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Cambridge Journal of Economics 1992,16,207-225
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P. Sai-wingHo*
1. Introduction
Among the changes, and developments in the world in the last two decades that have
far-reaching implications for the economics discipline, the rapid economic growth and
development of South Korea, Taiwan, Singapore, and Hong Kong should certainly rank
very high on the list. In the 1960s the former three countries switched away from
'inward-oriented' trade strategies to a more liberal 'outward-oriented' trade strategy.
Hong Kong has pursued a version of the latter strategy from early on. Together, they seem
to have provided a lesson which calls for a backlash from active government participation
and intervention in the development process. Thus, in the subdiscipline of development
economics, the experience of these countries has contributed to what has been dubbed a
'resurgence of neoclassical economics' (Little, 1982).
However, it is not clear how much momentum there is in this resurgence. The underlying framework for criticising the use of inward-oriented policies is neoclassical. As such,
conclusions are drawn with reference to the welfare theorems of the neoclassical
paradigm.1 But the fact that these are static theorems has raised some doubts about the
strength of the neoclassical resurgence.
There are two unanswered questions. First, to what extent can the outstanding
performance of these countries be explained, in the context of neoclassical economics, by
the mere abandonment of inward-oriented policies? As Srinivasan (1985, p. 54) notes,
While the evidence shows substantial gains from trade liberalization and outward orientation,
paradoxically, attempts to quantify such gains have almost always shown them to be relatively
insignificant, rarely exceeding one per cent of gross domestic product (GDP) . . . [E]ven though
countries that have followed outward-oriented liberal foreign trade policies have performed better
than inward-oriented countries in terms of GDP per capita, rate of growth of real GDP, and
indicators of income distribution and poverty, most models do not seem to capture these realities...
There are a number of structural features of these models that tend to underestimate the static and
particularly the dynamic gains from trade.
Manuscript received 4 January 1991;finalversion received 14 June 1991.
"University of Denver. I should like to thank Donald Harris, John Gurley, and two anonymous referees of
this Journal for their helpful comments on earlier versions of this paper. For any remaining errors, I alone
must accept full responsibility.
1
For a general discussion on these and the sources of the original contributions, see Myint (1987,
pp. 115-116).
0309-166X/92/020207+19 $03.00/0
© 1992 Academic Press Limited
20S
P. Sai-wing Ho
This view is echoed in World Bank (1987, p. 88), Myint (1987, pp. 116-117), and more
recently, Krueger (1990, pp. 109-110).
There is also a growing consensus among economists that the aforementioned
countries, with perhaps the exception of Hong Kong, have not been practising anything
close to laissez-faire. There are still substantial government interventions in the economies
of these countries. The second question thus arises: given these interventions, how can the
neoclassical model explain the continued impressive performance of these countries? In
the words of Myint (1987, p. 119),
[W]e do not really know whether countries that have distorted resources in favor of export
promotion are growing rapidly despite these distortions or because of them.
In search for answers to these questions, there are calls 'to consider the broad economic
themes that seem to be at work' (World Bank, 1987, p. 88). These would include factors
like 'economies of scale': in an outward-oriented regime, firms are not limited by the size
of the domestic market; there is greater competition and hence better incentives to
improve efficiency; and there is improved productivity as a result of induced technical
changes. One might be tempted to wonder how much progress has been made in trade and
development studies since Adam Smith!
Along the lines of classical economists like Smith, Ricardo, and Marx, much work has
been done by mainly non-mainstream economists to elaborate on the classical analysis of
trade and growth, and to further distinguish it from the neoclassical analysis. However,
these contributions are quite diverse; as yet, there is no unified and general classical
framework.1 Besides, few systematic attempts have been made to interpret the experience
of the East Asian countries.
This paper advances a Ricardian interpretation of the post-World War II growth
experience of Hong Kong. In employing this framework, the emphasis is on the link of
wages to growth via profits. As a capitalist economy, Hong Kong has continuously to
accumulate capital to reproduce itself, and to survive the competition from other capitalist
economies. The funds from which investments can be made is the 'surplus', distributed in
the form of profits, from the Hong Kong production system. The classical notion of a
surplus is, in general terms, equal to gross output less the 'necessary consumption' or the
wages of workers, and less the amount put aside for the replacement of used-up means of
production. For the purpose of this paper, wages are taken to be determined fundamentally by a social notion of subsistence.2 Given this social level of subsistence, the cost of
procuring the necessary wage goods will determine the nominal wage. This in turn
governs the size of the surplus from which investment funds are drawn and hence, the
speed of capital accumulation. In the specific area in the Hong Kong economy that is being
examined in this paper, the government has been playing a crucial role in dampening the
increase in wages. Thus, the interpretation advanced in this paper is made in a dynamic
framework in which there has been an explicit role played by the government in promoting
economic growth.
1
In the recent revival of interest in classical economics, a lot of work has been done to clarify its theoretical
structure and to contrast it with that of neoclassical economics. See, for example, Bharadwaj (1989). For works
that are more directly related to trade and growth, see Steedman (1979A3), Pasinetti (1981, ch. XI), and
Evans (1989). For an excellent survey of Marxist theories of imperialism, see Brewer (1980).
2
The level of the natural wage, according to Ricardo, essentially depends on the 'habits and customs' of the
people. For a brief discussion of the social and institutional forces which affect the wage-determination
process in Hong Kong, see Ho (1989, ch. IV, appendix IV.A.l).
Public housing services in Hong Kong
209
Section 2 provides a brief historical background to the Hong Kong economy. There it is
pointed out that a main concern in the early 1950s, when Hong Kong was desperately
trying to diversify away from entrepot to manufacturing activities (owing to the United
Nations embargo on trade with China), was wage costs. This concern was in turn due to
the high costs in procuring the two dominant wage-good items in a typical worker's
budget; their production required land and Hong Kong was land scarce. There was thus a
concern akin to that of Ricardo during the Corn Laws Debate in England. The difference
is that in the case of Hong Kong one of the dominant wage good items, housing services,
constitutes a kind of non-tradable good. As such, the increasing cost problem arising from
its domestic provision cannot be solved via imports. However, as Ho (1990) has illustrated
in a Ricardian model, if the rental income accruing to landlords can somehow be channelled into subsidising the provision of the non-tradable wage good, the arrival of the
'stationary state' can be postponed. Given that in Hong Kong the Government has also
been the landlord, there was thus a potential role for it to dampen the increase in the wage
cost.
