XN000022-1981-11-09 — Page 6

MONDAY, NOVEMBER 9, 1981

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IT WAS A WISE GOVERNMENT WHICH RECOGNISED CHANGING CIRCUMSTANCES AND ADAPTED POLICY ACCORDINGLY WHILE REMAINING TRUE TO ITS UNDERLYING PHILOSOPHY, HE SAID.

HE BELIEVED ALSO IN THE PRUDENT EXERCISE OF FREEDOM, OTHERWISE IT WOULD DEGENERATE INTO ANARCHY, AND ALSO IN THE BASIC PRINCIPLE THAT GOVERNMENT MUST PROVIDE A SAFETY NET IN WHICH TO CATCH AND HELP THE DISADVANTAGED WHO FELL OUT OF SOCIETY.

UNFORTUNATELY THE BASIC ARGUMENTS TENDED TO BE FORGOTTEN, AND THE POLICY STANCE TAKEN BY THE GOVERNMENT ON PARTICULAR ISSUES INVOLVING THE ECONOMY COULD BE EASILY MISINTERPRETED, ESPECIALLY WHEN CIRCUMSTANCES DICTATED THAT IT MUST BE PRAGMATIC, HE SAID.

THERE WAS NEED TO BE PRAGMATIC AND NOT DOGMATIC, HE SAID.

+ALTHOUGH THE GOVERNMENT IS GENERALLY SCEPTICAL OF THE BENEFITS OF INTERVENTION, IT IS NECESSARY IN CASES WHERE THE BENEFITS OF INTERVENING CLEARLY OUTWEIGH THE COST OF SO DOING, AND PARTICULARLY WHEN STABILITY RESULTS FROM A STABLE AND CONSISTENT FISCAL AND INSTITUTIONAL ENVIRONMENT IN WHICH THE PRIVATE SECTOR CAN OPERATE,+ HE SAID.

THE FINANCIAL SECRETARY POINTED OUT THAT HOUSING WAS A PRIME EXAMPLE OF GOVERNMENT INTERVENTION IN PROVIDING HOMES FOR TWO MILLION PEOPLE BELOW COST.

MR BREMRIDGE STRESSED TWO INTER-RELATED POINTS AS HAVING IMPLICATIONS FOR HONG KONG'S ECONOMIC POLICY.

THE FIRST WAS THE NEED TO RECOGNISE THAT THE ADJUSTMENT MECHANISM RARELY TOOK PLACE SMOOTHLY AND INSTANTANEOUSLY AND THAT THE PROCESS COULD CREATE GREAT HARDSHIP FOR PARTICULAR SECTORS OF THE ECONOMY, THUS REQUIRING A DEGREE OF INTERVENTION.

THE SECOND POINT WAS THAT IT WAS APPROPRIATE THAT THE EFFICIENCY OF THE ADJUSTMENT MECHANISM BE MAINTAINED AND IMPROVED OVER TIME. THIS CONSIDERATION HAS PLAYED AND WILL CONTINUE TO PLAY AN IMPORTANT ROLE NOT ONLY IN THE SHAPING OF SUCH SPECIFIC ECONOMIC POLICIES AS DIVERSIFICATION BUT ALSO IN THE SHAPING OF ALL GOVERNMENT POLICIES WHICH HAVE RELEVANCE TO THE ECONOMY NOT LEAST TAXATION POLICIES IN WHICH CONSISTENCY IS MOST IMPORTANT, HE SAID.

MR BREMRIDGE SAID ALSO THAT THE GOVERNMENT BELIEVED MARKET FORCES WOULD ENSURE THE EFFICIENT ALLOCATION AND USE OF RESOURCES WITHIN THE PRIVATE SECTOR. THIS CREATES A COMPETITIVE ENVIRONMENT WHEREBY THOSE WHO ARE EFFICIENT BENEFIT AND ERRORS OF COMMERCIAL JUDGMENT ARE PENALISED, HE SAID.

IN CASES WHERE MARKET FORCES DID NOT PRODUCE SATISFACTORY RESULTS, THE GOVERNMENT'S ROLE WOULD BE TO INTERVENE TO SHAPE THE INSTITUTIONAL FRAMEWORK WITHIN WHICH PARTICULAR MARKETS OPERATED.

+ IN ANY CASE, WE ARE NOT SO NAIVE AS TO IGNORE THAT MARKET PRICES ARE NOT ALWAYS FAIR AND MARKETS CAN BE RIGGED, HE SAID.

/AN EXAMPLE IN