(Next Magazine, 2015/4/16, A002, Second Opinion, Bill Stacey)
Euthanasia of the middle-class
HSBC was once a small start-up. Early pictures from 1871 show the founding General Manager, Victor Kresser, surrounded by a small group of half a dozen western clerks. Even as late as 1928, the vital local Chinese staffs were captured in a photo of just 14 men. The early founders and staff were not particularly wealthy, but they earned a decent living and provided a vital service.
A century and a half later, no one could run a bank with so few people, and since the founding of Sun Hung Kai Bank, (Fubon Bank’s previous incarnation), in 1982, there has been no new bank created in Hong Kong.
The reason why, is the onerous burden of regulation and licensing that close more and more industries to new entrants and competition. In the process, doors are closed to upward mobility, entrepreneurs are frustrated and new opportunities do not emerge.Politicians feign concern about the squeezed middle-class and the need to boost small businesses, all the while exacerbating their plight with new chains.Business, education, and professions are traditional routes to betterment, but regulation and a new “license Raj” are killing opportunity.
Business skills are not usually well suited to being acquired at a university. Knowledge helpful to business might come from a business school, but all who are successful in business will say they learned what is vital by doing the job, or in some form of apprenticeship with a business master. Usually, ventures start small, but that can be all the start an entrepreneur needs — Li Ka Shing started with plastic flowers.Yet it is a start that is becoming ever harder.
Once owning and driving a taxi could have been a small business, but since freezing its issuance in 1995, taxi license has become an appreciating asset for the well-off and relegate most drivers to meager pickings. The aspiring chef could once set up as a hawker roasting chestnuts, built some capital and later set up a restaurant. No longer. Now hawkers are banned. Food outlets face some of the most onerous regulatory requirements. For a restaurant to sell liquor can mean being tied up in regulatory knots for years. Most new food outlets are chains or funded by established backers.Stockbroking was once an easy business to enter.
I worked for a firm that 52 years ago started with two enthusiastic inexperienced brokers and a secretary who also did settlements, before growing into an NYSE listed billion dollar company. That is inconceivable today, when the capital, compliance and licensing regime cost millions and processes for approval drag on for months if not years.All businesses face petty harassments of MPF filings, mandatory insurance, Inland Revenue Department filings, plastic bag rules and increasing problems just setting up bank accounts in some sectors.
Minimum wages are another impost and now the small business administrative nightmare of a consumption tax is slipping back onto the agenda.Even the professions are becoming more closed. A degree from any Commonwealth country would once have been enough for a doctor to be licensed to practice. Up till the handover of sovereignty, Hong Kong natives would get the best qualifications they could from around the world and headed home to a vibrant, open and growing market to hang up their shingle and see what private practice might bring. Now a very few can struggle through a quota system masqueraded as exams that excludes many well qualified professionals. Law, architecture, engineering, teaching and most other professional roles are following medicine down a path of a local “license Raj”.There is some well-meaning rationale for all of the restrictions. Much is in the cause of consumer protection, but the practical effect is to protect many industries and jobs just for the big end of town and those who went to the right schools and universities.
A vibrant middle class cannot thrive without free and open markets. Free markets might be messy and less orderly for the bureaucratic mind. They deny politicians the option of meddling to lay claim to protecting the public. However, competition and choice is the best form of consumer protection. Legislators can best help the middle class by dismantling the barriers on the road to prosperity.