Section 3 examines the sources of rent for the Hong Kong landlord. The channelling of
rent into subsidising the provision of housing services is illustrated in Section 4. Section 5
briefly discusses the possible factors that have rendered this otherwise temporary solution,
in the form of a subsidy, longer lasting. In Section 6, the discussion is summarised and put
in perspective.
2. The situation in Hong Kong in the 1940s and 1950s
The pre-war Hong Kong economy was essentially an entrepot. The Japanese occupation
during the war brought most economic activities to a halt. When the war ended, every
indication was that Hong Kong would resume her pre-war economic role. But the Korean
War in the early 1950s triggered the United Nations to put an embargo on trade with
China. As most of the entrepot trade that had been going on involved China, Hong Kong
could no longer thrive in this area.
2.1. The concern vrith wage costs
Though it was clear that Hong Kong had to diversify away from entrepot trade, no one was
certain whether it could make the adjustment successfully. Part of the stage was set for
Hong Kong to take an alternative course of development. For during the civil war in China
between the nationalists and the communists, aflightof labour, capital, and entrepreneurs
to Hong Kong occurred. This effected what Owen (1971) dubbed a process of 'transferred' industrialisation. But interestingly, a major concern among the Hong Kong
capitalists at that time was with the high labour costs prevailing after World War II. In the
words of the Commissioner for Labour (CfL):
It must... be noted that the Colony has not been able to escape inflationary tendencies which have
been apparent throughout the Far East. Wage levels, therefore, have in most cases risen disproportionately to the productive capacity of the local industries. Considerable difficulty may be
anticipated when it is found necessary to reduce labour costs (CfL, 1946, p. 3).
Since the war, the shortage of raw materials, the damage to factories, and the difficulty of meeting the
labour costs, which haverisenin proportion to the cost of living, have all combined to make the task
of rehabilitation (of the textile industry) an extremely hard one (ibid., p. 11).
2.2. Two dominant land-based wage goods
In the Commissioner's Report in 1947, there was an elaboration on the two dominant
factors which led to a higher cost of living, and hence high labour cost:
210
P. Sai-wingHo
The most obvious effect of the war in East Asia was completely to upset the economics of rice
production and distribution, and to this single factor can be attributed largely therisein the cost of
living of a population the staple article of whose diet isrice.Locally, the cost of living is probably
higher than elsewhere in the East, and this is attributable to exaggerated rents which in turn spring
from an increased population and shortage of houses (CfL, 1947, p. 21).
Thus, the high cost of labour was attributed to the high rentals for housing services (a
non-tradable commodity), and to the high price of food (especially rice, a tradable
commodity).1
Both food and housing services require land as an input in their production. Since Hong
Kong is a 'land scarce' economy, their provision entails increasing costs. And the rather
sudden population explosion in the early post-war years, due to the return of residents
who fled during the Japanese occupation and the huge inflow of refugees fleeing the civil
war in China, further aggravated the land shortage problem.2 It is not surprising that the
Commissioner for Labour anticipated that there would be considerable difficulty when it
became necessary to reduce labour costs. Hence, in studying Hong Kong's rapid post-war
growth, it is important to find out how it has been able to solve the increasing cost problem
in the provision of the two dominant wage-good items.
The Commissioner for Labour pointed to the necessity of reducing the cost of rice and
of building more houses 'of a type suitable for the workers' (CfL, 1947, p. 21). Since rice
was tradable, the solution to the increasing cost problem could be through imports, a la
Ricardo.3 But housing services were non-tradable. As the Commissioner for Labour
remarked, 'The only factor which could be directly influenced by local action is the
improvement of housing conditions' (ibid., pp. 21-22).
2.3. Early attempts to solve the housing problem
Large squatter settlements mushroomed in Hong Kong in the early post-war years
because of the sudden population explosion. They were at first tolerated by the Government as a majority of the refugees were expected to return to China when conditions there
settled after the revolution. However, it soon became obvious that they would remain in
Hong Kong. The Government had to develop a resettlement policy. In its early stage this
policy was concerned with a gradual elimination of squatters in the urban area and their
resettlement through cottage development in the outskirts of the urban area.
If one treats the development of these cottages as a specific technique in the provision of
housing services, then it soon became evident that it was unproductive in the Hong Kong
environment. This was chiefly owing to the shortage of land suitable for any large-scale
extension of existing resettlement operations. In his 1954 Annual Departmental Report,
the Commissioner for Resettlement (CfR) remarked that,
1
Weights assigned to 'food' and 'housing' (i.e. the budget shares for these items) for the price indices
compiled in Hong Kong in the post-war decades have tended to confirm the importance of these wage-good
items in the worker's budget. Thus, for the sample households that belong to the lower income bracket
(supposedly the worker households), die weights for (i) food, and (ii) housing are respectively: (51-0,9-25%)
in die Retail Price Index, (55-6, 12-9%) in the Modified Consumer Price Index, (56-6, 14-1%) in the
Consumer Price Index (A), and (46-4,151 %) in the New Consumer Price Index (A). See Ho (1989, ch. IV,
table IV.4). And as subsequent discussions will attest, there is reason to believe that die true weight for
'housing' has probably been underestimated.
2
The population in Hong Kong in 1945 (after liberation) was widely believed to be about 600,000. By
mid-1946, this had more than doubled. It kept increasing in all early post-war years, except between 1950 and
1951. The increase was especially sharp in 1946-1947 and 1949-1950, and annual population growth rate
from 1951-1952 to 1954-1955 all exceeded 5%.
' See Chau (1983) and Ho (1989) for a discussion of the importance of imported foodstuffs in the economic
growth of Hong Kong.
Public housing services in Hong Kong
211
[A]lmost every site needed for permanent purposes such as housing, schools, and factories was
occupied either partially or completely by squatters and could not therefore be built upon until the
squatters were cleared. The development of die Colony as a whole was in fact being seriously held up
(CfR, 1956-1957, p. 2).
Because Hong Kong is a free-enterprise economy, one might expect the private sector to
step in to provide housing services to the squatters. The private sector certainly did
participate in the construction of houses and apartment buildings. However, only a few
were constructed with rents which were within the means of manual workers or the less
highly-paid clerical workers (CfL, 1948-1949, p. 31). From 1948 to 1952, the Government even provided for the private treaty sale of land for large housing schemes which
were initiated by employers or housing societies. But the response was poor (Bristow,
1989, p. 46).
