the failure of universal pensions in Hong Kong

January 21st, 2017

The outgoing Chief Executive of Hong Kong failed to keep a promise to push for universal pensions. Hong Kong is a wealthy territory. Taxes are very low, and government spending is even lower, leaving large fiscal surpluses. There is no economic reason to deny Hong Kong’s elderly citizens access to a basic pension. There is a universal pension in effect, but the amount is so small that it is known as “fruit money”. What is needed is a pension large enough to satisfy basic needs.

[Chief executive] Leung Chun-ying’s question-and- answer session for his swan song policy address was cut short after pan- democrats protested the ejection of lawmaker Lau Siu-lai for playing a recording of the outgoing chief executive’s “broken promises.” ….

Leung was answering questions about the policy address he delivered on Wednesday. When it was Lau’s turn, she played a 2011 video clip on her phone in which Leung “promised” to push for universal retirement protection.

In the press conference that followed his address on Wednesday, Leung denied having shown any support for universal pension when he ran for chief executive.

But in the clip Leung can be heard telling a senior citizen, Lo Siu-lan, that “we don’t need to be vigorous in implementing universal pension, we just need to be serious.”

When Lau told Leung he failed to fulfill his election promise, Legco president Andrew Leung Kwan-yuen ordered her to leave the chamber.

Chaos broke out as 10 pan-democratic lawmakers surrounded security guards who tried to escort Lau out of the chamber.

Andrew Leung suspended the meeting and in the melee that followed several people fell to the floor, some on top of Lau and independent lawmaker Claudia Mo Man-ching.

After more than 20 minutes, Andrew Leung asked the pan- democratic lawmakers to return to their seats. And when they refused he adjourned the meeting at about 11.45am.

Phoenix Un, “Leung session ends in bedlam“, The Standard (Hong Kong), 20 January 2017.

Goldman Sachs alumni on the Trump team

January 20th, 2017

Goldman Sachs alumni tapped by Trump for key posts include Gary Cohn (to head the White House National Economic Council) and Steven Mnuchin (his nominee for Treasury secretary).

[Additional] Goldman-linked appointments …include  Stephen Bannon and Anthony Scaramucci, both ex-investment bankers, and Dina Powell, former president of the bank’s charitable foundation. Jay Clayton, named to head the Securities and Exchange Commission, the market watchdog, is a Wall Street lawyer who acted for Goldman on the injection of government money in the depths of the crisis. Gretchen Butler Clayton, his wife, works at Goldman as a private wealth adviser. ….

All this after Mr Trump accused Goldman of “owning” Ted Cruz, his rival for the Republican nomination, and challenged Hillary Clinton over her paid speeches to banks, including Goldman.

Ben McLannahan, “Goldman Sachs: Occupying Washington again“, Financial Times Big Read, 21 January 2017 (gated paywall).

An earlier TdJ post on this subject can be accessed here.

Trump’s foreign policy

January 20th, 2017

“America has a new president”, writes FT columnist Edward Luce. “We have been duly warned.” Here are two snippets from the full column.

In case there were any lingering doubts about the sincerity of Donald Trump’s “America First” campaign, he laid those to rest the moment he swore the oath of office. His brief inaugural address was perhaps the most xenophobic in US history.

The 45th president’s one specific foreign policy promise was to eradicate Islamist terrorism “from the face of the earth”. His only other message to the rest of the world was to put it on notice that America would take precedence again after an age in which the US had “defended other nations’ borders” and subsidised their armies.

[Donald Trump] comes into office with the lowest approval ratings of any US president in modern history — twenty or so points below what is typical, and considerably below Mr Obama’s outgoing ratings. Unlike Mr Obama, he will inherit an economy in reasonable shape and no large scale US military wars. But the biggest contrast was in their tones. Mr Obama radiated hope. Mr Trump channelled rage.

Edward Luce, “President Trump’s speech puts the world on notice“, Financial Times online, 20 January 2017 (gated paywall).

Trump’s inauguration speech

January 20th, 2017

Donald Trump delivered an uncompromising pledge to put “America first” in all his decisions as he was sworn in as the country’s 45th president, with a defiant inauguration speech that echoed the combative spirit of his campaign. ….

Reprising his protectionist attacks on the consequences of globalisation, he said: “The wealth of our middle class has been ripped from their homes and then redistributed across the entire world.”

“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.”

Demetri Sevastopulo, Barney Jopson and Shawn Donnan, “President Trump makes defiant ‘America first’ inauguration pledge“, Financial Times online, 20 January 2017 (gated paywall).

There is much more at, and without doubt more to come. I listened to all of Trump’s speech. Prepare for trade wars.

war and trade in international relations

January 17th, 2017

FT columnist Martin Wolf has written a beautiful essay in support of the liberal idea of international relations based on trade rather than isolation, co-operation rather than war.

For much of human history, war was seen as the natural relationship between societies. Victory brought plunder, power and prestige, at least for elites. ….

Another way exists to achieve prosperity: commerce. The balance between commerce and plunder is complex. Both require strong institutions supported by effective cultures. But war requires armies, underpinned by loyalty, while commerce requires security, underpinned by justice.

Perhaps the greatest contribution of economics is the idea that societies will gain more from seeking to trade with one another than trying to conquer one another. …. The wise relationship between states, therefore, is one of co-operation, not war, and trade, not isolation. This brilliant idea … is … counter-intuitive, even disturbing. It means that one might gain more from foreigners than fellow citizens. It erodes a sense of belonging to the imagined tribe. For many, this erosion of tribal loyalty is threatening. It becomes more threatening if foreigners are allowed to immigrate freely. Who, people ask, are these strangers, who reside in our home and share in its benefits?

