The integration of the European Community and the reversion of Hong Kong to China offer an interesting - and disturbing - parallel for institutional investors.
To quell concern when it takes power, China ought to announce its government in Hong Kong will be modeled along the lines of the European Community's supranational authority. Then even the Chinese, long regarded for their reserved demeanor, might be strained to contain their chuckles.
The future of Hong Kong and its liberties, including property rights, after it reverts to China June 30 has been the subject of intense speculation, no less among institutional investors concerned about new investment risk of the former British crown colony.
How would investors in Europe be expected to greet such an announcement by Beijing? A close look at the European Community's government should raise no less concern for the future of democracy and investment freedom in Europe.
The authoritarian nature of the EC government in Brussels is scary.
The focus on Europe has been on the introduction of a single currency, the euro, proposed to begin in 1999. But the overall governmental organization deserves more scrutiny. It's as worrisome as China's imposition of its communist authority. In fact, the new European suprastate has little regard for the democratic rule and compares closer to China's communist government.
David Pryce-Jones, a British political analyst and novelist, presents a pessimistic outlook for a united Europe in a Commentary magazine article provocatively titled: "European Union - A Disaster in the Making."
"[T]oday's European Union is a bewildering improvisation imposed from the top, without the legitimacy conferred by popular consent," he writes in the June issue. "Its supreme body is the European Council . . . (whose members) meet two or three times a year for private discussion behind closed doors."
Subordinate are a variety of ministry councils, including those for finance, foreign affairs, transport. "Each such council enjoys both executive and legislative powers, and may, in the words of an authoritative work on the EU, 'convene in any configuration it chooses. "
The author, quoting again, writes the individual council "remains the most secretive as well as the most powerful of the institutions of the union." The author notes the council "is the only legislative body in the democratic world which meets and deliberates in secret."
"The legislation generated by this process is then passed to the European Commission for execution," he continues. "The commission consists of a president and 20 commissioners who are appointed to office and cannot be dismissed. . . . Under them are some 20,000 bureaucrats. . . . As a civil service, the European Commission is in fact unique in two respects: it may initiate and pass legislation and it is accountable to nobody and nothing but itself."
Another governmental group is the European Parliament, whose 600 members are elected in their own countries. Without genuine legislative power, the author notes "the Parliament is a figurehead."
You wonder how Europe's democratic leaders could have created such an authoritarian government. Mr. Pryce-Jones makes no mention of Hong Kong or China in his article, but it can offer an instructive analogy. With Hong Kong, already the subject of justifiable concern, can anyone imagine the outcry if China had promulgated such a government as exists in the EU?
Europeans - through their own national governments - might still have some say and a choice on whether to stay on the fast track to political and economic integration, including the creation of a single currency.
The people of Hong Kong, who don't enjoy the same legislative freedom, have to depend on China's good will to allow special liberties in one region it denies elsewhere.
But when purported democrats develop a system like the EC, how can the West persuade the Chinese rulers to nurture democracy in Hong Kong and China overall?
Institutional investors may find out, contrary to the verse, East is West and West is East and the twain may be meeting in non-democratic governments.