PUBLIC ADMINISTRATION AND DEVELOPMENT, VOL. 9, 185-199 (1989)

Administration in a small capitalist state: the Hong Kong experience

IAN SCOTT

University of Hong Kong

SUMMARY

This article is primarily concerned with the functions of bureaucracy in a minimal state and with how those functions might change in response to economic growth. It is predicated on the assumption that bureaucracy is necessary for economic growth even in those countries which seek to achieve such growth through the relatively free operation of the economy within the rubric of a capitalist state. Hong Kong is a case in point. Although it has often been taken as the epitome of the benefits which can be derived from keeping government out of the economy, the bureaucracy has in fact played a critical role in support of economic development. Aside from the functions which must be performed by any state, such as the maintenance of law and order, the administration of justice, and the provision of public works, three features of Hong Kong bureaucratic practice appear to have been important in the definition of the bureaucracy’s tasks in the economic growth process. These are ‘value for money’ and the constant need to justify government expenditure; effective line implementa- tion; and the ability to manage crises. If these constitute minimal essential requirements for such governments, they may provide useful criteria which small or micro-states, following capital growth models but not yet experiencing rapid economic development, can apply in assessing the capabilities of their own bureaucracies.

INTRODUCTION

Much attention has been paid to the role of the capitalist state in large developed Western countries,’ rather less to its role in small states which are more vulnerable to external economic and political forces (but see Katzenstein, 1985). The role of administration in micro-states, however, has been the subject of a prescriptive concern with the measures that such states should take in the best interests of their inhabitants and of efficient government (Murray 1981; Kersell, 1987). Kersell, summarizing Murray, notes that this might include eliminating some government activities altogether, scaling down some or most government activities, scaling down particular jobs and allowing employees to work on more than one task, and organizing teams to undertake particular projects. Micro-states cannot afford big government. They differ in this respect from small states, like Hong Kong, which could, if it so desired, vastly increase the government’s activities. If micro-states are

Ian Scott is Senior Lecturer in the Department of Political Science at the University of Hong Kong. This article is a revised version of a paper originally submitted to the annual meeting of the International Association of Schools and Institutes of Administration (IASIA) in Milan in July, 1987.

‘There is a voluminous literature. The following have proved helpful for present purposes: Alford and Friedland, 1985; de Jasay, 1985; Keane, 1984; Miliband, 1969, 1972, 1973, 1977; Offe, 1975; and Poulantzas, 1969.

027 1-2075/89/020185-15$07.50 0 1989 by John Wiley & Sons, Ltd.

186 I . Scott

to survive and develop, it is important to identify the critical minimal features of the bureaucracy. Hong Kong is an interesting case study in the definition of bureaucratic functions for it is essentially a micro-state which grew into a small capitalist state.

THE DEVELOPMENT OF HONG KONG

When Britain acquired the island from China in 1841, it comprised only an area of 29 square miles with a population of slightly over 5,000 (Eitel, 1895, p. 171). By examining the role of bureaucracy in the colony’s transformation from a ‘barren rock’ to a small economic dynamo, the tasks performed along the continuum from minimal to capitalist state may be examined. This analytical task is simplified, to some extent, because the distinction between bureaucracy and state in Hong Kong has, for long periods, been artificial. Until recently, there have been no political parties, no franchise, no elected legislature and an executive composed mainly of civil servants. The bureaucracy has been virtually synonymous with the state and state power.

Despite Hong Kong’s unquestionable economic success, this article is not intended as a panegyric to the role played by its bureaucrats or to the activities of its entrepreneurs. There have been substantial costs associated with economic development; other values have been neglected. Only in the last decade has expenditure on social policy risen to meet need (Scott and Cheek-Milby, 1986). Pollution remains a largely unsolved problem in the face of apathy and opposition from industrialists. Labour conditions still leave much to be desired although Hong Kong is now a long way from the sweat-shops of the 1950s. In addition to these public policy issues, the bureaucracy has its own difficulties: its political power is gradually being eroded. This stems partly from increasing demands for more democratic government (which have seen some moves towards a corporate state) and, more generally, to the resumption of Chinese sovereignty over Hong Kong in 1997. China’s plans for Hong Kong’s future seem to involve the idea of a capitalist economy without the superstructure of a capitalist state.* But it is by no means clear that such a construct is possible. Capitalist economies may not be able to function without capitalist states.

However, even taking into account these social and economic costs and the political uncertainties of the future, Hong Kong’s economic development has been spectacular. Table 1 shows some key indicators of growth over the past five years. It reveals a pattern which has been repeated over the last thirty years. Rapid economic growth has been punctuated by short periods of recession but the recessions have never been long enough to jeopardize the economic progress which has been made. The average compound rate of growth of GDP averaged 7.8 per cent between 1966 and 1985 (Hong Kong, 1987a, p. 3; Sung, 1986). The territory’s inhabitants enjoy an increasingly high standard of living, better social services and full employment during economic booms. By 1987, there was a labour shortage in

’The Sino-British agreement specifies that Hong Kong will remain capitalist and enjoy ‘a high degree of autonomy’ for fifty years after 1997, but most commentators expect strong Chinese influence on the political system. (See Hong Kong, 1984, p. 14, and Ching, 1985, p. 57.)

