CAPITALISM, SOCIALISM AND DEMOCRACY IN HONG KONG

Back in March, the people of Hong Kong had their new Chief Executive chosen for them by a CPC-appointed 1200-member corporate-dominated electoral college - what is known locally as a "small-circle election". CY Leung defeated his rivals by a comfortable margin - but no margin is entirely comfortable for the CPC, when attaining its desired outcome is widely seen as a barometer of Beijing's authority over the city. Come September, that authority may be tested again in elections scheduled for the Legislative Council.

The election took place against the backdrop of Hong Kong residents taking to the streets in the largest protests in years, protesting against the unsatisfactory performance of the outgoing government of Donald Tsang. During Hu Jintao's last visit to Hong Kong as acting President of the PRC, the protests also articulated anxiety that China was interfering in unwelcome ways with the city's internal affairs.

It echoed a declaration issued in 2004 by prominent academics and professionals that accused their mainland neighbour of undermining Hong Kong's "core values" - "liberty, democracy, human rights, rule of law, fairness, social justice, peace and compassion, integrity and transparency, plurality, respect for individuals, and upholding professionalism."

Here is a news report on the election of CY Leung:

To put this in context, below I have included a diagram that shows where Hong Kong falls as an administrative unit in China's political system - as a special administrative region (SAR) which is granted an exceptional degree of autonomy by Beijing.

And here is a map illustrating the location of these various units, including the two SARs, Hong Kong and Macau:

The main fear of those campaigning for democracy in Hong Kong is that China will not stick to its promises to introduce direct elections for the city's full legislature and Chief Executive within this decade, since it has already postponed them several times. At the same time, there is a widely-held view outside of China that Hong Kong must sooner or later become democratic - with all of its social, cultural and economic differences from the mainland - or else it will lose the lively, liberal character that has made it what it is today, an international financial hub.

And the assumption is that China cannot afford to lose that.

But when we look at Hong Kong in the twentieth-century, we find a history of repeated promises of democracy made and broken by its British colonial administrators. This provoked anger and demonstrations in the street that occasionally turned violent - but, essentially, the British got away with it. Sustained pressure for democracy emerged only once it became clear that Hong Kong would be returned to Chinese sovereignty, at a time when China was in its preliminary phase of post-Mao reform and Hong Kongers feared China would export both its authoritarian "rule by law" and its political instability.

Since the handover in 1997, China has been politically stable and economically successful, whilst Hong Kong has benefited from the rapid growth in bilateral economic ties between the two entities. Although large numbers still congregate in Victoria Park every June to commemorate the victims of Tianenmen Square in 1989, an effective mass movement for elective democracy does not seem to have emerged. What we see are regular protests and a mixture of intermittent state-backed repression and concessions. And, disconcertingly, almost exactly the same reasons proffered in Beijing for delaying elections that were given by the British decades earlier.

Moreover, the pro-democracy camp in the Legislative Council seems too riven by mistrust to coordinate effective collective action. The video below is from 2010, though the situation was the same back in 2003-4 when Joseph Y. S. Cheng observed: "The various pro-democracy groups attempted to appear united, but failed to present themselves as an alternative administration, not an opposition operating merely for the sake of opposition. Cooperation among the pro-democracy political groups in the Legislative Council elections proved to be much more difficult than in the District Council elections, and coordination was unsatisfactory".

To account for the glacial progress towards liberal democracy in Hong Kong, I think we need to break down and analyse some of the assumptions underlying the influential view that economic success needs capitalism, and capitalism - sooner or later - necessitates democracy. In short, I do not think the latter proposition is true. To explain why I think this, I will first show how Hong Kong came to be seen as the definitive proof of the former proposition - and thus how it became a test case for the latter.

THE ROCK THAT SHIPPED

When word reached the British government that it had secured Hong Kong Island in the Treaty of Nanjing as reparation for China's burning shipments of British opium, it came as a crushing disappointment.

The Foreign Secretary Lord Palmerston dismissed it as "a barren and uninhabited rock...with hardly a house upon it", whilst Queen Victoria was amused to speculate that her daughter might one day be "princess of Hong Kong", an insignificant lump of granite. The historian Niall Ferguson writes in Empire that, at the time, "the only real benefit of acquiring Hong Kong as a result of the war of 1841 was that it provided firms like Jardine Matheson with a base for their opium-smuggling operation."

