Another good article from Nick Smith, Chairman of Lion Rock Institute, the only free market think tank in Hong Kong. Reposting in full, enjoy.
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Nick Sallnow-Smith 31/05/2018
I hope my title this month will at least intrigue you.
This phrase is perhaps the longest palindrome ( it reads the same backwards as
forwards) that has a meaning. It refers to the building of the Panama Canal
over 100 years ago; perhaps referring to Ferdinand de Lesseps, whose attempt
failed, or to Theodore Roosevelt, whose American led attempt succeeded. It can
be argued that De Lesseps failed because he did not have a complete plan. (For
example he had no plan to manage the flow of the Chagres River in the wet
season. The Americans did.)
Why am I writing about planning? Central planning of a
country, or indeed a city, should have been completely discredited by the
Soviet “experiment” 100 years ago. One might have expected that the breakup of
the Soviet Union in 1989 would have marked the last we would hear of central
planning. Yet so called “liberal” economies move further and further towards
planned economies today, with regulations and legislation controlling more and
more economic activity. Why?
My guess is that the obvious need for each of us to plan
our days to meet objectives, and for each enterprise to do the same, tempts the
belief that what makes sense for an individual or company must also make sense
for the entire community. Most citizens not only accept that the City should
plan, but that it must plan. In other words, the Government is expected to
plan. It must have an IT plan, a plan for youth, a plan for the elderly, a plan
for everything.
But this makes no sense. Central plans don’t work for two
main reasons. First, no Government can have enough currently applicable
information to implement any plan effectively. (Moreover plans tend to be fixed
while the world constantly changes.) Second, and more important, there is no
single plan that can satisfy the myriad of different preferences and desires of
the population. Laissez faire economies work because each of us can make our
own decisions; about what to eat, where to live, what to read, who to befriend,
etc. The outcome of millions of these daily decisions is not planned and cannot
be planned. We each have our own plan based on our own knowledge of our needs
and desires, as they change every day.
The city of “Hong Kong” is not a single entity. It is
simply the aggregated outcome of what all of us living here decide to do every
day. Yet so much debate of public policy seems to assume that a single “policy”
can be discovered that represents what “Hong Kong” wants/needs. The
administration continually searches for “public consensus” on such policies and
seems surprised that it is so hard to build such a consensus. But with a
population of 7 million people, this is a fool’s errand. There will never ever
be a consensus on anything interventionist or coercive. This means if the
social structure of Government is based on imposing single monolithic
“policies” on all, there will always be division and discontent.
The only avenue that leads away from such a divided
society is a free economy where each of us pursues his own preferences (as long
as we don’t impose on our choices on others). Yet we have an administration
that believes its mandate is to find solutions for all of “us”, instead of
allowing citizens to find their own solutions. There one consensus that is
possible. A laissez faire consensus that Government’s role is to defend
citizens against coercive acts of others. That is, to provide for policing and
the courts. It seems to me that when most citizens say how important the rule
of law is, they are reflecting an underlying consensus of this type. But this
is in effect a consensus that no one should coerce others. In complete
contrast, Government today (globally, not only in Hong Kong) seems to involve a
whole range of coercive acts where some members of the population are forced to
accept a policy they dislike because the Government wants to implement its
“Plan”.
Let’s look at a couple of examples to see where this
approach leads. Education systems across the world demonstrate how consensus
can never be achieved. Rather than restraining Government invention to
redistributive taxation, to provide poorer citizens the means to buy education
in the private sector, most governments operate the educational institutions
themselves. This results in a monopolistic sector with the usual consequences
of monopolies; poor service and high cost. It is ironic that all Governments
rail against any monopoly in the private sector. Yet inside the public sector,
the perils of monopolies are ignored. But beyond the inefficiencies of this,
the lack of choice that results is perhaps even more insidious and damaging to
public contentment.
Think of the constant debate in the media about curricula
issues; national education and liberal studies to name only two. Because the
school system is state owned and monolithic, all kids will receive the same
form of teaching and curriculum. Some parents and children may like it, some may not. But the latter group cannot
vote with their feet and move to another school that teaches differently. All
they can do is to move into the sphere of “politics” to seek ways to change
Government “policy” on these matters. Those who lament how politics everywhere
are always so aggressive and confrontational miss the point. Since the aim is
to win power and force others to accept something they dislike, of course it
will be confrontational. Politics is confrontation. Yet if the provision of
education was left to the private sector, many different types of learning
arrangements and content would be offered, precisely because there are
differing demands. Parents could make their own choices and the supply side
would adapt to this. No one would think of the Government deciding we should
all eat pork and never chicken. No one would accept a Government “policy” for
every dinner menu. Yet this is what happens in schools. The consequence is a
never ending search for consensus where none exists, and endless discontent
throughout society.
Let me take transport as another example. At first sight
this industry appears to be in the private sector. The franchised buses, PLBs,
taxis, ferries and even the MTR are run by private companies. But through
regulation the Government control almost everything. Fares, routes, type of
vehicle, are all subject to Government approval. You might think that bus
routes should be decided by public demand, met by competing providers. Yet
closing an unprofitable routes is subject to Government approval. The industry
is prevented from responding to those countless individual travel “plans” we
all might have every day, that I spoke about earlier. Routes are kept going
because of “political” pressure even where demand is lacking.
As I noted earlier, the sad aspect of this for me is that
citizens themselves do not see the value of the market. A few months ago there
were proposals to run ferry services across the harbor between new locations.
In the debate some commented that this should not be tried because it may not
be wanted. Yet a market economy works precisely because it tests whether there
is demand. If there is not, the business will fail. The correspondent writing
to the newspaper took the view, however, that the Government should assess
whether it thinks there will be demand and if it does not, the service will
never even be trialled. In other words the Government should plan, and then
implement their plan. The market test should never be tried. Free choice should
not be tried.
More and more Government planning inevitably means that
personal choices will be reduced. Next time you are tempted to demand the
Government comes up with a “plan” for this or that, please remember the part of
cost will be fewer choices for you as a citizen. Do you really want that?
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