Leo F. Goodstadt - Poverty in the Midst of Affluence: How Hong Kong Mismanaged Its Prosperity

Hong Kong is among the richest cities in the world. Yet over the past 15 years, living conditions for the average family have deteriorated despite a robust economy, ample budget surpluses, and record labour productivity. Successive governments have been reluctant to invest in services for the elderly, the disabled, the long-term sick, and the poor, while education has become more elitist. The political system has helped to entrench a mistaken consensus that social spending is a threat to financial stability and economic prosperity. In this trenchant attack on government mismanagement, Leo Goodstadt traces how officials have created a new poverty in Hong Kong and argues that their misguided policies are both a legacy of the colonial era and a deliberate choice by modern governments, and not the result of economic crises. This provocative book will be essential reading for anyone wishing to understand why poverty returned to Hong Kong in this century.

The book has been thoroughly revised and updated for this new, paperback edition.

Leo F. Goodstadt is an Honorary Fellow of the University of Hong Kong and was Head of the Hong Kong governments Central Policy Unit from 1989 to 1997.

Leo Goodstadt has identified the New Poor as those made vulnerable through diminishing access to essential services and opportunities. The culprits are misguided policies, and the callous and uncaring decisions of those in power. This compelling critique carries weight and demands a response.

Christine Fang, Former Chief Executive of The Hong Kong Council of Social Service

This is a critical reflection on Hong Kongs path of social development and a most discerning analysis of the Third World mentality espoused by the government and the business community in the area of social welfare.

Lui Tai-lok, Chair Professor of Hong Kong Studies, The Hong Kong Institute of Education

Welfare spending was like pouring sand into the sea to reclaim land, thought one Chief Executive. Governments restrained social spending based on that skewed view... This book is meticulously researched and painfully insightful. It is a masterly chronicle of Hong Kongs social welfare policy.

Anna Wu, Non-Official Member of the Executive Council, HKSAR

Poverty in the Midst of Affluence

Poverty in the Midst of Affluence, Revised Edition

How Hong Kong Mismanaged Its Prosperity

Revised Edition

Leo F. Goodstadt

Hong Kong University Press

The University of Hong Kong

Pokfulam Road

Hong Kong

www.hkupress.org

2013 Leo F. Goodstadt

Revised edition 2014 Leo F. Goodstadt

ISBN 978-988-8208-22-7 (Paperback)

ISBN 978-988-8313-13-6 (eBook)

All rights reserved. No portion of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage or retrieval system, without prior permission in writing from the publisher.

Cover photograph by Ko Chung Ming. Courtesy of Next Magazine. Mr. Ko Chung Ming is the winner of the WYNG Masters Award 2012 on the theme Poverty.

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.

First printing 2014

First eBook 2014

10 9 8 7 6 5 4 3 2 1

Contents

Preface

This book is the last of a trilogy which I have written in gratitude to the people of Hong Kong with whom I have spent my life since 1962. The first book, Uneasy Partners: The Conflict Between Public Interest and Private Profit in Hong Kong, investigated the collusion and cooperation between government and the business and professional elite. It described how the community defeated the rampant corruption within both the public and the private sectors. It traced the development of a political maturity and social discipline which made Hong Kong the most stable society not only within China but by comparison with the whole of Asia. It charted the rise of a manufacturing sector that dominated the worlds textile market despite decades of global protectionism. At the same time, Hong Kong overcame Cold War embargoes and worldwide currency controls to provide China with an outstanding international financial centre.

The second book told a similar story of Hong Kongs triumph over its political and economic handicaps. Profits, Politics and Panics: Hong Kongs Banks and the Making of a Miracle Economy, 19351985 recounted how a city ruined first by the Japanese invasion and then by the Korean War blockade of China managed to replace its lost Mainland markets almost overnight as its factories boosted their exports by 136 per cent a year in the 1950s. High-speed economic growth continued in the decades that followed, financed almost entirely by the local banking system despite repeated bank failures, market collapses, corporate scandals, currency crises and government mismanagement. By the end of the last century, this talented community had won for itself a new lease of life because of what Chinas Prime Ministers in this century have described as its irreplaceable role in the nations modernisation.

Hong Kong had also emerged from the global financial crisis of 200709 with an enhanced reputation for financial stability and well- regulated financial institutions. So much so that I felt obliged to interrupt the trilogy to write Reluctant Regulators: How the West Created and China Survived the Global Financial Crisis, which highlighted how impressive Hong Kongs recent performance has been by world banking standards.

This, the final book in the trilogy, presents a very different experience of Hong Kongs prosperity. Research into housing conditions was what brought me to the University of Hong Kong. When I first arrived in 1962, most families had to make their homes in housing that was barely fit for human habitation in both the public and the private sectors. I quickly discovered that despite the squalor and lack of amenities, people were unfailingly positive, pleasant and helpful, even in the worst tenement slums. Streets were safe and crime was low. Adults were clean and healthy, and schoolchildren were immaculate. There was a confidence among ordinary men and women about finding new jobs as old industries failed and giving their children a decent chance in life, no matter what the shortfalls in educational and other social services. Most striking of all was the robust confidence that political uncertainties and economic setbacks would not halt the rise of prosperity and that the future would be even better for the next generation.

The grounds for such optimism were highlighted by the first Legislative Council proceedings that caught my attention that summer. The government declared that Hong Kong had eradicated hunger among its largely refugee population and, as a result, welfare agencies should tell their foreign donors that food relief was no longer needed. In 2008, history was reversed when the second Chief Executive asked the public to support food relief programmes.

In 1962, the government was insisting that standards of public hygiene and fire safety should be kept at the lowest possible levels for the 580,000 people living in squatter huts in order to deter families from leaving their filthy, overcrowded tenements and building shanties for themselves on the hillsides. In 2011, a senior minister adopted a similar strategy. She announced that individuals living in dangerous, dirty and usually illegally subdivided buildings would have to put up with these dreadful conditions: to relocate them would be to create an incentive for other families to move into such accommodation in the hope of being rehoused by the government.