. Commentators led by the New York Times’ Thomas Friedman repeatedly asserted that China “got it” and the United States risked being left behind. Yet by the time Todd Stern arrived in Copenhagen, the news cycle turned against China. The international press quickly picked up on Stern’s 97% sound-bite. The Chinese delegation reacted with an indignation that began to look ham-handed. Instead of picking apart the logic of Stern’s comments, Chinese negotiators fell back on ad hominem attacks, suggesting the US negotiator “lacked common sense,” and that Western countries that had not reduced their own emissions “had no right” to speak about other countries. Over the following two weeks the atmospherics failed to improve, and even though summit produced an agreement, the Economist called the Chinese “churlish,” the Guardian alleged that China had “wrecked” the accord, and much of the media laid Copenhagen’s “failure” at China’s door. What went wrong with China’s public diplomacy? The problem was not a lack of effort. China’s UN Photo/Mark Garten

in crafting the accord, their failure to be included in the final picture symbolizes an erosion of influence due to Europe’s constitutional inability to settle on a single representative to articulate a unified position. Finally, for all the hype about the rise of the developing country powers such as Brazil, India and China – and make no mistake, that rise is real – these countries do not trust each other very much and have great difficulty in establishing common ground. Because of their diversity of interests, they cannot pick a single representative; but they are all important enough to be included at the decision-making table. That these countries were unable to make progress until Obama came in to negotiate directly bespeaks the continuing importance of the American role in global decision-making. Copenhagen also exposed some severe challenges for China’s diplomacy. As Ken Lieberthal of the Brookings Institution pointed out, the climate summit pushed China into a far more visible position than it is used to, and forced it to negotiate rapidly and to move beyond prepared positions in a way that it had never done before, causing visible discomfort in the delegation. A crucial point is that the leaders of the US, the EU and the other BASIC countries are politicians, whereas Chinese leaders are bureaucrats. Leaders brought up in the rough and tumble of electoral politics are used to facing harsh public criticism and cutting deals on the fly; Chinese leaders inhabit a more formal bureaucratic culture where public criticism is unknown and decisions are made by a slow consensus-driven process. As China becomes part of the central global political group, demands will increase for it to develop a more flexible, more political and less bureaucratic approach to international negotiations.

Losing the PR war

Secretary-General Ban Ki-moon (left) meets with Premier Wen Jiabao at the United Nations Climate Change Conference.

Winter 2010

Global Perspective Policy Analysis

and reducing carbon emissions – and developing the new technologies required to meet those goals – are in China’s national developmental interest. Immediately after the climate summit ended, China beefed up its renewable energy law, and this year will see the setting of new and possibly more ambitious energy efficiency and renewables targets for the 12th five year plan (2011-2015). Much work still needs to be done to transform Copenhagen’s political agreement into an effective global carbon-reduction regime. In that process, China looks to be a willing but tough-minded partner. First printing by Gavekal. Deborah J. Seligsohn is a Senior advisor at the World Resources Institute.

Matthew McDermott

delegation was enormous – as many as 150 members, according to some reports. The delegation included the usual negotiators and experts from the National Development and Reform Commission (NDRC) and the Ministry of Foreign Affairs, a few other ministers and their academic advisors, and a fairly large public affairs team that for the first time ran a pavilion with regular talks and press conferences. But China’s media strategy was a last-minute, firsttime effort. The young people manning the pavilion were eager to please, taking name cards and sending out notices, but they also hadn’t thought about how to handle the press. Press conferences were open to all regardless of press credentials, with no effort made to identify and cultivate the top journalists. NDRC Director General Su Wei’s first press conference was mobbed, and a number of leading international journalists couldn’t get in. As a result most of the international audience never came back to the pavilion, which was at the very far reaches of the conference center. The Chinese delegation did hold a few press conferences in the main press center, but these tended to get caught up in debates about detail, and China was unable to present the big-picture story about its energy and environment strategy. Part of the problem was inflexibility. China came to Copenhagen with a predetermined message about its domestic policy, and this message didn’t change. But international negotiations are fast-moving, and the media is hungry for new stories – in particular stories on the negotiations themselves, rather than the parties’ opening positions. The Chinese found themselves unable to move fast enough to craft subtle messages and crisp sound-bites for the 24-hour news cycle. China’s “green development” strategy came off sounding like yesterday’s news, and its comments on the negotiations were purely defensive. Yet we should recognize that China’s PR failings were just that – failures of public relations, not failures of commitment. China signed the Accord, and did so because it believes that improving energy efficiency

et we should recognize that China’s PR failings were just that – failures of public relations, not failures of commitment. 42

