Out like a Lam: Hong Kong’s new leader

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Hello, and welcome to the Intelligence from the Economist. In New York, I'm John Fastman.

And in London, I'm Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world.

Airplanes and tourist attractions are once again packed after spending much of the past two years at home. People are eager to get out, but they're also eager to do something else. Start a business. We'll find out why the pandemic has produced an entrepreneurial spirit.

And tonight in Turin, the semifinals of the annual Eurovision Song Contest begin. Among the contenders in this beloved festival of overproduced silliness, a folk rap group representing Ukraine that's coming straight from the battlefield. But first, This week, Hong Kong has a new leader. Though to say that John Lee won a free election is overstating it a bit.

The only candidate, Mr. John Lee Ka Chiu. Number of support votes given to the candidate is 14, 16, and number of not support votes given to the candidate is 8.

With 99% of the votes in the territory's electoral colleges, it was a landslide. But that's not to say he's a beloved politician. Over the past couple of years, opposition candidates have been squeezed out just as effectively as independent media outlets have. Mr. Lee is only the fifth chief executive of Hong Kong, a notionally independent leader who it's Increasingly obvious, is at the mercy of leadership on the Chinese mainland, which is why Mr. Lee's background is so telling.

The new leader of Hong Kong, John Lee, is a career cop, and that makes him exceptional.

James Miles writes about China for the Economist.

All the previous chief executives in Hong Kong since the territory was handed back to China by Britain in 1997, have either been business people or drawn from the elite of the civil service. And that was the case with the current Chief Executive, Carrie Lam, who will be handing over this job to John Lee at the beginning of July. He has been serving as Chief Secretary of Hong Kong, as Carrie Lam's number two. Prior to that, he was head of security. And before that, stretching back into the British colonial era, he was serving as a policeman.

So now that he has risen to Chief Executive, what's he planning to do? What will he do in office?

Well, he's stressed the need to solve some of the pressing problems of the territory. One he's highlighted is housing. Everybody complains about how expensive it has become. At a press conference, after he was selected by this election committee of 1400 odd people, he talked about ushering in a new chapter of stability and prosperity.

With loyalty and perseverance, I shall undertake.

This historic mission and shoulder this responsibility to unite and lead the 7.4 million Hong Kong people to start a new chapter together. But then he went on to say that maintaining order would be a priority. Safeguarding our country's sovereignty, national security and development interests, protecting Hong Kong from internal and external threats, and ensuring its stability will continue to be of Parliament importance.

And how is Mr. Lee clearly a law and order man through and through, seen by the people of Hong Kong?

Well, John Lee is closely associated with the crackdown on the unrest in 2019, which erupted in response to the government's efforts to introduce an extradition bill that would have allowed people wanted by the Chinese authorities to be sent to the mainland for trial. In the end, this was shelved. But the protests engulfed the territory, led to huge and endless confrontations between police and protesters. Tear gas, rubber bullets and so on. And many people in Hong Kong associate John Lee with that violence. One thing he said he wants to do is implement Article 23. And that's a piece of legislation that China has been demanding that Hong Kong introduce ever since the handover in 1997 related to crimes such as treason and sedition and subversion and so on, which China believes, and John Lee appears to agree, is necessary in order to make sure that kind of unrest doesn't happen again.

So that response in 2019 and being behind that legislation makes him fairly unpopular in Hong Kong. How is it that he won by such a margin?

Well, after the unrest in 2019, China imposed a National Security Law in Hong Kong in 2020, which has resulted in sweeping change, really, in the way the territory is run, a more conspicuous level of involvement by the central government. It now has a national Security advisor in Hong Kong, but more importantly, really the weeding out of really all critics of the government from the legislature, from this election committee that produced John Lee as chief executive. This committee, having previously been stacked with supporters of the Communist Party, now even those few who were critics of the government in Beijing have been excluded from it. And as a result, John Lee secured more than 99% of the vote. China's calling this an example of how well democracy works in Hong Kong. Of course, many Western governments have criticized the process as a sham.

And what does it tell us then that such a high fraction of essentially Beijing loyalists have selected, rather than elected perhaps Mr. Lee as the Chief executive?

Well, it clearly shows that security is a priority for the Chinese Communist Party in Hong Kong. It also shows that they may well have doubts about continuing with this tradition of drawing on members of the broader elite of the civil service to rule the territory. I don't think they were entirely happy with Carrie Lam's administration. I think they blame her for blunders in 2019 that allowed these protests to escalate. I think although John Lee is going to draw on members of this elite for his team, nonetheless there is much skepticism among Chinese officials about whether these kind of civil servants really are the best kind of people to run the territory. What it worries about, I think partly is that many of them have been steeped in the traditions of the British civil service. And we're really talking about a core of about 700 odd administrative officers, as they're called. These people, it believes, have not shown enough loyalty to the Communist Party. They believe that there were waverers during the unrest in 2019, that there were skeptics among the administrative officer class about the way the protests were being handled. And I think one thing they're going to want John Lee to do is to make sure that this group of people, this elite, is brought firmly in line.