Administration in Hong Kong 187

Table 1. Year Expenditure Per Capita GDP: Rate of Exports: Rate Unemployment

on GDP GDP Growth (in of Growth (in rate (in March (HK$millions) (HK$) real terms) real terms) of the given year)

Some key economic indicators 1981-86

W G ) (Yo) (Yo) 1981 164,943 31,827 9.4 8.1 4.1 1982 186,328 35,393 3.0 -2.7 3.3 1983 207,562 38,832 6.5 14.6 5.1 1984 248,728 46,079 9.5 21.9 4.0 1985' 263,579 48,308 0.6 5.7 3.0 1986' 281,897 52,759 8.7 15.1 3.1 Source: 1987 Economic Prospects (Hong Kong: Government Printer, 1987) pp. 45, 48, 49, 54, 55 'Figures for 1985 and 1986 are provisional.

the territory (Hong Kong, 1987c, p. 9). Its entrepreneurs have extended their base of operations into the Asian region, North America and Australasia and the value of its exports and imports has increased dramatically from year to year. Hong Kong is the 13th largest trading entity in the world (Hong Kong, 1987a, p. 1). In the course of the last three decades, it has become prosperous, cosmopolitan and an important financial centre.

It was not always so. Indeed, for much of its history, Hong Kong was simply another backward, plague-ridden, barely self-sufficing British colony (Endacott , 1964, Preface). Apart from its magnificent harbour, Hong Kong had no natural resources, no industry and no apparent foundation on which to base economic development. The principal economic activity in the nineteenth century was the opium trade.3 Social services were almost entirely in the hands of missionaries and voluntary agencies. To the limited extent that government existed, it was primarily concerned with maintaining law and order and containing the not-infrequent epidemics which afflicted the territory. It suffered from corruption from the earliest times, was remote from the people it sought to govern, and did little to stimulate economic development (Lethbridge, 1978, Ch. 9; 1982). The colony did begin to develop an unsophisticated manufacturing industry after the First World War but this was almost immediately wiped out by the Japanese occupation which had devastating effects. By 1950, little progress had been made towards recovery although exports were beginning to expand; in that year, one pressure group, the Reform Club, went so far as to call on government to request an international loan of f 25 million and an American grant of f 9 million to capitalize Hong Kong industry (Reform Club, 1950). An American journalist visiting Hong Kong in 1951 described it as a 'dying city' (Endacott, 1964, p. 316).

Yet within five years the territory was booming. The economic miracle that occurred can be variously explained with different weights being attached to different factors. At the end of the Second World War, the population of Hong Kong was 600,000. Two years later, as refugees from the Japanese occupation flooded back into the territory, the population rose to 1.8 million (Hong Kong, 1987a, p. 298). By the mid-l950s, with the communist takeover in China, and more refugees, it had increased to 2.2 million. This made for a supply of cheap labour, but that is characteristic of all under-developed countries. What was different in the

3The trade continued as a government monopoly until 1941. (See Miners, 1983.)

188 1. Scott

Hong Kong case was that industrialists with capital fled to Hong Kong from Shanghai in 1949 (sometimes shipping their factories with them) (Wong, 1984); and that the new refugees had a cultural ethos and a ‘refugee mentality’ which supported hard work, entrepreneurial skills and the accumulation of capital. Finally, the lifting of the United Nations embargo on trade with China together with niches in world markets provided room for growth in exports (Owen, 1971; Youngson, 1982). The impetus for this industrial revolution came from the sweat- shops of the 1950s. The initial concentration was on cotton textiles but in the 1960s there was a gradual movement into woollens and man-made fibres and, in the late 1970s, into up-market fashion. Industrial diversification into electronics, watches, toys, plastic goods and other light industries also took place. By the 1980s, Hong Kong (now with a population of 5.6 million) was, in addition, established as a major regional financial centre (Jao, 1980).

Government’s role in this development was, at first, fortuitous rather than planned. On Christmas Day, 1953, a fire made thousands of squatters homeless and provided the incentive for government to start a public housing programme which now houses 42 per cent of the population (see Drakakis-Smith, 1979). The first housing blocks were very basic but they were located close to the main industrial areas, making for short travel time to the factories and the probability of long hours of work in a largely unregulated labour market. They also came to represent a commitment from government to furnish the infrastructure for economic develop- ment: housing, transport services, civil aviation, regulation of the port and, much later, a recognition that the need for skilled workers required government initiatives in training. But is this all? Can we simply explain Hong Kong’s rapid economic development as a happy capitalist accident? Was the role of government limited to providing what the capitalists needed and thereafter staying out of their way? What has been the government’s attitude towards the complex issues which have emerged since the economic ‘take-off‘ in the 1950s?