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China would have done well to take a lesson from others’ PR campaigns and better outfit their own.

leader’s bookshelf

An Appraisal of What the Proper Role of Government Ought to Be The Revolution: A Manifesto reviewed by Shane Lively

n Ron Paul’s libertarian treatise, The Revolution: A Manifesto, the reader is compelled to draw comparisons with other prominent idealists whose ideas, at the time, were not considered to be de rigeur, but whose central message remained years after the fashionable ideas of the current orthodoxy faded. The book itself is broken down into seven chapters. Chapter one explores the false choice in American politics, where there is little material difference between supposed political opponents in the political process. Chapters two and three explore the position of the founding fathers on foreign policy and the constitution, and compares this position to that of modern politicians who take an

increasingly expansive definition of their powers. Chapters four and five explore civil liberties, economic freedom, and admonish how supra national organisations like the WTO “‘manage’” free trade, while undermining national sovereignty. Simultaneously, these organisations also admonish the un-freedom agenda of the “conservative” movement from the “new right” of the early 1980s onwards. Importantly, chapter six explores the secretive behaviour of the Fed, currency devaluation and how governmental control over the money supply favours powerful elites in a form of indirect tax on ordinary people; it also makes an easy to

oming to this book from a country in which political discourse does not use the language of political freedom, and which does not have a tradition of constitutional rights, or a particular history of limiting governmental power, this book provides not only a critique of what appears to be broken in the American political system, but also what a government agenda of freedom really should look like for other countries.

The Revolution: A Manifesto Author: Ron Paul Grand Central Publishing New York, NY 208 pages

understand case for sound money. The fifth and final chapter outlines a blueprint for how the above can be implemented. As an Australian coming to this book from a country in which political discourse does not use the language of political freedom, and which does not have a tradition of constitutional rights, or a particular history of limiting governmental power, this book provides not only a critique of what appears to be broken in the American political system, but also what a government agenda of freedom really should look like for other countries. The Revolution was published on April 30, 2008, during Dr. Paul’s run for the Republican nomination in the 2008 presidential election, during a time that many would regard as an ideological about face in world

Winter 2010

Roxanne Jo Mitchell

leader’s bookshelf

aul’s short, accessible book examines the false choice that voters have in American politics.

Even though Ron Paul’s campaign for Presidency in 2008 failed, his message of freedom and liberty would eventually transcend popular politics.

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candidates with few disagreements on fundamentals pretend that they represent dramatically different philosophies of government.” What Paul means by this is that many structural elements of government – the Federal Reserve, the continuing decline in economic and personal freedoms, a growing welfare state and bureaucracy, an insolvent entitlement system, an overextended presence abroad, a growing budget deficit and an eventual currency collapse – are routinely ignored. During an election at a time of political and economic crisis, the average American voter does not get to witness an honest appraisal of what the proper role of government ought to be. Instead, the “false choice” means that the supposedly credible, electable “mainstream” candidates largely maintain the status quo: “should we launch pre-emptive wars against this country or that one? Should a third of our income Jayel Aheram

politics. By the time US President Obama was inaugurated on January 20, 2009, Bush’s staunchest allies, Tony Blair and John Howard, had already stepped down as heads of state of England and Australia, respectively. As their constituents rendered these leaders obsolete, the language of discourse changed. Since the late 1970s, economic and social policy has focused on the failure of the state. In the midst of the global financial crisis, political debate began to focus upon the nationalisation of banking and for the need of governmental regulation to curtail what was considered to be failures of the free market system. Despite the period from 2001-09 being characterised by an unprecedented expansion of government ranging from expansionist military spending to police-state styled attacks on civil liberties, in the mainstream media, Paul’s message of liberty was largely ignored. Despite this, during the Republican primaries, Paul’s message of individual liberty, constitutionalism, limited government and a balanced budget led to a large majority of online polls proving Paul to lead in every single positive category. Ron Paul also had the highest rate of military contributions as well as holding a one-day fundraising record of US$4.2 million. Despite Paul’s

