Hong Kong social land management

Chris Burford cburford at gn.apc.org
Sat Dec 26 15:34:10 PST 1998

At 09:42 PM 12/24/98 -0500, Michael Hoover wrote wrote:
>discovered below in stored file:
>> By having essentially no landed capital in Hong Kong, what the government
>> gets is not a tax, it is actually the ground rent. Under either system it
>> could be said that such charges raise property prices and production
>> I do not wish to prettify this, but to make a fundamental point about the
>> tactical and strategic possibilities of left-wingers isolating and
>> attacking landed capital, and eliminating it, *because Hong Kong shows it
>> can be done*. I accept it would therefore be more correct to say in line
>> with this analysis that the capitalist Hong Kong system is one in which
>> there is only one landed capitalist, the government. It is a state
>> capitalism in land.
>> Nevertheless this may provide a transitional form which *with class
>> struggle* could be used to slice up the capitalists, and move towards more
>> effective socialisation of the market.
>> Chris Burford
>> At 07:57 AM 11/14/98 -0500, Michael Hoover wrote:
>> >because the gov't land policy is used to raise revenue, it is
>> >taxation in the form of higher property prices and rents...the
>I meant to place word taxation in quotation marks, although ground
>rent would be correct term...point is the deriving of surplus value,
>allow me to play devil's advocate here for a moment: HK gov't land
>policy has kept direct taxes low and resulted in large budget
>surplus that is, in effect, 'taxation' in excess of public spending
>needs that should be returned to 'the people' or spent on public
>& social services...real cause of housing crisis lies with govt's
>high-land-price policy which deliberately restricts private sector
>housing supply, so gov't intervenes in market with subsidized
>housing program, also paid for 'the people'...barriers to entry
>in the property market undermine people's interests, because
>the market is not very contested, no new firms have become
>significant suppliers of new housing stock...more market based
>solutions to balancing long -term supply with demand and to
>increase competition in property development market is needed...
>as for suggestion that leftists can seize control of the existing
>capitalist state (even a state monopoly one) for socialist
>purposes, didn't Marx write something to the contrary about
>workers doing that? Michael Hoover

Sorry I could not get back earlier on this with a considered reply.

OK we are agreed that ground rent would be the more precise term. I think in a post around this time I also agreed that as the Hong Kong regime is capitalist it would be correct to say that this state ownership of land is state capitalist land ownership. I am not arguing that it is inherently socialist, but just the form allows it to be used in capitalist or socialist ways.

Concerning the devils advocate arguments -

Ground rent is like taxation, but my understanding is that in marxist theory, rent to the landowning class is a first charge on all economic activity involving land - a sort of taxation to the landowning class. So it seems better it goes directly to the state without having to support a landowning class.

As to whether any of this money "should" be returned to the people, that is a question of the class character of the state, although different classes will have their own moral views on this question. And the state is capitalist.

About the government restricting the land available for housing and therefore raising the price of land leases - we would need concrete information about how much this is the case. My understanding is that the government has managed land from the point of view of rational planning for industrial capital. But the system certainly does depend on town planning, with the town/state reaping the gains from increased economic activity on the edge of cities, instead of farmers, or other landowners getting windfall capital gains from a change in economic usage.

Some of the other devils advocate arguments are about the benefits of competition. Well under managed capitalism or market socialism, the benefits of competition are not denied but seen to be relative.

As for the more substantive strategic argument:

>>as for suggestion that leftists can seize control of the existing
>capitalist state (even a state monopoly one) for socialist
>purposes, didn't Marx write something to the contrary about
>workers doing that?

Guess he did. But he also wrote, and Doug quotes him several times in Wall Street that capitalism produces forms that may be used under socialism. The essence is class struggle.

Contrary to Henry's assumptons under this thread title, which he joined 3/4 of the way through I have by no means been arguing that Hong Kong's relative prosperity derives mainly from this. It derives mainly from having a plentiful supply of cheap labour that has flowed into an area of conctrated capital, creating a virtuous circle of capitalist accumulation.

I have pursued this thread about Hong Kong to demonstrate two things.

1) They were able to resist free market fundamentalism. The defiance by the Hong Kong government of the "contagion" spread by the hedge funds in August 1998 was a turning point in what New Left Review has call the crash of neo-liberalism. I have kept a clipping from Fortune dated November 23rd by Jim Rohwer entitled Hong Kong's Folly. At that date he admitted that the Hang Seng was 40% above the August low. The figures I quoted from Asiaweek for Dec 25th show it to risen further to 55% above the August low.

2) Even more interesting is the land question, which is what Michael has come back to me on. Although the market in leases is run in a capitalist way, the freehold ownership of land is with the state. I suppose logically critics could say that Hong Kong's resilience as a capitalist state, is in spite of this, but no one has put forward the arguments. I submit that it is perfectly clear from the case of Hong Kong, that industrial capital does not necessarily need landed capital, and indeed with a government sympathetic to business, land policy may be managed more rationally from the point of view of industrial capital.

Indeed the figures from Asiaweek suggest that the recession has hit landvalues in Hong Kong far harder than industrial stock values. This is economically rational as a way out of the capitalist business cycle. Instead of being stuck in stagnation like the Japanese, trying to find a way to write off vast quantities of capital in overvalued banks who built up excessive holdings in land, that are now uneconomic, the capital in land leases in Hong Kong has been automatically discounted in such a way as to make it easy for entrepreneurs to pick up economic activity as soon as possible by paying a low rate for land rent.

None of this automatically means socialism. It does demonstrate however that it is quite possible for more politically conscious states to make inroads on landed capital and perhaps finance capital, without necessarily scaring industrial capital away. If this example spread in the world, and environmental considerations support this idea, then we would be in a much more tactically favourable position in 20 years time, globally.

Chris Burford


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