The right-wing Heritage Foundation recently declared Hong Kong to be the world’s freest economy. It based the rating on a variety of factors that you can judge for yourself by looking at the foundation’s “Index of Economic Freedom”.
Clearly, the Heritage folks don’t worry about cartels and monopolies in their observations. Hong Kong is a hotbed of competition in many areas, such as telecommunications. But it’s also home to some of the greatest market concentration on the planet in key industries.
The government in this “Special Administrative Region” of China severely restricts the available supply of land for housing, for example. There’s plenty of land that could be developed outside the central city, but it’s not being used. The result is one of the artificially highest costs of housing anywhere.
Then there are the powerful families that control huge parts of the local economy. A few families control real-estate development, shipping, supermarkets and other vital assets here. Challenging the family empires doesn’t get you very far, by all accounts.
Apart from the damage caused to average consumers by cartels and oligopolies, family-run big businesses are not necessarily good for shareholders, either. The International Herald Tribune reported an upcoming study by economists from the Chinese University of Hong Kong and the Catholic University of Milan, in which key findings show that “”prominent family-run businesses also are prone to enriching themselves at the expense of small shareholders.”
Yes, Hong Kong is economically quite free. And despite some ominous signs of interference from the mainland it remains mostly free in other respects, such as the right to speak one’s mind.
The Heritage study is really about government interference. If allowing cartels and oligopolies to operate with impunity is a demonstration of freedom, that’s an odd definition of the word in my book.
A View from the Valley
I’ve given a couple of talks this week to Hong Kong audiences that want to know how the world looks from the belly of the beast, a.k.a. Silicon Valley. In both cases I’ve made clear that I don’t speak for the valley, but reflect my own observations that may or may not be congruent with valley thinking.
I started each talk out by showing a slide:
I used to show this slide to describe the typical dot-com business plan. Happily, it no longer works.
But the hockey-stick curve had a purpose beyond making a joke. I then showed the following slides, representing the exponential improvements we’re seeing in processing power, storage and bandwidth:
There’s no human analog for improvements of this sort. None.
Then I asked, what happens when we combine these trends:
Actually, we don’t multiply these trends together, most likely. But nor do we simply add these things together. I suspect it’s somewhere in between. The point is that these improvements feed on each other.
We’re making everything smarter. We’re giving everything memory. And we’re connecting everything at high rates of speed. What does this mean?
I think we’re just beginning to find out.
(That’s how I began each speech. If anyone’s interested, I’ll post more of the slides and explain where I went from there.)