A Public Policy Journal
rebuilding marketing institutions
the language of leadership
Hong Kong and capital controls
combating the spread of fake medicines
Inside Best Practice
Vol. 1 N0. 2 Summer 2009
20 the Language of Leader’s Bookshelf
45 For sleuthing amateurs
ron Manners honours sir arvi of economics
Parbo for his service and comments the economic Naturalist reviewed
on the way forward, not only for by Michael Mo.
australia, but for all others on the
46 Privatization Bears Fruit
Policy Recommended for the in the Big apple
Market Privatization in the city reviewed by
5 26 the Privatization of
Lawrence W. reed.
From the editor
Public services Odds and Ends
6 From the Founders John L. chapman on why
48 Master of slaves
privatization is indeed the only hope
for renewal of once proud cities.
Jackie chan has declined the value
of freedom to show his obedience.
Cover Story 34 Hong Kong and capital 50 Patriotic Panic
8 rebuilding Market controls
Jim Walker questions the controls in
a low flying plane spotted in
institutions after the the betting arena.
Manhattan causes panic.
Bill stacey navigates financial risk Global Perspective Policy 52 Let’s Not Lose Our
and regulatory changes and throws
37 combating the spread
us a ladder to climb out of the
the mass hysteria surrounding the
spread of swine flu does little to
Policy Recommended For The
of Fake Medicines protect us.
through Free Markets
14 Origins of the Financial Julian Harris and alec van Gelder
trail counterfeit medicines and
Market crisis of 2008 suggest systems to help china shed
anna J. schwartz suggests how to
its “Factory asia” label.
avoid a replay of the factors that
produced the credit market debacle.
Around The World
17 Monetarism Defiant 42 restoring the Freedom
Guy sorman on legendary economist to trade
anna schwartz – the feds have alec van Gelder on the Freedom to
misjudged the financial crisis. trade campaign’s importance.
Editor: Nicole idanna alpert editorial Office: article submissions:
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Summer 2009 3
From the Editor
Fancy More regulation?
he movement to increase regulation in order Our cover story,
to rebuild the economy has a large following. “rebuilding Market
at the same time, however, it is well known institutions after the
that some of the very regulations enacted years ago Financial crisis,” by Bill
with the support of this movement backfired, playing stacey, explores financial
a large role in the formation of the crisis. Knowing risk and regulatory changes while addressing
which regulations and policies to alter or roll-back is numerous areas to suggest what shape reforms
proving to be elusive, and committing to one school should take. anna schwartz helps us move forward
of thought amidst this confusion is worrisome. by understanding the past as she explains the factors
Many new policies have been considered for of the crisis and the expansive monetary policy under
regulatory change under the auspices of now the last U.s. administration. Notably, this section,
knowing better. But do policymakers really Policy recommended for the crisis, indicates that
understand the outcomes of past policy and allowing regulations, and the risks involved with
regulatory change – those that had admirable goals them, to play a larger role than the current market
but turned out to be some of the main drivers of devices themselves is too big a risk to take.
the crisis? the cra regulation, while only one John chapman opens our Policy recommended
chapter of the tragedy, is notable because its impact for the Market section with “the Privatization of
was large enough to set the scene by lowering Public services,” in which he details two cities’
lending standards across the board. its policy effect government activity compared to that ascribed to
was detrimental: banks moved away from a focus markets. chapman debates that the outcome of cities
on hard credit standards and other institutions like Detroit is far from inevitable; the real reason for
proceeded similarly. this whole array of government their failure is a greater size of government coupled
policies to encourage home ownership vastly with a lack of competition for public services and
distorted the financial system, adding fuel to the fire. high taxes.
an illogical assumption, but still widely held, Jim Walker uncovers a betting arrangement of
is that government agencies are able to “correct suspect form in “Hong Kong and capitol controls”
market failure” despite their bad track records. the where people in Hong Kong are virtually banned
thought of a bewildered-empowered tinkering again from betting and watching horse races overseas.