But Captain Charles Elliot, the Superintendent of Trade in Canton who had bargained for the sovereignty of the island, believed this pessimism was short-sighted; in time, he thought that the island's deep water harbour would be a vital strategic asset as a gateway for traders from East and West, even more valuable than the already-humming trading centres situated further up from the Pearl River Delta. Yet he was still recalled to Britain and replaced for "unaccountably strange conduct."

Captain Charles Elliot (1801-1875)



Queen's Road, 1910

In the decades that followed, trading activity increased and the British instigated some social reforms, including reform of the education system. According to Jonathan Fenby, "Chinese visitors to Hong Kong returned impressed by conditions in the colony", and these visitors included the prominent Qing reformer Kang Youwei who was impressed by the standards of Western learning he observed there in 1879. In the early twentieth-century the first Chinese President Sun Yat-sen commended the colony's new Supreme Court, its University, and the Kowloon-Canton Railway. He contrasted the rule of law the British had instituted in Hong Kong with the politicised judiciary in the rest of China.

Nonetheless until the Second World War Hong Kong was economically outshadowed by other entrepots such as the British 'treaty ports' of Shanghai and Guangzhou. Instability on the mainland led to waves of large-scale migration to Hong Kong: in 1950, its population increased by 186% just as a result of inward migration. Many of these migrants were politicians, officials and businessmen associated with the exiled Nationalist regime, and they brought with them their skills, their capital and their connections.

The Legco

 The 1950s saw Hong Kong's economy begin to gather real momentum, boosted by an influx of talent from the newly-established PRC and its now unique status as a free port with direct access to China while its rival port cities came under increasingly strict political control.

This economic success (average GDP growth of 10% in the 1950s-60s) followed the failure of the first, and most far-reaching, British plan to democratise the colony, the 1949 Young Plan, as described by Brian Hook. The Plan envisaged the gradual transfer of all decision-making power to a two-thirds directly-elected municipal council as a preliminary to full self-determination, but it was abandoned in the face of unanimous opposition from inside the government, and from local elites.


Victoria Harbour

For their part, the British government decided that, because of mass migration from the mainland during the Korean War and the U.S. trade embargo against the PRC, the timing was "inopportune" for introducing elections. Local political and business elites argued that it would be preferable to reform existing organs of government - the Legislative Council (Legco) and Urban Council (Urbco) - rather than institute "cumbersome and duplicative machinery."

In other words, the system could be geared towards more consensual and responsive government without the need for far-reaching change - as they had managed to do by modifying the "unequal treaties" after a wave of anti-imperialist strikes and demonstrations in the 1920s. They seemed to be vindicated in that belief when, in 1956, leftist groups and students staged anti-colonial protests that failed to win over wider public support - the so-called 'Double-Ten Riots'.

I'LL NEVER MAKE YOU BLUE



Factory in Hong Kong, 1960

In the1960s Hong Kong's economy shifted from commerce to light industry and sustained its strong growth. It specialised in low-end consumer goods and, subsequently, appliances and electronics, while textiles and garments still comprised the bulk of its exports.

It was a decade of burgeoning prosperity and rags-to-riches stories of individual entrepreneurs abounded. Here is some footage of Hong Kong Central from 1962, which shows the impact of modernisation on the landscape.

This was also a "golden era" of beat-pop in Hong Kong, which starkly symbolised the pluralism and artistic freedom in the city compared with the ideological straitjacket being imposed on the arts in the mainland during the Cultural Revolution, which officially began in 1966.

In 1964 The Beatles played in Hong Kong and inspired a whole generation of young musicians to form bands such as The Menace, and Teddy Robin & The Playboys. "It's So Easy" by Danny Diaz & the Checkmates was a major hit in Hong Kong in the seminal year of 1966.

In the same year as the UN adopted the International Covenant on Civil and Political Rights (ICCPR), the then Governor Sir David Trench published the second plan for democracy in Hong Kong. The Dickinson Report proposed a hierarchy of mostly directly-elected self-government in the colony, "constituting a system of local administration intended to achieve optimum local participation, decentralisation of central government and devolution of financial responsibility." There already existed an elected body with some responsibility for governance in urban areas, the 'Urbco', but the Report called for a far wider and simpler franchise.

Then, in 1969, the Urbco itself issued a "Report on the Reform of Local Government", which went beyond the transfer of powers from central government to Urbco envisaged in the Dickinson Report.

