Economic policy

Abstract

Economic policy can be understood broadly as how government manages the overall economy through defining the role, size, and scope of the public sector and structuring its fiscal system, and relatively narrowly as industrial policy, the incentives and strategies targeting specific industries and sectors in the hope of achieving structural changes and substantiated growth of the overall economy. Heritage Foundation, a well-known U.S. think tank in Washington, D.C., has consistently ranked Hong Kong as the freest economy in the world for the past seventeen years in a row ever since the establishment of its index of economic freedom. Milton Friedman (1982), the late and famous Nobel Prize Laureate in Economics, also described Hong Kong as the world's greatest experiment in laissez-faire capitalism. The key reasons for these praises for Hong Kong include the small size of its public sector, often measured by public expenditure as a percentage of GDP, and the few regulations it has on the economy. For example, Hong Kong is the only industrial economy which still does not have a sales tax. It is one of the very few major economies which do not have a maximum working hours law, or anti-trust and fair competition law. Its first-ever minimum wage law was only passed in July 2010, which was implemented in May 2011. At first glance, it seems that the economic policy of Hong Kong should be characterized as almost "government-free", with Hong Kong well qualified for being the "capital of capitalism", a symbol of the triumph of market, with a very minimum level of government.