with financial products and policy (at some points, Best Practice’s Global Perspective Policy analysis
without having even understood what is up for returns with Julian Morris’ and alec van Gelder’s
legislation) is the stuff of nightmares. and yet, it’s “combating the spread of Fake Medicines.” Both
our reality today, as improvident home-ownership fascinating and helpful, they suggest policies that
policies were years ago. provide easy and counterfeit-proof systems to make
We should be wary of new regulations and rules all pharmaceuticals safer.
when the political environment lacks necessary Leader’s Bookshelf reviews enjoyable and
knowledge or endeavors to promote political goals. influential books and for further enjoyment, Odds
We should be wary when what’s actually happening and ends closes this issue with a very entertaining
in markets and businesses is being overlooked. round-up of international happenings.
after all, the readiness to pass new laws undermines We’ll meet again next season, but until then, let
the rule of law in the first place, which is why this me know what you are thinking – you can reach us
summer’s issue of Best Practice: “Less is More” at email@example.com.
is dedicated to monetary policy and financial
regulations. Nicole Idanna Alpert
Summer 2009 5
From the Founders
On Where Hong Kong is Headed
he second issue of Best Practice comes at recovering teenage addicts and the unskilled elderly
you at a pivotal time in Hong Kong’s history. are kept from gainful employment. For the young,
While the fallout of the financial crisis is still never working leads to a life of indolence and crime.
having far reaching impacts on our city, we seem On the rare occasion they find work, they find
to be seeing through this crisis and already looking it unfamiliar and irksome. in europe and North
beyond. While the financial realm is of course america, those who would clean the streets at a
important, it oft seems that the greatest threats to lower than minimum wage instead make those streets
our success come from within. dirty with crime and despair.
Hong Kong is consistently ranked the freest For the elderly and unskilled, being replaced by a
economy in the world, but those living in Hong less expensive camera from their night watchman job
Kong are only too aware of when the government robs them of their ability to contribute to people’s
intervenes. sometimes the results are comic – like the safety and well-being – and their dignity arising from
recent decision and hopeful reversal not to license a job done with honour. the elderly of the West are
shoe shiners. the question has to be asked: Whose often living quiet lives of desperation, rather than
idea was it to require shoe shiners to get a license working with pride in later years like those in Hong
anyways? are there concerns about unlicensed Kong.
shoe shiners over-buffing patrons’ shoes to an the elderly, yet vibrant men, working the alley
unsightly sheen? Or if we didn’t restrict the numbers, behind shanghai tang are the frontline potential
shoe shiners would take over the city with their victims of labour restriction that would rob them of
pernicious…stools and buffing rags? their pride. Will we replace it with welfare and the
No doubt there are mid-level bureaucrats earning message that their usefulness to the world is done?
a decent living off of licensing the absurd. in this By introducing minimum wage, will we do the same
case, it is certain they live better than those whose to young men who are just beginning life, without
humble livelihood they would seek to extinguish. to the full benefit of education? imagine the impact on
those dutifully keeping Hong Kong’s leather bright, these valuable young people who, while not meshing
this is no joke however, but rather a theft of their with our rigid education system, can still make an
honest work and dignity that goes with it. honest contribution to the world.
More far reaching in its impact is the proposal for Policy has real impact on real lives. this is the
a minimum wage. the economic arguments against it motivation behind the founding of Best Practice.
are well known and feared by workers on the edge of Hopefully we can use it to find a better way, a Hong
employment and employers on the edge of survival. Kong way, and not repeat the mistakes of the so-
Less understood is the moral damage of it. called “advanced” economies. Hong Kong’s way has
While the impact of government intervention been a better way for many years. We should not be
seems obvious to us here, you have to experience it shy to use the world’s best practice – but also create
in social democracies to really see why Hong Kong it, so the world may follow in our footsteps.