Yet neither of these proposals was ever implemented. Why? According to Brian Hook the reason was that the colonial authorities fear that elections would bring the Cultural Revolution to Hong Kong:

"Cultural Revolution violence had spilled over into Hong Kong and even though the credibility of the government was high while that of the Chinese government was low, it was arguably not the right time for steering into uncharted waters... Having been made aware by civil disturbances over increases in Star Ferry charges in 1966 that improvements to existing systems of consultation were needed, rather than create representative district councils or increase the jurisdiction of the Urban Council, the government decided to strengthen administration at the basic levels in the urban areas by appointing district officers."



Protesters covering Government House with posters

From May to December 1967 the Cultural Revolution spilled over into Hong Kong in a dramatic way.

Until this time it is possible to argue that the governance of Hong Kong corresponded to a model of laissez-faire capitalism: as the last Governor of the city Chris Patten puts it in his book East and West, the colony was "blessed with a small team of colonial administrators eccentric enough to believe in free markets". The Foreign Office in London exercised restraint in using its extensive formal powers, which amounted to the "sovereign power to appoint and remove the Governor and senior officials, to appoint the senior judiciary, to disallow legislation, to apply specifically designed Acts of Parliament and Orders in Council to Hong Kong, and in the responsibility for its external affairs, with the exception of trade relations."

But this also meant that the power of government remained passive in areas which, in Britain itself, were considered legitimate domains of government intervention - namely to ensure full employment and look to the welfare of its people "from cradle to grave." The justification for this was captured by the racist saying that "the Chinese need no Sundays." The combination of the government's insensitivity to public opinion and the widening gap between the rich and the poor led to a rash of industrial action and civil disobedience in 1966; when the police responded by suppressing the protests, they turned violent.

Leftist groups in Hong Kong, inspired by the Red Guards across the border (and brandishing their own Little Red Books), formed a "struggle committee" and launched an "Anti-British, Anti-Violence Struggle" with the aim of forcing the British out of Hong Kong. And unlike the riots ten years earlier, the riots in 1967 initially attracted broad public support.


HMS Bulwark

Then the leftists deliberately provoked the police into firing wooden bullets into crowds, which caused fatal injuries, and, on instruction from Beijing, fostered a wave of panic by planting real and fake bombs in public spaces around the city. The Foreign Ministry was seized by a "Rebel Faction." At this point, the British government was seriously considering a withdrawal, and dispatched the HMS Bulwark. What persuaded them otherwise was the forceful insistence of Governor Trench that he could restore order if he was permitted to exercise his extensive powers.

With Whitehall's consent the government responded by declaring Martial Law - the Emergency Act stipulated that the Governor could detain anyone without charge for seven days, but this could be, and was, used to effectively detain suspected protest leaders indefinitely (such as the leftist leader Cai Weiheng who was detained without trial for a year and half). Alongside internment went curfews, restrictions on the freedom of the press and a purge of the education sector - headmasters of "leftist" high schools were arrested and deported, and the overall number of schools was reduced from 57 to 34.

The documentary below covers these fascinating events, and argues that it took a show of violence to shake the colonial government out of its complacency and made it respond with a range of measures: social welfare laws to serve the poor, a labour ordinance, better institutions for consulting public opinion on policy (including bicameralism) and an assertive anti-corruption agency - the Independent Commission Against Corruption (ICAC), created in 1971.

The legacy of the 1967 riots subsequently became crucial to the different narratives used to frame what Hong Kong's development story signified. In the documentary above, the then Secretary for the New Territories Sir David Akers-Jones saw the government's ability to quell, and respond to, the riots as proof of both the durability of Hong Kong's economic model - "very quickly we put the problems of 1967 behind us and the economy recovered" - and of the capacity of the colonial political system to successfully adapt to public demands without the need for full-scale democratisation (they were helped in this by Beijing's withdrawal of support for the bombing campaign, Mao well aware that there was only so far they could push the British without losing the entrepot on which their economy depended).

In the course of the following decade, Hong Kong emerged as a leading player in finance and banking, as rising labour and real estate costs began to edge out its competitive edge in other industries, and the lifting of U.S. sanctions against the PRC opened up new opportunities. As the economies of Western developed countries ran into difficulties, Hong Kong came to be represented by influential thinkers on the 'New Right' as a beacon of free-market rectitude that could guide them back to the "ancient economic virtues" which had made them great.

