What's so great about democracy, anyway? What are all those kids in Hong Kong fighting for?
Dig below the surface and we find an incredible story.
Since 1997, Hong Kong has been a case study in economic freedom. The relationship between China and Hong Kong is commonly referred to as "one country, two systems."
It's a powerful idea.
Each year, the Heritage Foundation compiles its Index of Economic Freedom. It looks at 10 aspects of economic freedom, including a country's laws, the scope of its government, the transparency of its markets and its regulatory efficiency.
Hong Kong is at the top of the list. It's held the No. 1 spot for 20 straight years. It's a title its citizens are proud of and aren't eager to relinquish.
China, on the other hand, ranks 137th. It falls in a category Heritage dubs "mostly unfree."
Again, it's one country, but two incredibly different systems.
It's no wonder the folks in Hong Kong are fighting for what they have. And it's no surprise Beijing is scared the fight for economic freedom will spread to the mainland.
After a few decades of growth and success, Hong Kong has figured out something we've known for a long time - that wealth isn't about money, it's about freedom. It's a core idea of The Oxford Club. We have 70,000-plus Members that are eager to argue in favor of the fact.
The situation in Hong Kong has proven that when citizens find wealth, they expect the freedom that comes with it.
Wealth and riches are great. But they are worthless without freedom.
Alex Green highlighted the idea in a piece for Investment U yesterday: Wealth is the great equalizer. It doesn't matter if you're a man or woman, black or white, young or old, tall or short, gay or straight, educated or not. If you have money, you have power... in the best sense.
Wealth is freedom, security and peace of mind. You can do what you want, help the people and causes you love, follow your dreams, and live life on your own terms.
That's what we're seeing in Hong Kong this week. Its citizens are richer, but not happier. They are free to make money, but the freedom to spend it the way they want is under attack.
Beijing is coming.
In many ways, China has reached a turning point. The addictive taste of wealth is spreading within its population.
The Alibaba (NYSE: BABA) IPO is a good example of the dichotomy Beijing faces. The e-commerce giant is arguably one of the greatest success stories to come out of China... and yet it turned to America for its public debut.
Ironically, Hong Kong was left on the sidelines because of its strict shareholder rights. Proving that freedom has trade-offs, the same aspects that put the city at the top of the Heritage Foundation's list pushed Alibaba to New York.
Hong Kong's "one share, one vote" policy is designed to ensure all owners of a company have an equal say. The more equity an investor owns... the larger his vote.
But, like a power-hungry government, Alibaba didn't like that idea. It wants to ensure its directors remain in power, no matter what all of those new shareholders think.
To make it happen, it took advantage of America's two-tiered voting rights. The law allows for separate classes of shares, with unequal voting rights. (It's what allows minority owners like Rupert Murdoch to keep control of their companies.)
It's fitting that the protestors in Hong Kong took to the streets this week because of a similar voting issue. They are peeved because China will control the list of candidates that will vie for the city's chief executive position in 2017.
In other words, Beijing's shadow over Hong Kong will soon darken, but it's that same shadow that could force Hong Kong to loosen its market restrictions and prevent future IPOs (and their wealth) from leaking overseas.
It's a continuation of an age-old debate. Where's the balance between democracy, wealth creation and freedom?
Our case study is far from over. Unfortunately, Hong Kong's reign as the leader in economic freedom may be coming to an end.
It's a great loss to wealth seekers across the globe.
Good investing,
Andrew Snyder
Editorial Director, The Oxford Club
|