But part of the proposition in Hong Kong has always been a measure of independence and that any string pulling from Beijing would be light and more, less in the shadows. Are we to expect that the control will be more explicit from here on out?

I think that Chinese officials will still want to Keep a low profile to make John Lee look like the man in charge. But given his limited range of experience, he will be turning to the liaison office in Hong Kong. That's the central government's outpost there when big decisions need to be made. That's the way. Of course, Carrie Lam also had to operate. But I think it's going to be far more the case under John Lee that the real power behind the throne will be ultimately the Communist Party in Beijing.

But won't that in turn undermine the proposition for people outside Hong Kong? It's been a center of business and finance for all this time, in part because the control from the mainland was so light touch. It was sort of an easier way into the Chinese market and to do business business in that part of the world.

I think in the long run, what China really wants is an evolution that will bring it to the point where it can be completely satisfied that the kind of unrest that occurred in 2019 simply cannot be repeated. It knows that foreign business people will grumble from time to time, that there will be concerns about the way the law is being used to crush dissent. But nonetheless, mainland businesses still see a great future in Hong Kong. This year marks the halfway point between the handover and the end of the 50 year period that China has promised that Hong Kong would initially enjoy this one country, two systems arrangement. Already, one country, two systems has become barely discernible. But what it really wants is by the time that 50 years is up, for the territory really to look, to all intents and purposes, like a mainland city.

Thanks very much for joining us, James.

Thank you, Jason.

The lasting economic effects of COVID 19 are starting to become clear. Surveys suggest that Americans who can work from home are likely to do so for two or three days a week, compared with hardly any at all in 2019. But in the wake of the pandemic, a different trend has emerged.

Something entirely unexpected is happening, really across the rich world, which is that the pandemic appears to have jump started a huge rise in entrepreneurship.

Callum Williams is the Economist's senior economics correspondent.

Now, people have been talking about this in the US for some months, but it turns out that the trends are much wider.

So where is this happening?

It's not happening absolutely everywhere. One example is Italy, where entrepreneurship remains a lot lower than it was in the early 2000s. But in lots and lots of countries, you're seeing a pretty sharp rise in entrepreneurship. So in France, for example, the rate of startup formation is between 50 and 60% higher than it was before. The pandemic and Callum.

What industries are these entrepreneurs primarily focused on?

So a wide range, really. A lot of them are in more high tech, glamorous industries that perhaps you might think of when you hear the word startup. Last year there was a lot of venture capital investment and seed investment and so on. One example that I explored was a fitness instructor in Northern Ireland, Caroline Girvan, who started this YouTube based fitness business during the pandemic, who has become this global Internet sensation with her at home fitness videos.

It's simply going to be a super.

Quick mini ab circuit.

In researching this piece, I did a couple of her workout videos which turned out to be almost impossible.

We're definitely going to be sweaty, we're.

Going to get the heart rate up.

Throughout pretty much this entire workout.

However.

But actually what you're finding is most companies that are starting up are in much less glamorous industries. These are new restaurants starting up, even new hotels, consultancies, all that kind of stuff. Mom and pop shops that are not going to get much press.

Why do you think this is happening?

So I think there's a few things going on. One I think is to do with the fiscal support that was handed out during the pandemic. So what you had in lots of countries in 2020 and to a lesser extent in 2021, is that people cut back a lot on spending, so their outguildings were lower. But then also a lot of people received a fairly large amount of money from the government in stimulus checks and the like. So you had this big rise in saving. And there's a lot of evidence that when people have that kind of financial cushion, they feel more comfortable about taking risks, essentially because if things don't work out, it's not so bad. So I think that's one reason. The other thing is that the pandemic has led to a lot of new tastes being created and a kind of reallocation, both between industries, but also geographically. The classic example being that city centres are relatively less busy in most countries today than they were in 2019 and suburbs are a lot busier. So you, in other words, have the need for more businesses to be started in suburbs. And then I guess the third reason, which is more hard to measure, but I do believe it is true, is that there has been a kind of cultural change engendered by the pandemic, where people realize that life is short and they are perhaps more likely to pursue their passions. And so therefore they think, yes, I'm actually going to go and start this business that I never dared do before the pandemic. And there is evidence of this from prior pandemics, even all the way back to the Black Death. You have evidence of more entrepreneurialism after the Black Death. This was also true after the Spanish flu epidemic in America. So that's the third potential reason.

