The Nature of Political Economy - HKU Faculty of Social ... powerpoint on C… · 6/14/2004 Speaking Notes 7 Land and the Colonial Political Economy aIn East Africa, the first rights

6/14/2004 Speaking Notes 1

The Nature of Political Economy

What it Means for Hong Kong

Stephen BrownKim Eng Securities

6/14/2004 Speaking Notes 2

What do we mean by the term “Political Economy”?

The integration of legal and social sciences into one unifying theme. Hume and Adam Smith “their theory of the law and their theory of the market mechanism were closely related”. No-one studies systematically anymore the central unifying themes of these various sciences. Hayek

6/14/2004 Speaking Notes 3

Ricardo defined Political Economy as...

“ in different stages of society, the proportions of the whole produce of the earth which will be allotted to each of these classes under the names of rent, wages and profits will be different.To determine the laws which regulate this distribution is the principal problem in Political Economy”.

6/14/2004 Speaking Notes 4

The Marxist View

“Political Economy regards the proletarian ... like a horse, he must receive enough to enable him to work. It does not consider him, during the time when he is not working, as a human being. It leaves this to criminal law, doctors, religion, statistical tables, politics, and the beadle”.

6/14/2004 Speaking Notes 5

Stuart Mill’s attempts..

“Political economy informs us of the laws that regulate the production, distribution and consumption of wealth. Political Economy is to the state what domestic economy is to the family”. “The science relating to the moral or psychological laws of the production and distribution of wealth”.

6/14/2004 Speaking Notes 6

Britain’s Colonial Legacy

Limited the rights to land ownership and to vote.Chief administrator independently appointed attempts to balance interest groups to maintain stability.Land sales to tax the rich to avoid the US issue of direct taxation and representation.

6/14/2004 Speaking Notes 7

Land and the Colonial Political Economy

In East Africa, the first rights to parcels of land in private occupation were recorded by certificates of occupancy for a period of 21 years in 1897 under the East Africa Land Regulation

Wakefield in Australia in 1830’s..

Her Majesty’s instructions 5th April 1843 to Sir Henry Pottingerstate that all land is to be auctioned with a reserve price that was to be “fair and reasonable”.

Proceeds from land sales would be dedicated to fund subsidizing immigration from Great Britain. Thesystem was self-regulating, for as land sales increased, more labor would be demanded; the proceedsfrom the additional land sales would then be used to bring more labor to the colony to satisfy the newdemands. The critical element in Wakefield's theory is the upset price of land. If the Governor sets theupset price too low, then settlement will be too dispersed and economic development will suffer; and ifthe Governor sets the upset price too high, it will be a drag on the colony's economic development

6/14/2004 Speaking Notes 8

and in London in 2002

THE PUBLIC’S animosity towards taxation is psychologically corrosive,economically damaging and culturally corrupting. Dodging the payment of taxes isapplauded as a national sport. At the same time, people demand an adequate quality ofservice in education, health, transportation, defence, and the other amenities that arefinanced out of taxes.

There is one way only to overcome this resentment: transform the fiscal base.If correctly presented by statesmen, the philosophy of defraying the cost of publicservices out of rent would be accepted as principled - grounded in justice andeconomic efficiency. Public charges on rent would appeal to the British people’ssense of decency. They are proportionate (to the benefits one receives), and consistentwith existing principles (the obligation to pay for the benefits one receives)

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The Prisoners’ Dilemma

Two prisoners planning to escape - keep faith or betray are your choices.Maximum personal benefits if you betray the plan but the other prisoner keeps faith.Political equivalent is do you try to get bigger subsidies ( betray) or do you hope that the world is fair ( keep faith)

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Game Theory and Public Choice

A,B Bkeeps faith

Bbetrays

Akeeps faith 3,3 0,5

Abetrays 5,0 1,1

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Constitutional Reform

3,3 represents people accepting that they should not get an advantage and seek rent through interest group pleading.5,0 is if everybody else stops pleading for special interests and you continue. O’Rourke does it mean “give em a dollar”

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However Tit for Tat wins in multi-game series

Rules of Tit for Tat say that:1) Start with “Keep Faith”2) Copy opponent’s last turn on your nextturnOr the moral code of: be honest, an eye for an eye and forgive

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The Honest Prosper

Tit for Tat says that you do not need to bother about decision making, you just need to focus your energy on the most productive forms of co-operation.

Prisoner’s Dilemma shows played over numerous turns shows that liberal capitalist economies surpass in prosperity and overwhelm a theft or rent seeking system.

6/14/2004 Speaking Notes 14

Post 1997 ...

Increased local participation in some elections but..Chief Executive elections seen as being poor replacement for an “independent”governor facilitating rent seeking activities with not everyone able to play “prisoners’dilemma”

6/14/2004 Speaking Notes 15

Hong Kong needs to

Fundamentally assess what type of society it wants to be.Political parties need to depict this vision.Decide how the cake is going to be cut. Liberal capitalist economies best.

