Download Small Government, Governance Crisis and the Prospect of the Third

香港之小政府、管治危機舆第三條路的前景社會政策角度的分析
(Small Government, Governance Crisis
and the Prospect of the Third Way in Hong
Kong – A Social Policy Analysis)
Wong Chack Kie(王卓祺)
Professor
Department of Social Work
The Chinese University of Hong Kong
Workshop on the Role of Government,
Central Policy Unit, the Government of SAR
Hong Kong
15 May 2009
1
Outline



Small government in comparative
analysis
Governance crisis – a structural
analysis
Third Way – the only way to tackle
governance crisis?
2
Hong Kong has a small government in
social policy in terms of public
expenditure (Table 1)
3
Table 1 Social Expenditure (Social protection + Education) as % of
GDP, OECD selected countries and Hong Kong
1995
Social
protection
Sweden
Education
32.1
7.1
Korea
3.3
NA
Japan
14.3
3.6
UK
20.2
5.1
USA
15.3
NA
OECD*
Total-30
19.9
5.3
Hong
Kong@
5.07
2.96
2000
Total
39.2
Social
protection
Education
2005
Total
Social
protection
Education
Total
28.5
7.2
35.7
29.4
7.0
36.4
5.0
3.9
8.9
6.9
4.4
11.3
17.9
16.5
3.7
20.2
18.6
3.5
22.1
25.3
19.2
4.4
23.6
21.3
5.4
26.7
14.5
4.9
19.4
15.9
5.1
21.0
25.2
19.3
5.1
24.4
20.5
5.4
25.9
8.03
7.87
3.9
11.77
5.69
3.85
9.54
*Social protection in OECD including pension, unemployment, family, disability and housing allowances,
and health care, etc. Source: http://stats.oecd.org/wbos/Index.aspx?datasetcode=SOCX_AGG
Education in OECD countries, source: Education at a Glance 2008: OECD Indicators –OECD 2008
@ Social protection in Hong Kong including health care, social security and social welfare, and public
housing. Source: Budget, various years. 1995=1995-96, 2000=2000-01, 2005=2005-06
4

But small government is not
necessarily meant economically
competitive (Figure 1)

Nordic countries, high spending but are
competitive than Hong Kong
5
Figure 1 Social Expenditure as a % of GDP and Global Competitiveness
Index (GCI) 2005 Score in selected Countries and Hong Kong
6.0
United States
5.8
Denmark
Sweden
GCI 2005 Score
5.6
Switzerland
5.4
Norway
Australia
5.2
Japan
Netherland
United Kingdom
Canada
Korea
Germany
New Zealand
5.0
Hong Kong
4.8
Ireland
Austria
Luxembourg
4.6
0
5
10
15
20
25
30
35
Social Expenditure as a % of GDP
Social Expenditure as a % of GDP
 GCI 2005 Score
6
Why Hong Kong has a small
government in social policy?
Hong Kong spends less in every
aspect of social policy except education
In particular, it is very constrained in
cash transfer
 On average OECD countries spent 12%
of GDP on cash transfer (Figure 2)
7
Figure 2 On average OECD selected countries spend on cash
benefits % of GDP (2003)
7.0
5.0
Average (12.0)
6.2
2.2
United States (8.4)
5.6
4.2
United Kingdom (9.8)
8.0
7.4
Sweden (15.4)
10.2
4.5
Portugal (14.7)
5.3
8.8
Denmark (14.1)
3.0
Canada (7.4)
0
4.4
10
5
15
20
Cash Benefits
Income support to the working age population
Pensions (old age and survivors)
Source: The Social Expenditure database: An Interpretive Guide, SOCX 1980-2003, OECD2007 (Version: June 2007)
8
Hong Kong is shy away from
cash transfer!