So, Callum, you mentioned bouts of entrepreneurship after the Black Death, 1918 flu. I wonder how long those lasted and how long you think this will last. Is this a pandemic specific response that'll fade in a couple of years?

Or.

Or is this a lasting change in people's willingness, do you think, to start new businesses?

I mean, that is the million dollar question. To go back to the Black Death, there was certainly a lasting change in attitudes to risk, very clearly seen in the literature. So the optimistic case is that this will persist. And people had expected the rate of American entrepreneurship to be back to its normal level by now. And in fact, it's still pretty high. So that does suggest there is perhaps a more permanent shift underway. I mean, bear in mind that what was happening before the pandemic was this pretty steady decline in entrepreneurship across the rich world, which people were puzzled by and trying to explain. So there's certainly room for a rebound. And if there was one, this would be great news, because entrepreneurs, they bring new ideas to market, new technologies and ways of doing business. So if this does endure, it would be actually pretty good news from an economic standpoint.

And so more broadly, Callum, what does this mean for the global economy?

So I guess you can think of it in terms of creative destruction just as a shorthand, essentially. The idea being that what you will have in an environment of high entrepreneurship, all else equal, is a bunch of companies that are being out competed by new ones. And so what that means is that the capital and the ideas and the people that are in the less productive companies are competed away and they move to more productive outfits. Essentially, this is the process by which capitalism ensures that everyone gets richer. So in terms of productivity growth, GDP growth, earnings, it's potentially very good news over the long run. And then the second thing, of course, is that the thing about young companies is that they're normally trying to expand. And if you're expanding, it means you need to hire more staff. And so from the perspective of labor markets, unemployment, employment and so on, it's also pretty good news.

All right, Callum, thanks so much for joining us today.

Thanks, John.

The Eurovision Song Contest is to European culture about what monster truck rallies are to American culture. It's camp and extravagant and so uncool. It's cool. The annual competition between countries has been running since the 1950s. The Italian city of Turin is hosting this year, with the first semifinals starting this evening ahead of the final on Saturday.

Many would forgive Ukraine for skipping this year's contest.

Wendell Stevenson writes about Ukraine for the Economist.

They had a TV competition with several entrants and the winning singer actually had to withstand after it became apparent that she'd visited Crimea and performed there, which Russia illegally annexed in 2014, and so it's considered enemy territory. She was disqualified and Kalush Orchestra became the entry.

Tell me about the band. Where are they from? What kind of music do they perform? What are they like?

Well, it's kind of a mashup. Half of them are rappers and they did a collaboration with a group of traditional Ukrainian folk musicians. Most of them are from the west of Ukraine. It's a rather apostate entry for a Ukraine that is establishing a new identity. It's half traditional and half modern global, and it's kind of a cool collaboration. I was there for their first rehearsals when they were sound checking the song sound and figuring out some of the choreography and the moves they were going to perform.

And have they been performing in recent months? I mean, how has the ongoing war affected the band and their music?

They had been on tour when the war started, so they were just finished, I think, their final gig and they were just about to go home and the war began and they all scattered, as everybody did, trying to take care of their families. And several of them went home to villages in the west of Ukraine and became involved, as many, many Ukrainians did and are still doing, in volunteer networks, organizing evacuations of refugees and distribution of humanitarian aid. Their manager, in fact, Mykola, joined the Ukrainian army and went to the front in Kyiv to defend it. He told me he'd never held a gun before and found himself slightly out of his depth. So he spent, I think, the. The first month of the war raising money and procuring equipment for his unit, but pretty much the war scattered them all to the winds. And it was not at all clear that they were going to be able to kind of come together and gather and be able to figure out how to perform and produce and organize and choreograph a show.

How does Ukraine usually do at Eurovision? And this year, will they at least beat Russia?

Well, they will beat Russia because Russia has been prohibited from competing. Very quickly after the war was declared, the governing body said that they were not welcome to send an act. The Eurovision is really important in Ukraine. It's a really big deal. They've done incredibly well historically. They almost always place in the top five or 10. They've had some great acts. They've won it twice. So there's a lot of hope for Kalush Orchestra this year.

So you think they have a good shot of winning?

It's a good song. I like it a lot. I like the fact that it's very resonant. It has all the elements of being quite toe tapping and kind of hip and also traditional. It's very Ukrainian.

Wendell, thanks so much for joining us today.

Thank you.

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