(This essay was published in South China Morning Post on 17 June 2015.)
Since my article appeared last week, I have been asked to clarify what I mean by a just society. One request was over my suggestion that some young people no longer believe we have a just society and believe democracy is the only solution to restore justice and get rid of corruption.
The other request pertained to my idea of subsidizing the disadvantaged to become homeowners. How could a free market economist like myself have the audacity to advocate a populist socialist policy that would wreck individual incentives? How could this be just?
A more important question is, what is justice?
In the Classical period, the concept of justice was rooted in the recognition that people were unequal in their abilities and talents. Justice was based on applying the same treatment to individuals who were similar (or equal), and a different treatment to those who were dissimilar (or unequal). This rudimentary principle underlies the rule of law.
One critical question was how to dispense justice to those who were dissimilar (or unequal). For this, the Classical thinkers invented the idea of a natural order which accords with human nature, is the origin of society’s ethical norms and rules, and can be discovered through human reasoning.
During the Enlightenment period, the idea took hold that people had equal political rights even though they may have unequal abilities and talents. This made inequality a central concern in what constituted justice.
If abilities and talents were unequally distributed in society, achieving equality of outcomes would imply adopting discrimination measures that interfered with the natural order – a violation of the Classical principles of justice and the rule of law.
Adam Smith’s idea of market competition addressed this concern. Where liberty prevailed and coercion was absent, a natural order would prevail and every person would be paid his fair due – the competitive market price. Different economic outcomes could thus be compatible with justice, as long as there was equality of opportunity and equal treatment for those who were alike.
Smith’s economic ideas were similar to the ideas of the British political philosophers, which limited the powers of the sovereign through the constitutional monarchy and later representative government. Justice thrived when there was maximal feasible individual liberty and minimal necessary state coercion, governed by the rule of law.
A different concept of liberty came from the German philosophers, who regarded liberty as the free will of the collective people rather than the free choice of the individual.
Majoritarian political democracies embodied the collective will of the people. Therefore, the powers of their governments should not be limited as long as the elections were free and fair. The distinction between equality of opportunity and outcome was largely irrelevant. Justice was political, not a matter of the rule of law.
History has unfortunately shown that the German view can be naïve and dangerous. It has inspired fascism and communism, and tyrannies that are anything but liberal democracies.
Majoritarian political democracies necessarily come under pressure to turn populist at times of crises, such as economic recessions. They may become more tyrannical either on behalf of those with vested interests or those who wish to overthrow them.
Hong Kong has experienced such a challenge since 1980. Economic globalization, China’s opening, and prolonged low interest rates have created an unequal society of “haves” and “have-nots” in terms of assets held.
Half the population are among the have-nots. Modest asset price appreciation can normally be attributed to prudent investing, but the huge windfalls that have been experienced were not foreseeable and unlikely to be self-reversible. The natural order is unable to heal itself.
Given such a state, privatizing public housing is in my view necessary for restoring the credibility and proper functioning of the natural order. Failing to do so risks even greater injustices.
Privatizing public housing is unjust if it damages the integrity of the natural free market order. But it is just if it restores the natural order so as to allow equality of opportunity to function properly again, without risking an extremely long painful coercive adjustment process. This is something a political democracy does not have the patience for. Policy inertia can inflict permanent damage to the natural order.
The political rhetoric of the radicals in Hong Kong has deep Germanic origins. Their impatience is familiar and not difficult to understand. Their belief that all society’s evils can be resolved through political democratization alone is foolish. But their political message of impatience should not go unheeded.