Three possible explanations have been suggested. The first, put forward by the economists Milton Friedman and Alvin Rabushka, argues that Hong Kong’s success can be attributed to the limited role of government (Friedman, 1980; Rabushka, 1979). The second, sketched by Sir Philip Haddon-Cave, a former head of Hong Kong’s civil service, suggests that the Hong Kong government’s role can best be explained by ‘positive non-interventionism’ (Haddon-Cave, 1980). And the third, which I shall contend is the most fruitful, is to see Hong Kong as a capitalist state and seek to explain the behaviour of its government in terms of its often-active promotion of the long-term interests of capitalism.

THE LIMITED GOVERNMENT APPROACH

This approach is based on the premise that the less government there is, the better the chance of rapid economic growth and a rising standard of living for the entire population. It assumes that government is a hindrance to such growth and should be restricted to the performance of necessary tasks. Friedman, following Adam Smith, sees the purpose of government as limited to four duties: the protection of individuals in the society from coercion, whether it comes from outside or from their fellow citizens; an ‘exact administration of justice’; the erection and

Administration in Hong Kong 189

maintenance of certain public works and institutions which are necessary for the welfare of society but which would be an unprofitable undertaking for private individuals; and Friedman’s added, but limited condition that government has a duty to protect members of the community who cannot be regarded as ‘responsible’ individuals (Friedman, 1980, p. 53). In Hong Kong, Friedman finds ‘an excellent current example’:

Government plays an important role that is limited primarily to our four duties interpreted rather narrowly. It enforces law and order, provides a means of formulating the rules of conduct, adjudicates disputes, facilitates transportation and communication and supervises the issuance of currency. It has provided public housing for arriving refugees from China. Though government spending has grown as the economy has grown, it remains among the lowest in the world as a fraction of the income of the people. As a result, low taxes preserve incentives. Businessmen can reap the benefits of their success but must also bear the costs of their mistakes (Friedman, 1980, p. 55).

Rabushka, too, sees in Hong Kong ‘the textbook model of a market economy, encumbered only with the barest overlay of government’ (Rabushka, 1979, p. 83).

How accurate are these pictures of the competitive capitalist paradise? If an explanation of Hong Kong’s economic development in terms of laissez-faire and limited government were correct, then one might have expected rapid economic growth to take place much earlier, in the nineteenth century, say, when government truly was limited. Friedman’s description is correct as far as it goes, but it ignores many functions carried out by the Hong Kong Government. The Hong Kong Government intervenes in the economy whenever it feels the need to do so. The availability and use made of land, which is of critical importance in a state the size of Hong Kong, is rigorously controlled by the government. Social services expanded considerably during the 1970s and the bureaucracy has grown accordingly. The Hong Kong Government is by far the largest employer in the territory; one in fourteen of Hong Kong’s workers was a civil servant at the end of 1986.4 Most important of all, the government is often the guiding or controlling hand behind economic action. As Youngson has remarked, ‘Hong Kong and laissez-faire have only an occasional acquaintance’ (Youngson, 1982, p. 132; see also Youngson, 1981; Schiffer, 1984).

POSITIVE NON-INTERVENTIONISM

Sir Philip Haddon-Cave, the head of the Hong Kong civil service, who was Financial Secretary for much of the 1970s and who later became Chief Secretary, took a largely similar view. He noted that the Hong Kong Government’s attitude to the economy ‘is frequently but inadequately described as being based on a philosophy of laissez-faire’ (Haddon-Cave, 1980, p. xii). He preferred instead to describe the

4Based on a labour force of 2.5 million of whom 180,000 are civil servants (Hong Kong 1987a, p. 1; Hong Kong, 1986).

190 I . Scott

Hong Kong Government’s stance as one of ‘positive non-interventionism’. In economic terms, this meant that there should be no attempt to plan the allocation of resources available to the private sector or to frustrate the operation of market forces; the private sector should accept and meet the costs of its own mistakes. On the other hand, Haddon-Cave recognized a responsibility on the part of government to respond when industries with social obligations (such as banking) ran into trouble, and when an institution (such as the stock market) needed regulation to prevent inequitable practice. Further, governmental action, as he saw it, was a consequence of the interplay between the provision of public services and social and economic infrastructure, social needs which have a moral rather than an economic justification and a continuing emphasis on cost-effectiveness and cost- efficiency (Haddon-Cave, 1980, p. xiv). However, the criteria on which a decision to intervene might be made are not specified in any detail.

Haddon-Cave’s formulation has the advantage of recognizing the Hong Kong Government’s propensity to intervene-forcefully, if necessary-in economic affairs and, indeed, in many other aspects of the lives of the territory’s citizens. The government’s presence, at times, seems all-pervasive. A Hong Kong citizen may well live in public housing. His children may go to government or government- aided schools. He may travel to work on government-built roads which are patrolled by the police force. (There are 30,000 policemen in Hong Kong.) He may use transport facilities which are either government-regulated (the bus companies) or government-owned (the Mass Transit Railway Corporation or the Kowloon/ Canton Railway). He may work in a company which is increasingly affected by government regulations. If he needs health care, he will find that it is probably provided directly or indirectly by government. If he listens to the news, he will find it dominated by government’s activities. And so on. A laissez-faire government may be a contradiction in terms or it may be descriptive of a government with very limited powers. Whatever definition is adopted, it is not appropriate to Hong Kong’s experience. It seems more useful and more accurate to describe Hong Kong as a capitalist state.

