Opinion

George Chen

Income gap matters

By George Chen
April 12, 2011

PaulsonBy George Chen
The opinions expressed are the author’s own.

We’ve been talking about accelerating inflation for some time, and it has resulted in another tough issue for the government to address — with much care — the growing income gap between rich and poor.

Income disparities in some affluent cities such as Hong Kong have apparently reached a critical point, with frequent protests in the former British colony. Last weekend, a group of the so-called post-1980 generation of young people went to Central to protest the wealth imbalance. They even attempted to break into Cheung Kong Centre before the police arrived and stopped them.

They viewed Cheung Kong Centre, home to many large banks like Barclays Plc and BNP Paribas, as well as the offices of Li Ka-shing, Asia’s richest and also the city’s most powerful man, as a symbol of the imbalance. I was told by friends in mainland China that a similar anti-rich atmosphere is also brewing fast in big cities like Beijing and Shanghai, where relatively poorer people are complaining about inflation, especially rising property prices and rents.

When investors feel more confident about returning to the Shanghai and Hong Kong markets as the economic impact of the Japan earthquake and nuclear crisis eases, some people predict the income gap issue may change the whole game if the central and local governments fail to address the increasing social unrest.

Does this make sense? Income gap is considered by some political scientists as one of the key causes to the recent popular revolt in the Middle East, the “Jasmine Revolution”, which already made Egypt a difference.

Local media reported that some Hong Kong lawmakers and businessmen joked that Hong Kong was “a city of protests” — in addition to the unexpected protest at Cheung Kong Centre, there were at least two other high-profile public protests in the city last weekend, potentially damaging Hong Kong’s image as a stable global business and financial centre.

If global investors lose confidence in Hong Kong, it would be certainly a lose-lose result for both the rich and the poor. Last night, former U.S. Treasury Secretary and ex-Chairman and CEO of Goldman Sachs Henry Paulson gave a talk at the University of Hong Kong. In response to a HKU student’s question, Paulson acknowledged that the income gap in the United States was also something the government needed to focus on.

Income gaps in different regions may need different solutions, said Paulson, adding that skills training and education were needed in the U.S.

However, he didn’t offer any specific advice for China. I wonder if Paulson just wanted to be diplomatic, or he may not really have an answer. He did say China’s economy was a very complicated matter and was becoming more complicated as it expanded.

The bigger the economy, the larger income gap? That doesn’t sound like a win-win deal for anyone.

George Chen is a Reuters editor and columnist based in Hong Kong. He’s also a part-time post-graduate student, studying international relations at the University of Hong Kong.

Photo: A protest sticker seen on the poster of Henry Paulson’s talk about global economy and U.S.-China relations at the University of Hong Kong on April 11, 2011 Reuters/George Chen

Comments
6 comments so far | RSS Comments RSS

I can’t see where this is all going. There will always be income disparity and there will always be a few mega rich people. Should all lottery winners be forced to share their wealth? Should people who make a lot of money in some business be forced to share their wealth with those who did not succeed? What purpose will this serve other than to make the those who don’t succeed better off, and those who do worse off?

Posted by zotdoc | Report as abusive
 

If the wealthy want to manipulate world governments and the associated economies, they should pay up for that privilege.
Seems fair to me.

Posted by RickCain | Report as abusive
 

“If global investors lose confidence in Hong Kong, it would be certainly a lose-lose result for both the rich and the poor”.I must disagree with this statement.I’m a fear based Lower Middle Class American.I found a stock that I thought I would buy. It’s a copper producer in Peru based in Mexico. The local population, farmers, doen’t want the mine expanded.The people protested and the Company withdrew. The point is, the people made a decision to stand up and the last thing I would want to invest in is someones misery. If the people of any region stand up for fairness and the preservation of there environment they can’t lose. It can’t always be about the money.

Posted by dr.bob | Report as abusive
 

The system where there is no wage or wealth gap is communism. And we all know, if the nurse, doctors and engineers get paid the same, the smart people become politicians, and you get horrible consumer goods, and equal crappy health care.

Oh, and the politicians still live in a suspended reality, just like the democratic world.

Posted by dzoo35 | Report as abusive
 

@zotdoc…. Possibly you haven’t seen the disparities in Hong Kong. Last time I was there, about 6 months ago, there was a major political stand off about the increase in “cage” flats over the past few years. A cage flat is a normal size flat with 20 or more cages in them. Each cage being about double the size of a coffin. People are renting these out on a monthly basis as they can’t afford anything better, many of these people are fully employed. Given its proximity to China and a mass pool of cheap labour, wealthier residents take advantage which leads to people working and living in conditions more akin to slavery than modern first world conditions. When the economy is so skewed some sort of redistribution needs to occur otherwise all hell will break loose at some point.

Posted by davect | Report as abusive
 

Thank you for this article George. Have you written about the recent truck drivers’ blockade/strike at one of the ports servicing Shanghai last week? What were the causes? I suspect they’re not too dissimilar to those leading to protests in HK, but the eventual ‘explosion’ will be even more dire on the mainland.

What is China’s corrupt Government doing to address the very depressing conditions for the majority of China’s population? And, yes, I am including the lower and middle middle-class, who cannot afford to buy a home in the cities in which they live and work, and who find the value of their modest savings being reduced on a daily basis.

Posted by NueWurldOrdaa | Report as abusive
 

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