But this account of Hong Kong's development greatly distorted the degree of state intervention in its economy, most notably in the allocation of land. What was presented as a spontaneously-occurring self-correcting system was in reality the result of political movements and political decisions.

CAPITALISM AND FREEDOM

Arguably the most influential of the free-market evangelists who sung the praises of Hong Kong was the economist Milton Friedman of the so-called "Chicago School" of his discipline.

In 1980 Friedman presented a television series called Free to Choose, based on his book of the same title, in which he toured the globe to show that deregulated laissez-faire capitalism was the best means to both prosperity and freedom.

In the first episode, The Power of the Market, he ventured East: "If you want to see capitalism in action, go to Hong Kong." In the program he argues that Hong Kong has "the freest market in the world", with no tariffs or customs duties, low taxes and low labour market regulation. Yet they are rich and free, and it was not achieved by "a government official sitting in one of these tall buildings and telling people what to do."

Instead, it quadrupled average real wages since 1945 by leaving the price mechanism unfettered; this allowed it to do its job of signalling relative scarcity to economic agents so that all resources in the economy were allocated as efficiently as possible. Risk and reward were thus welded together, and the economy had responded to increased foreign demand and sectoral change by upskilling, which produced high growth that was sustainable over the long-term. Hong Kong was an especially appealing test case for Friedman, since it had started out bereft of natural resources and was forced to rely on sensible policies and the quality of its workforce.

Here is the full first episode (the section on Hong Kong starts at 08:00, and Friedman debates his critics from 28:55):

There was one big problem with this account of Hong Kong's success: the colony had not had laissez-faire economic management since the 1967 riots, precisely during the time it had flourished as a financial centre.

The riots were a devastating blow to investor confidence in Hong Kong - with good reason, given that Britain seriously contemplated withdrawal. To restore confidence and stem the outflow of people and capital (there was run on Chinese banks in the colony), the colonial administration intervened to buy up huge tracts of land in 1967-8, thereby propping up property prices - in the process, they helped salvage the profitability of the large real estate companies whilst also crowding-out their smaller competitors. These real estate companies also bought up large amounts of cheap land which they could turn a vast profit on once order had been restored.

This was exactly the kind of collusion between government and big business that Friedman railed against so pasisonately in his program. But it was the price that had to be paid to sustain the trappings of a low-tax, small-state free-market society by doing just enough to reconcile the demands of those at the bottom and those at the top.

Taking these two constituencies in turn, Michael Littlewood has argued in his terrific history of fiscal policy in Hong Kong that the powerful business community made its support for the colonial government contingent on its keeping regulation light-touch and taxes low. After 1945 the government served the interests of big business by modifying the island's first-ever income tax so that it was levied on three (later four) separate sources of income: "If there are separate taxes on different kinds of income, a person whose income all comes within a single schedule will pay much more tax than one whose income is the same but split among two or more schedules." 

The "inherent inequity" of the schedular system made it politically feasible for the government to keep direct taxes too low for purposes of redistribution or to fund a welfare state. Littlewood surmises the political implications as follows: "Many people very much like Hong Kong's tax system as it is; but they also like democracy; and they fear that it is impossible to have it both ways because, they think, everywhere else in the world, democracy has led to steeply progressive income taxes, not at all like Hong Kong's."

 As regards appeasing the poor, Chris Patten has described how, in the early 1970s, the then Governor Lord Maclehose responded to the failure of the unregulated market to provide sufficient housing for low-income residents by adopting the housing policy of Singapore. This involved the government using the land it owned to quickly build large amounts of cheap public housing: "It was municipal socialism writ large: a colonial version of Herbert Morrison's London County Council."

Although it built a lot of rented public housing, it was far from enough to provide housing for all those who needed it - and that was the point. It was enough to deter just enough low- and middle-income residents from supporting further protest movements, and turn them into a vested interest with a stake in the status quo:

"Rents became the most politicised aspect of government policy in Hong Kong... Over 12% of households in the public-subsidised sector (while staying put themselves) bought private accommodation to rent out to others... Better-off families paid lower rents for better accommodation than poorer families were paying for often rotten private-sector homes... The Housing Authority kept the worst problems at bay and nudged things at the margins an inch or two in the right direction. Anything more radical would have involved more political pain than an unelected government could manage."