In 2003-04 financial year, we spent
22.7 billion HK$ on cash benefits
(CSSA, OAA and disability
allowances); equivalent to 1.8% of
GDP
We don’t have pension (7% of GDP,
OECD), but Mandatory Provident
Fund, a forced savings, but it does
not include in public expenditure
9


We don’t have tax credit and other benefits to
the working population (5% of GDP, OECD)
But our public education expenditure is similar
with OECD average

5.0% (OECD, 2004) 4.6% (HK, 2004)
10
o In public health care, we spent 2.03%
of GDP (2007-08) but no-one in Hong
Kong is denied of appropriate health
care
• We adopt the British Universal Health Service
model
• USA has a predominantly private health
system funded by employer-paid insurance
 But USA spent 7% of GDP on public health
(another 8% on private health, 2005), but 45
million people without health care insurance
11
o In housing, we provide public rental
housing for 30% of the population, 15%
in home ownership scheme housing
Public rental housing
in Hong Kong
Some are more than
affordable housing!
12
 So, we are doing fine!
 Why should we change?
 We may face a a governance crisis!
 Now, we come to a structural analysis of
a small government in social policy in a
new economic order
13
 The World Bank sees the role of
government in governance,
 “Even in societies that are highly marketoriented, only governments can provide
two sorts of public goods: rules to
market work efficiently, and in some
cases, corrective interventions where
there are market failures” (1991:3)
14
Where market fails


Hong Kong is good in the first type of public
goods - rules to market work efficiently
But not the second type - corrective
interventions where there are market failures

Evidence - Income between the poor and the rich is
always a concern in Hong Kong
 But Hong Kong is shy away from income
redistribution
 This might be fine in pre-1997 era
 But not in post-1997 era!

See next, Figure 3
15
Figure 3 Hong Kong Household Income Distribution
(1981-2006 Census years)
41.8
41.4
18000
17500
16000
14000
45
18705
41.2
17250
37.3
35.2
35.5
35
30
12000
25
10000
9964
20
8000
15
6000
5160
10
4000
2955
2000
40
1.4
1.6
1.3
1.1
5
0.9
0.8
0
1981
1986
1991
Median Monthly Domestic Household Income
Lowest 10% Household Income Distribution
1996
2001
0
Top 10% & Lowest 10% Households
as % of Total Household Income
Monthly Household Income (HK)
20000
2006
Top 10% Household Income Distribution
Source: Census & Bi-Census Reports, various years, Census and Statistics Department
16


Widening income gap has been an
international phenomenon (Table 4
on Gini ratios since mid-1980s)
But tax and transfer help reduce
income gap


Table 4 – OECD-25 31% reduction in
after tax and transfer (mid-2000s),
whilst 10% in Hong Kong
We did poorly in comparative terms
17
Table 4 Gini Co-efficient: HK & OECD selected countries
Mid80s
Country
Canada
Denmark
Portugal
Sweden
Before Tax & Transfer
0.39
After Tax & Transfer
0.29
Before Tax & Transfer
0.37
After Tax & Transfer
0.22
Differenc
e (%)
-25.6
-40.5
Mid90s
0.42
0.28
0.42
0.21
Before Tax & Transfer
-
-
0.49
After Tax & Transfer
-
-
0.36
Before Tax & Transfer
0.40
After Tax & Transfer
0.20
United
Kingdom
Before Tax & Transfer
0.44
After Tax & Transfer
0.33
United States
Before Tax & Transfer
0.40
After Tax & Transfer
0.34
-50.0
-25.0
-15.0
0.44
0.21
0.48
0.35
0.45
0.36
Hong Kong redistributes
much less!
Difference
(%)
-33.3
-50.0
-26.5
-52.3
-27.1
-20.0
Mid2000
s
0.44
0.32
0.42
0.23
0.54
0.38
0.43
0.23
0.46
0.34
0.46
0.38
OECD-25
Before Tax & Transfer
-
-
-
-
0.45
(Total)
After Tax & Transfer
-
-
-
-
0.31
1986
Hong Kong
Before Tax & Transfer
After Tax & Transfer
0.453
-
1996
-
0.518
-
Difference
(%)
-27.3
-45.2
-29.6
-46.5
-26.1
-17.4
-31.1
2006
-
0.533
0.475
-10.9
Source: OECD (2008) Social Expenditure Database, download from http://stats.oecd.org/wbos/Index.aspx?datasetcode=SOXC_AGG
18
 In sum, governance crisis is structurally
caused by
 the insufficient market wage in the new economic
order where the lower income groups are not
able to get a larger share,
 accompanied by the inadequate or insufficient
corrective government interventions for making
work pay or with a social wage/income that is
considered as just as compared with the rich
 This crisis has a moral dimension
 The poor and disadvantaged do not get more in
the new economic order – social justice is at
stake!
19

