(This essay was published in Hong Kong Economic Journal on 24 September 2014)


Last week I discussed the three political narratives that have emerged around the concept of “one country, two systems”. The first is the “establishment narrative”, which sees populist democracy as the greatest threat to preserving Hong Kong’s capitalist way of life. The second sees “bottom-up” democracy as the only way of preserving Hong Kong’s way of life. And the third would like more democracy, but without the confrontations with Beijing that have characterized the second narrative. This week I will look closely at the origins and trajectory of the first narrative.


As the freest economy in the world, Hong Kong has always been deeply committed to four “fundamental tenets”: limited government, a free enterprise economy, civil liberties, and the rule of law. Hong Kong’s adherence to these tenets has marked it as a last bastion of classical liberalism. Free market economist Milton Friedman called this his favorite city.


The commitment to these “fundamental tenets” defines the core values of Hong Kong; many institutions in Hong Kong, especially within government, are designed to support them (see my article in HKEJ 2013-4-10). They inform rules and procedures on how to make choices and handle conflicts. Civil servants are trained to embrace such a culture in their work.


The Unease with Populism


The establishment narrative is premised on the fact that for decades economic and civic freedoms and the rule of law thrived in Hong Kong without democracy. Hong Kong is probably unique in the world in this respect.


Before 1997, Hong Kong’s non-democratic political arrangements helped it to avoid the divisive political life experienced by numerous mature capitalist democracies. Critics and skeptics of the establishment narrative should take note that these arrangements have been the envy of many who live in mature democracies. They have enabled Hong Kong to be one of the very few economies where the government has large surpluses and is not burdened with massive public debts or threatened by fiscal insolvency.


In the lead up to 1997, a considerable part of the business and professional elite, as well as the middle-class, believed in the establishment narrative. The capitalist “can-do” spirit of the people of Hong Kong reflected the appeal of this narrative to all income classes – a spirit nurtured by a free capitalist society offering equal opportunities and fair treatment for all. Hong Kong was seen as a just society. The rags to riches story of many Hong Kong tycoons created not only heroes for the young, but moral respectability for the establishment narrative.


The fear that populist democracy could threaten Hong Kong’s capitalist way of life thus had both economic and moral dimensions.


The Reluctance to Change


The establishment narrative was always much less concerned about the threats posed by a non-democratic Chinese sovereign on Hong Kong’s “core values” and capitalist way of life, than it was with populism. Indeed, considerable segments of the establishment appeared to be far more willing to place their faith in the sovereign than in populist democracy to defend the four fundamental tenets.


Why did they trust the sovereign, especially one that is non-democratic and non-capitalist?


One common explanation is that the business sector had little choice if it wished to engage with the Mainland. Aligning with Beijing was good for business. From this perspective, the establishment narrative becomes a mere veil for protecting established interests. But this cannot be a complete explanation. Why bother with an elaborate narrative if it is ultimately only disguised self-interest?


The establishment narrative has kept alive the belief that Hong Kong found the proper political arrangements for making things work even without democracy. Key parts of the Basic Law simply codified many existing arrangements. After all, building a democracy from scratch and getting it right is not without huge risks. The conservative wisdom is to never mend something that is not broken.


This line of thinking has made it vitally important to the business and professional elites to keep things as they are. Their confidence in their own ability to make Hong Kong work probably encouraged Beijing to put its faith in them. The lack of any other viable alternative at the time also limited Beijing’s choices. Beijing also appeared to have held the view that capitalism should be run by capitalists.

But no matter how things were kept unchanged, still the colonial arrangements had to come to an end. This gave opportunity to another vocal part of the educated elite in Hong Kong who wanted democracy.


Democracy a Dimming Star


When the Basic Law was hammered out between Beijing and Hong Kong in the 1980s, democracy was enjoying an excellent reputation. From the 1970s to the late 1990s, the number of countries embracing democracy rose from 45 to 120. This transformation was what Harvard University Professor Samuel Huntington called the “third wave of democratization.” Democracy as the default form of government became part of the accepted political landscape.


As a result local democracy under Chinese sovereignty came to be seen as Hong Kong’s natural post-1997 choice, but with strong constitutional safeguards against populism to allay establishment fears. The deference to the establishment narrative suggested that only a limited kind of local democracy was initially envisaged. The Basic Law reflected this thinking and did not spell out details of the democratic arrangements at the outset, but allowed for them to be developed gradually over time.


By the early 21st century, the global situation had turned and democracy was under attack. Some one-fifth of the new democracies that had emerged since the 1970s, had reverted back to authoritarianism or seen a significant erosion of democratic institutions. The overwhelming reason was that these institutions had failed to meet the economic and social aspirations of their people. Successful transformation is just not easy to execute.


There were even problems in mature democracies. Poorly designed election systems, legislative processes, and other political arrangements had amplified some of the worst aspects of democratic political life – of divisiveness and policy impasse. For example, gerrymandering in US local elections and the party-list proportional representation system in European local elections helped to give rise to highly divisive politics characterized by the tyranny of the minorities.


Rule of Law and Democracy


These developments reinforced the concern about populism among the business and professional elites. They had witnessed how the accumulation of ad hoc and discriminatory legislation could cripple an economy and warp public policy, because its real purpose was to reward or penalize specific groups that were singled out for special treatment. Such legislation violates the fundamental principle of the rule of law, which is that everyone be treated equally before the law without discrimination.


Hong Kong’s establishment was not, however, opposed to democracy altogether. Although democracy can sometimes compromise the rule of law, it can also become its guardian. Democracy disperses power and in so doing keeps government within the law, which safeguards the rule of law. For businessmen with large economic stakes, a robust system upholding the rule of law is immensely important and valuable.


Still, designing a functioning and sound set of rules for democracy is not an easy task. When things go wrong, what can save the system? Thailand has the monarch. What does Hong Kong have?


For the business and professional elites, the idea of political discourse and building democracy from the “bottom up” (in the manner done elsewhere) was not something they could naturally embrace.


It seemed more sensible to them that the business of governing Hong Kong should proceed largely as it had always proceeded. They had faith and experience in what had worked. They also surmised that Beijing was not averse to this approach.


The Basic Law enshrined this desire to fend off populist democratic challenges through the commitment to an executive-led government, curtailment of the powers of the legislature, and preservation of free port status, low taxes, and fiscal prudency.


The Unchanging Establishment Narrative


These articles notwithstanding, the elites also sought to sustain their establishment narrative by proposing that the Basic Law provide for two chambers with substantive powers in the legislature (not unlike the House of Lords and House of Commons in the British Parliament of an earlier era). This proposal was based on the belief that either democratic politics had to be successfully structured within the confines of a framework of consensus politics or the establishment should always prevail over important policy choices and legislations by possessing veto powers.


The two-chamber idea was rejected probably because it appeared too blatantly undemocratic or too obviously British, and perhaps more importantly would have placed too much influence in the hands of the local elites – a prospect likely resisted in Beijing and by its sympathizers in Hong Kong.


Nonetheless, since 1997, there has been an informal resurrection of the two chambers idea in the form of private members’ bills and motions that have to be passed by majorities of members returned from both the geographical and functional constituencies. This is a manifestation of the latent balance of political powers in society.


In addition, the business and professional elites, as well as the Chinese sovereign, continue to exercise influence over the choice of candidates for the Chief Executive.


As these developments illustrate, the business and professional establishment has sustained its narrative since 1997 and remains more worried about the possibility of populism than tampering by Beijing.




YCR Wong, “Has Hong Kong Lost Its Magic? (Part One),” Hong Kong Economic Journal, 10 April 2013

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