Wealth inequality is high on the political agenda these days.
No matter whether we are talking about the government’s budget, constitutional reform or youth policy, we will unavoidably touch on the issue of inequality.
Undoubtedly, Hong Kong’s wealth gap has been widening, and chances for upward mobility are diminishing. These problems will definitely sow seeds of political and social instability.
People have put forward different explanations for the problem of inequality in Hong Kong. Some attribute this to the lack of economic diversity; some attribute this to an unfair political system.
Fewer pundits in Hong Kong have mentioned that this is a challenge facing many developed economies.
For example, in the United States, many lament that the American Dream is dying.
Earlier this year, The Economist wrote a cover story about “America’s new aristocracy”, pointing out it is more and more difficult for youth from disadvantaged backgrounds to receive a quality education.
Nobel economics laureate Paul Krugman went further, proclaiming that “knowledge isn’t power”, as increasing social inequality has rendered education a less powerful tool for upward mobility.
So what is the cause of this widening gap?
In 2013, French economist Thomas Piketty wrote the book Capital in the Twenty-First Century, which has become an unlikely bestseller all over the world.
Simply put, the premise of this book is: in developed economies, the returns to wealth persistently outpace economic growth, aggravating inequality as a result.
He worries that the widening gaps within many western countries will undermine democratic values.
Some even believe that the political instability that results will be so severe that western economies may fall back into chaos.
But not everyone is so pessimistic.
American political scientist George Friedman has identified population decline as a possible factor leading to a new economic landscape.
As the workforce shrinks, the price of labor will probably increase, shifting wealth from employers to wage earners to some extent.
Historian Ian Morris has provided other reasons for relative optimism.
First, despite the worsening within-nation inequality, the level of between-nation income inequality will probably drop.
Second, the emerging economies can create demand that supports the global market.
Third, new class structures may provide new chances for some people.
Last but not least, technology advancement may bring an unprecedented form of production, creating an economic system that can endure a higher level of wealth inequality.
Nevertheless, both Friedman and Morris admit that even though the impact of the inequality problem may not be as catastrophic as some might think, the road to a new economic order will be bumpy.
Hong Kong is facing similar problems.
Increasing wealth inequality has become a long-standing issue.
Various studies have shown that while higher education still helps improve one’s chances to move upward, the average real wage of fresh graduates has stagnated.
The new economic system foreseen by Morris, in which “inequalities far beyond those Piketty imagined might start to seem entirely reasonable”, is possible.
Still, during the transition, political and social risks will be huge. Something must be done to mitigate these risks.
In addition to improving redistributive policies, the government needs to help people get access to the new opportunities.
Factors like the rise of developing economies and the advancement of technology are creating both challenges and opportunities for advanced economies.
We need an education system that enables our students, regardless of their backgrounds, to become more outward-looking and globally competitive.
Our youth need to consider opportunities provided by places like mainland China and ASEAN countries as well as advanced economies.
Also, the government should offer support for companies to expand to new markets and should create an environment that is friendlier to new ventures.
Opportunities in this new world order are not low-hanging fruit. We need to take care of those who cannot win in this new game.
At the same time, we should make an effort to give more people in this society the chance to win.
Germaine Lau is the writer of this article.
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