In July 1951, the Government also set aside a number of 'approved' areas and a few
'tolerated' areas for certain types of resettlement structures. For a squatter eligible for a
site in an 'approved' area, the construction of a bungalow would cost him well over
HKS1000. The building of a simpler type of structure permitted in the 'tolerated' areas
would cost several hundred dollars. Many of the squatters were poor and simply could not
afford these forms of resettlement.1
In September 1952, the non-profit-making Hong Kong Settlers' Housing Corporation
was set up. It wasfinancedpartly by the Government and partly from funds subscribed by
the public. It built over 1500 large and small cottages to be sold to settlers on hire-purchase
terms, the instalments being $35 and $20 a month respectively. Despite these expedients
and a good deal of assistance given by welfare agencies in individual cases, most squatters
still could not afford the cottages.
The situation was summarised succinctly in the 1954-1955 Annual Report of the
Housing Authority (pp. 2—3).
[T]he inevitable result (that land is expensive and building cost inflated by expensive piling or
site-formation)... applies particularly to the urban areas, where ... land is not available for cheap
single-storey building or for schemes of aided self-help. Space can only be found vertically and to
find room for all who need it accommodation must be provided in multi-storeyflats.This is not the
ideal form of dwelling and it is relatively expensive to construct. On these terms private enterprise
cannot produce the accommodation required at rents within the means of the poorest of those who
need it. Government assistance is essential.
One can interpret the situation as follows. There was a certain amount of housing services
that each worker household required for subsistence. However, given the shortage of land,
the available technique of production for providing such a service would be such as to
render the general rate of profits very low or even negative for the economy as a whole.
Thus, there was hardly any private initiative. In other words, at the given wage (i.e. the
subsistence requirement for housing) and with the available technique, of production of
housing services, the Hong Kong 'production system' was not productive enough for the
system to be viable.
Housing services being a non-tradable commodity, the landlord's rental incomes had to
be channelled to subsidise its provision, so that capital accumulation, and thus Hong
Kong's growth, could continue.
1
In 1950, an unskilled workman working for European firms and the few big Chinese firms was making
83-50-5-00 per day (Hong Kong Colonial Reports, 1950). However, it should be kept in mind that the squatters
would probably be working in lower paid (and perhaps less secure) jobs than these. The Government did not
collect wage figures for these jobs.
212
P. Sai-wingHo
2.4. The Hong Kong Government as the landlord
How has this channelling been done? In Hong Kong, this has been facilitated by the fact
that there is in a sense only one member in the landlord class—the Government.
Back in the 19th century, the British Crown assumed the position of landlord through
three conventions between Britain and the Ching Imperial Government. Under the
Convention of Chuenpi (1841) and the Convention of Peking (1860), the Hong Kong
Island (29 square miles) and the tip of the Kowloon Peninsula (3-5 square miles) were
respectively ceded in perpetuity. And under the Convention of Peking (1898), the New
Territories (365-5 square miles) was leased for 99 years starting from July 1,1898.
In each case, the change in landownership—from an extremely complex landownership
system in Imperial China to a relatively simple one under the British Crown—was not
without difficulties. There was chaos, which required considerable effort on the part of
the Hong Kong Government to resolve. Eventually, all land was declared to be Crown
Land, and a Crown leasehold system was established. Because of this peculiar political
circumstance, the Hong Kong Government became the sole landlord.
'Rents' accruing to the Hong Kong landlord have been used to finance the Government.
To be sure, the Government has to rely on other sources of revenue as well. Nevertheless,
as will be seen in the next section, the 'contribution* by the landlord is still not inconsiderable, and this has the result that the rental incomes of the landlord have been channelled
into subsidising the provision of housing services.
3. Sources of rent for the Hong Kong landlord
There are basically two methods by which land in Hong Kong has been allocated for
different uses. The first is the disposal of land through public auction or tender, by which
most land targeted for private sector commercial, industrial, or residential development
has been allocated. The second is the disposal of land through private treaty. This covers
land for public housing projects, public utilities, schools, hospitals (clinics), and approved
charitable purposes.
3.1. Four sources of rents
Four types of government revenue can be identified as crude counterparts to the Ricardian
rent. The first source of revenue is from 'Land Transactions' or 'Land Sales'. This
includes premia on new leases through sales by public auction or tender, as well as
premia on new leases through private treaty grant. The second source is revenue from
'Properties', which includes Crown Rents, Rents from Short-term Tenancies, and Crown
Land Licenses. Crown Rent is the additional annual payment made by a lessee of Crown
land which is stipulated at a nominal level.1 Revenues from 'Rents from Short-term
Tenancies' and 'Crown Land Licenses' are essentially rents from land leased out on a
much shorter-term basis (say, 1-year), as opposed to the leases sold by auction which are
mostly of a duration of 75 years. The third source is revenue from 'Rates'. These are levied
on the occupation of landed property (land or buildings) at a percentage of the assessed
rateable value—the annual rent at which the property might reasonably be expected to be
let. And the last source is the 'Property Tax', which is charged on the owner of land or
1
Before 1851, rental was the subject of bidding in public auction. After the bidding subject was changed to
premia in 1851, the rental became afixedamount according to the location of the lot. Over the years, this 'zonal
rent' has been revised and now bears no relationship to economic rental. See Hadland (1978, pp. 75-76).
Public housing services in Hong Kong
213
Table 1. Rents (HK$millions) as percentages (%) of consolidated revenue (from 1947-1948 to
1984-1985)
Year
Rents
As a percentage
ofrevenue
Year
Rents
As a percentage
of revenue
1947-1948
1948-1949
1949-1950
1950-1951
1951-1952
1952-1953
1953-1954
1954-1955
1955-1956
1956-1957
1957-1958
1958-1959
1959-1960
1960-1961
1961-1962
1962-1963
1963-1964
1964-1965
1965-1966
24-6
291
35-4
49-3
52-8
590
660
75-8
92-7
104-9
129-7
143-8
150-5
219-4
289-9
4261
449-5
428-4
4660
150
14-9
13-4
16-9
14-3
14-7
16-4
17-3
20-2
20-4
21-7
22-6
21-9
25-2
27-7
33-5
31-3
24-9
27-6
1966-1967
1967-1968
1968-1969
1969-1970
1970-1971
1971-1972
1972-1973
1973-1974
1974-1975
1975-1976
1976-1977
1977-1978
1978-1979
1979-1980
1980-1981
1981-1982
1982-1983
1983-1984
1984-1985
473-6
511-2
5350
651-5
8510
911-8
13671
1320-8
1427-8
1722-5
22061
3778-6
4186-6
53820
13740-5
13572-5
9390-7
7478-7
10462-3
25-3
26-1
24-9
25-5
270
25 0
27-2
23-9
22-9
23-7
26-4
33-4
301
29-5
45-4
NA
NA
NA
NA
Sources: Various issues of Accountant General, Annual Departmental Report; Commissioner of Inland
Revenue, Departmental Report; Housing Authority, Annual Report.
