Stability will only return when Hong Kong ends its property tyranny

Sky-high property prices are the root cause of the ongoing social instability in Hong Kong. When the average household would have to put aside all their salary for 10 years to afford to buy the space for a bed - never mind eating and drinking, and other living expenses - or that incomes have grown by only 10 per cent in a decade, where is the hope for ordinary people, especially the young? Unless Hong Kong restructures its property market to serve the people, instead of milking them to the last drop, the city won't see stability again.

Hong Kong has been run like a medieval city state. A business elite at the top has the dominant voice on how wealth and income are created and distributed. Hong Kong's system encourages people to make money with maximum economic freedom and low taxes.

Tight land supply adds to the problem - often a result of hoarding by a few of the big boys. The banking system is structured to load people with a mountain of debt, which means people must work even harder to keep their tiny apartment.

The system worked when incomes were rising rapidly. When China was not fully open up to the world, Hong Kong had plenty of opportunities as a bridge between the two, and could charge a hefty premium for the service. After China joined the World Trade Organisation, those opportunities as a middleman vanished. Taxing people with ever higher property prices couldn't work anymore. But Hong Kong's system didn't adjust to the new reality. The ensuing instability is hurting everyone. The city's ruling elite, through uncontrollable greed, have done themselves in.

In contrast, Singapore has been run like a proper dictatorship. The system doesn't do stupid things to hurt its ruling class. It focuses its greed on foreigners and distributes the spoils among the people through good public housing, quality education and health care, and a nice pension. Most Hong Kong people seem to like Singapore.

When you think about it, medieval city states like Florence and Venice flourished using the same policies. They used strong militaries to protect their trade monopolies and, sometimes, just looted others when opportunities arose. Because their ruling elite had the wisdom to distribute the loot among all contributors, their enterprises or scams lasted for centuries. Their luck finally ran out when rising nation states built bigger militaries.

Both Hong Kong and Singapore are leftovers of the British colonial era. They have enjoyed much higher incomes than their giant neighbours by arbitraging their inefficiencies. The business model is not so different from Venice or Florence centuries ago. As their neighbours change, they must adapt to sustain their income premium. Instead of building ships or making semiconductors, Singapore has switched to casinos and private banking. Maybe these businesses don't smell so good, but they bring in the money to buy social peace.