ranks so well. restrictive labour laws, of which
minimum wage is a starting point for a tsunami Simon Lee Chao-fu
of red tape, keep those with the most to gain from Andrew Shuen Pak-man
honest labour out of the workforce. school dropouts, Andrew Work
6 Best Practice
Bill Stacey Anna J. Schwartz Guy Sorman Ron Manners Jim Walker John L. Chapman
the chairman of Hong One of the world’s French professor, a fourth generation the founder and an adjunct scholar in
Hong’s leading free greatest monetary columnist and author. He prospector with over 40 managing director of economics, working at
market think tank, the scholars. With her has written twenty books years of experience in asianomics Limited, an aei under the auspices
Lion rock institute. expertise on banking that preach the ideals of the mining industry in economic research and of the National research
He is also on the Board and money analysis, she creativity and modern Wa. He is chairman of consultancy company. initiative where he
of advisors of the became the president of capitalism. His ideas the Mannwest Group of Prior to establishing researches and writes on
Mannkal economic the Western economic about renewable energy private companies, and asianomics in December the history and impact of
education Foundation. association. she also and environmentalism in is also the Managing 2007, he was the chief private equity investment
Professionally, Bill published a book with his book Progress and its Director of Mannkal economist at cLsa on the U.s. economy.
has been an executive Milton Friedman, A Enemies are particularly economic education asia-Pacific Markets.
with leading financial Monetary History of the controversial. He is Foundation, an He was voted best
institutions in asia and United States, which was currently working on a educational foundation. regional economist by the
globally. He is currently a very influential. at the book on economy as a He is currently working asiamoney stockbrokers
partner in boutique equity age of 93, she is still with science. on his next book entitled Poll between 1994 and
house, aviate Global. the National Bureau of Heroic Misadventures. 2004 as well as frequent
economic research and is number one rankings in
one of the most prominent the private Greenwich
economists there. surveys of fund managers
in asia, europe and
Alec van Gelder Julian Harris Michael Mo Lawrence Reed Eugenio Suarez Anuj Jhunjhunwala
Project Director of the a research Fellow at in his final year of studies served as Mackinac currently an economics- a junior at columbia
trade and Development international Policy at city University of Hong center for Public Policy’s Philosophy major at University in New
Programme at Network, a think tank Kong. His experience President, a Midland- columbia college and York city, majoring
international Policy based in London. He campaigning for Barack based research and is also the treasurer for in economics-Political
Network, a think tank works on international Obama in america educational institute, the student Governing science. He interned
based in London. health policy and has inspired him to attempt for its first two decades Board. eugenio co-founded in the Louisiana state
His work on trade, recently authored to apply similar campaign starting from 1987. the University chapter Governor’s Office where
health, technology and articles on counterfeit strategies in Hong Kong. at age 55, he became of the cuban american he researched the effects
development issues has and substandard drugs Michael is a native of president emeritus of the Foundation. He interned of federal legislation on
been published in many published in many Hong Kong and is fluent center. On september with congresswoman elderly welfare recipients
news outlets. alec holds outlets. Last month iPN in Putonghua. He is also 1, 2008, reed assumed ileana ros-Lehtinen and living on Medicare. He
a Master’s degree in launched his paper on the one of the editors of the presidency of the was an editor for the is vice-president of the
international economics topic: “Keeping it real: idea4HK think tank and is Foundation for economic columbia Political review. columbia University
and Development from combating the spread currently working at the education, headquartered He is a native of Miami south asian club and
UcL in Belgium and of fake drugs in poor Lion rock institute for in irvington, New York. and fluent in spanish. active in the rotoract
speaks english, spanish, countries.” the summer. eugenio is currently a service club. anuj also has
French and Dutch with research assistant in a good command of Hindi
fluency. the Barnard economics and is a native of Baton
Department and working rouge. He is currently
at the Lion rock institute working at the Lion rock
for the summer. institute for the summer.
Summer 2009 7
ODDs aND eNDs
Master of slaves
Jackie Chan has declined the value of freedom to show his obedience
f the chinese nation should be the intention of Jackie to deliver political power.
controlled, so should Jackie. such a speech is obvious – to so Jackie, the people of china
From Jackie’s definition of please Beijing. When the central should be controlled? Let’s
“too much freedom,” he’d administration has been pushing hypothesize and instate some new
probably be happiest as the newest hard for “harmonized governance,” controls. say we make extramarital
citizen of Pyongyang. it is certain that Jackie would like affairs illegal
in a pluralistic society, there must to portray himself as tuned-in. and those who
be clashes between ideologies and ironically, his latest film, shinjuku are found guilty
it is all about give and take among incident, has been banned for should be insulted
various interest groups. Jackie screening in the Mainland because in tiananmen
upset many chinese people with his it does not “harmonize enough.” square. if so, i
words, and i suppose he hasn’t yet Ultimately, it is Jackie’s right to bet Jackie will
experienced the peaceful transition of please an authority for political turn himself
power between Labor and Liberals convenience and ruin his pocket. into a complete
in the land down under (no wonder Giving up his freedom is his right aussie.