Notes: (1) Since in 1981-1982 the Government stopped publishing figures on consolidated revenue, no
percentagefigurescan be calculated for those years. (2) In calculating the percentagefigurefor 1980-1981, the
actual general revenuefigurewas used in place of the estimated consolidated revenuefigurebecause the latter
was grossly underestimated. Using the actual general revenue figure should thus give a smaller error. (3)
Revenues from Land Sales and Rates have been the more important sources of rents. Proceeds from Land
Sales have been highly volatile. However, the volatility has been smoothed out by revenues from Properties,
Rates, and Property Tax (which have increased much more steadily). See Ho (1989, ch. V, Table V.2) for
details.
buildings. Before 1983-1984, this was levied at a certain standard rate on the 'net assessable value'. Since then, it has been based on the actual rent received, less an allowance of
20% for repairs and maintenance.1
3.2. Thefigures
Table 1 shows the 'rents' (i.e. the total revenues from Land Sales, Properties, Rates, and
Property Tax) and the percentage of consolidated government revenue accounted for by
1
Since the last two sources involve also 'buildings' apart from land, some explanation is in order. Before a
piece of land is auctioned, the Government will specify the conditions of sale by indicating if that piece of land
is to be developed for industrial, commercial, and/or residential purpose. In order to discourage the hoarding
of and speculation in land, a building covenant is also imposed in the lease. This stipulates that a certain
amount (in dollars worth) of building work has to be completed within a certain period of time from the date of
possession. A charge is made for the extension of that period, and the piece of land cannot be resold until the
covenant is fulfilled (Hadland, 1978, p. 8). Should these conditions not be met the Government has the power
to re-enter the piece of land for sale. Thus, if a piece of land put up for auction is being taken, the rent accruing
to the landlord includes not only the premium on the lease and the annual Crown Rent, it also includes the
(expected) revenues from Rates and Property Tax.
214
P. Sai-wing Ho
them. Before the mid-1950s, 'rents' accounted for less than 18% of consolidated revenue.
That rose to more than 20% in the late 1950s and early 1960s, and then went above the
30% mark in 1962-1963 and 1963-1964. Since then they have dropped back to between
22 and 28%, and stayed there for 13 years. In the last few years in which data are available,
they showed signs of an increase again.1 On the whole, 'rents' have become an important
source of consolidated revenue. The trend is slightly upward, allowance being made for
the highfluctuationsin proceeds from Land Sales.2
4. Rents used as subsidies in public housing projects
The stages through which the Government has become increasingly involved in the
provision of public housing will be re-traced in this section. In the process, the ways in
which the Government has been subsidising public housing will be examined.
Generally speaking, the subsidy has been provided in three ways: (1) capital costs are
under-reported, and this is made possible by selling land at lower than market prices as
well as under-reporting engineering and construction costs; (2) concessionary interest
rates are used to calculate the repayment on the already under-reported capital expenditure; (3) public housing rentals are raised only infrequently. Soon after the formation of
the new Housing Authority in 1973, the Government even decided to provide land 'free'
to public housing estates. On top of this, loans are granted to the Authority with no
requirement to repay interest.
4.1. The Department of Resettlement
In sub-section 2.3, it was pointed out that cottage development, which was the
Government's initial version of a resettlement policy, was doomed to fail. There was
hardly any private initiative to provide for resettlement of the squatters, and the few
schemes of aided self-help did not succeed. During those early post-war years, several
other approaches to the problem were discussed and debated by the Executive Council,
the Public Works Department, and the Urban Council (Bristow, 1989, ch. 2). But it is fair
to say that, owing to disagreement (e.g. on the scope of finance by the Government) and
indecision, no substantive action was taken.
The triggering event for the Government to experiment with multi-storey buildings
was a huge fire in Shek Kip Mei on Christmas Day in 1953, which rendered 53,000
squatters homeless. An Emergency Sub-committee of the Urban Council was set up to
make recommendations for solutions. In one of its conclusions, it reinforced the belief that
squatters had to be resettled in multi-storey buildings. Moreover, noting that it was
difficult to interest private capital in resettlement, it suggested that the only alternative would be for the Government to deal with the problem. This, according to the
Sub-committee, should be done 'even if it meant very heavy capital expenditure'.
1
Even without the figures on consolidated revenue from 1981-1982 to 1984-1985, one can safely predict
from the 'rents' figures that the percentage of 'rents' in consolidated revenue would have shown declines in
those years. This was mainly due to the decrease in proceeds from Land Sales. For the years 1982-1983 to
1984-1985, this can in turn be attributed to the uncertainty associated with the Sino-British negotiation on
Hong Kong's future.
J
Given the nature of the land-allocation methods, there are two things which have to be kept in mind when
one interprets the figures on rents in Table 1. Firstly, for lands allocated by auction or tender, one has to ask
if the leasehold system enables the landlord to capture rents that should obtain at the prevailing market
condition. Secondly, for lands disposed of by private treaty, one must be aware of the element of 'imputed
rents'. Ho (1989, ch. V, appendices V.A.3 and V.A.4) has a discussion on these and concludes that the figures
do not fully reflect the market rents as well as the imputed rents. Thus, one can expect that the actual
percentage contribution of rents to consolidated revenue can even be higher than those figures in Table 1.
Public housing services in Hong Kong
215
Table 2. Calculations of rental in resettlement housing (1954)
HK8
I. Capital cost of one block of 432 rentable rooms
Value of land (23,000 sq. ft. @ 810 per sq.
ft.)
Construction cost (including an element for average cost of site-formation
and piling)
2% of construction cost to cover Public Works Department's
supervision, etc.
Overall completed cost of one block
230,000
780,000
15,600
1,025,600
II. Annual outgoings including capital repayment, in respect of one block
Amortisation: annual sum to be repaid in order to write off in 40 years a
loan of $1,025,600 bearing interest at 3-5% compound
Crown rent ($800 per acre per annum)
Maintenance of building @ 0-5% per annum on cost of construction
Estimated administrative and miscellaneous recurrent expenditure
Overall outgoings for one block per annum (or rentals accruing from one
block per annum)
48,026
418
3900
12,895
65,239
in. Monthly rental for each room
$65,239/(432 x 12)
Monthly charge for water
Monthly charge for bad debts, voids, etc.
