PLA a part? Hong Kong’s growing unrest

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Hello and welcome to the Intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Employee share ownership seems like a great idea. Workers get a piece of the pie that they're helping to make. They earn more and stick around longer. But there's a push by some on the left to make the scheme mandatory. Others worry that sounds more like socialism than capitalism. And if you can't get a ticket to a music concert at face value, well, good luck to you. You'll be paying ticket resellers an arm and a leg. Part of the problem is that they are getting their tickets on the sly from the bands them. First up though. In Hong Kong yesterday, demonstrators mounted their fiercest challenge yet to the government, an escalation of two months of protest. Civil servants went on strike, paralyzing public transport and halting flights into and out of the territory. Evening demonstrations have grown more violent and police are responding in kind. It's clear they're using more rubber bullets and tear gas to to contain the protests. Fears are growing that as the unrest spreads, the central government in Beijing may choose to intervene, sending in the garrison of troops it maintains in the territory. Today, for the second time in as many weeks, the central government's Hong Kong and Macau Affairs Office held a rare press conference. Once again, spokesman Yang Guang delivered a pointed but restrained message.

It was very strong in its condemnation of the protests.

James Miles is our China editor.

But interestingly, when pressed on on the topic of the use of a Chinese military force, in other words, the deployment of the People's Liberation army, the spokesman was non committal. The PLA is a force of power, but also is a civilized power.

It is under the leadership of or command of the Communist Party of China.

It acts in accordance with law.

So if the message is roughly the same, then why have a second press conference? Last time we visited this topic it was extremely rare and now there's a second one. Is that itself a signal?

I think the point of these press conferences is to show that after two months of these protests roiling Hong Kong, that China now really wants to step in and start controlling the message more effectively. And it wants to show that it is taking this seriously, watching every step that's going on in Hong Kong, but watching it, I think, in a considered fashion, trying to show that Beijing is in control of the debate. And I think it was very interesting that the spokesman expressed strong support, a very strong support for Hong Kong's leader, Carrie Lam, and by that, trying to dismiss speculation that these protests might result in her replacement by the central government. I think we can conclude from this that Carrie Lam is very much following the script that the central government would like her to follow at this press.

Conference, as at the last. It's in part about what's not being said as well as what's being said. I mean, what did you make of the tone?

It was interesting to watch. I remember press conferences in the buildup to the use of military force in 1989 to crush the protests centered in Tiananmen Square. We're seeing a very, very different kind of style now. Then it was stentorian. It was dictatorial. It was almost kind of thumping on the table. Now we see officials being presented to the foreign media, to the Hong Kong press, who seem calm, measured, a tone of disappointment, surprise, certainly strong in condemning the protesters, but also, it's hard to say, but almost a tone of puzzlement that the people of Hong Kong could be behaving this way. I think there's an effort to appear human or more human in their response to this.

So you went to Hong Kong last week. I mean, what's the feeling on the street amongst the protesters as the protests get more violent, more chaotic?

Well, what struck me was how sustained the level of passion in Hong Kong is. They've been at this for two months now, staging these huge protests involving hundreds of thousands of people, the biggest one perhaps about 2 million people. And there had been a widespread expectation that after these huge shows of strength and public outrage, that interest would dissipate. And we'd seen that to quite a considerable extent in 2014 during the Occupy protests, as they're known, or the umbrella movement. And yet large numbers of people still turn out, they continue to turn out for peaceful protests in spite of knowing that those protests often lead to more violent ones. That's very interesting. So the line between these peaceful protests and the more violent ones is not clearly drawn. And those involved in the more radical Action often seemed to be well educated young people, the same kind of people who are taking part in those peaceful protests. So it's something that seems to have far more legs than anyone had ever expected.

Fairly early on in these protests, there was a significant concession. The controversial bill that would have allowed extradition to the mainland was rescinded, was put on ice. Why are these protests still going on?

Well, that's true. The protesters want another step beyond that. In other words, the complete revocation of the bill, which is a more formal process. And that is something, it seems, the Hong Kong government has dug in its heels on. The Hong Kong government appears to believe that giving anything more of substance to the protesters will be the beginning of a slippery slope.

So in the press conference today, there was this very direct question about the possible use of troops from the mainland of the garrison that's in Hong Kong. And again, the answer was non committal, as before. Do you see that changing? Do you think that could change if things continue to get worse, if the violence spreads? And if it did, how would that play out?