THE CAPITALIST STATE

The characteristics of capitalist states are a product of different political, economic, cultural and social variable^.^ In the Hong Kong case, the state does not exercise the tight control over the economy that seems typical of other newly industrializing countries in the region. Nonetheless, it plays an important role in safeguarding the long-term interests of capitalism against parochial short-run considerations and also provides for the authoritative adjudication of disputes arising between capitalists. It may also intervene as an economic force in its own right if policy-makers perceive the need to do so. In analysing the mode, timing and ability of the state to intervene in the economy, one concept which seems helpful is that of ‘relative autonomy’. This holds that, in order to ensure the reconciliation of different and sometimes conflicting capitalist interests, the state must possess a certain degree of autonomy. As Miliband puts it, ‘While the state does act, in Marxist terms, on behalf of the

‘The state here is distinguished from the government and is used in Miliband’s sense.

Administration in Hong Kong 191

ruling class, it does not, for the most part, act at its behest.’ (Miliband, 1977, p. 74.) For other writers, the relative autonomy possessed by a state is relative to the contradictions of capitalism although the class struggle might be one manifestation of it (Poulantzas, 1969).

In the Hong Kong context, the notion of ‘relative autonomy’ provides a useful framework within which to study the actions of the state. Prior to 1982, the Hong Kong Government enjoyed a high degree of ‘relative autonomy’. Intervention from London and Beijing was fitful. There were no political parties and no elected legislature. Business pressure groups were strong but did not dictate public policy; other pressure groups were weak. The government’s actions were continually legitimized by the territory’s spectacular economic growth. After 1982, when the negotiations on Hong Kong’s future began, the government’s credibility suffered and it was not able to impose its decisions as quickly or as authoritatively as it had previously done. London and Beijing became much more involved in decision- making. Political participation increased. Business groups began to seek their cues from China. And, while economic growth continued unabated, this tended to be attributed more to the ‘prosperity and stability’ afforded by the Sino-British Agreement than to any specific actions of the Hong Kong Government. Yet, paradoxically, the Hong Kong Government has far more to do in the transitional period to Chinese sovereignty. If it is to maintain the long-term interests of capitalism in the territory, it will almost certainly have to intervene in economic affairs to a greater degee than it has in the past. Thus at the very moment when its public policy role is, of necessity, increasing, its ‘relative autonomy’-the ability to enforce new decisions effectively-has substantially decreased.

This changing public policy role throws into relief some administrative features of the capitalist state in Hong Kong. I have suggested that the duties carried out by the state were always rather more extensive than those outlined by Friedman and Smith. But it is not simply the nature of the state’s responsibilities that is at issue; it is also the manner in which these tasks are performed. The Hong Kong Government has traditionally played its role within the confines of certain clear administrative guidelines. Indeed, those guidelines have become so ingrained and so much part of the policy-makers’ frame of reference that they may be said to constitute something of a philosophy of government. In this respect, they may suggest one model of the role of government in a small capitalist state which may provide the necessary, if not the sufficient, bureaucratic conditions for economic growth. There may be administrative lessons for small and micro-states in this experience.

There are three critical inter-related elements which provide the parameters for bureaucratic action in Hong Kong. The first concerns costs and value for money. The civil service is expected to perform its role as cheaply as possible. Although the ideal is not always achieved, there is constant pressure from the Finance Branch within government, and from taxpayers and business groups outside government, to limit expenditure, vet new posts carefully, and to ensure that underemployment and economic wastage in the civil service are kept to a minimum. The second element is effective line implementation. When the Hong Kong Government is faced with a problem, one of its commonest responses is to increase the numbers of those serving in line positions. Sometimes this has been at the expense of quality in policy-making, for a large proportion of organizational resources goes into funding

192 I. Scott

line rather than staff positions. Finally, and closely related to this, is the government’s ability to deal with crises. As in most small states, crises come frequently in many different forms, some of which in the Hong Kong case are of the government’s own making. Policy-makers are expected to respond to and solve such crises. Generally, where the crisis can be solved through effective line activity, the Hong Kong Government tends to be successful. Where it involves a qualitative response to a new problem, it is far less impressive. Value for money, effective line implementation, and the ability to handle crises have been vital to the Hong Kong Government’s role in the past. However, in the present context of the erosion of bureaucratic power and political uncertainty about the future, they will probably not constitute an adequate framework for future government action. Nonetheless, they may still have relevance for small states seeking rapid economic growth and modernization. For this reason, it is perhaps useful to examine these elements in greater detail.

