A week ago most of the businesses in Wanchai and Causeway, an area close to the venue where the WTO Ministerial Conference was held, were adversely affected because of the conference. Politicians in Hong Kong have come up with a "way" to help these businesses. Read the details here.
Bottom line: the government will adopt a host of measures to encourage more people to visit and spend money in those two places. The government hopes that businesses in Wanchai and Causewaybay will be appropriately compensated by doing so.
Will the policies be effective in boosting businesses in those two places? Certainly. But this misses the point.
Suppose, if not for the WTO, shops located in the Wanchai and Causeway would have sales that amounted to HK$ 1 million. Now with the WTO, consumers made their purchases elsewhere. In other words, total spending in Hong Kong did not decrease because of the WTO. The only difference the hosting of the WTO made was that the geographical distribuiton of sales shifted from one place to another. The losses in sales for businesses in the Wanchai and Causewaybay area was completely offset by sales increase of the same amount elsewhere.
Now with the policies proposed by the government, the opposite will happen. Businesses in Wanchai and Causewaybay area will benefit at the expense of businesses elswhere. In other words, the proposed government policies are pure tranfers, they will not bring along any net benefits to the Hong Kong society. Such transfer policies, like any other transfer policies, will also need to consume some resources for their implmentation. So on net, the benefits from those policies are likely to be negative from the society viewpoint!
Now who said politicians are out there to look after the society's interest eh?
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