Hong Kong Political Economy, Part 1

On the Heritage Foundation 2011 Index of Economic Freedom, Hong Kong is ranked number 1 as a result of low or non-existent taxation and minimal government intervention. Not surprisingly, therefore, Hong Kong is also number 1 in income inequality among developed nations (Singapore is 2nd and the USA is 3rd). Only this year has Hong Kong finally established a minimum wage.

The area where the inequality is most severely manifested is in housing. Hong Kong is the most expensive place to live in the world. Land is owned by the government and the sale of land to real estate conglomerates is the primary source of Hong Kong revenue. Very few people can afford to buy an apartment/flat and what is available is overpriced and undersized. Since government revenue is derived from the sale and leasing of land and property, the government has an interest in keeping prices inflated and steadily rising. This is one sphere where there is very little free market competition.

In "Land and the Ruling Class in Hong Kong" Alice Poon writes: "Our government seems to have more interest in the revenue it earns from land than any regard for the social repercussions of large groups hoarding this scarce and precious resource. This resource has enriched the few large groups so much that they have practically become the ruling class of Hong Kong....Acute concentration in the hands of the economic lords has divided society into a wealthy oligarchy and a poor, struggling-for-survival majority."

One of the stark indicators of this social crisis is the existence of "cage homes".


More with photos here.