HONG KONG: Good Economics for Hard Times (2) — It Takes Strong Political Will To Lead 4.0 Industrial Economic Choice Towards New Urban Sustainability And Growth Formula
Continue Chapter (1) — Prof. Abhijit V. Banerjee and Esther Duflo of the “Good Economics for Hard Times: Better Answers to Our Biggest Problems”, while attempted to explain what factors keep the poor trapped, they extended the socio-economic reasoning to the swing of political will as the elephant of economic growth is more complicated than expected, where the choices of economic structure and policies, hence, changed.
Standing on the shoulders of Prof. Banerjee and Duflo, the following few economic theories and model are adopted to shape the fundamentals to the action items, projects and long-term contributions towards the community-driven public policy innovation for Industry 4.0 and Urban Sustainability Roadmap in Hong Kong (Tai Po District and Northern Metropolis), by the Good City Foundation in Hong Kong and the SE Lab in Tai Po.
1. Stolper-Samuelson Theorem (1940s)— The Poor Gets Poorer In Global Trade
Benefited by the globalisation and blooming of technology innovation, Hong Kong, as the only part of China that’s open market which adopts the capitalistic market mechanism, enjoys tremendous gain from trade with the large relative advantages in financial and professional services in the last 30–40 years.
The theorem hence reasoned the even dividing of wealth gap across districts in Hong Kong due to the extremely uneven clustering of industries. For example, professional services and financial industries are over concentrated in Central and Western District while the manufacturing sectors across a few key districts in Kowloon and New Territories were not shared with a proper set of redistribution policies.
The extremely successful economic gain due to financial industries in Hong Kong bring up the rapid rise of land values as a whole and it pushes out the manufacturing sectors to Guangdong provinces (now Greater Bay Area) and Southeast Asia. Despite the rapid urbanisation and new town developments, talents were also unevenly supplied to financial and professional sectors. The homogeneity of industry in Hong Kong leads to where we are today — the most expensive city to survive and the most costly economy to transform.
2. Solow–Swan Model and Solow Residual (1956) — Growth Is Exogenous and Limited (Uncorrelated On The Surface)
In the 1950s, the economists in The US had a brave hunch that output growth would not be positive forever, so did the other developing countries who afterwards participated in the global trade afterwards with the developed economies. Some did not even gain enough from global trade for growth.
Both China and Hong Kong had seen the limit to growth after the 2008 (or even earlier). In the past decades, together upon the economic reform in China, the 2nd largest economy in the world and the Asia’s most financially traded city have experienced the rise of capital and labour costs, meaning a diminishing marginal return to financial investment as a whole.
While, the relative right-wing economists believed that, in the context of developed economies where capital investment is no longer the determining factor to the growth, there is/should (be) not much space for public policies and political administrations to impact the TFP in economic output, such belief of “Big Market — Small Government” (小政府大市場) leaves China and Hong Kong SAR Government helpless and vulnerable to global-scale shocks especially in the 2010s, as frequency of black-swans in the market gets higher.
3. Paul Romer’s Endogenous Growth Theory (2018) — A Call To Make Economic Choices At Political Will
On the other hand, though, the Nobel Prize Laureate in 2018, Prof. Paul Romer, suggested that the TFP growth, instead, could endogenous if the policies are done right with a good match of political will power and environment of “freedom of idea”(more elaboration in the next chapter).
It, hence, signals a call for Hong Kong SAR Government to make economic choices with stronger political will, in which a new sets of economic politics and welfares shall be set to establish new redistribution ecosystem among districts in Hong Kong, and therefore, the Greater Bay Area.
Social Entrepreneurship Lab with Fundamental Socio-Political Economics Understanding and Reasoning
Community Program — Enlightening “Kwong Fuk Road”(“社創實驗室：革新大埔未來產業”) is designated as a series of School Workshop, Community Explores and Social Entrepreneurship Lab in August and September 2022 to conduct an in-depth community engagement with various stakeholders in Tai Po District, a location as one of the key urban economy undergoing Re-Industrialisation process, where conventional industrial estates adopt Industry 4.0 technologies, integrating with the research and development (R&D) capability provided by the HK Science and Technology Parks (HKSTP) and unleashing the role of advanced manufacturing supply-chain hub for the Northern Metropolis and Greater Bay Area.
Adopting the fundamental theories and model above, the Tai Po District is considered to be a potential key engine for fostering sustainable TFP growth.
7 Groups of public policy research interns (in total of 21) were deployed since early June to address various components of variables that lead to the construct of Total Factor Productivity (TFP) that shapes a proper conditions of the 4.0 industrial economic development roadmap (工業藍圖)(through Re-Industrialisation Strategy (再工業化) as stated by the HK Science Parks).
The research group attempts further to address the unique value proposition of “Political Will”(政治願景) where Hong Kong SAR Government at current conditions could adopt and advocate to reason (and communicate those to the general public and key stakeholders) the political importance of various key conditions that make the roadmap possible.
Cycling Tour to Lam Tsuen (大埔林村) and Tai Yuen Estate (大元村)
As part of the preparation activity to the SE Lab and dialogues, a cycling tour was organised with the secretariat of the Social Enterprise Summit, policy research interns and partner of KPMG to visit local representatives in Lam Tsuen and Tai Yuen Estate to conduct a field audit on district urban economic structure to validate and verify the use of fundamental theories and model.
Observations and comparisons where made among Tai Po District and other districts in Hong Kong to distinguish the heterogeneity of social demography and urban structures.
Road to the Greater Bay Area — Q4 2022 Strategy Dialogue with the World Economic Forum
From fundamental theories to dialogues and actions, the contributions and advocacy to the new urban sustainability do not plan to stop at the community programs. The Social Entrepreneurship Lab hosted by the Hong Kong Social Enterprise Summit would be connected to the Strategy Dialogue through the Good City Foundation with the World Economic Forum, where more strategic policy committees and boards in the Hong Kong SAR Government in relevant domains would be engaged.