Hong Kong Does Not Need More Regulations

Second Opinion
Next Magazine
2010-02-11

Every time when we hear a call for more regulation or restriction on trade, we should first examine the implicit cost of such interventions to our economy.

Quite often this column has recognized the Hong Kong government as the key impediment to economic growth, individual liberty, and the operation of free markets. Yet, we would give our civil servants far too much credit to suggest that they come up with the ideas that form the foundations for the ill thought out policies government often inflicts on the Hong Kong people.Ideas, however bad, are the basis for policy. In Hong Kong, as the people are not the final arbitrator of public policy, we have an entire industry of academics, civic/environment activists, professional service providers such as lawyers and accountants, and of course business special interests, unchecked in their quest to add, or in the case of business special interests, delete/re-write, Hong Kong's regulatory framework.

By far the most destructive group in terms of providing the intellectual fodder for new regulation is our, often imported, academic community. 20th Century writer William McGurn commented often on ideas that are so bad only a genius could come up with them. Hong Kong academics continue McGurn's maxim into the 21st century.

One day, maybe, the Asia Institute of Financial Law at the University of Hong Kong will have a speaker who is in favor of the free market. But until that time comes we are stuck with the white guy back-scratching club that sponsors speakers to lecture us on"Green Taxation in East Asia" or"Hong Kong's Tax History and Some of The Questions It Raises". Do you think net tax reductions are favored in either of these talks?

Not that the Institute is completely anti-market. Lawyers, accountants, other leaches of regulation and other financial supporters of the Institute, must be thrilled their donations support the arguments that form increased regulation. Frankly the Institute should go for the fundraising gold and host a seminar:"Laws and Regulation, How You Can Profit From Their Implementation".As for the professional service crowd, if the military industrial complex were half as successful in influencing government as lawyers and accountants were in directing regulatory policies, we would all be wearing camouflage and driving Humvees. The drumbeat for every regulatory cost increase in Hong Kong, from tax code revision, introduction of class action lawsuits, introduction of competition law, and any number of additional securities regulations are, more often than not, driven by those who would profit from their introduction.

Years ago, I was told that if the United States had Hong Kong's tax system, 500,000 lawyers, accountants, tax preparers and government workers would be out of work. But millions more would be in jobs in industries not driven out of the US. Regulations don't create jobs, they add cost.

Civic, social, and environmental activists are always pushing for more government. But at least they are honest about it. One can't really fault Greenpeace for wanting a tax on plastic bags or the Cancer Society wanting to ban smoking in bars. Both are bad ideas that have no real effect, but neither group is making a buck on their bad ideas.

The final group influencing regulation is the business community. With the exception of the new"green industries" and Hong Kong power companies, who need to increase the cost on other products to make their products work, most businesses are trying to reduce or stave off regulation. Yes, they profit from their efforts, but that is what business does. And when business saves money we as consumers save money. Competition is the enemy of regulation and what we should always remember is not only the cost of regulation, but also who benefits each time a new regulation is proposed.

Regulation is a cost. No one is advocating destroying the environment or allowing guns in the streets of Hong Kong. Yet, it would serve Hong Kong well if every time when we hear a call for another rule or restriction on trade that we first examine the costs implicit in increased regulation.

Mark Simon first lived in Hong Kong from 1992 to 1995. Since 2000 he has been an executive with the Next Media group in Hong Kong. He has written on free trade in the Asian Wall Street Journal, IHT, SCMP, and various international policy journals.