Rather than pressure the private sector to provide more affordable housing, the government provided a half-way solution, which divided worse-off residents into "insiders" with an interest in keeping the availability of land restricted, and "outsiders" who received no help (the politics of this is brilliantly analysed in this article). By the 1980s property prices were being kept artificially astronomically high. And Hong Kong became a dramatically less equal society as a result: between 1971-2001 the Gini coefficient measure of income inequality increased from 0.43 to 0.53.

In the 1980s many manufacturing businesses in Hong Kong relocated production to the Special Economic Zones (SEZ) that were established in coastal areas of the PRC, and services made up a greater share of the island's economy. As had happened with housing, this sectoral shift reinforced the division between the "winners" and the "losers" of change. In a sense, it weakened the impact of labour laws passed in the early '70s, as industrial workers left behind failed to respond to signals from the marketplace: an underfunded Higher Education sector failed to provide enough skilled graduates to meet new demand, and cartels endemic in key sectors of the economy meant that rising living costs rendered workers easier to exploit. Today over a fifth of the people in Hong Kong live below the poverty line, because despite having the world's tenth largest economy it also has one of the world's largest disparities of income and wealth. 

The Goddess of
Democracy in Hong Kong

The point I am trying to make here is that the oft-heard contention that for Hong Kong to continue to prosper it must retain a form of laissez-faire capitalism, and thus must remain liberal and must become democratic, does not necessarily follow from its recent history - with episodes of illberalism, crucial forms of state intervention and the obstruction of democracy - and, moreover, I do not see that it follows from the sort of arguments that are usually given as justification.

To clarify the point further, it is worth examining this argument in detail, which is laid out with admirable lucidity by Lord Patten in East and West. Here is an interview with Lord Patten from 2000 in which he describes how assuming the governorship at a time when all the talk was of "Asian values" eclipsing the decadent, individualist West forced him to reflect deeply on how he saw the relationship between capitalism, democracy and liberty. The most relevant segment starts around 15mins in.

Patten had served as a cabinet minister under Margaret Thatcher, where he had witnessed firsthand the power of Big Ideas to transform the political landscape. This is how he describes that realisation, from the vantage point of a newly-elected MP on the moderate wing of the Conservative Party:

"My friends were not without ideas themselves, but one of their ideas was that there was not a single Big Idea, except precisely that. You could, we thought, only nudge political argument a little this way or a little that. The dimensions of the political battlefield were largely predetermined; you had to find the middle point on it and there pitch your tents. Thatcher believed you could shift the battlefield in your own direction; you could fight over terrain of your own choosing provided you could convince people that your own - perhaps currently unfashionable - ideas were right... If you achieved that, then you could do things that had previously been deemed politically impossible."

Thatcher's Big Idea, which Patten took with him to Hong Kong when he was appointed Governor in 1992, was that free markets, in the long run, always and everywhere produce inexorable pressure for liberal democracy, because it is under liberal democracy that they function best.

That Big Idea is composed of several small ones. First, the notion that capitalism requires trust to function properly, which is provided by the rule of law. For Patten, the rule of law embodies a "majestic neutrality" and universality,  for example, guarantees that contracts will be impersonally enforced - "markets depend on freedom... In a market economy, decision-making is devolved." But he insists that - in the long run - the rule of law can only fulfil this purpose in a representative democracy: "a system in which people not only elect their government and lawmakers but also have their individual rights protected by a system of rules that applies to everyone."

Under this system, "We can use the law to defend ourselves against anyone, however powerful. The law is made by those we elect to represent us in a legislature or parliament, and it can be changed if we can persuade enough of our fellow citizens that it should be. We are therefore both rulers and ruled."

The rule of law functions best under elective democracy   because of the fundamental human need for a sense of "reciprocity", and the instinctive belief that the law should correspond in some reliable way to a society's customs and values. According to Patten, this need for reciprocity is the justification for the legal protection of our basic human rights and civil liberties: it means "giving others the ability to obtain what you yourself wish to obtain, when the rules apply equally to everyone, when everyone has the same security and opportunity to excel, and when there is parity of esteem."

However, it is one thing to say that, taking the long view, capitalism works best in a liberal democratic setting, and quite another to suggest that it always and everywhere works to increase the likelihood of liberal democracy - especially when, in the case of any particular society, the choice confronted is more often than not between worst and second- or third-best outcomes.