Total
=$12-50
1-00
0-50
=$1400
Source: Commissioner for Resettlement, Annual Departmental Report, 1955-1956.
At first, the Government did not commit itself to the construction of multi-storey
accommodation for general resettlement purposes. But it agreed to undertake, as an
experiment, the construction of eight six-storey buildings at Shek Kip Mei. A temporary
Department of Resettlement was set up in 1954 which would provide resettlement
buildings for the 53,000 squatters made homeless by the fire.
In retrospect, however, this turned out to be the beginning of the Government's
participation in massive public housing projects. The Department of Resettlement stayed
on and subsequently provided for the rehousing of squatters cleared from land for the
construction of Resettlement Housing and other types of development, for families made
homeless by the demolition of dangerous buildings, for certain victims of natural
disasters, and for compassionate welfare cases.
It was another recommendation of the Emergency Sub-committee set up after the Shek
Kip Mei fire that resettlement accommodation constructed by the Government ought to
be let 'at a rental related not only to the capacity of the settlers to pay but also to the cost of
construction*. However, in practice, the capital cost was calculated in such a manner as to
entail a heavy subsidy by the Government to the tenants.
The account in Table 2 illustrates how rental was calculated in 1954 for a standard
seven-storey block containing 432 rentable rooms. The standard size of a room was 120
square feet, with communal washing and toilet facilities. Part I of the account shows the
calculation of capital cost. The subsidy came firstly in the valuation of land, which was
216
P. Sai-wingHo
granted at one-third of the market price. Secondly, although an element for average cost of
site-formation and piling was included, this did not count the cost of engineering for
works such as roads, drains, and water supply (CfR, 1957-1958, p. 44). Thirdly, it must be
pointed out that the total capital cost did not include the value of the land required for
roads, recreation spaces, and space between blocks, but merely the actual area built upon
(which in a whole estate is less than 50% of the total site area).
When this understatedfigurefor capital costs is carried to Part II of the account to work
out the annual outgoings, another subsidy element creeps in in the form of a concessionary
interest rate used to calculate the repayment on capital expenditure.
Finally, the rental calculated in Pan III of the account was, in principle, to be subject to
periodic review so as to allow for variations in the cost of construction, maintenance, and
administration. But the use of ground floor rooms as shops and workshops had increased
the revenue from rentals. Hence, for eleven years the rental for a standard room as calculated above could stay unchanged. And when it was raised to $18 in 1965-1966, it
remained constant for another eight years, at which time the Department of Resettlement
was absorbed into a new Housing Authority (to be discussed later). Besides the slow
increase in rentals, the latter were worked out in respect of a particular Mark (i.e. design)
of block, on the basis of contract prices/or the earliest ones to be constructed, and applied to all
blocks of that Mark irrespective of location and date of construction (CfR, 1966-1967, p. 51).
Table 3 gives a statement of the expenditure and revenue of the Resettlement
Department from its establishment in 1954 to its absorption into the new Housing
Authority in 1973. Notice how the total revenue had fallen short of the total expenditure.
This is a reflection of the subsidy in the rental (which explains the small amount of the total
revenue). However, one should not forget that the expenditure figures were, for the
reasons pointed out earlier, underestimated. Thus, the actual discrepancy between total
revenue and total expenditure should even be larger than that reported in the table.
4.2. The Housing Authority
In the same year that the Resettlement Department was established, the Housing
Authority as a statutory body was also set up. Its aim was to provide housing for citizens
earning (at that time) between $300 and $900 per month. The majority of the population in
this income group lived in tenements in the urban area. So the target group was different
from that of the Resettlement Department, which was mainly the squatter population.
The Authority was intended to function as a commercial enterprise in that its housing
projects had to pay their own way. Moreover, it was expected to budget for a surplus of
income over expenditure which would then be ploughed back into additional housing,
forming an element of self-financing for future schemes. With such high hopes, the
Government had put itself into a position in which it had to subsidise.
Crown land for Housing Authority estates was, like land allotted to Resettlement
estates, granted at one-third of the normal market price. To finance the capital expenditure, the Authority borrowed from the Development Loan Fund on concessionary terms.
Beginning from 1958, all outstanding loans were consolidated into one block loan, interest
on the first $45 million of which was at 3-5% per annum, and 5% per annum on any funds
over that amount (both over 40 years). All approved loans were used as a capital fund and
advances were called for as required. The Government did not require repayment of
capital. The capital repayment element of rental income was thus available for further
development, or for reducing withdrawals from the fund, which would then keep interest
charges to a minimum.
Public housing services in Hong Kong
217
Table 3. Statements of expenditure and revenue (HK$ millions) for the Department of Resettlement
and the Housing Authority (1954-1972)
Department of Resettlement
Expenditure
Year
capital
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
22-4
16-2
14-7
19-9
20-8
280
42-3
40-5
49-3
88-7
103-4
1110
1060
83-7
52-8
35-6
49-8
41-7
32-7
Rental
- income
recurrent: and fees (Deficits)
1-9
2-9
3-6
50
5-7
7-5
9-4
10-4
111
140
18-7
24-2
30-7
33-2
41-4
44-7
491
61-5
85-5
1-2
2-7
4-6
5-9
7-5
91
11-3
14-8
19-4
24-6
300
45-7
45-8
50-7
57-3
61-6
67-1
68-9
74-9
(230)
(16-4)
(13-7)
(190)
(18-9)
(26-4)
(40-5)
(36-2)
(410)
(78-2)
(921)
(89-5)
(90-9)
(661)
(36-9)
(18-8)
(31-8)
(34-3)
(43-3)
Housing Authority
Expenditure
capital
recurrent
_
1-9
23-7
12-4
12-8
11-2
21 8
37-9
33 1
31 1
14-2
12-3
12-8
39-8
281
22-7
17-6
11-5
25-8
_
00
00
0-6
2-3
4-2
4-7
7-9
101
140
18-3
20-6
22-2
230
25-8
27-5
30-9
33-6
35-7
- Rental
income
_
00
00
0-3
2-8
4-4
5-6
8-5
11-4
161
21-6
24-2
25-6
27-4
29-7
33-2
41-5
50-6
53-6
Surplus
(deficits)
_
(19)
(23-7)
(12-7)
(12-3)
(110)
(20-9)
(37-3)
(31-7)
(290)
(10-9)
(8-8)
(9-4)
(35-4)
(24-2) (171)
(71)
5-5
(7-9)
Sources: Commissioner for Resettlement, Annual Departmental Report, 1972-1973; Housing Authority,
Annual Report, 1972-1973.
