(This essay was published in Hong Kong Economic Journal on 30 March 2016.)


After the Occupy Movement ended, the government hoped that political reform would take a back seat to livelihood issues. Time will tell whether this approach has been practical. However, livelihood issues, like political reform, are also impregnated with politics. Indeed without a working political system to aggregate diverse views and interests, the implementation of livelihood policies will become unavoidably opportunistic, populist and fragmented resulting in severe long-term negative consequences. That would be as detrimental for Hong Kong as the failure of political reform.


The background to this situation lies with the political forces that formed around two large coalitions in the lead up to 1997: the democrats versus the establishment. Their political agendas overlapped considerably but three broad orientations could be identified.


First, the establishment placed more emphasis on economic issues and the democrats on social issues. Second, the establishment was more concerned about the negative effects of populist democracy than the democrats were. Third, the establishment was more willing to adopt a partnership approach in engaging Beijing but the democrats were inclined to use a distancing (later confrontational) approach.


The democratic coalition had initially two groups of supporters – the social liberals and the liberal democrats. The social liberals favored a more expanded role for social policies, wanted to limit economic liberalism, and were ready to use populist democracy as an instrument to realize its goals. Many in the coalition had built up grassroots support either among workers or residents mainly in the rental housing estates.


The liberal democrats were more concerned about building liberal democracy to shield Hong Kong from Beijing, especially after a million people marched on the streets in Hong Kong during the June Fourth movement. Democracy for them was an institutional wall to protect civil and economic liberties, freedom of speech, freedom of the press, rule of law, and also private property rights in Hong Kong. The middle class valued democracy as they, unlike the upper classes, did not have sufficient economic resources to acquire a self-insurance or self-protection policy against Beijing’s behavior if necessary.


The establishment coalition contained several diverse interests. Business and professional interests supported the rule of law, private property rights, free markets, and low taxes, but were divided in their support for political democracy. Some supported liberal democracy as a system to uphold the rule of law and protect private property rights. They were less concerned about populist democracy as a direct threat to economic liberty and private property rights, and how such a direct threat might indirectly erode political and civil liberties.


But, others were more worried that all forms of political democracy would succumb to populist pressure and sooner or later infringe upon private property rights in the name of a populist majority. They did not trust the democratic coalition, especially its social liberalism. Some feared that the social agendas of rent-seeking interests would destroy economic liberalism and with it the dynamism of the Hong Kong economy.


Beijing was, at least initially, optimistic that the administrative machinery inherited from the British could provide an effective governance structure for “one-country two-systems” to operate with a high degree of autonomy. They were also more sympathetic to the voices from the business and professional interests and their concerns about populist democracy. Traditional patriotic grassroots organizations were mobilized to support and join the establishment coalition to rival the social liberal interest groups.


But the optimism was misplaced. Once the nomination and selection of the Chief Executive was transferred to a body of representatives from Hong Kong and the legislature was returned through geographic and functional constituencies, the critical features of the old British model of governance were subverted. The introduction of an election element, no matter how unrepresentative it might still be, had replaced a top-down power structure with a bottom-up structure that could become a permanent source of stress and conflict for an administration unwilling to listen.


The members of the old ruling coalition under the British owed their positions to the colonial governor and served at his pleasure. Since 1997, the power of appointment has been passed to local constituencies according to the Basic Law. Although the elections can be manipulated, the outcomes can no longer be perfectly controlled. Moreover, attempts to manipulate the outcome, whether successfully or not, will always be viewed as unwholesome and a source of grievance for some party.


The British colonial governor could dismiss a member of the ruling coalition from a seat of power. The power of dismissal at will gave the governor much greater leverage over members of the ruling coalition, but it was also entirely his responsibility to act wisely. The act of dismissal could either bring credit or discredit to his administration and it was important that his considerable powers were exercised prudently.


Under the post-1997 arrangement, the administration has lost control over the appointment and discipline of members of the ruling coalition. It has also had to share the blame for the failures of members in the ruling coalition, but cannot take credit for their successes. The governance model has in effect changed from top-down to neither top-down nor bottom-up.


The ruling coalition of the establishment is by design a loose coalition that cannot be easily controlled by the administration. And this has led Beijing to step up its involvement in domestic affairs in order to assist the Chief Executive to govern more effectively. Structurally, the system is flawed and requires the enormous personal charm of individual administrators, and above all the Chief Executive, to exercise rare personal leadership qualities to have a chance of making it work.