VALUE FOR MONEY: THE COST AND SIZE OF THE HONG KONG CIVIL SERVICE

The Hong Kong Government is extremely cost-conscious. The Finance Branch exerts pervasive control throughout the civil service, apparently basing its actions on the precept that if you look after the cents, the dollars will look after themselves. Operating expenses are pared to a minimum, requests for new posts are exhaustively vetted, and any attempt by departments to improve the quality of their outputs is subject to intensive central scrutiny. Unfortunately, the frugality which may be a virtue in individuals may not always be so for governments. Clearly, there are hidden social costs in the type of services offered by a penny-pinching civil service. And it does not always follow that if care is given to the expenditure of small sums, it will also be given to the expenditure of large sums. Partly because the Hong Kong Government does not devote much by way of resources to improving the calibre of its policy-making system, there are occasionally great planning disasters which prove to be very costly.6 In general, however, it is probably fair to conclude that the Hong Kong Government has been a cheap and efficient government within the parameters of Haddon-Cave’s guidelines.

Table 2 shows the size, growth and cost of the Hong Kong civil service over the last decade (See also Scott and Burns, 1984, Ch. 2). Three major factors have contributed to the relatively low level of personal emoluments in comparison with states at similar levels of economic development. First, the structure is heavily weighted towards the establishment of new line posts at the bottom of the hierarchy. Figure 1 shows the high concentration of personnel at the lower end of the salary scales. Second, such posts are not particularly well paid in either the public or private sector in Hong Kong. The ratio of the lowest paid civil servant to the highest paid is about 1:327 excluding the substantial fringe benefits (housing,

’Three examples are the de-salination plants, which were built at considerable cost but never used; the Prince Philip Dental Hospital which, in terms of producing dentists, was not strictly necessary; and a governmental dental scheme which cost taxpayers HK$131 million in less than two years through over- charging by private dentists and possible corruption among minor civil servants.

’The lowest paid civil servant in 1986 was paid approximately HK$2000 per month, while the highest paid, the Chief Secretary, was paid HK$64,000 per month. 1US$=HK$7.80.

Tabl

e 2.

Es

tabl

ishm

ent,

stre

ngth

and

cos

t of

the

Hon

g K

ong

civi

l ser

vice

197

7/7&

1987

/88

1977

/78

1978

/79

1979

/80

1980

/81

1981

/82

1982

/83

1983

/84

1984

/85

1985

/86

1986

/87

1987

/88

Esta

blish

men

t at

be

ginn

ing

of y

ear

117,

756

126,

489

134,

712

141,

738

153,

532

168,

298

173,

788

176,

322

179,

160

180,

646

184,

810

Yo a

nnua

l gro

wth

rat

e of

esta

blis

hmen

t 7.

4 6.

5 5.

2 8.

3 9.

6 3.

3 1.

5 1.

6 0.

8 2.

3 -

Stre

ngth

at

begi

nnin

g of

year

10

8,38

5 11

5,67

4 12

2,83

8 12

9,21

7 13

9,25

2 15

4,03

4 16

6,56

9 17

0,05

1 17

2,64

1 17

4,94

6 17

9,05

3

Pers

onal

em

olum

ents

in

$ m

illio

n 2,

475.

0 2,

892.

1 3,

517.

1 4,

670.

6 6,

843.

8 9,

030.

3 10

,215

.4

11,7

51.2

13

,409

.4

14,8

76.4

’ 15

,582

.7’

Tota

l gov

ernm

ent

recu

rren

t exp

endi

ture

in

$ m

illio

n 6,

219.

1 7,

308.

1 8,

865.

2 11

,919

.1

16,2

94.9

20

,498

.4

22.8

75.9

25

,991

.6

29,3

26.3

32

,397

.3’

35,7

87.7

’

Pers

onal

em

olum

ents

as

YO

of to

tal

Sour

ce: C

ivil

serv

ice

pers

onne

l sta

ristic

s 19

87 (

Hon

g K

ong:

Civ

il Se

rvic

e Br

anch

, Gov

ernm

ent

Secr

etar

iat,

f987

) pp.

6,

18.

‘Rev

ised

estim

ate

‘Est

imat

e

recu

rren

t exp

endi

ture

39

.8

39.6

39

.7

39.2

42

.0

44.1

44

.6

45.2

45

.8

45.9

43

.5

b

5’

194 I . Scott

Directorate 0.6%

Maximum salary between 1- MPS 48-51 and equivalent 1 .O%

4.7%

Source: Civil Service Personnel Statistics 1987 (Hong Kong; Civil Service Branch, Government

'The Model Scale 1 Pay Scale consists largely of artisans and labourers. 'The Master Pay Scale (MPS) ranges from point 1 (the lowest) to point 51 (the highest). The Directorate

Secretariat, 1987).

Pay Scale is above point 51.

Figure 1. Strength of the Hong Kong civil service by salary groups (April, 1987)

passages) to which senior civil servants are entitled. Third, the effects of the rapid increase in the size of the civil service between 1978 and 1982 have not entirely worked their way through in terms of increments on the salary scales. As those recruited during that period rise in the hierarchy, the cost of the civil service will also rise.