To Patten's credit, he qualifies this argument. At a general level, he maintains that "opening the door to the market ushers in political liberty." "Markets", he writes, "by their nature, nurture responsibility in citizens... Choice implies freedom, including the freedom to make a poor choice - the freedom to make mistakes." By linking risk-taking with financial reward, capitalism makes people able and willing to take responsibility for their own lives, and this transfers directly to politics:

"A responsible economic citizen is a responsible citizen, who cannot be split down the middle indefinitely, one moment the audacious master of his or her own destiny, the next an obedient, unquestioning stooge... You cannot compartmentalise freedom."  

It was the power of big business to evade the disciplines of the marketplace, and to collude with government against other economic agents, which posed the greatest danger: the tycoons "were against competition, found monopolies extremely cosy, disliked open tendering (or anything open for that matter), and believed that any regulation of markets or of corporate governance was thinly disguised socialism."



Francis Fukuyama

 But Patten recognises that, even if there is at present no grand ideology to rival liberal-democratic capitalism, the re-emergence of an alternative is not inconceivable, and that means that the political case for democracy -and the philosophical vision of individual autonomy, dignity and equality that underpins it - must be continually re-made by its advocates; there are no grounds for complacency:



"Asia has shown the rest of us how much can be achieved by energy, commitment and hard work, but it does not offer some new idea for the age - least of all the case for authoritarianism... I agree with Fukuyama that the case for political and economic freedom has indeed been won. But there is much history still to be made in securing those freedoms, and no guarantee, in Asia (and particularly in China) and nearer to Europe as well, that their future is wholly assured."  



It was Fukuyama who memorably declared after 1989 that the battle over Big Ideas was over - liberal-democratic capitalism had decisively won the argument about the best way to organise society. His view bolstered the arguments of those who believed that capitalism would bring liberal democracy to Hong Kong - whereas anti-democratic capitalists in the past had merely been fooling themselves, now they could no longer do even that. I will return to this point later.



Quite apart from the nuts and bolts of this argument, it must also be said that Patten's assessment of what had made Hong Kong into an economic powerhouse is inadequate:

"Hong Kong swishes and stirs most of the better ideas which have been adduced for explaining the nature and causes of economic growth. It supports the proposition that growth is essentially an urban phenomenon, the unplanned consequence of one bright spark's energies animating the prospects for other, less talented, citizens. The economists call this, rather dourly, the 'externalities' of growth."

This is the same vision of a spontaneous, decentralised economic boom expounded by Milton Friedman, and in the very same way it manages to miss the wood for the trees - the "spillover effects" from individual enterprise that drove rapid growth of the economy in the aggregate were promoted by the government's policy of controlling and restricting the allocation of land for development, which provided for a highly concentrated and flexible but insecure workforce. In contrast to laissez-faire, this approach has been dubbed "positive non-interventionism." The distinction is subtle but hugely significant.

Arguably the government was only able to implement these policies because it did not have to face any electorate - which is not to say that rapid growth might not have been achieved in some other way under democratic conditions, but that we should not extrapolate any simple lessons about the relationship between markets, growth and democracy from Hong Kong's development story.

In any case, it is right to see 1989 as a turning-point in this story - in more ways than one.

FLOATING VOTERS (OR, HOW TO BOIL A FROG)

Despite Beijing's assurances that Hong Kong's reversion to Chinese sovereignty would be characterised by "One Country, Two Systems" - Clause V of the 1984 Sino-British Joint Declaration states "The current social and economic systems in Hong Kong will remain unchanged, and so will the lifestyle" - the decade leading up the handover in 1997 saw increasing demands on the colonial government to implement reforms which would entrench self-government for the foreseeable future.

The period from 1984-97 was full of interminable wrangles and recriminations between British and Chinese diplomats and politicians, far too many to go into here. In essence, the argument centred on whether either party to the Joint Declaration was betraying what they had signed up to, in its letters or spirit, and how. At the heart of the matter was what the Declaration meant by "convergence" between Hong Kong and the PRC over the intervening period.

In Understanding China, John Bryan Starr states the essence of the disagreement:

"The Chinese understood this to mean that no change would be made to Hong Kong's economic and political systems as they existed at the time of the signing of the agreement, while Britain presumed that it could legitimately make alterations in Hong Kong's governance prior to the transfer of sovereignty and that Beijing would make no change to the economic and political systems of Hong Kong as they existed at the time of the transfer of sovereignty."