Well, if you look and listen to the language being used by Chinese officials, all of it is building up into the kind of picture that is normally painted by the Chinese government when it is preparing to use extreme force to put down unrest. And of course, we have to recall the way they responded to the unrest in 1989.

So this is, in fact, a warning shot, you think?

I think it is. I doubt very much that the central government has actually made a decision to use military force, but I suspect there's a great deal of debate about that. It would certainly be hugely concerned about the international ramifications of that, the impact that might have or certainly would have on Hong Kong's economy. And that's absolutely vital. Hong Kong is still hugely important to China as a conduit for doing business with the rest of the world, for raising capital through its stock market. This would have a huge impact on Hong Kong economically and therefore on China.

And of course, having troops on the streets of this notionally autonomous region would be incredibly bad optics on the world stage.

Well, it would be incredibly bad optics just having them there marching through the streets. But bear in mind what might ensue from that. It's quite likely that Hong Kong people would be outraged by that sight as well. And indeed, it might well provoke many of them to come out and show even more opposition. The risk that this might escalate, that violence might ensue you, would be considerable. And I think the sight of Chinese troops controlled by the Communist Party using extreme violence against people calling for democracy would send shutters around the world that would have a profound impact on the way people in the west think about the nature of China and its Communist Party. So I think we're moving now to a situation in Hong Kong that could be a defining one for the way China and its Communist Party are viewed by the rest of the world.

James, thank you very much for your time.

Thank you, Jason.

How do you make people more invested in their jobs? One long standing idea is to make them investors in the companies they work for. Employee schemes typically offer workers stocks and profit shares in addition to a salary. Studies show that on average, employee owned firms benefit from higher output per worker, a more stable workforce and higher returns on assets.

In America, profit sharing and employee ownership are pretty well entrenched.

Henry Tricks writes the Schumpeter column for the Economist covering global business, finance and economics.

You have companies like Southwest Airlines, Starbucks, and even Huawei in China that are either partially or wholly employee owned. In Britain, less so. But it's incredibly popular and people treat it extremely reverentially.

But while shares are something that companies offer voluntarily, proposals have been put forward by some on the left to make it mandatory in America. That risks upsetting long standing bipartisan support for share ownership.

Well, it's becoming more of a political issue on both sides of the pond in America, Bernie Sanders actually gatecrashed the AGM of Walmart down in Arkansas in order to push for a resolution to put one of Walmart's hourly workers on the board. The proposal was rejected, but he's clearly using this as a campaign theme. And Elizabeth Warren, another firebrand Democratic senator with her eye on the presidency in 2020. She's also pushing for this change the.

Rules to put more economic power in the hands of the American people, workers and small businesses.

We need to put power back in.

The hands of workers.

And in Britain, Jeremy Corbyn has launched a policy in which he's hoping to force companies to oblige big companies to put a portion of their shares into a trust that is given over to workers. John McDonald's proposals for inclusive ownership funds will mean workers sharing more fairly in the rewards of successful businesses. Economic justice needs to be hardwired into.

The way the economy works.

And this is not very popular with the business establishment.

So do you reckon these politicians have a point? Is there a good case for employee ownership?

There's definitely a good case for it. It doesn't work in all cases, but it's been proven in Studies to help boost the incomes of workers, it helps with job retention and it seems to work across the board. It seems to benefit people of different races, different age groups. So there's a lot to be said for it. The danger is that politicians push what is essentially capitalism for the masses into something that's perilously close to socialism. This whole concept of employee ownership is a delicate balancing act. On the one hand, it appeals to sort of radical leftists because it takes a bit of the company away from the boss and gives it to the workers. On the other hand, conservatives support it as well because in a sense it gives the workers a stake in capitalism and it gives them incentive to work work a lot harder because they profit from the company's better performance. So the delicate balance has existed for a long time. But the danger is that the proposals of these politicians are just too reckless. They risk turning something, which has always been a policy of coaxing businesses to do the right thing, into something much more coercive. And the chances are that the business establishment will react strongly against that.

So what's the case against it altogether, even if it were a matter of gentle coaxing rather than coercion?

