Public sector power and public sector pay in Hong Kong : the political economy of pay determination in a British colony (1965-1985)

Abstract

This study focusses on the special feature of bureaucracy-led the polity of Hong Kong during the period under study, with the objective of ascertaining its impact on civil service salary determination. In order to pursue this enquiry, the salient features of Hong Kong's polity, the loci of power in the public sector and the overall political economy of civil service pay determination, have been documented and analyzed. The dissertation covers a crucial period (1965-1985) in the history of Hong Kong, and spans two major historical signposts. It begins in the mid-1960s, when the territory had just emerged from being a sleepy colonial outpost and was well on the way into becoming an international metropolis of trade and commerce. It concludes in 1985, when following Mrs. Thatcher's historic visit to Beijing, the process of the territory's transformation from a Crown Colony of the British Empire to a Special Economic Region (SAR) of the Peoples Republic of China had already begun. In the run up to the transfer of power to China, from 1985 the fundamental features of the unique model of Hong Kong's polity and political economy started to change. Inter alia, an element of indirect election was introduced, thereby heralding the virtual beginning of the end of its civil service-led polity, a feature that was the hallmark of the period under study. During this period (1965-1985), the 'industrial colony' of Hong Kong, with a sophisticated international economy, functioned under an archaic political structure of a 'civil service-led' government. It has no parallel in the history of colonialism, save the possible exception of Singapore. Since the civil service-led government functioned with hardly any effective checks and balances, a scrutiny of the manner in which it determined its own pay and the consequence of this, proved to be a very rewarding field of enquiry. In this connection, it is worth noting that an influential corpus of scholars have argued that bureaucrats tend to increase their earnings and influence, by maximizing the budget (i.e. expanding both the expenditure and the size of the civil service) (see W.A. Niskanen, Bureaucracy and Public Economics, Aldershot: Elgar, 1994, ch. 4, also R. Michels, Zur Soziologie des Parteiwesens in der modernen Demokratie, translated by Paul, C & E, Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy, NY: Free, 1962, part 2, ch. 7). Even Weber was aware of the potential of bureaucratic tyranny (see by A.M. Henderson & T. Parsons, in The Theory of Social and Economic Organisation, NY: Free press, 1964, pp. 1 58- 176). Therefore, without any preconceived judgment, this dissertation tests the hypotheses that, (1) The absence of ministerial and effective legislative oversight on the civil service pays determination in Hong Kong during the period of the study had led to: (i) Excessive salary awards for the civil servants in general, and (ii) An undue expansion of the civil service (2) The policy-making top bureaucrats took advantage of their virtually unchallenged position to substantially enhance their own salary in relation to the civil service as a whole. Interestingly, the topic of civil service pay determination has assumed an increased relevance from the early 2000s, with the current debate over the issue of civil service pay determination and the pay cuts undertaken by the SAR government. Valuable information on various aspects of civil service salary in Hong Kong per se, can be found in many available publications, including official reports and documents. However, the existing material on civil service pay is scattered, and no comprehensive analysis has so far been undertaken to cover the multifarious facets of the structure and the system of the Hong Kong civil service salary determination. The study encompasses the entire spectrum of the subject matter, covering conceptual paradigms of the relative issues, as well as methodical documentation of the practical process involved. More importantly, this study is a seminal effort in examining the question of the effect of the absence of ministerial and effective legislative checks and balances on the salary awards, as well as expansion of the civil service. To the best of my knowledge, this is the first time that in this thesis Hong Kong's civil service salary determination has been examined, not only in the context of 'Wagner's law', which postulates that with increasing prosperity public sector expenditure grows faster than the GDP (see A. Wagner, Finanzwissenschaft, translated by R. A. Musgrave & A.T. Peacock (eds), Classics in the Theory of Public Finance, London: Macmillan, 1958), but also in the context of cross-country comparisons based on analyses of time series of statistical data from three other carefully chosen relevant economies.