Third Way – the only way to
tackle governance crisis?
20
What is the third way in social
policy?
(1) The Third Way values

Third way stresses values like equality of
opportunity, rights based on responsibility,
rewards for entrepreneurship, and risk taking
(Bonoli & Powell, 2002) are at home with
Chinese traditional beliefs
(2) The Third Way is business friendly

It reorganizes state apparatus in favour of
economic competitiveness, i.e., active labour
market policies and turns passive welfare into
positive welfare

It harmonizes economic efficiency and social
justice, albeit it is criticised as neo-liberalism in
disguise (Callinicos,2001)
21
3) Policy principles or slogans (Bonoli &
Powell, 2002; Powell, 2000)

Initial redistribution of assets and productive
endowments of skills and jobs



‘Make work pay’
‘No rights without responsibilities’
‘Work for those who can, security for those who
cannot’
4) Target groups and policy tools

The target groups of the Third Way social policy
primarily at the employable adults - working poor,
single-parents, youth and migrants (Powell, 2000;
Hills & Waldfogel, 2004; Myles & Quadagno,
2000,156)
22

Policy tools used include the followings:
Minimum wage
 Earned income tax credit (USA), Working families tax
credit (UK)
 Child-care tax credit (UK)
 Family accounts- inherited capital fund for retirement
and health care, if not spent in one’s life, for the next
generation (Novak, 1998:16-18)
 Matching grants, e.g., matching grants to private
donation for universities (Hong Kong)
 Endowment fund model
 Put aside budget surplus for designated use in future,
e.g., the injection of budget surplus to MPF accounts
(Hong Kong)
 Social Security Fund for retirement protection(China)

23

Is Third Way the only way for Hong
Kong in social policy?
24

Morally – the erosion of
government legitimacy due to
structural change of the
economy and outcome of
income distribution


the trickle-down is no longer
true – no more larger pie for the
underdog to get ahead in life
Therefore, the need to use
Rawlsian justice (Kapstein, 1999;
Myles & Quadangno, 2000)
25
In terms of government capacity


Hong Kong has more budget deficits
than before in the post-97 era！
This is a good excuse for a small
government

See Figure 4
26
Figure 4 Surplus or deficit of government budget as % of GDP 1973/74-2007/08
10.00
8.00
6.00
4.00
2.00
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
1991/92
1990/91
1989/90
1988/89
1987/88
1986/87
1985/86
1984/85
1983/84
1982/83
1981/82
1980/81
1979/80
1978/79
1977/78
1976/77
1975/76
1974/75
1973/74
0.00
-2.00
-4.00
Supposed that Hong Kong has more budget
deficits than before in the post-97 era！
-6.00
This is a good excuse for a small government,
but!
27

In fact, it is not the case


The Hong Kong SAR
Government was able to
spend more in social policy
Figures 5 & 6
 We
had falling public
and social expenditures
under Mr. Tsang’s
Administration
28
Figure 5 Public Expenditure and Social Expenditure in
Hong Kong
25
Started Tung’s
Administration
1,700,000
1,600,000
1,500,000
20
1,400,000
1,300,000
1,200,000
15
1,000,000
900,000
800,000
10
700,000
600,000
Started Tsang’s
Administration
500,000
400,000
5
300,000
200,000
100,000
0
83
19 /84
84
19 /85
85
19 /86
86
19 /87
87
19 /88
88
19 /89
89
19 /90
90
19 /91
91
19 /92
92
19 /93
93
19 /94
94
19 /95
95
19 /96
96
19 /97
97
19 /98
98
19 /99
99
20 /00
00
20 /01
01
20 /02
02
20 /03
03
20 /04
04
20 /05
05
20 /06
06
20 /07
07
/0
8
0
19
HK million$
1,100,000
GDPat current price (Million $)
Total Social Service Expenditure (Million $)
Social Service Expenditure as % of GDP (%)
Public Expenditure and Social Service Expenditure
as % of GDP (%)
1,800,000
Total Public Expenditure (Million $)
Public Expenditure as % of GDP (%)
29
Figure 6 Social Expenditure (by policy area) as % of GDP
Started Tung’s
Administration
14.00
Started Tsang’s
Administration
12.1
12.04
11.77
11.54
11.38
11.31
12.00
10.57
10.00
9.54
8.85
8.03
7.16
6.50
6.78
6.37
6.33
6.66
7.05 6.83
8.38
7.26 7.4
6.72
5.86
6.00
4.00
2.00
Social service expenditure as % of GDP
Education
Health
Housing
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
1991/92
1990/91
1989/90
1988/89
1987/88
1986/87
1985/86
1984/85
0.00
1983/84
%
8.00
8.82
8.33
Social welfare
30