Understand implications of land policy and impact on society.Design a constitution that reduces rent seeking and denies rule by the tyranny of the majority(Madison)

Political Reform –From Small and Medium Enterprise’s Perspective

by Dr. James Tangby Dr. James TangThe University of Hong KongThe University of Hong KongJune 12, 2004June 12, 2004

Views of SME Entrepreneurs

InInMay 2004, Faculty of Social Sciences organised a focus group study and conducted indepth interviews with a small number of SME entrepreneurs to collect their views on Hong Kong’s political development.

Participant ProfileParticipant Profile

GenderGender

Female87%

Male13%

Participants ProfileParticipants Profile

below 4013%

over 5513%

40‐5574%

Age GroupAge Group

Participants ProfileParticipants Profile

SecondaryEducation13%

Post‐secondaryEducation13%

UniversityDegree74%

Education LevelEducation Level

Participants ProfileParticipants Profile

Yes38%

No62%

Registered Electors ofRegistered Electors of LegCoLegCofunctional constituenciesfunctional constituencies

Participants ProfileParticipants Profile

Services(includingTrading,

Distribution)38%

Manufacturing62%

Nature of BusinessNature of Business

Participants ProfileParticipants Profile

HongKong87%

MainlandChina13%

Company HeadquarterCompany Headquarter

Participants ProfileParticipants Profile

No13%

Yes87%

Business Operation in Business Operation in mainland Chinamainland China

Participants ProfileParticipants Profile

over 80%62%

61%‐80%25%

Below 25%13%

Size of Workforce in mainland ChinaSize of Workforce in mainland China

DoesDoes the business perceive any problems in our current political system?  Do you agree that some change or reform in our political system is in order?  So simply a change in our political leadership will suffice?

1

IfIf changes are indeed necessary, which part of our political system should be reformed?  e.g. should we reform:

the mode of election of the Chief Executive?the functional representation system in the Legislative Council?the legislative‐executive relationship?the accountability system of principal officials?the government system of consultation?

2

HowHow should the reform be unfolded?  At what pace should it be carried out?  What are the business’ major concerns in the process?  Should political reforms be premised on any pre‐conditions, like

a wider tax base?a more mature political party?fully developed public policy think‐tanks?more civic education?

3

HowHow do you understand the role of central government in the political reform of the SAR? e.g. should we try to work out the “baseline” of the central government before making any proposals?

4

AccordingAccording to the interpretation by the NPCSC, any proposals to reform have to be initiated by the SAR government.  In your views,

What mechanisms and criteria should the SAR government adopt in consulting the public and making proposals on the reform?How can we ensure that all strata and groups in society can participate in the process?When should the SAR government put forward a concrete proposal and schedule for the reform(s)?

5

WeWe often hear the following “business opinion” in the media.  Do you think that such “opinion” genuinely reflect your views?  Have you heard of any alternative opinion within the business sector?

“Democratisation will lead to free lunch.”“Democratisation will bring about economic slowdown.”“Democratisation will scare off foreign investment.”“Democratisation will bring about political instability.”

6

HowHow may the business contribute to the political development in Hong Kong?  e.g should the business sector:

sponsor more public policy research?sponsor more local political parties?encourage more business people to participate in formal political activities?take on more responsibility for socioeconomic issues?

7

DoDo you think that the current political system in the SAR has provided ample channel for SMEs to voice out their concerns?  Do the SMEs face any constraints in political participation?  How may such participation be facilitated?

8

Hong Kong Searching for Political Ideologies

Christine LohCivic Exchange12 June 2004

Two Questions

“We are Trotskyites, how about you?”Long Hair, Hong Kong,1985

“Ms Loh, are you a radical environmentalist-feminist?”

Student, Switzerland, 2001

Spectrum of political ideas

Ideology as a system of thought

Ideology as a coherent set of principles

Ideology as the dominant ideas of society seen as reflecting its means of production

Left vs. RightMonarchism, Fascism, Nazism, Marxist, Leninism, Trotskyism, Stalinism, Maoism, Capitalism

Totalitarianism, Republicanism, Democratic-Liberalism

Christian democracySocial democracy

ThatcherismReaganomicsDengism

FeminismEnvironmentalism

Starting with status quo

1. What do you see as the status quo – starting point?2. In which direction do you want to change?3. What are your political values?4. What goals are you trying to achieve?5. What is the method of change you are advocating?6. How fast do you want to change?

Imagine you are ….

Democratic PartyDABFrontierLiberal PartyProgressive Alliance

Long HairTung Chee-hwaChan Yuen-hanAlan LeongRita Fan

Major political divides

Identity – who are we?Pro-Beijing, pro-democracyGrassroots, middle-class

Distributive - What do we do?How to deliver government services and regulate the economy

Process – How to do it?Conservatism, Socialism, Liberalism, and also democracy vs. current system

Redistributive – Who benefits?Rich vs. Poor

Political Representation vs. Relative Influence

1. District Councils – 75% elected by universal suffrage but only advisory.

2. LegCo – 30 FC (147,266 humans and 13,036 non humans) + 30 GC

3. CE selected by 800-member EC, who appoints ministers and others

4. NPC deputies – appointed by Beijing5. CPPCC members – appointed by Beijing