There are, however, reasons to believe that it will be difficult to maintain an inexpensive civil service in the future. Although public sector expenditure, as a whole, is only approximately 11 per cent of GDP and is forecast to remain at that level for the next five years (Hong Kong, 1987b, p. 38), the government is experiencing pressure to increase expenditure. A central plank in the transition to Chinese sovereignty is that the civil service should be stable (Scott, 1986a). Public sector unions, which are much better organized than their private sector counterparts, have not been slow to realize the bargaining power which this confers. A 1986 consultancy report for government, which purportedly showed public sector salaries outstripping those at comparable levels in the private sector, led to a union

Administration in Hong Kong 195

walk-out from the main consultative committee.8 Effectively, this killed the report, for in the face of the political need to keep the civil service satisfied, government can do little but accede to continued annual pay increases. In the wider arena, the conclusion of the Sino-British negotiations saw much greater pressure group activity. As the Hong Kong Government lost its relative autonomy, so it became more vulnerable to the need to buy political stability in the transitional period. There have been repeated calls, which have not yet been met, for greater expenditure in almost every area of social policy. If this were granted, even to a limited degree, it would probably substantially increase the size of a civil service, which still has something of a ‘law and order’ profile (see the percentage of disciplined services staff in Figure 1). Calls for expanded social services have alarmed business pressure groups which have traditionally supported limited and cheap government. But there does appear to be greater backing from the middle class and from professionals for more services in many areas (Scott, 1986b). Their demands will be increasingly difficult to deny and it seems likely that government will gradually become more expensive in real terms.

EFFECTIVE LINE IMPLEMENTATION

One of the major problems for small, underdeveloped states is effective line implementation. Hong Kong is fortunate in that it is not faced with the formidable communication problems which hinder line implementation in many other parts of the world. It has also been aided by a heavy reliance on the values of classical bureaucracy matched by congruent traditional Chinese values and by the long- standing practice of devoting a disproportionate amount of human resources to line rather than staff positions. The result has been effective top-down implementation, based on the government department as the principal unit, at the cost sometimes of the co-ordinated implementation of social policies which require more lateral communication between departments.

The Hong Kong Government bears a close resemblance to a classical bureaucracy. There is a strong emphasis on hierarchy, discipline and neutrality. Lines of authority and communication are clearly specified. If problems do arise, the first assumption is that there is a need for structural reform to improve the span of control or refine the hierarchy. This works quite well in the Hong Kong context because it is supported by the Chinese values of deference to authority, avoidance of conflict and hard work (Lau, 1982). Not much importance is attached to the contributions that junior civil servants could make towards solving problems. They are expected to carry out orders and they usually seem to do so efficiently, effectively and quietly. Top-down implementation is the rule rather than the exception.

Implementation is effective because, as Figure 1 shows, a very high proportion of resources is spent on strengthening line functions.’ Policy-making is essentially

PThe study, undertaken by Hay Management Consultants, led to a walk-out by the unions from the consultative committee. %or further development of this point, see Scott (1987).

196 I. Scott

restricted to those at directorate level and points 48-51 of the master pay scale. Even within the largely incremental framework of policy-making in the Hong Kong Government, the small numbers involved tend to mean that senior officials are harassed and under constant pressure. There is little time for forward planning, particularly with the volume of new legislation required in the run-up to 1997. At the middle levels of the civil service, however, the relatively larger number of officials allows for more comprehensive consideration of organizational problems and for minor modifications to established policies. There is also a tendency, encouraged by the fact that the Hong Kong Government is cheap, to attempt to solve problems by recruiting more personnel for line positions. Thus, although the quality of policy-making often leaves much to be desired, its implementation, and any minor adjustments required, are usually speedily and effectively carried out.

CRISIS MANAGEMENT

Crises abound in small states. Their sources are as varied as the results they produce and they are often unpredictable. Since the Hong Kong Government believes that prosperity and stability go hand in hand, its ability to handle crises assumes some significance. In theory, it should be able to respond immediately when a crisis threatens; in practice, it is sometimes hampered by its own structure and the values which serve it so well under normal conditions. With this in mind, it is perhaps instructive to examine how crises are dealt with in Hong Kong and what kinds of procedural steps are taken in efforts to solve them.

Some crises are predictable. In the summer, Hong Kong is usually menaced by at least one typhoon. This kind of crisis falls well within the compass of effective line implementation. Emergency procedures are in place, regulations governing everything from building requirements to the blockage of drains are in force, and an entire bureaucratic team is ready to move once a typhoon is on the horizon. If the territory is in fact hit, there is also learning and feedback from the experience. In consequence, damage is normally contained within certain limits, although catastrophes still do occur. Major disasters, however, such as life-threatening landslips or buildings collapsing, are less frequent than they were in the past.

Other crises are far less predictable. Often they result from changes in the external environment about which the government can do very little. Because the policy-making capacity of the Hong Kong Government is stretched, it responds rather poorly to such crises, in some instances apparently not even having a basic contingency plan. A case in point is the way in which the government handled the Vietnamese refugee problem. In December, 1978, a Taiwanese-owned freighter, the ‘Huey Fong’, with 2,700 Vietnamese refugees on board, requested permission to enter Hong Kong harbour. The government refused permission but the ship approached Hong Kong and was eventually told to anchor outside the harbour. The Hong Kong Government had no policy for accepting refugees, although the issue had already become an important regional and international concern. It took almost a month before the ship was finally permitted to dock in Hong Kong (Hong Kong, 1980, Ch. 1). Such issues serve to emphasize the weakness of the present system: the government is not prepared to devote many resources to forward planning or to improve the quality of its policy-making.

