Neoliberalism,Laissez-FaireCapitalism and Economic Crisis: The Political Economy of Deindustrialisation in Hong Kong

Abstract

The search for an “institutional fix” to enable national and sub-national economies to survive global competition and change has attracted some attention from analysts of regional development and global political economy in recent years. Tracing the historical processes of industrialisation in Hong Kong prior to its reversion to China in July 1997, this paper aims to provide some empirical support for the contention that neoliberalism is a major contributor to the recent economic crisis of deindustrialisation in Hong Kong. In particular, this paper examines three areas in which the laissez-faire colonial state in Hong Kong has failed to provide the necessary institutional support for industrialisation: (1) quota restrictions; (2) technological upgrading and (3) outward investment Such a failure has resulted in the progressive decline of Hong Kong's industrial sector and the lagging performance of Hong Kong's manufacturing industries vis-à-vis counterparts in the other three Asian newly industrialised economies. On the one hand, the Hong Kong government has ceded its power to local big businesses whose financial and commercial interests are more faithfully represented in various political decision bodies. On the other hand, Hong Kong's industrial sector has faced serious competitive pressures from global economic change and concomitant industrial restructuring. The long term survival of the industrial sector in Hong Kong, to a large extent, rests on the role of a proactive state and its institutional capacities.