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effectively divert resources away from the private sector or bid-up wage rates to uncompetitive levels, thereby
dampening the rate of growth of exports.
5. Even so, Hong Kong might be inclined to argue that further increased expenditure, on top of a recently accelerated programme of spending on housing, education and social services which cannot really be cut back (paragraph 16), simply must be contained since the additional finance required cannot be raised without damaging business confidence and imposing additional burdens on a community (both businesses and households) that is already finding life economically difficult By way of reinforcing this point, the government could draw attention to a series of quite unforeseeable and largely uncontrollable events that, since 1971, has left the economy unsettled and rather out of breath. Apart from the 1973-75 oil crisis these include: (a) the 1970-71 'mini' recession (paragraph 17); (b) the floatation of sterling in 1972 and the devaluation of the United States dollar in 1973 (paragraph 18 (c) the erosion and depletion of the fiscal reserves in 1973-75 (paragraphs 19 and 20); (d) the stock market crisis in 1972- 73 and its consequences for the banks' reserves and bank liquidity in 1973-75 (paragraphs 21-22); (e) rapid world inflation in 1973-74 (paragraphs 23-24) and (f) the floatation of the long Kong dollar in 1974.
6. In attempting to assess the validity of these economic arguments the following points need to be borne in mind:
(a) As has been mentioned above it never has been unambiguously the case that Hong Kong's economic well-being has been dependent on such factors as low taxation etc.
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/(b)