few words on social protection

Milton Friedman in Hong Kong

" This thriving, bustling, dynamic city, has been made possible by the free market indeed the freest market in the world. The free market enables people to go into any industry that they want; to trade with whomever they want; to buy in the cheapest market around the world; to sell in the dearest around the world. But most important of all, if they fail, they bear the cost. If they succeed, they get the benefit and it's that atmosphere of incentive that has induced them to work, to adjust, to save, to produce a miracle. This miracle hasn't been achieved by government action by someone sitting in one of those tall buildings and telling people what to do. It's been achieved by allowing the market to work. Walk down any street in Hong Kong and you will see the impersonal forces of the market in operation." - Milton Friedman, 1980

I have a classmate who is an adamant follower of Milton Friedman's economic principles. He thinks that aside from national defense and foreign affairs, the government should have no role in providing any social service. Those who want unemployment/retirement insurance should purchase them in the private sectors, and government's interferences was precisely the reason of inflated medical cost. He thinks Hong Kong's economic success attests to his beliefs in laissez-faire capitalism. And to his point, private sector is almost always more economic efficient than the public sector and excessive state intervention compromises economic potential.

While I respect his free-market faith, I don't believe that nil government involvement in social services brings out the best of the economy and the people, especially in an advanced economy. As an economy develops and people become richer, the opportunity cost to innovate or to pursue a "different path" also rises correspondingly. Living in an unforgivingly competitive society, people confront not the question of job choice but a matter of survival. Even those who are better off becoming an entrepreneur or a writer has no proper outlet to develop their potential but to be stuck at their mundane day jobs just to make end meets. Social protection in the form of unemployment insurance or social security therefore can serve as a safety net for people to become the best that they can be . Of course, excessive amount of social protection bounds to have undesirable consequences. Some said that the perennial high unemployment of many southern European countries is attributed to the overly generous protection of their social security system, and I will not argue with that. People are just responding to incentives after all.

Coming back to Hong Kong, its apparent economic achievements have masked the latent issues of growing social divide and the ossified upward social channels for the young. These have been much discussed by the local intellects at the backdrop of a sudden spur of the post-80s demonstrations in the last year. These angry youngsters are despised by "social injustice", namely the overtaking of Hong Kong's economy by a few prominent families and living a life whose sole and unattainable goal is home ownership. These are all ugly manifests of the "free-market" history of Hong Kong, where monopoly law is essentially nonexistent and the long overdue minimum wage law was only introduced in August. Much else is needed to prevent further fractionalization of the city. In order for the government to regain the heart and mind of the Hong Kong resident at a time when freedom is further restricted under the tight monitoring of the mainland and fruits of economic success is unequally shared, I suppose a slow transition to a modern welfare state is inevitable.