Note: Numbers have been rounded.
Rentals were determined by calculating the direct annual expenditure and charges (for
amortisation of the capital cost) on each estate, and then assessing a standard rental, which
gave a basic rent per flat. This was subsequently adjusted in detail according to relative
quality, position and size of the flat. Such rentals also included provision of an amount of
reserve for the Authority in accordance with the aim of self-financing for future schemes.
When all of these were considered, the average rental (including Rates) charged was
approximately 22 cents per square foot of occupied space including the internal service
area (i.e. kitchen, toilet and verandah). This was in the late 1950s and early 1960s when few
small private post-war fiats were let for less than SI per square foot1 [Housing Authority
(HA) 1964-1965, p. 3].
In September of 1964, a review of rental policy was started. A year later, a schedule of
rent adjustments which would be effective up to 1971 was adopted. The adjustments
would, in broad terms, generally entail an increase of not more than 10% in the rents of all
estates every second year. This would work in rotation, starting with the oldest estates
first. The increases would continue until a 'Target Rent', established by the Finance
1
In the Housing Authority's 1958-1959 Annual Report (p. 1), it was reported that in the private sector a
cubicle (average of 63 sq. ft.) would rent for 830-80 per month; a bed-space (average of 24 sq. ft.) would rent
for 812-30 per month; and a room of 120 sq. ft. would rent for 8120 per month.
218
P. Sai-wingHo
Committee of the Authority, was attained. This should be at a level 'which when compared with market value, [would still be] favourable to the tenant'. The rents in respect of
any particular phase of a new estate would not be increased within two years, but would be
reviewed not later than four years after the substantial occupation of that phase (HA,
1965-1966, pp. 2-5).
Table 3 shows the statement of the revenue and expenditure of the Authority from
1955-1956 to 1972-1973 (after which a new Housing Authority was established). Calculating the difference between Rental Income and Expenditure (which includes Recurrent
and Capital Expenditure) again reveals substantial deficits for all years except 1971-1972.
This again reflects the subsidy element in the rental. Bearing in mind that the expenditure
items (especially the Capital Expenditure figures) were underestimated as discussed
earlier, the actual discrepancy between total revenue and total expenditure should be even
larger than that suggested in the table.
4.3. Government low cost housing
In 1956, a Special Committee on Housing was appointed to investigate and report on the
housing situation. As a result, the Government announced in 1959 its decision to embark
on a programme of very low-cost housing for persons whose family income was (at that
time) less than $300 per month.1 The Public Works Department was to design the
buildings, which were to be constructed on the principle of resettlement blocks but would
be of improved quality and with better amenities. The buildings were to be built and
owned by the Government.
The Housing Authority began to manage these Government low cost housing estates in
1961. Separate financial records were kept. Rentals were fixed by the Government and
paid over to the Treasury. All estate expenses were reimbursed in full by the Government.
Hence, the Authority managed these estates on a 'no loss, no profit' basis.
4.4. The new Housing Authority
The effort by the Government to subsidise public housing schemes was spread over
various departments or bodies until the early 1970s, and there was an obvious lack of
co-ordination. In 1973, a new Housing Authority was established and given the
responsibility of planning, building and managing all public housing estates. It was to be
served by the Housing Department, the formation of which saw the merging of the former
Resettlement Department and the Housing Division of the Urban Services Department.
All estates were renamed, and divided into Group A estates (formerly Housing Authority
estates and Government low cost housing estates) and Group B estates (formerly
resettlement estates).
Initially, this new Housing Authority was provided with three main sources of finance.
The first was in the form of borrowings from the Government. These were normally from
the Development Loan Fund in the form of either a revolving fund or, if the Government
required repayment, an ordinary loan, at the rate of 5% per annum. The second source
was income from rentals, which was wholly used to meet expenditure on the management
and maintenance of Group A estates. Expenditure on the management and maintenance of
Group B estates was also expected to be met wholly from income from rentals. However,
the new Authority had inherited those estates running at a loss. Hence, the Government
1
T o be sure, the income limit for such low cost housing was set in accordance with the limit for Housing
Authority estates. Both income limits had kept changing with time. In contrast, there was no income limit for
one to qualify for Resettlement Housing. Nevertheless, in both the Housing Authority and Low Cost Housing
estates, tenants whose economic conditions had improved after being housed would not be evicted.
Public housing services in Hong Kong
219
agreed as a temporary arrangement to provide a deficiency grant to meet the difference
between income from rentals in respect of Group B estates and recurrent expenditure on
their management and maintenance. That was the third source of finance.
This set of financial arrangements proved to be temporary. In 1975-1976, a set
of revised financial arrangements was agreed upon between the Government and the
Authority. It was implemented starting from 1976-1977. And this set of revised financial
arrangements illustrates starkly the Government's increased commitment to subsidising
the provision of public housing.
Firstly, under the new arrangements the Authority was no longer to be required to pay
any premium for land granted by the Government for public housing estates, but land
value is written into the Authority's balance sheet as a Government contribution.
Secondly, loans obtained from the Development Loan Fund for construction of the
domestic portion of public rental housing estates were to be payable over 40 years at an
annual interest rate of 5% on a reducing balance. However, 'to alleviate the cash flow
burden on the authority, the Government does not require the interest to be paid in cash.
The interest charges must, none the less, be fully accounted for, along with the value of
the free land provided, in the Authority's balance sheet as part of the Government's
contribution to public housing' (Annual Report, 1987, p. 152). Besides all these, a part
of the Authority's recurrent expenditure (e.g. for squatter control, management of temporary housing areas) was to befinancedfrom the Government's general revenue account,
and that to be used for squatter area improvements was to be financed from the Capital
Works Reserve Fund.
Table 4 shows the liabilities side of the Authority's balance sheet. Of interest is the
extent of the Government's involvement—in the form of'Government Contribution' and
loans—which far exceeded the 'Housing Authority Contribution'.
Despite all these subsidies, the Authority has been complaining that the rentals charged
at the old (mainly the Group B) estates were too low. Coupled with high maintenance and
improvement costs, this inevitably burdened the Authority's estate working account for
domestic properties with a substantial dificit. This is shown in Table 5, which compares
the income with recurrent expenditure in both types of estates. It is clear that both the
domestic and non-domestic portions of Group B estates had been losing money up to the
early 1980s. While the non-domestic portion started to yield a small surplus after 19831984, the domestic portion had not shown any improvements. In fact, starting as early as
1979-1980 the deficits burden of the domestic portions of Group B estates had become so
great that even the surpluses from the domestic portion of Group A estates were not
enough to cover them.
