World Bank memos

Enzo Michelangeli em at
Sun Dec 6 19:27:31 PST 1998

-----Original Message----- From: Henry C.k. Liu <hliu at> Date: Sunday, December 06, 1998 12:45 AM

>Henry rebuts: There is now a reverse daily and monthly commute back into
>from HK as well as reimmigration because of high unemployment and lack of
>business opportunities in the current economic recession in HK. Many HK
>are in fact moving to Shenzhen when rent and food is cheaper to commute
daily to
>HK to work.

But of course: rent and food are cheaper because the average income is lower: less demand, and cheaper production. If the borders were even more open, the arbitrage would quickly drive the prices to a similar level. In fact, Shenzhen is substantially more expensive than than inner regions of China.

>Chinese tourists who spend money are promoted and welcome in HK.

Where are they not? :-)

>Also, you are stretching it to call HK a free market rather than the
>that it really is.

Oligarchy is a term referring to the political environment, not to the economic one. HK of course still suffers from colonial arrangements protecting the interests of the British hongs; on the other hand, small and medium enterprises and retail sector are remarkably freer than in most other places. What bugs me in China's attitude is that they seem eager to take the place of Britain, taking over monopolies and oligopolies instead of dismantling them. Luckily, in some area (e.g., telecommunications) there are improvements: but they seem to be driven more by the need of competing with other countries than by sincere reformist spirit. Which confirms my deep feelings: "globalization = good; state-nations = bad".

>Also, the high wages (which is coming down very fast, faster the comsumer
>prices) in HK are neutralized by higher cost of living.

Nope, the cost of living is high _because_ the wages are higher, and abundant demand chases a scarce supply. In recessionary times, of course, the prices come down, and they go up during boom times.

>There are higher rate of suicides and family violence due to financial
>in HK than on the mainland.

I would be more sure about that if the Mailand had a free press...

>> So much for the beneficial effects of state ownership.
>What about LTCM, Berrings, the Savings and Loan Crisis, the nuclear energy
>industry, the insurance industry, defense waste, even scandals in the baby
>Fraud is everywhere, not only under socialism.

Sure, but socialism (or at least its commonly-implemented garden variety, based on state ownership) tends to eliminate competition and accountability. "Hey, the company is controlled by the Government, which is controlled by the Party, which is expression of the People: how can anything be less than perfect?"

>The Grain account scandal showed precisely it was a Confucian structural
type of
>social corruption and not one or two bad individuals pocketing the cash to
>on the beach in the French Riviera.

Aha, so there ARE corrupt officials after all: and it's a structural problem. (But why blame it on poor Kung, who wrote that it's preferable to live on a tiger-ridden mountain rather than under a corrupt bureaucracy?)

>They are try hard relocate to China if China would open its markets to
them. GM
>has invested over US$2 billion in China already and Ford and
>are competing fiercely to follow. GE has over US$1 billion in China.
Boeing is
>laying off 48,000 workers because of the Asian crisis.

Well, so far investments from car manufacturers (e.g., Volkswagen) have not been very successful. And primarily, as you say, their real target is access to the local market.

>> I think you are kidding. Just last week, Legco has blocked changes to the
>> current rules about electricity generation, not to "discourage the
>> investors".
>That is precisely my point. HK's "free market" requires a higher rate of
>to capital than in China.

It depends to produce what: international trade is mutually beneficial precisely because of comparative advantage.

> HK should just buy electricity from China at low cost
>and forget about generating its own at high environmental abuse. The
>independent power source strategy was merely a left over relic of the Cold
>and British colonialism
>For once, you got it right, ;-)

Gee, glad to see that, occasionally, we can agree on something ;-)

>Nothing is just a fact of life. Humans are their own masters. We can ban
>environmental and labor abuses. Humans can make rational decisions under
>enterprise, remember, you said so yourself.

Yes, but they should be based on a cost/benefit analysis.

>That fact is: market capitalism is not as desirable as you claim and
>is not doomed to fail as you predict.
>I can even understand why rich capitalists support capitalism because they
>well rewarded by it, although many with a conscience have reservations and
>to buy self respect through philanthropy. But I find liberal think tank
>propaganda to poison the unknowing middle and working classes obscene.
>the slaves that slavery is good for them just does not wash. What I resent
>in that the pervasiveness of market capitalism forces a lot of good people
>participate in bad activities just to survive.
>A good social system should be one that ordinary people can do good things
>naturally, and not to have to play down their guilt in order to survive.

When you find one that works, drop me a note. 3,500 years of Buddhism or 2,000 of Christianism have managed to achieve, for liberation and welfare of humankind, much, much less than a couple of centuries of polluting industrial revolution and selfish capitalism.

>Note the emergence of socially conscious mutual funds in America. Do you
>these investors hate money?

No, they are only gullible by slick fund managers who peddle "how to get rich while at the same time saving your soul".

>Don't forget to change the filter on you air conditioner. I want you to
stay in
>good health to continue the debate,

Thanks, my windows are open on a crisp and sunny day. I can even see Lantau


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