Food For Thought

- from gregmankiw.blogspot.com

Defense spending in the US is shrinking as a general trend in recent years...


...yet that budget is still the largest of any country in the world.

What's wrong with that?

Issues Back Home

R.I.P. Posi Noni (1961-2006)

The common name Friedman succeeds in capturing my attention. Thomas Friedman - The World is Flat. Milton Friedman - Permanent Income Hypothesis. So when lucid writer Milton writes an Op-Ed titled "Hong Kong Wrong", I invariably take some time out to read what he has to say:

Hong Kong's policy of "positive noninterventionism" was too good to last. It went against all the instincts of government officials, paid to spend other people's money and meddle in other people's affairs.

My question is: although politicians are paid to spend and meddle, surely there is an incentive to be paid and do nothing, given that there has historically been a grander justification than indolence. I am all for advocating a 'conspiracy' (if it's not painfully obvious) of PRC interference.

Mr. Tsang insists that he only wants the government to act "when there are obvious imperfections in the operation of the market mechanism." That ignores the reality that if there are any "obvious imperfections," the market will eliminate them long before Mr. Tsang gets around to it. Much more important are the "imperfections"--obvious and not so obvious--that will be introduced by overactive government.

A disappointment from Tsang. Is the introduction of the GST (Goods & Services Tax) such an action to "obvious imperfection"? Perhaps if the government is running out of funds for its lavish projects, it should reflect on whether it is being, as Friedman points out, overly active. "Broadening the tax base" seems a euphemism for not wanting to piss off the very rich. Instead, civil servants are worried that funds for their pensions are not secured, thus wanting to push the GST bill quickly through LegCo.

Administrative costs will reduce that revenue on a grand scale, and further decrease Hong Kong's allure as an investment location. From ordinarygweilo.com:

[The GST] will also mean (in theory at least) that if you buy goods outside Hong Kong you would have to pay GST when bringing them into Hong Kong - well, good luck with enforcing that at Lo Wu, chaps. As well as the extra civil servants need to collect and enforce this tax, there will be additional costs for private firms to administer and forward the tax to the authorities - and you can bet that these costs will be passed on to consumers. In addition, exporters will need to pay GST and then claim it back.

Not only will Hong Kong no longer be a "shining symbol of economic freedom", it seems that the prying fingers of Zhong Nan Hai are tightening their grip. The future of Hong Kong hangs upon several threads (connections in trade, human capital, economic prosperity); as they break one by one, and as we are scrambling to make feeble ones to keep it hanging, universal suffrage is crucial, and how HK negotiates that with China. Friedman's still waiting for a verdict:

The ultimate fate of China depends, I believe, on whether it continues to move in Hong Kong's direction faster than Hong Kong moves in China's.

I'm hoping to watch Wong Kar-Wai's 2046 in a few weeks.