Are democracy and the market in conflict?

Yash Ghai
Apple Daily
June 14, 2004

Ms Maria Tam, a confidant of the CPG and a member of the Committee for the
Basic Law, says that the pace of constitutional reform is faster than the
growth of the economy. She wishes to see a better ‘balance’ between the
market and democracy. She considers that the economy is more important than
democracy, and says that the people of Hong Kong think so too. She is quoted
as saying, ‘I have not seen any one commit suicide by burning charcoal
because there is no universal franchise. It is the economy that drives
people to despair’. This line of thinking is also reflected in the second
report of the Task Force on constitutional reform, which was endorsed by the
Chief Executive and submitted to the Standing Committee of the NPC. The
decision of the Standing Committee on the permitted scope of reform was
informed by the second report, although it would be fair to say that the
Task Force itself was influenced by various Mainland pronouncements on its
vision of Hong Kong-as a commercial city which should eschew politics and
find its true identity and destiny in engaging in economic activities.

Let us explore the implications of Ms Tam’s remarks. Is it true that
democratisation is moving faster than the economy? If so, Hong Kong people
have not noticed it. On the one hand, there are many optimistic predictions
of a resurgent economy. On the other hand, the Standing Committee has put a
brake on constitutional reform and we are unlikely to escape from the
straitjacket of the Basic Law for the foreseeable future. Second, it is not
clear what is meant by the ‘balance’ between democracy and the economy. Ms
Tam seems to imply that if you have more democracy the economy will suffer,
so that the only way to revive the economy is to reduce democracy. There are
undoubtedly echoes of the ‘Asian Values’ stance in her position, although
the matter has not been put in this form.

There is considerable literature on the relationship between democracy and
economic development. It would not be accurate to say that there is any real
consensus, but the predominant view seems to be that democracy facilitates
economic growth. This is particularly the case if the vehicle of growth is
the market which cannot co-exist for long under an authoritarian government,
particularly in these days of globalisation. Moreover the market can be
exploitative and oppressive without some degree of political regulation. An
important role of democracy has been to legitimise the market by involving
the people in key decisions of the state and by moderating the predatory
tendencies of capitalism. There was the great political compromise between
capitalists and workers, involving rights for workers and ultimately full
franchise, in Europe in the late nineteenth and early twentieth centuries
which led to the full flourishing of the market. Without it, Marx’s
prediction of the collapse of capitalism might well have come true.

In Hong Kong by vesting so much power in functional constituencies, for the
most part representing business interests, the Basic Law puts power where it
most needs to be regulated. When I first came to Hong Kong more than 14
years ago, it was quite common to hear that the locus of power was in the
following descending order: the Jockey Club, the chair of the Hong Kong
Bank-and the Governor. This appears not to have changed. The mechanisms of
the Basic Law put the Chief Executive at the mercy of the business
community. The result is still a somewhat predatory capitalism in which
welfare has become a dirty word. Ms Tam please note: why are people driven
to suicide, and not only of the charcoal variety, out of economic despair
when we are one of the richest societies on earth? The stranglehold of a
dozen tycoons or so will only be prised away if we truly democratise Hong
Kong. Otherwise the economy will continue to decline in the long run and
persons with technological and managerial skills, at a premium in a
globalised economy, will vote with their feet-and this time not to return.

Hong Kong’s economy, we are frequently told, is at a cross roads. We cannot
rely on business tycoons, the principal beneficiaries of the present system,
to tell us how to get out of our present predicament. We need a wider
debate, with genuine participation of all key political, social and economic
sectors. The modern market thrives on information, ideas,
accountability-and vigorous debates. These things seem to be lacking in Hong
Kong, in part because of the constraints of the Basic Law, and the
prevailing laissez-faire economic ideology, joined in by even the Mainland
authorities ostensibly committed to socialism. Deprived of this stimulus,
and driven by the business community who seem to have excellent relations
with Mainland leaders, Hong Kong may increasingly be driven towards crony

To return to Ms Tam. How do know that people are not driven to despair by
the nineteenth century economic and political system of Hong Kong? How do
you account for the anger of people manifested so dramatically on 1 July
last this year and last week in Victoria Park? Do you not think that
economic despair may be born out of our political system, where among other
results, the lack of democracy has rendered our autonomy meaningless-and
people feel no longer in control of their destiny. Men and women cannot live
by bread alone. That, Ms Tam, is the lesson of history.

The writer is Sir YK Pao Professor of Public Law, University of Hong Kong