message of freedom and the large online following he had during the election and among young people and libertarians, the American people nonetheless elected the incumbent president on a policy platform of socialised medicine, education reform and nationalisation of industry. Indeed, the mainstream media and popular culture deified Obama as a benevolent leader ready to lead the people of the United States towards a future filled with hope and change. This was in stark contrast to the humble, modest Paul, who considers himself honoured to be the inspirational figure for the increasingly visible libertarian movement. Paul’s short, accessible book examines the false choice that voters have in American politics. Revolution admonishes the current political climate in which politicians distract the people with the same, tired, predictable routine: “two

leader’s bookshelf Everett Taasevigen

Daniel Greene

be taken away by an income tax or a national sales tax?” Paul’s manifesto is an enunciation of the way in which elites retain power in representative democracies, while giving the illusion of choice. It provides a blueprint for what the agenda of the President should be if he or she wants to move toward a free society once again, regardless of political party or personal ideological preferences. If Paul’s success as a political candidate was judged on getting elected President or even Republican frontrunner, his campaign was a resounding failure. However, the campaign and his subsequent book, which reached number one on the New York Times Best Seller list, have no doubt inspired many people to organise and have a wider voice in society. More broadly than that, Revolution has encouraged many Americans to consider what the proper role of government ought to be and to question the legitimacy of supposed sacred cows such as the Federal Reserve and various social welfare institutions in political debate. At the very least, The Revolution has significantly raised awareness. The most visible example of this is the tea-party movement,

which began in 2009 as a populist reaction against Obama, the Federal budget deficit, and more specifically the stimulus package. Ron Paul notably referenced the Boston tea party during his 2008 election campaign. However unpopular Paul’s ideas as an electoral candidate were, Revolution’s message of freedom and liberty transcends popular politics. With a growing fiscal deficit, high unemployment, economic stagnation and the Fed soon to end its policy of Quantitative Easing, the issues outlined in The Revolution may have to be dealt with sooner rather than later. The best analogy that comes to mind when referring to Revolution (of which the seeds are being sewn today) is in the election campaign of Barry Goldwater. Goldwater lost by a large margin to Lyndon Baines Johnson in the 1964 election and his Vietnam war, failed social welfare

programs (that are insolvent today, such as Medicare and Medicaid), the war on poverty and public education. Yet, Goldwater is remembered as a libertarian and conservative hero, whereas Johnson is regarded as the architect of the Vietnam War and failed social welfare legislation. Goldwater’s campaign against the welfare state and federal government spending ultimately led to a revival of the libertarian movement and the co-opting of much of his message of freedom in the election of Ronald Reagan (many voters were former Goldwater supporters). Similarly, Paul’s election defeat will be regarded in history as the beginning of Paul’s Revolution. Unlike Goldwater, I just hope it doesn’t take another 16 years for freedom to win. Let the Revolution begin. Shane Lively is a Mannkal Economic Education Foundation Scholar.

aul’s election defeat will be regarded in history as the beginning of Paul’s Revolution. Unlike Goldwater, I just hope it doesn’t take another 16 years for freedom to win. Winter 2010

leader’s bookshelf

The Underlying Question for Every Policy: Will it Benefit Society? Minimum Wages reviewed by Hawkins Chin

Minimum Wages Authors: David Neumark and William L. Wascher The MIT Press Cambridge, MA 400 pages

mong all of the public policy debates in Hong Kong in recent years, no subject has been more controversial than minimum wage. However, most debates do not touch upon the root of the issue. For the most part, economists believe minimum wages will harm employment prospects. In Hong Kong, many liberal economists and some business groups argue against minimum wages as they inevitably will do more harm than good. On the other hand, labour union officials and leaders of many pressure groups criticise those economists and politicians for being “too ideological” when against minimum wage. They claim mainstream economists are out of touch with reality and their research