Administration in Hong Kong 197

At the same time, it should be said that when there is a fair lead time before a crisis is expected to materialize, or where the government perceives that a potential future crisis could vitally affected Hong Kong's prosperity, resources can be effectively mobilized. The Trade Department, for example, foresaw that Hong Kong's exports would be badly affect if the Jenkins Bill or similar protectionist legislation passed the US Congress. The government responded to this threat by hiring permanent lobbyists in Washington to present Hong Kong's case and to attempt to persuade Congress that the free port of Hong Kong should be distinguished from its more protectionist neighbours in the Asian region.'" A rather different example, but one that illustrates the same point, is that of the subway system. For reasons which are not entirely clear, Hong Kong's policy- makers became convinced that, unless a subway system was built, Hong Kong would grind to a halt in traffic congestion. The project was granted top priority, human and financial resources were amply provided, and the Mass Transit Railway, remarkably for such an enterprise, came in on time and under budget (Hong Kong, 1980, p. 13; see also Harris, 1980).

The crises which Hong Kong currently faces are of a rather different kind. They are political crises with a largely domestic orientation, involving the allocation of resources among competing groups who perceive that they have much to lose or gain under the present circumstances. Some such groups are the products of the Sino-British Agreement; they have emerged, at least partly, because the confidence of their members in their future is at stake. Although resource allocation may be important, these are not the sorts of crises that can be easily or wholly solved by making resources available and then using effective line implementation. They require negotiation, bargaining skills and some measure of forward planning, qualities which the Hong Kong Government does not possess in abundance. In some areas, the government will almost certainly have to move away from reactive to pro-active measures. In others, particularly in the field of social policy, it will have to improve the quality of its policy-making in order to deliver services effectively. This may well result in changes in character and structure, away from the classical bureaucratic format.

Is Hong Kong sui generis or can we derive lessons for small or micro-states from this experience? For Hong Kong itself it would seem that the period of the capitalist state, possessing considerable 'relative autonomy' in its relationship with the economy and backed by a classical bureaucracy, has come to an end. Katzenstein has suggested that the small states of Western Europe have done better economically than their larger counterparts, because they have been able to employ a corporate strategy (Katzenstein, 1985). Hong Kong, too, seems to be moving towards corporatism. For small states which have not yet enjoyed rapid economic growth, however, and which seek to do so through capitalist methods, the Hong Kong experience may have some value. If there is a lesson to be drawn, it is that there are certain functions a state must perform under capitalism if economic growth is to be sustained. These appear to include not only those specified by Adam Smith and Friedman but much more as well. A capitalist state must enjoy

~~

"According to media reports, the Hong Kong Government spent about US$S00,000 on lobbyists in the past year. As a colony, Hong Kong has no diplomatic representation but it has trade representatives in Washington, Brussels, Geneva, London, New York and San Francisco. (See Hong Kong 1987a.)

198 I . Scott

the authority to adjudicate and, if necessary, to intervene in the economy in the long term interests of capitalism. In Hong Kong, this has been exercised through the control of land and sporadic rescue efforts for institutions such as failing banks. It is also necessary for the state to be able to implement its policies effectively and efficiently. This has been achieved in Hong Kong through a reliance on the often under-valued virtues of classical bureaucracy, by paying attention both to the criteria specified by Murray and Kersell (Murray, 1981; Kersell, 1987) and to value for money in administration, effective line implementation and the ability to respond adequately to crises. Small or micro-states which follow capitalist development modes may not possess these particular features but they may be suggestive criteria for future state-building programmes.

REFERENCES

Alford, R.R. and Friedland, R. (1985). Powers of Theory: Capitalism, the State and

Ching, F. (1985). Hong Kong and China: For Better or For Worse. China Council of The

de Jasay, A. (1985). The State. Blackwell, New York. Drakakis-Smith, D. (1970). High Society: Housing Provision in Hong Kong 1954 to 1979.

Centre of Asian Studies, University of Hong Kong, Hong Kong. Eitel, E.J. (1895). Europe in China. Kelly and Walsh, Hong Kong. Endacott, G.B. (1964). A History of Hong Kong. 2nd Edition Oxford University Press,

Friedman, M. (1980). Free to Choose. Penguin, Harmondsworth, UK. Haddon-Cave, P. (1980). ‘Introduction: The making of some aspects of public policy’. In:

Lethbridge, D. (ed.), The Business Environment in Hong Kong. Oxford University Press, Hong Kong.

