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Jake Van Der Kamp

Legends of rags to riches live on for generations. Many entrepreneurs started their business without much experience, technology or capital. But their flexibility and market acumen have opened up new opportunities in different trades and markets.
John Tsang Chun-wah, budget speech
Having established how this town came to achieve its wealth, our financial secretary then loudly proclaimed that he did not think it could be done any longer and people would need his money to succeed in the future.
Make no mistake. That was what he effectively said in his budget speech when he followed his tribute to Hong Kong's entrepreneurial spirit by scattering billions of dollars among a selection of favoured industries that he and his colleagues wished to encourage.
And the sad thing about it all is that these handouts will probably have the effect of making the dire prognosis come true. Subsidies of this nature do more to suppress than to stimulate entrepreneurial spirit.
One way in which they do it is by ignoring cost. The money for these subsidies does not float down from heaven. Through a range of taxes, duties, hidden land-use costs and other exactions, it all comes out of your pocket in the end.
It is easy to see where the money goes when the financial secretary hands out a film development grant, but hard to see exactly from where the money comes. There could be millions of people who each in a very small way has been forced to contribute.
Things not easily seen are easily ignored, but the laws of how money works still apply, even at the level of this small individual effect. The particular law operating here says that whenever you spend money, you create jobs and support industry.
Thus, when Johnny uses his budget to spend HK$5 million - his latest maximum per project - of the public's money on just one of our 320,000 small and medium enterprises, he will give that SME a very big boost.
Meanwhile, however, perhaps five million people who depend for their livelihoods on the 319,999 other SMEs will find their job and sales prospects diminished by the value of HK$1 each in money that might have been spent on their businesses but was instead spent on Johnny's favourite one.
It is unlikely that they will notice it and unlikely that this will tip any of them into unemployment or bankruptcy, but it is still HK$5 million on either side in money taken of out of the economy somewhere to be put back in somewhere else, less the cost of administering this transfer.
Of course, if it turns out that Johnny's SME is the best of all the 320,000 and will lead Hong Kong into the new industries of the future, then the money is better spent on that one than on any of the 319,999 others and no one will have cause for complaint.
Yet, if I had to pick the prescient person who could make this choice for us, Johnny would be at the end of the queue. Career civil servants invariably look backwards, not forwards. Johnny's choices of industry are either yesterday's (garments and movies) or ones in which the city has little hope of success (high technology).
The best way would be to let 7.2 million people in Hong Kong pick the winner by indicating where they individually choose to spend or invest their money. It was how those legends of rags to riches came about in the past. It was how our economy made its big shifts from ship repair to garments and now to business services.
But, no, Johnny may pay tribute to past ways but he scorns them for the future. He now sees all. We post the blind as lookout man.
What makes it worse is that really promising start-ups do not thrive easily when government-backed competition not only starves their investment sources but pushes them aside if they are in the same general industry.
Subsidise film development with public money and what you will get is the 20th sequel of Return to the Shaolin Temple while the newest clever ideas in video will find it all the more difficult to clear such drudgery out of their way to the audience.
Market acumen, Johnny, you don't have it.
jake.vanderkamp@scmp.com


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Hong Kong

Having established how this town came to achieve its wealth, our financial secretary then loudly proclaimed that he did not think it could be done any longer and people would need his money to succeed in the future.


Jake's View

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


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Jake’s View