Therefore, when Lord Patten arrived as Governor in 1992 and immediately put forward proposals for de facto directly electing two-thirds of the Legco by universal suffrage (the remaining third being appointed), Beijing reacted furiously and snubbed Patten for the remainder of his term in office.


Inside the Legco

 

Technically, the Declaration committed the government to keeping one-third indirectly elected by functional (occupation-based) constituencies but Patten stretched the definition of who counted as being employed by the qualifying professions, and which people within those professions were eligible to vote, to make them approximate geographical constituencies. He latter recalled how "my Chinese critics were scandalised when they discovered that a consequence of our electoral proposals in Hong Kong was that shopfloor factory workers, chaffeurs and hotel bellboys would have exactly the same electoral entitlements as their bosses."

Patten's plan to democratise Hong Kong was a response to increased public pressure in the wake of the killings in Tianenmen Square in 1989. At the outset of the 1980s there had been similar pressure exerted on the colonial government, but that faded away as China seemed to open itself up and embrace the market. According to Brian Hook, the colony was still "an example of the administrative absorption of politics, a secluded bureaucratic polity and a minimally integrated social-political system."

Throughout that decade, the influential "tycoons" consistently opposed tentative moves towards democracy. The business press in Hong Kong argued that universal suffrage would lead to the creation of a welfare state and excessive public spending on all of the colony's pent-up social problems, which in turn would provide the PRC with a justification for intervening to curb its autonomous status: in other words, the masses in Hong Kong could not be trusted to use real freedom responsibly, and would only end up sacrificing the "high degree of autonomy" Beijing had put on the table. As Patten puts it, "The reasons for blocking the development of democracy...were not cultural, they were political." Nevertheless, J. B. Starr writes:

"The massacre in Beijing in June 1989 was a major turning point, in public attitudes in Hong Kong and also in the relations among Hong Kong, Beijing, and London. The news had a devasating effect on public confidence in Hong Kong, with anger and fear politicising a large segment of the population."

As a result, the British strategy of trying to reach an ongoing consensus with Beijing gave way to one of "making Hong Kong "indigestible" - as democratic as possible in the time remaining so that when the Chinese took control in 1997, undoing the changes would cause them the maximum possible international embarrassment."

Here is a clip from the 1997 BBC documentary The Last Governor about Patten's time in Hong Kong. It is an really insightful series worth watching in its entirety. This clip shows the election held in September 1995 - the first and, so far, only election in which a majority of the representatives were directly elected.



As well as being assailed by the CPC, the Hong Kong "tycoons" currying favour with their new masters and pro-Beijing parties such as the Democratic Alliance for the Betterment of Hong Kong (DAB), Patten was criticised by pro-democracy politicians in Hong Kong like Martin Lee, who wanted Patten to bequeath a legislature with a guaranteed pro-democracy majority, if necessary by increasing the proportion of trustworthy appointees. 

Members of the new Legco being sworn in, June 1997

But Patten remained steadfast in trying to find an arrangement that stuck within the parameters laid out in the Joint Declaration - he was determined to "play by the rules", even if they were rules the people of Hong Kong had played no part in formulating. He also rejected proposals to have elected members on his advisory Executive Council (Exco).

Beijing set up its own Provisional Council for Hong Kong during this period, which met regularly in Shenzhen, and in 1996 a selection committee appointed by the National People's Congress (NPC) chose Tung Chee-hwa to replace Patten (whose sham election Jonathan Dimbleby described as "certainty in slow motion"). The PRC declared that it did not recognise the legitimacy of the 1995 election and would dismiss the resulting Legco after 1997 - which it proceeded to do.

Here is some footage of the official handover ceremony (the lowering/raising of the flags is at 06:30).

When the Asian Financial Crisis hit later that year and the Hang Seng Index lost 6,000 points (about 40%), the Hong Kong government responded by heavily restricting the supply of land, in order to prop up the property market and appease the tycoons - it did the same thing when the global financial crisis started in 2008. But because of the uncompetitive nature of this market, the intervention tended to help the larger real estate firms at the expense of smaller homeowners in the private sector who faced a tide of negative equity.

The political system set up after 1997 has remained basically the same, with only minor modifications. The PRC has repeatedly promised to make the Legco and Chief Executive fully elected, with the latter being the most important in a centralised system (opposition legislators inside Legco are constitutionally prohibited from sponsoring bills on matters of public spending, the operation of government, or the political structure, and for bills relating to government policy they need the prior written consent of the Chief Executive).