Harris, P.B. (1980). Hong Kong: A Study in Bureaucratic Politics. Heinemann, Hong Kong. Hong Kong (1980). Hong Kong 1980: A review of 1979. Government Printer, Hong Kong. Hong Kong (1984). A Draft Agreement between the Government of the United Kingdom of

Great Britain and Northern Ireland and the Government of the People’s Republic of China on the Future of Hong Kong. Government Printer, Hong Kong.

Hong Kong (1986). Civil Service Personnel Statistics 1986. Civil Service Branch, Government Secretariat, Hong Kong.

Hong Kong (1987a). Hong Kong 1987: A Review of 1986. Government Printer, Hong Kong. Hong Kong (1987b). The 2987-88 Budget. Government Printer, Hong Kong. Hong Kong (1987~). 1987 Economic Prospects. Government Printer, Hong Kong. Jao, Y.C. (1980). ‘Hong Kong as a regional financial centre: evaluation and prospects’. In:

Leung, C.K., Cushman, J.W. and Wang, G. (eds), Hong Kong Dilemmas of Growth. Research School of Pacific Studies, Australian National University, and Centre of Asian Studies, University of Hong Kong, Canberra and Hong Kong.

Democracy. Cambridge University Press, Cambridge.

Asia Society and the Foreign Policy Association, New York.

Hong Kong.

Katzenstein, P. (1985). Small States in World Markets. Cornell University Press, Ithaca. Keane, J. (1984). Public Life and Late Capitalism. Cambridge University Press, Cambridge. Kersell, J.E. (1987). ‘Government administration in a small microstate: developing the

Lau, S.K. (1982). Society and Politics in Hong Kong. The Chinese University of Hong Kong,

Lethbridge, H.J. (1978). Hong Kong: Stability and Change. Oxford University Press, Hong

Miliband, R. (1969). The State in Capitalist Society. Weidenfeld and Nicolson, London. Miliband, R. (1972). ‘Reply to Nicos Poulantzas’, New Left Review, 59, reprinted in

Miliband, R. (1973). ‘Poulantzas and the capitalist state’, New Left Review, 82, 83-92.

Cayman Islands’, Public Administration and Development, 7(1), 95-107.

Hong Kong.

Kong.

Blackburn, R. (ed.), Ideology in Social Sciences Fontana, London.

Administration in Hong Kong 199

Miliband, R. (1977). Marxism and Politics. Oxford University Press, Oxford. Miners, N.J. (1983). ‘The Hong Kong Government opium monopoly 1914-1941’, The

Journal of Imperial and Commonwealth History, XI (3), 275-299. Murray, D.J. (1981). ‘Microstates: public administration for the small and beautiful’, Public

Administration and Development, 1(3), 245-256. Offe, C. (1975). ‘The theory of the capif-alist and the problem of policy formation’. In:

Lindberg, L. et al. (eds), Stress and Contradiction in Modern Capitalism: Public Policy and the Theory of the State. Heath and Company, Lexington.

Owen, N.C. (1971). ‘Economic policy’. In: Hopkins, K. Hong Kong: The Industrial Colony. Oxford University Press, Hong Kong.

Poulantzas, N. (1969). ‘The problem of the capitalist state’, New Left Review, 58, 67-78. Rabushka, A. (1979). Hong Kong: A Study in Economic Freedom. University of Chicago

Press, Chicago. Reform Club. (1950). Reform Club memorandum: social and economic requirements of

Hong Kong. File B/Sec 2/1916/50. Schiffer, J.R. (1984). ‘Anatomy of a laissez-faire government: the Hong Kong growth model

considered’. In: Hills, P. (ed.), State Policy, Urbanization and the Development Process. Centre of Urban Studies and Urban Planning, University of Hong Kong, Hong Kong.

Scott, I. (1986a). ‘The Sino-British agreement and political power in Hong Kong’, Asia Pacific Community, 31, 1-18.

Scott, I. (1986b). ‘Policy-making in a turbulent environment: the case of Hong Kong’, International Review of Administrative Sciences, 52(4), 447469.

Scott, I. (1987). Policy implementation in Hong Kong’, South east Asian Journal of Social Sciences, 15(2), 1-19.

Scott, I. and Burns, J.P. (eds) (1984). The Hong Kong Civil Service: Personnel Policies and Practices. Oxford University Press, Hong Kong.

Scott, I. and Cheek Milby, K. (1986). ‘An overview of Kong Kong’s social policy-making process’, The Asian Journal of Public Administration 8(2), 166-176.

Sung, Y.W. (1986). ‘Fiscal and economic policies in Hong Kong’. In: Cheng, Y.S. (ed.), Hong Kong in Transition. Oxford University Press, Hong Kong.

Wong, S.L. (1984). ‘The migration of Shanghainese entrepreneurs to Hong Kong’. In: Faure, D. et a1 (eds), From Village to City: A Study of Traditional Roots in Hong Kong, Centre of Asian Studies, Hong Kong.

Youngson, A.J. (1981). ‘Is Hong Kong the last bastion of laissez-faire?’. Inaugural lecture, University of Hong Kong, 12 February, 1981, Hong Kong.

Youngson, A.J. (1982). Hong Kong: Economic Growth and Policy. Oxford University Press, Hong Kong.