On average in 1986, public housing tenants paid about 7-8% of their income as rental.
This compared with, about 19-20% in the private sector. Median rent-to-householdincome proportion for tenants was about 5-6%. The corresponding figure in the private
sector was 17% (Annual Report, 1986, p. 140). In the newest estates, rentals were set at a
more realistic level. Still, they came to about one-third of the current market rents, and
took up 13-15% of total family income (Annual Report, 1987, p. 156).
4.5. The Home Ownership Scheme (HOS)
As a further step to subsidising the provision of public housing, the Government started to
promote home-ownership in the lower-middle income group in the late 1970s. The HOS
was established. The Legislative Council set up a Home Ownership Fund, provided by
the Government, from which the costs of the scheme would be met until sufficient funds
220
P. Ss
Table 4. The new Housing Authority's liabilities(HKSmillions) (from 1973-1974 to 1985-1986)
Aiiflif
/\UUlUllljr
Total
Year
(a)
(b)
(c)
(d)
1973-1974
1974-1975
1975-1976
1976-1977
1977-1978
1978-1979
1979-1980
1980-1981
1981-1982
1982-1983
1983-1984
1984-1985
1985-1986
NA
NA
936
936
1028
NA
1176
1291
1437
1434
1439
1463
1464
1468
1467
250
330
330
NA
330
330
330
330
330
330
330
330
330
39
77
121
NA
2
NA
NA
4318
4774
6320
7000
7647
9613
12,010
18,466
23,568
23
79
188
368
626
976
1392
1843
s.
Housing
Government contribution
S
NA
NA
NA
5378
5796
6387
8136
8922
9754
12,002
14,750
21,626
27,179
contribution
vjuvcrnnicni
loans
fun
S
%
8
%
3
^
NA
NA
NA
NA
89
95
131
306
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
44
55
62
89
NA
NA
89
400
6
164
3
135
2
82
491
565
652
819
967
1152
1521
1967
6
5
5
5
5
5
4
5
753
1749
3302
5158
7145
8781
10,110
11,268
10
16
25
32
35
35
30
27
192
276
387
495
560
721
778
885
2
3
3
3
3
3
2
2
0/
/o
76
67
60
58
58
64
66
era
liabilities
NA
NA
Total
liabilities
NA
NA
NA
NA
6495
7822
10,726
13,263
16,226
20,674
25,404
34,024
41,298
Source: Housing Authority, Annual Report, various issues.
Notes: (1) The four types of Government Contribution are: (a) land provided by Government for rental housing estates without requiring payment of the full or any
land premia by the Authority; (b) rental estates built and financed by Government, and transferred to the Authority without payment; (c) loans borrowed by the
Authority from the Government prior to April 1,1976 and now waived by Government; (d) interest on loans from the Government borrowed by the Authority after
April 1,1976 for public rental housing. (2) All figures have been rounded, and the percentage figures are with reference to total liabilities.
3
o
Public housing services in Hong Kong
221
Table 5. Surpluses and deficits (HK$millions) in the working accounts of
Group A and Group B estates (from 1977-1978 to 1985-1986)
Surplus (deficit)
Domestic portion '.Non-domestic portion
1977-1978:
A
B
AandB
94-5
(38-5)
560
280
(4-6)
23-4
1978-1979:
A
B
AandB
79-7
(521)
27-6
37-9
(40)
33-9
1979-1980:
A
B
AandB
66-3
(69-9)
(3-6)
57-7
(6-7)
510
1980-1981:
A
B
AandB
69-2
(95-9)
(26-7)
118-7
(8-8)
109-9
1981-1982:
A
B
AandB
57-4
(1080)
(50-6)
213-4
(9-2)
204-2
1982-1983:
A
B
AandB
17-5
(153-5)
(1360)
303-6
(28-9)
274-7
1983-1984:
A
B
AandB
(24-4)
(164-6)
(1890)
390-3
(30-8)
359-5
1984-1985:
A
B
AandB
5-6
(163-4)
(157-8)
495-2
4-9
5001
1985-1986:
A
B
AandB
45-9
(166-3)
(120-4)
550-2
6-5
556-7
Source: Housing Authority, Annual Report, various issues.
Nous: (1) The figures were computed by comparing recurrent expenditure
and income. (2) Prior to 1977-1978, the Authority did not report the domestic
and the non-domestic figures separately. (3) For the non-domestic portion
(shops, market stalls, restaurants, banks, etc.), the rental policy is not to
subsidise commercial operators, but to keep rents at or close to the market
levels.
were generated by the sale offlatsto enable further development to proceed. Private sector
applicants for HOS flats may not own domestic property and are subject to a household
income limit which has been revised upward with time. These restrictions do not apply to
applicants who are public rental housing tenants, but they must be willing to surrender
their existing tenancies.'
'From 1978 to 1989, about 119,000 HOS flats (including 39,000 produced under the supplementary
Private Sector Participation Scheme) were sold to eligible families, 45% of which were public housing tenants
(Hong Kong, Annual Report, 1990, p. 182).
222
P. Sai-wingHo
The flats were at first sold at prices based on the actual costs of land, design, construction, and marketing, which was still about 20% below the market level. Starting from
October 1981, land value was excluded fromflatprices. The latter then came to only about
half the market price.1 In addition, favourable mortgage arrangements for purchasers
have been negotiated by the Government with leading banks.
Asa supplement to the HO S, the Government has since 1979 invited private developers
to produce similar flats for sale. In this Private Sector Participation Scheme (PSPS), the
basic specifications and unit price for theflatsare stipulated by the Government, and the
developers tender for the land reserved for the project. Processing and screening of
applicants is carried out in the same way as for the HOS.2
4.6. The Home Purchase Loan Scheme (HPLS)
In 1988, as part of a 'Long Term Housing Strategy', the HPLS was introduced. This
further promotes home purchase by assisting lower-middle income families to purchase
flats of their own in the private sector. Eligible applicants are offered interest-free loans,
repayable over 20 years. This helps overcome the problem of initial financing faced by
many families wishing to buy their ownflats.There is a ceiling on the amount of the loan
and, in addition, there are disincentives to speculation and restraints on resale.
