Capitalist Solutions

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Honesty is the Best Policy

by Simon Patkin

Recently in the South China Morning Post, casino operator and property developer Stanley Ho apparently admitted to barefaced lying to keep property prices high. He was quoted as saying, “I have been forced to tell bare-faced lies in the past seven years that the property market would rebound soon so that the public could set its mind at ease.”

Now to be fair, some lying is perfectly valid. For example lying to a robber, terrorist or a potential kidnapper helps protect the innocent from harm. However Mr. Ho has apparently chosen to tell lies in the public policy arena so that the public would be set at ease about property prices - in other words his statements are apparently for so-called public benefit.

Mr. Ho is in a position of trust as head of the Real Estate Developers Association. So too is he head of a company with a permit to operate casinos in Macau. What then are the public supposed to make of Stanley Ho’s statements? For example, what about his 100% endorsement of Donald Tsang; is that really a wholehearted endorsement of Sir Donald, or was he giving that to set the public at ease again?

What then about his customers, his shareholders, the Macau government and other members of the Real Estate Developer’s Association? Would it be right to lie to them and what then is the moral standard for determining when someone should lie? Indeed, should everyone lie, or only a chosen few? After all, some in Enron’s senior management might brazenly try to claim that they were attempting to keep investor and employee confidence by lying to them about their finances.

In the case of property prices, Mr. Ho apparently justifies lying by saying that it will keep the markets high, a policy which he as president of the Real Estate Developer’s Association endorses. However such policy represents interference in the market and keeps families in smaller flats with higher repayments, subsidizing government extravagance and developer flabbiness. Whilst I strongly support developers to develop land how they see fit - especially when it leads to larger kitchens, bathrooms and bedrooms - any support ends when they run to the government to force prices high or get their own private Cyberport style deal. This high land price policy is penalizing the productive and rewarding the flabby. For example, they are resulting in increasing rents and many good businesses have to close or relocate because of it.

It appears some developers might be afraid of the free market, something that the government should stay out of altogether and not try to manipulate. Free markets allow leaner operations where companies are forced to exit if they cannot keep up. Further if the market was truly free, then Mr. Ho’s words would have a lot less influence, because the government would not be in a position to act upon such statements. The markets not the government would set long term pricing.

It is clear that the current land policy is unfair and is nothing but a backdoor technique to steal more money from the productive middle classes. The Government should get out of the land business altogether and release ALL land to the public for sale over the next 20 years. At the same time, it should look at ALL sectors where government restricts competition and repeal those laws, including the airline, electrical, telecommunications and bus and rail sectors. Notice for each sector their argument again is that by restricting competition or fixing prices, they are somehow helping the public.

On the broadest level, businessmen should remember that barefaced lying is a violation of the virtue of honesty and affects their long-term reputation. Also it just does not work. Whilst cynics may not agree, I posit that honesty is necessary to long-term business survival and as such should be the goal of anyone who wishes to practice long-term rational egoism. Ultimately rational egoism and dishonesty are not compatible. To be truly selfish over the span of an entire lifetime, honesty and integrity are the best policies.

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