Peter Liang says HK can negotiate new global uncertainties characterized by Brexit through its 'super-connector' role to link the mainland market to overseas suppliers

Britain's vote to leave the European Union (EU), or Brexit, was a shock and surprise to the intellectual elites, including Prime Minister David Cameron, who have fallen so much out of touch with the general public.

As noted by many commentators, the EU referendum was basically a vote on nativism against internationalism. The result of the referendum has forcefully demonstrated that the force of nativism is on the rise not only in Britain but also in the United States and other developed economies.

The meteoric rise of the political fortunes of Donald Trump, the presumptive nominee of the Republican Party for president, is widely seen as a rebuke of some, if not all, of the common values that formed the basis of the thoughts and deeds of the liberal elites who have dominated the world stage since the end of World War II.

The broken promise of globalization has cast a shadow of public doubt on the wisdom of the ruling class and their holy cow: international division of labor achieved through the free movement of goods and people. Instead of wealth and prosperity for all, globalization is seen by a growing number of people in the US to have brought about a widening wealth gap, resulting in the progressive destruction of the middle class.

Economic prosperity has enriched only a minority, or the famous 1 percent, of the population while the median income of the majority of workers has remained static for several decades despite remarkable productivity gains. Much of that has been blamed on the loss of many well-paying manufacturing jobs to various emerging markets.

Some commentators have argued that Brexit was a result of a vote against immigration, stemming from a fear of job loss. It is the fear that underlines the rise of trade protectionism which could have a far-reaching effect on the externally oriented Hong Kong economy.

Since the 1960s, Hong Kong has benefited from the progressive liberalism of global trade, serving, initially, as a low-cost supplier and, later, a regional center of trade financing and transportation after the exodus of its industries to the Pearl River Delta region in the 1980s.

The transformation to a services center has been blamed for widening the wealth gap to the highest level among developed economies and magnifying the shortcomings of the social welfare system, especially in the care of the elderly poor. Growing public discontent, manifested in growing hostility among younger people against the establishment, has fueled the Hong Kong version of nativism, more commonly called "localism" in this city.

There is nothing wrong with "localism" as long as it confines itself to preserving what are widely believed to be Hong Kong's core values, including individual freedom and the rule of law. But the notion has been exploited by some opposition politicians and extremist groups to gain support by fanning anti-mainland sentiment. This can be very counterproductive at a time when Hong Kong needs the mainland market most to counter the loss of trade to the growing tide of protectionism in its traditional markets.

The mainland is stepping up its efforts to restructure its economy by promoting domestic consumption to replace exports as the main engine of economic growth. For years, Hong Kong has benefited greatly as the gateway of mainland exports to the world. It must now learn to perform this role in reverse.

Of course, the advantages have remained. They include excellent infrastructure facilities in transportation and telecommunications, financial expertise and the free flow of goods, capital and information. But Hong Kong business people, who have established a strong network of contacts in Western markets, must work harder to do the same on the mainland.

Many politicians and social analysts have lamented the lack of opportunities for young people in Hong Kong's narrow-based economy that is dominated by finance and property. There has been the suggestion to bring industry back to Hong Kong. But Hong Kong can never hope to compete with the many regional low-cost manufacturing bases with plentiful supply of land and labor.

The government is making a major push for innovation. Unlike Shenzhen and South Korea, Hong Kong is constrained by a tiny domestic market and the lack of supporting industries that can provide the necessary support to innovative startups.

Hong Kong has fashioned itself as the "super-connector". Its future may lie in its success in connecting the mainland market to overseas suppliers.

The author is a veteran current affairs commentator.

(HK Edition 06/27/2016 page12)