Although the HOS, PSPS, and HPLS have all promoted home-ownership among the
lower-middle income group, they would not have succeeded had it not been for the
subsidies provided by the Government (in the form of lowflatprices, favourable mortgage
arrangements, interest-free loans, etc.). And to the extent that sitting tenants surrender
their tenancies in public rental housing (or prospective tenants forgo their rights to public
rental housing) to opt for such ownership, more public rental housing units would be left
available for the more needy.
5. A temporary solution?
Ho (1990) shows that the use of rents to subsidise the provision of a non-tradable wage
good would only be a temporary solution to the increasing cost problem. That is, it can
only postpone the arrival of the stationary state. Has this become evident in the case of
Hong Kong?
In answer to that question, three observations can be made. One is the improvement in
construction technologies over the years. For instance, the initial 'experiments' carried
out by the Government in the mid-1950s were with six- or seven-storey buildings. The
Housing Authority can now easily construct high-rise public housing buildings of
20-storeys of more. Improvements in technology of this sort have probably rendered the
'solution' to the provision of housing services longer lasting.
The second observation has to do with the gradual urban encroachment of the New
Territories (the latter is sometimes referred to as the last frontier of Hong Kong). For
1
Before the exclusion of land value in October 1981, purchasers were not allowed to sell within 5 years,
except back to the Housing Authority at the original price. The conditions on resale changed after the
exclusion of land value: (1) within 5 years of purchase, purchasers can sell back to the Authority at the
purchasing price; (2) within 5-10 years, they can sell to the Authority at the prevailing price; (3) over 10 years,
they can sell freely, subject to making a compensation to the Authority.
J
As an extension to the PSPS, the Middle Income Housing Programme was introduced in 1982. This was
targeted at families with incomes exceeding the limit for the HOS but who were unable to afford flat prices in
the open market. But owing to the sharp decline in prices for private flats in 1982 and 1983 (because of the
uncertainty associated with the Sino-British negotiations on Hong Kong's future), this programme ceased to
be necessary and was discontinued.
Public housing services in Hong Kong
223
a number of decades since its lease to the British, the New Territories (excepting
New Kowloon and Tsuen Wan) had practically been isolated from the developments in
Kowloon and the Hong Kong Island, partly owing to its geographical separation from the
Kowloon Peninsula by the Kowloon hills. Also, since it was only leased and not ceded to
the British as were Kowloon and the Hong Kong Island, the Government had not been
anxious to develop that area.
Nevertheless, the need for space has removed these barriers over time. New towns, with
new public housing estates and factories located nearby, have gradually emerged. This
utilisation of the 'last frontier' has again made the 'solution' to the provision of housing
services appear to be more long-lasting. In this, it reminds one of Ricardo's (1951B, p. 18)
argument that '[i]f... in the progress of countries in wealth and population, new portions
of fertile land could be added to such countries, with every increase of capital, profits
would never fall...'.'
Finally, in the last decade or so, some Hong Kong capitalists have sought to utilise the
frontier beyond the last frontier—the special economic zones in China. Such a move
allows these capitalists to have access to factory space. And for the Chinese workers that
are hired, their subsistence requirement for housing services is not taken care of inside
Hong Kong but in and around those economic zones in China. Such investment activities
were, of course, not undertaken with the sole aim of avoiding the problem of having to
meet the requirement for housing services inside Hong Kong. But they have certainly
avoided that problem.
6. Concluding remarks
One of the potential contributing factors to high wages in Hong Kong in the post-war
years was high rentals for housing services. There was a strong feeling that the provision of
houses affordable to the workers had to be greatly increased.
But by whom? There were hardly any private initiatives. This can be attributed to the
problem of increasing cost in the provision of housing services. Given the tiny land area in
Hong Kong, the subsistence requirement of housing services in the wage bundle together
with the available technique of production of such a service would have rendered the Hong
Kong production system 'unproductive'. Indeed, the land shortage problem in the early
post-war years for a while raised the fear that the development of the territory would be
totally held up.
Since housing services are non-tradables, the possibility of solving the problem of
increasing cost in their provision through trade is ruled out. But Ho (1990) shows that one
possible (albeit temporary) way out would be to channel the rental incomes of the landlord
to subsidise the provision of the wage-good.
In sub-section 2.4, the overlapping roles of the Government and the landlord in Hong
Kong were pointed out. Revenues from rents have been used as government revenues.
And the Government has indeed been actively involved in the provision of subsidised
public housing.
By 1985, a little over 2-4 million people in Hong Kong lived in some sort of
Government-subsidised housing. This already excludes the 0-4 million squatters,
occupants of licensed or resite areas, and inhabitants of non-domestic premises. In that
same year, a little over 2-5 million people lived in private housing.
1
Part of this process in Hong Kong has also taken the form of reclaiming land from the sea, especially on
both sides of the Victoria Harbour.
224
P. Sai-wing Ho
As shown in sub-section 4.4, in 1986 public housing tenants on average paid 7-8% of
their income as rental, which compared with about 19-20% in the private sector. So the
Hong Kong Government, through its contributions of rental incomes to subsidise the
provision of public housing services to the lower income group, has indeed been able to
suppress the level of the rentals and also their increments. The increasing cost problem in
the provision of the non-tradable wage-good—housing services—has thus been solved.
Can this framework be applied to interpret the experience of other East Asian countries?
It seems that Singapore readily falls into the same category. It has in many respects the
same housing problem as in Hong Kong; it has by the mid-1980s roughly half of Hong
Kong's population inhabiting in an area approximately half the size of Hong Kong. But by
that time, about 85% of its population was living in public housing!1
It must be emphasised that the interpretation advanced in this paper by no means
constitutes a complete account of Hong Kong's post-war growth experience. For instance,
this paper has not illustrated how the increasing cost problem in the provision of the other
major wage-good item—foodstuffs—has so far been solved. And while the focus of this
paper is on the wage cost aspect of Hong Kong's labour force, the factors affecting its
productivity aspect have not been examined.
This latter consideration reminds us that there is not, as yet, a unified classical
framework to analyse the relationship between trade and growth. Nevertheless, as distinct
from an interpretation that is neoclassical and hence static, the one advanced here uses
a dynamic framework. Besides, there is an explicit role played by the government in
promoting growth. It remains for future research to incorporate additional factors conducive to growth (e.g. those pertaining to productivity improvements) into this Ricardian
interpretation.
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Unwin Hyman
Brewer, A. 1980. Marxist Theories of Imperialism: a Critical Survey, London, Routledge & Kegan
Paul
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