It has also promised to preserve Hong Kong's "social and economic systems" for at least fifty years; Deng Xiaoping promised that "horses will keep racing, and nightclub dancilg will continue" and Tung Chee-hwa aimed to make it "the most cosmopolitan city in Asia." Fundamental freedoms are enshrined in the Basic Law, the constituion for Hong Kong drafted by the PRC in the mid-90s (interestingly, Article 108 commits the government to preserving its "low tax system"). But Hong Kong's highest court can be overruled on constitutional affairs by the Standing Committee of the NPC (NPCSC) - as it has done in several controversial "anti-sedition" cases pertaining to the balance between civil liberties and national security. Yet the high court has fought back against the NPCSC, with successes such as overturning harsh penalties imposed on Falun Gong practitioners.



Pro-democracy activists argue that the rule of law is being undermined in an incremental and pernicious way in Hong Kong, so that if and when democratic reforms are implemented the chances of "liberal democracy" will be diminished. Martin Lee uses the analogy of a frog in hot water to make the point: if you throw a frog into a boiling pot, it will leap straight out, but a frog will sit still in lukewarm water that is slowly raised to boiling point. Hong Kong looks the same on the surface, but its foundations are gradually being corroded.

Pro-democracy demonstration, 2004



Outside observers of Hong Kong tend to assume that, this time, the same combination of "benign authoritarianism" and recurring street protests will yield a different outcome that it did in the past, when liberal democracy was kept at bay by fears of socialism, anarchy or something worse.

But why should this be so? Many of the arguments used by the British to postpone democracy still have as much plausibility today as they did back then: it is too restless and mobile for meaningful geographic constituencies (as Patten puts it, "a refugee community - not rootless, but conspicuously able to dig up and put down roots at high speed"); further improvements should be made to the existing system before radical change (including the vast machinery of boards and committees used to consult public opinion); the mass of social problems should be solved first, or else the poor will vote for unsound economic policies resulting in either civil disorder or pre-emptive and explicit intervention by the PRC.

To my mind, arguments about the democratising power of new technologies seem to cut both ways - they might allow more people to connect with other likeminded people, but the same speed and ease they lend to organisation may also make it harder to build the deep bonds of trust that make for durable and credible political movements, bonds which arise out of commitment and sacrifice.

What, then, of the role of ideas? I accept that, in a strictly limited sense, a successful capitalist economy does require the rule of law, but I would argue that democracy only becomes a necessary corollary to the rule of law when there are Big Ideas that people can sign up to and use as rallying-points in the pursuit of other goals - in Patten's own words, these are ideas that "are right and relevant to people's conditions and to their hopes." He further opined that: "The greatest excitement of politics was to have a view of how the world works, or should work, and to convince other people that it was the right one. The politicians who really mattered were those who did this. This was the sort of political leadership that really left an imprint on history."

But if the "battle of ideas" is supposedly won, then it would seem that the challenges that arise from below are more likely to be ones that can be managed and controlled from within the system - even if that system is an authoritarian capitalist state that promises, eventually, to be a liberal democracy. If liberal democracy requires free-market capitalism, but not vice versa, then it would seem as if Hong Kong can claim to be progressing towards democracy simply by shoring up its economy (and, of course, taking any administrative measures necessary to preserve market stability).

In the end, I think we can afford to be more optimistic because I think that the "End of History" proclaimed by Fukuyama carries within it the potential for new alternative Big Ideas for solving new societal challenges. In removing broad-brush rivals to liberal-democratic capitalism, it has made it easier to notice the actually existing plurality of forms that the uniform facade of capitalism has taken around the world; far from coming to an end, the debate has moved forward and the terms have been clarified. The global financial crisis, by casting a spotlight on just how heavily involved governments are in their economies, even in supposed bastions of "neo-liberalism", has highlighted how the rhetoric of free-markets is often used to distract from the underlying reality of "positive non-interventionism", and the essentially contestable political choices and value-judgments embodied therein. If this helps to move us away from the notion that there are countries, such as Hong Kong, that represent some idealised "pure" free-market standard against which we must measure ourselves, then I think it is all the better.

In the meantime, I am not pessimistic about the chances of Hong Kong moving towards liberal democracy - it's just that I think it is unlikely to happen as straightforwardly as some might expect.