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on minimum wages relies too much on the axiom ceteris paribus, which assumes all other things are equal and sometimes has too narrow a focus. And yet, research on both sides of the debate wrongly focus on ceteris paribus, leading to narrow studies with skewed results. Authors of Minimum Wages, Professors David Neumark and William Wascher, highlight the problems of studies relying heavily on this axiom. Neumark and Wascher skillfully show that ceteris paribus is a doubleedged sword. It helps to provide accurate results if the researchers have chosen appropriate variables but leads to biased results if the scope of the research is too narrow. Although Neumark and Wascher are not involved in Hong Kong’s debate, they clearly answer the underlying question: whether minimum wages will benefit society or not. In Minimum Wages, Neumark and Wascher offer a comprehensive review of theoretical models as well as, and most importantly, evidence of the

economic effects of minimum wages. The authors are both experts in their fields where they have published over 30 papers over the last two decades and are very well positioned to write this review. A remarkable feature of this book is that it does not merely list and describe studies (which wouldn’t be helpful). Instead, Minimum Wages’ greatest weight and value is in its highly critical assessment and breakdown of the best studies and the worst. The book not only answers long standing questions about minimum wages leading to unemployment, it also discusses the impacts of minimum wages on the distributions of income, schooling and acquisition of skills, and aggregate economic output. Throughout the book, I was impressed with their rigour and thoroughness in the treatment of other studies in the field. The authors start the book by summarising the impact of minimum wages on employment. They discover that two-thirds of studies conclude with the result

esearch on both sides of the debate wrongly focus on ceteris paribus, leading to narrow studies with skewed results.

leader’s bookshelf

inimum Wages’ greatest weight and value is in its highly critical assessment and breakdown of the best studies and the worst. Wascher further point out other weaknesses in Card and Kruger’s study, such as the focus on short-run effects rather than long-run effects, and survey techniques which use vague telephone surveys instead of actual payroll data. Pro-minimum wage advocates criticise the liberal analytical framework – the use of ceteris paribus – while still quoting from Card and Krueger’s book which also used the same framework which resulted in erroneous conclusions. It seems that both camps rely on the axiom, however, it doesn’t mean the studies on minimum wage have no value. Neumark and Wascher answer this question by explaining the techniques employed in some of the most important studies in the field. Based on authors Neumark and Wascher’s comprehensive review of the evidence, Minimum Wages show that minimum wages do have harmful impacts on society and finishes with three concluding points. First, despite a few outliers, the literature points out that an increase in minimum wage leads to a reduction in employment opportunities for low-skilled and directly affected workers. Second, there is no evidence that minimum wages reduce the proportion of families with income near or below the poverty line. And finally, minimum wages impede skill acquisition by reducing educational attainment and training, resulting in lower adult wages and earnings. Eventually, Neumark and Wascher suggest that support

Hawkins Chin is a graduate student in Hong Kong.

Ljubisa Bojic

that higher minimum wages lead to higher unemployment. Neumark and Wascher criticise one of the most popular pro-minimum wage studies, done by David Card and Alan Krueger, which concluded in their book Myth and Measurement, that minimum wages raise employment levels. Their research used “natural experiments” – comparing the state of employment ex ante the implementation of a minimum wage, with the state of employment ex post the implementation – to study the effects on employment in New Jersey’s fast-food industry. Card and Krueger’s results erroneously showed that increases in the minimum wage not only didn’t harm employment prospects of a low-wage worker, but also promoted increases in employment. Neumark and Wascher found that the use of “natural experiments” used by Card and Krueger, like all other studies which investigate whether minimum wages lead to unemployment, could not escape the restriction of ceteris paribus. The fatal weakness in Card and Krueger’s well-known example was actually due to ceteris paribus, with the study’s data sample not large enough, nor accurate. Card and Krueger ignored all other factors (e.g. close substitutes of fast-food within the food industry) and narrowly focused solely on the fast-food industry within a particular state. The study was found to be an ad hoc example of not taking many other important variables into consideration; it was unsound science. Neumark and

for minimum wage legislation rests upon moralistic, rather than economic grounds. For example, some people may argue that paying someone HK$20 an hour is immoral. However, as argued by economists and otherwise, subjective viewpoints are not in the best of positions to make good judgements. Concerning minimum wage, we have to respect the evidence set forth, and the book Minimum Wages provides tested evidence that minimum wages definitely do more harm than good. Minimum Wages is a must read for anyone with an interest in the role and impact of minimum wages on society. The book helps contribute to the recent minimum wage debates in Hong Kong. Labour union officials, government officials and anyone from a pro-minimum wage position would benefit from an understanding of the concepts outlined in Minimum Wages. Ultimately, it can help facilitate the current debate by providing evidence-based information, separating subjective bias from real facts.

In Minimum Wages, Neumark and Wascher review studies and show minimum wage legislation will do more harm than good.