Martin Wolf, “The economic peril of aggrieved nationalism“, Financial Times, 18 January 2017 (gated paywall).

As always, there is much more in the full column, which can be accessed at the link above.

chart of the day

January 17th, 2017

US healthcare is in urgent need of reform not only because medical costs are high, but also because expenditure is concentrated in a small segment of the population Expenditure per person is high, even though most of the population has very restricted access to healthcare services.

The US spends far more on health per person than any other country (measured at purchasing power parity), yet the life expectancy of the American population is shorter than in other countries that spend far less.

Americans spend five times more than Chileans, yet their lifespan is shorter than Chileans by roughly five years. ….

The chart … hides another peculiarity of US healthcare: the top 5 per cent of spenders account for almost half of all healthcare spending.

Federica Cocco, “The problem with US healthcare in one chart“, Financial Times, 17 January 2017 (gated paywall).

the politics of universal pensions in Hong Kong

January 16th, 2017

One of the three candidates for Chief executive of Hong Kong is a strong supporter of universal age pensions for the territory’s residents. Suffrage in Hong Kong is severely limited, though, so the pro-universal candidate has little chance of winning the election, scheduled to take place at the end of March.

Chief executive hopeful Woo Kwok-hing warned voters against his “dangerous” rival Carrie Lam Cheng Yuet-ngor, describing her as an autocrat who would decide everything by herself for the Hong Kong people.

Speaking before a public forum yesterday, Woo described Lam, who resigned as chief secretary on Thursday, in a negative light when asked by Lay Yan-piau, an Election Committee member from the social welfare subsector, to comment on Lam’s disregard of University of Hong Kong professor Nelson Chow Wing-sun’s research report which endorsed a universal pension.

The retired judge said Lam was “dangerous” as she talked like an autocrat, making all the plans for Hong Kong without public consultation on issues which should engage the public. ….

Woo reiterated his support for a universal pension scheme financed by tripartite contributions from employers, employees and the government as suggested by the scholarly proposal.

Phoenix Un, “‘Dictator’ Lam mustn’t lead HK, warns Woo“, The Standard (Hong Kong), 16 January 2017.

Woo Kwok-hing (born 1946) is competing against two pro-Beijing candidates: Regina Ip (born 1950) and Carrie Lam (born 1957). A new Chief executive will be selected by the 1,200-member Election Committee on 26 March 2017. Woo would like to see the voter base for choosing the Election Committee expanded from the current 250,000 to one million by 2022, three million by 2032 and eventually near-universal suffrage.

fake news and real news

January 16th, 2017

Old-fashioned media everywhere are finding themselves pushed to the margins of financial implosion because so few people appreciate that finding things out costs money. We are well into a race against time. More and more people are unwilling to pay for proper journalism. We will only know what we have lost once it’s gone.

Jeremy Paxman, “Fake news makes old concerns redundant“, Financial Times, 16 January 2017.

The author is a contributing editor of the Financial Times. I agree with him, and support old-fashioned journalism.

Donald Trump’s pro-business policies

January 14th, 2017

Chicago economist Luigi Zingales writes that the economic policies of president-elect Donald Trump “will be neither populist nor popular, but strictly pro-business”.

The first signal …  is his choice of Cabinet members. Trump had promised to “drain the swamp” in Washington of lobbyists. Few realized that he would do that by making intermediaries pointless, as the lobbyists themselves would be in charge of the departments: the CEO of Exxon as head of foreign policy, a former Goldman Sachs partner at the Treasury, the daughter of a ship owner for Transportation, a raider at Commerce, etc.

The second signal was the president-elect’s picks to head the most important government agencies. As the head of the EPA, [for example,] Trump placed a lawyer who sued the EPA in Oklahoma for the oil industry. ….

The third signal was Trump’s threat to introduce a “border tax,” another name for a tariff on imports. …. The tax would be contrary to the World Trade Organization’s rules. However, Trump has threatened that the U.S. will leave the WTO.

The worst signal, however, comes from the way Trump has used his tweets to attack and coax American businesses. ….

With this strategy, Trump cleverly uses the carrot and stick approach. When Ford was publicly commended for deciding not to build a new plant in Mexico, the price of its shares rose 4.5 percent. Softbank did even better (+ 6.2 percent) after being praised by Trump for investing $50 billion in the United States. Softbank’s motive was simple: Softbank owns Sprint, a mobile operator that would like to merge with T-Mobile in order to increase market power. The authority to permit this merger lies with the new head of the Federal Trade Commission, yet to be named by Trump. ….

We would expect such behavior from a dictator of a banana republic, not from the President-elect of the oldest democracy in the world. The Trump presidency has begun in the worst possible way for all those who, like me, still believe in the market.

Luigi Zingales, “Donald Trump’s Economic Policies: Pro-Business, Not Pro-Market“, Pro-Market blog, University of Chicago Booth School of Business, 12 January 2017.

Donald Trump strikes out against ‘fake news’

January 11th, 2017

A confidential document containing allegations against president-elect Donald Trump was leaked to the press yesterday. FT columnist Gideon Rachman writes that “the immediate impact … will be limited”.

Tuesday brought … the news that the US intelligence agencies have briefed both the president and the president-elect on a series of damaging allegations made against Mr Trump. ….

The two most damaging allegations are that there was illicit communication between the Trump campaign and the Russian government and that the Russians have compromising material on bizarre sexual behaviour by Mr Trump. ….

Mr Trump has already dismissed the story as fake news and a political witch-hunt. ….

There is a certain irony to the fact that Mr Trump, who spent many months peddling a false allegation that President Barack Obama was not born in the US, should now be complaining about “fake news”. [Emphasis added.]

Gideon Rachman, “Five points about the Trump/Russia allegations“, Financial Times, 11 January 2017 (gated paywall).