A ruling coalition made up of successful businessmen and professionals will always run the risk of becoming a rent-seeking coalition – a governing oligarchy. Under the British this was prevented by a committed professional administration, advised by the enlightened voices from society that relied on the governor to hold the last defense. In a fundamental and profound way the political system had changed.


In the past two decades, the administration, under pressure from the democratic coalition, has had to rely on the support of the establishment forces to govern. It has been fighting a losing battle to prevent the coalition from naturally evolving into a rent-seeking coalition. To hold onto its withering control over this group in order to effectively govern, the administration has had to fill its ranks with more loyalists than achievers.


Unfortunately, the tug-o-war between the two political coalitions in the past 30 years has occurred against a background of rapid economic and social transformation. Both society and the economy are now more divided and less equal. The political arrangement that had worked under the British after the 1967 riots rested on the economic and social foundations of an industrial economy and a reliable family support structure supplemented by government-funded social services.


Unfortunately, the former has long disappeared and a new high value-added service economy is still in the process of maturing. Sky-high divorce rates that have resulted in poverty-stricken broken families have seriously compromised the latter.


Under British rule, the ruling coalition was formed with business and professional interests as the senior partner and liberal social interest groups as a junior partner. The administration relied on these groups to voice and tackle many social problems not considered by economic policy. Many of the earliest liberal social interest groups were focused on providing services in the public rental housing estates (the centerpiece of government policy initiatives after the 1967 riots).


The social liberal interest groups represented the voice of social conscience from the grassroots, often critical of government policies, but they performed an indispensable role in improving the effectiveness of political and administrative governance. In this sense, they were an integral part of the ruling coalition as a junior partner with difference. Funding support for this sector came primarily from government. Public responsibility for the sector rested with the Chief Secretary.


Their role as the junior partner with difference in the ruling coalition began to change when many of them became a part of the democratic coalition. The traditional patriotic grassroots organizations became the new junior partner of the establishment (and sometimes a reluctant one). This change of roles is of course completely unsurprising. But the allocation of resources to social interests groups has now acquired a new political dimension.


The politicization of social support for the unfortunate and needy could not have come at a worst time because new social problems are appearing on the horizon. A much higher fraction of low-income households, divorced and single parent households with children, and recent immigrant households are now living in the public rental housing estates, especially in the northern New Territories. This is what has happened in Hong Kong in the past two decades, away from the sight of those who work in Central offices.


The growing support given to radical politicians by a new generation of young voters is a wake-up call. It is the result of delays and failures in getting help to families and neighborhoods that are poor, isolated, and feel abandoned and without hope. Politics cannot help these people; it can only help them to vent their frustrations and misery on the streets and in violence.


In the past, the establishment and democratic coalitions were mostly in a tug-o-war for the political votes in the center. Over time, both coalitions have become less internally cohesive as a result of prolonged failure to narrow the differences between them. Within both coalitions, new dissenting voices have appeared.


The rise of radical angry politics is fragmenting the democratic coalition and leading it astray from the struggle for its foundational liberal democratic values and for social liberal values. Within the establishment coalition, extreme hardline voices are getting stronger. Both sides embrace radical populist politics. Both are now frequently on full display in unabashed form.


The radical left wing and radical right wing are attacking the voter base of the democratic coalition. The challenge first appeared from within the coalition, but increasingly the radicals are mounting an attack from outside the coalition and appealing to new voters in the public housing estates. If successful, they will fragment a civilized democratic movement and further paralyze politics and governance to the detriment of all.


The originality of “one-country, two-systems” makes its implementation challenging and without any prior experience to guide it. It requires reason, tolerance and accommodation on the part of both coalitions. Give and take are in short supply and both coalitions have in turn been impatient for victory.


Unfortunately, the momentous economic and social change of the past three decades has been very unforgiving for conducting an experiment in political transition. Finding the right path will take time and space for the parties on the ground to sort out their differences. Only Beijing can provide that breathing space.


Politics is about livelihood, everyone’s livelihood. When the political rules change at the same time as momentous economic and social changes take place, the hiccups we would normally expect in the political transition will increase. The best approach is to deal with these hiccups through reason, tolerance and accommodation. And if Beijing fails to demand such a standard of its officials on the ground, then everyone will cease to be sober. Whether Beijing likes it or not, it is the sovereign and the only player to wield the powers possessed by former British governors.



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