Winter 2010

odds and ends

One Disney – Two Systems Stephen Vines comments on the Government’s dream of Disney parks (in reality little more than office space and residential housing developments) and in case anyone forgets there is even a hotel in Cyberport which is wholly owned by the government. Hong Kong has long been run by bureaucrats who have an astonishing confidence in their abilities. It was in this spirit that a bunch of them, under the leadership of Donald Tsang Yam-kuen, now the Chief Executive, went into negotiations with Disney before the park opened in 2005. Hong Kong’s Mickey Mouse negotiators ended up with a deal that involved using public money to fund 90 per cent of the theme park’s costs in return for 57 per cent of the equity. And Disney ensured that even if the park was not making one cent in profit it would still be earning plenty of cash because Disney got 10 per cent of all admission charges, a 5 per cent royalty on food and merchandise sold at the park, plus a flat 2 per cent of all revenues and on top of that were management fees and incentive payments ranging from 2 to 8 per cent. This is why Disney has been able to assure its shareholders that they have nothing to worry about at its Hong Kong outpost. And, of course, this is why the Hong Kong government has done everything it can to keep quiet about the deal. If that were all it would be quite bad enough but the same bunch of suckers who cobbled together this deal made great efforts to publicize the claim that the park would yield ‘net economic benefits of up to $148 billion over 40 years’ and that 18,400 new jobs would be created. They also

Joe Penniston

hen the great history of sucker deals comes to be written there will definitely be a place for the Hong Kong government’s extraordinary deal which led to the establishment of the Disney theme park. Now, for the first time in Hong Kong, Disneyland has revealed the extent of its losses and missed targets. Actually this revelation is not as new as it sounds because Disney officials have been briefing shareholders in America since the beginning but this information was not given to Hong Kong shareholders, meaning local taxpayers. Now they know that losses are mounting, that all targets have not been met and that even the promise of profitability next year is phony because Hong Kong Disneyland will only go into the black if costs such as interest payments, depreciation and amortization are knocked out of the equation. Before considering how all this came about let us ponder one fundamental question: why on earth are Hong Kong taxpayers involved in a project which in other countries, namely the United States, Japan and France, are purely private enterprise ventures? Yup, here in supposedly free enterprise Hong Kong the government cannot resist the temptation to get into businesses which elsewhere are run by commercial companies. It’s not just Disneyland, Ocean Park, which has lost money for many years, is also a public enterprise, as are exhibition halls, so-called science

said that attendance in the first year of operation would be 5.4 million; in fact only 4.1 million people came and they promised that this figure would gradually “rise to around 10 million per annum after 15 years.” The figures for 2008-09 show that only 4.6 million people visited the park. In other words not a single government promise about Disneyland has turned out to be true. If nothing else this should serve as a serious warning to be very cautious about any economic projections the government provides when touting its latest big project. Figures tossed out by ministers concerning the new high speed railway should certainly be seen in this light. As the truth about the park emerges, the government responds by moaning about Disney’s poor management; taxpayers meanwhile are still waiting for an apology from the bureaucrats. Permission to reprint from Next Magazine. Stephen Vines is a journalist, broadcaster and businessman who has lived in Hong Kong for more than two decades. Winter 2010

odds and ends

Smoking Policy Goes Up in Flames Bruce

All the smoke signals from the rise of the tobacco tax show, despite some smokers saved, that the other harms cannot be snuffed out

n an effort to reduce the number of smokers in Hong Kong, the government bit off more than they could chew. Now problems linger, stinking like stale smoke in the air affecting community health. As some elderly, mothers and their children have been vilified as cigarette smugglers, smokers were kicked to the curb. Is this what it takes to reduce smokers in this city? There are problems with the smoking policy, much of which has been adapted from international organizations. Today, people complain about the inexhaustible cigarette smoke they face walking down urban streets – a reminder of the logic flaws inherent in this policy choice. The first negative spinoff the community endured because of this policy was the hit on newspaper vendors and infringement on property rights of private venues. Next, the inescapable smoke as smokers poured onto the street with nowhere to go. Another consequence was the swelling of black market activity, not to mention the otherwise