We can spend more, a choice not
about government capacity

The Administration under Mr. Tung could
do that!
31
The policy trajectories Hong Kong
can choose
1. Status quo – government legitimacy
is slowly eroded
– not politically and socially desirable
32
2. Regime jumping to social
democratic countries



Unlikely due to the lack of
collectivist tradition and weak
labour movement (Power resource
theory, Korpi, 1983)
Societal preference: a low-tax
regime
Also on fiscal implication,
impossible- taken 2005 as the base
for calculation, Hong Kong needed
to spend 16.36% of GDP (OECD
average 25.9%, whilst HK 9.54%,
Table 1), it was 213,516 million
HK$
33
3. Expansionist trajectory to the Third Way
 More likely as Hong Kong has similar
values as the Third Way in relation to
business; it is business friendly
 The missing thing is – we need to have a
new set of social ethics; such as with the
following beliefs:
 It is unjust to have working people unable to
make ends meet
 It is morally wrong not able to allow children
from poor families to get ahead in life
From
Blair
To
Tsang?
34

In fact many policy choices Hong Kong now
has are typical Third Way social policy tools
and similar practice




MPF – save for one’s welfare, asset than income
distribution
Matching Grants – shared responsibilities, e.g.,
matching grant for universities
Home ownership scheme and child development
fund – asset building
Travelling expenses for working poor in remote
districts
35
 But we don’t have
 Earned income or working family tax
credit
 Work does not pay
 Child development fund is just a pilot
 Great danger of intergenerational
poverty
 Working families do not get carer
allowances
 Great stress on dual-worker families
 Travelling allowance – not enough in
coverage and benefits
36
 We have
 Abandoned the home ownership schemes for the
lower-middle class
 More difficult for them to accumulate assets
 Adopted some market mechanisms e.g., cost
recovery, in social policies
 Make life more difficult for the lower class people
 Contracted out public services
 The race to the bottom in worker’s wages at the
lower-end of the labour market
37

The Third Way expansionary trajectory in
fiscal terms means




That is, to spend 11.2% of GDP on social policy on
average (the average of the 8 budget years under
Mr. Tung)
No reason why Mr. Tsang’ Administration could not
do what Mr. Tung had done!
This means, using 2007-08 8.38% of GDP as the
base, the gap was 2.82%, that was HK$46,587
million on that budget year
Not to be excited about the Third Way in social
policy, not at all progressive, it is just in the middle
ground, just a small step away from the small
government!
38


The government can especially spend
more on public housing, it is particularly
less financed in Tsang’s Administration
But it does not mean, not to spend
smartly, e.g.,



Matching rights with responsibilities
Rewarding work ethics
Asset-based equal opportunity for the poor
to get ahead in life and to tackle social risks
at different stages of life
39
Conclusion

The small government in social policy
seems to be unable to cope with the new
social and economic orders


It is run out of stream in terms of moral highground
The Third Way social policy seems to be
the viable option with a new set of ethics
and policy tools compatible with the new
reality
40
References:







Giuliano Bonoli & Martin Powell (2002) Third Ways in
Europe? Social Policy and Society, 1,1:59-66
Alex Callinicos (2001) Against the Third Way, Oxford:
Polity Press
John Hills & Jane Waldfogel (2004) A “Third Way” in
Welfare Reform? Evidence from the United Kingdom,
Journal of Policy Analysis and Management, 23,4:765-788
John Myles & Jill Quadagno (2000) Envisioning a Third
Way: The Welfare State in the Twenty-first Century,
Comparative Sociology, 29,1:156-167
Michael Novak, Is the a Third Way? IEA Choice in Welfare
No. 46
Martin Powell (2000) New Labour and the third way in the
British welfare state: a new and distinctive approach,
Critical Social Policy, 20, 1:39-60
W. Korpi (1983) The Democratic Class Struggle. Boston:
RKP
41