Well, there are criticisms. The first is that it encourages employees to put essentially too many of their eggs in one basket. They are buying shares in the company in which they work. So if the company goes bust, then not only do they lose their jobs and their income, but they also lose their wealth. The other concern about it is that it encourages free riding, that when everyone has a stake in the company, they work very hard, so other people who join just kind of go along for the ride and slightly shirk their responsibilities. But the evidence suggests that that is not such a problem because co workers will just chivy you along if they find out that you're loafing on the job. So by and large the evidence suggests that the schemes are pretty beneficial for workers, that they don't over concentrate their wealth. They're not a substitute for paying.

But what about the future for these kinds of schemes in a changing sort of work environment? The future of work is always talked about in terms of artificial intelligence and robotics. Does employee ownership have a brighter future in that scenario?

Yeah, I think this is one of the exciting aspects of employee ownership. It could actually really help in the whole question of what happens to workers salaries and workers wealth in the era of AI, when the idea is that the company needs fewer workers and it gets richer on the back of the capital that it invests in machine learning and robots. And that leaves the worker somewhat stranded. So the idea is that if the worker gets to share in some of the benefits of that, in some of the profits that are generated by the robots, then it will create a more harmonious work environment and in a sense, a fairer society.

Henry, thanks very much for coming in.

Thank you, Jason.

These days it's hard to get music tickets. You queue online for hours waiting for the chance to buy one, and then just as you get to the front, they're sold out. You can only find them from scalpers for an entire incredible markup. Well, there's a reason it seems barely affordable to see your favorite band.

Concert ticket prices have been increasing enormously in recent years. Between 1996 and 2018, they went up in the US by 190%.

Michael Hann writes about music for the Economist.

I look back at some of my old concert ticket stubs and see myself paying three pound fifty to go and see Iron Maiden in their peak in the mid-1980s. You know, I was 14 years old and I could afford to buy an Iron Maiden ticket by saving up my pocket money for two or three weeks. No 15 year old could do that these days.

So what's behind the rise in ticket prices? Why are we paying so much more to go see the Iron Maidens of today?

For many years, people in the music industry have been pretty sure that major artists have been sending their tickets for shows directly to secondary ticketing sites, sites like Viagogo or StubHub. This came to light publicly though, a couple of weeks ago when a report in Billboard showed that Live Nation admitted that for several artists, including Metallica, they had sent tickets directly to secondary sites at the express request of the artists. So they've let promoters put tickets to secondary sites, enabling the promoters to make more money and give more money to the artists. So we have the ridiculous situation where in order to make the guarantees to the artists, the promoters have to sell some tickets for more than face price.

But why do the artists need to do that? Why can't they just put the prices up themselves?

That's because they really believe that their fans want to see them as deeply ethical people who are wholly committed to the music and less concerned with making money.

Bless em. They. Has there been any kind of backlash against the artists that do?

It's been quite interesting because in fact the music industry has remained very quiet about this. I mean, one reason for this is that Live Nation, the promoter concerned, are incredibly powerful. Many in the music industry aren't actually surprised that this happens. The only surprise is that Live Nation have actually been forced to admit it.

But why is it that the big stars need to command those huge numbers, like, frankly impossible numbers?

Well, of course, revenues from recorded music have diminished enormously over the past 10 to 15 years. Now, to make up the money that they used to make from album sales, they've turned to live performance. Now, when you're trying to maximize your revenue from tours, you have to charge as much as humanly possible. But the other thing is, people demand bigger and bigger spectacles. Now, you need pyrotechnics, you need incredible stage setups, you need massive production, and that costs a fortune. Now, even at the best of times, big stadium tours only start making money in the last few percent of ticket sales. Now, given the level of financial uncertainty, they really will do almost anything to try and up their revenues. I just kind of wish they'd be a bit more upfront about it.

Well, quite. And there must be other ways to sort of gin up more money from a tour. I don't know, selling more expensive merchandise or something.

You might sell packages for maybe $1,000, which will give you a meet and greet backstage and give you access to the very front of the arena. I went to see Kiss the other week and we were talking about the things that they do. And if you look on their website, for their farewell tour, the most expensive package they offer is $5,000. People want to pay for experiences, so that's what artists are offering. But of course, as you say, merchandise is another big thing, and it's become increasingly important to artists. Merchandise sales can be the difference between a hugely profitable tour and one that just makes a certain amount of money.

Maybe what I should do is become a music journalist. That's got to be a good way to do it.

You get into the shows, but you don't earn very much money doing it.

Michael, thank you very much for joining us.

No problem.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple podcasts and you can subscribe to the economist@exterator.com radio. Offer 12 issues for $12 or 12 pounds. See you back here tomorrow.