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unnecessary growth and spending to increase manpower in customs in response to the increase in illicit cigarettes. The most farcical in all this, recently, is that elderly and other community members are now vilified as cigarette traffickers and there is now talk to create outdoor smoking areas. In restricting outdoor smoking areas, policymakers further limit choice, the same logic which created the negative consequences in the first instance. The worst of it is that the black market trade is growing, which means youths have easier access to illicit cigarettes and the larger trade in general. Additionally, illicit cigarettes often times, if not always, are worse for your health. At this point, it would be wise for policymakers to revisit their decisions. It’s not easy to roll this up into a black and white situation. One can only narrowly blame the smokers for purchasing illicit cigarettes. It’s only logical for them to purchase the cheapest option. And you can’t blame community members wanting to make an easy buck for engaging in the illicit trade. Incentives matter. We can sympathize with all who are involved. How would you feel if, all of a sudden, the wine duty was reverted, or a favourite food had an extra 50 percent tax levied – you’d be outraged, and if it was banned, we’d have protests on the streets. Certainly the hike has helped

people quit smoking, but is it in the Government’s interest to impose behavioral changing incentives and has it been worth it? This tax is supposed to help smokers kick the habit, but if the government intended to stop people from smoking for their own health, the most effective policy would be to ban all forms of tobacco use outright. That said, implementing such a stringent policy would tarnish Hong Kong’s image, after all, the Nazi regime was the first to ban tobacco products. Moreover, what product would be next – McDonald’s and Girl Scout cookies? There are actually initiatives in the US to regulate these products – thus do not imagine Hong Kong is incapable of pursuing similar initiatives, straying from allowing informed adults to make their own decisions. The city certainly hasn’t gone that far, nor will it as far as most can see, but this is the current situation: demonizing community members, increasing illicit trade and cigarettes, endangering youths, infringing on property rights and smokers’ rights in the name of “protecting adults.” With shocking arrests involving the elderly, mothers and their children, increasing the tobacco tax has caused enough negative consequences that outsize the benefit the government originally intended. And whether it was ever their business in the first place remains a point of contention.

odds and ends

The World Needs Hong Kong and Hong Kong Needs Competition Denis Ng

Neville Kennard argues that without competitors, Hong Kong will become a victim of its own success

n the annual indexes of economic freedom, published by the Fraser Institute of Canada and another by the Heritage Foundation of the US and The Wall Street Journal, Hong Kong comes out on top year after year, followed by Singapore. Hong Kong’s famous laissez faire capitalist system works. It has made Hong Kong prosperous and uniquely successful. Low taxes, predictable rule-of-law, strong property-rights, low regulation, banking privacy and a history of “good behaviour” in the financial and political areas make it attractive to capital and talent. Meanwhile, much of the (Western) world is going down a path of higher taxes, heavy regulation, and big government. This could be the 52

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outcome of long-term success and prosperity (they are getting fat and lazy), of unfettered democracy, or simply of a tendency for governments to grow and become interventionist and expansive. One of the things that tempers the (once-prosperous) West in their clamour for more taxes and compulsion for more interventions is competition – for capital and for talent. The politicians of Western democracies are prone to promise things to voters in the hope that they will get elected. But politicians and their bureaucracies are not stupid (at least not all the time) and they know that if they raise taxes too far, or regulate too heavily, they will lose their support-base. People, particularly wealthy and skilled people, will vote with their feet and bank accounts, and move to capital-friendly and talent-friendly jurisdictions; this is where Hong Kong plays a valuable role in keeping the rest of the world honest. But Hong Kong is prone to the same forces of government growth as the West. There is pressure to intervene, to regulate (and eventually to raise taxes?). Some say Hong Kong is losing its “positive noninterventionist” tradition. Local officials find areas they think they should be involved – in the name

of “fairness” (or something). And pressure comes from international busy-bodies, like the IMF, for interventions such as Minimum Wage Laws that will, bit by bit, erode not only Hong Kong’s competitive advantage but also its dynamic culture and work ethic. It is the “Unintended Consequences” of such interventions that cause the damage. These unintended consequences can permeate into unforeseeable nooks and crannies of the economy and the society with insidious results. So while other nations need Hong Kong to keep them honest and somewhat economically free, Hong Kong too needs competition, from places like Singapore, and other capital-friendly regimes, to keep it from becoming a victim of its own success and sliding into interventionism. Hong Kong needs a strong appreciation of its specialness by reinforcing its commitment to hands-off, laissez-faire capitalism. Institutions like the small but vigorous Lion Rock Institute are needed to point out the dangers of interferences and regulations in Hong Kong’s economy. Neville Kennard is an Australian businessman now living in Hong Kong.