his house near canberra has been even though it philosophically
burned out). appears unjust to become a slave of a Michael Mo, Hong Kong
48 Best Practice
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ODDs aND eNDs
A low flying plane spotted in Manhattan causes panic
n april 27, 2009, a Well, that settles it – no need to the Mayor of New York was an
Boeing 747 and two panic. i’m sure all the folks with post astute political maneuver – override
F-16s were spotted traumatic disorder after 9-11 will be the competition. Not allowing
flying in Manhattan enchanted to see patriotic images of citizens without proper clearance
near the site of one of the most the President’s private 747 soaring by to view these photos is a bold and
catastrophic terrorist attacks on the statue of Liberty. Yes, wave your commendable stab at eradicating
american soil. Panic ensued. flags and let us rejoice! terrorism. and finally, we thank you
everyone must wonder: there Pardon me? Most of these pictures Mr. President for the mysterious
must have been sound reasoning are classified? Well, it must be an resignation of Louis calder, the
to support this perceived assault. issue of national security. We must Director of the White House Military
surely it was a well planned event not succumb to our emotions. if Office. this shows that the Obama
for a practice evacuation? Or maybe those sensitive photos fall into the administration will not accept nor
it was to check New York city’s hands of evil terrorists our safety condone errors of judgment.
emergency response time? Or, i would be in great peril. By the way, for the photos that
don’t know, maybe the Obama i am glad that the U.s. President, were released – they could use some
administration “needed to update Barack Hussein Obama, and his Photoshopping.
their photo files”? administration have taken charge of
a photo op for air Force One? the situation. First, failure to inform Eugenio Suarez, New York
illustration: Bay Leung
50 Best Practice
ODDs aND eNDs
Let’s Not Lose Our Minds
The mass hysteria surrounding the spread of swine flu does
little to protect us
illustration: Bay Leung
all it “swine flu,”
“H1N1,” or even “new
flu” – whatever you
call it, just be sure to pick a name
that ensures complete chaos and
fear amongst the general populace.
after being labeled as a pandemic
by the WHO earlier this year, the
disease has fomented paranoia and
confusion wherever it has spread
– with ridiculous consequences. in
april, the egyptian government,
afraid that its constituents may
contract the disease by eating swine,
slaughtered nearly 300,000 pigs
despite a clear lack of evidence
that any of these pigs carried the
disease. as of this article, china and
russia have yet to lift import bans
on american pork products. even
U.s. Vice President Joseph Biden Walk around Hong Kong for a major cities, it is easy to see why
got into the mix, stirring up the couple of hours and it is easy to see even the most harmless of coughs
paranoia by exhorting americans to such fear: stores proudly proclaim would send an entire restaurant of
avoid enclosed spaces like trains and that they “disinfect door handles people running out the door.
airplanes. Biden said that given the every 3 hours,” people walk around Here’s a thought: don’t go crazy.
circumstances, americans should wearing flimsy face masks that have Yes, take your precautions against
completely avoid all crowded, been proven ineffective in preventing the disease. Wash your hands
confined areas. a stimulus to the the spread of viral, airborne diseases regularly and cover your nose and
economy that would have been, for (sars redux, anyone?), and there mouth when you sneeze. Go to the
sure. have been instances in which entire doctor if and when you feel sick. But
the misinformation surrounding planeloads of people have been for the sake of humanity, just drink
the spread of swine flu (now referred quarantined because of a single the corona already. it’ll be good for
to as “H1N1” by the WHO and by traveler’s innocuous sneeze. you.
major media outlets) has seemingly With this kind of paranoia
permeated all aspects of society. rampant throughout the world’s Anuj Jhunjhunwala, New York
52 Best Practice