-----------
The Man Behind the Hong Kong Miracle
FEBRUARY 10, 2014
by LAWRENCE W.
REED
Three cheers for Hong Kong, that tiny chunk of Southeast
Asian rock. For the twentieth consecutive year, the Index of Economic Freedom—compiled
by The Wall Street Journal and the Heritage Foundation—ranks
Hong Kong (HK) as the freest economy in the world.
Though part of mainland China since the British ceded it
in 1997, HK is governed locally on a daily basis. So far, the Chinese have
remained reasonably faithful to their promise to leave the HK economy alone.
What makes it so free is music to the ears of everyone who loves liberty:
Relatively little corruption. An efficient and independent judiciary.
Respect for the rule of law and property rights. An uncomplicated tax system
with low rates on both individuals and business and an overall tax burden that’s
a mere 14 percent of GDP (half the U.S. rate). No taxes on capital gains or
interest income or even on earnings from outside of HK. No sales tax or VAT
either. A very light regulatory touch. No government budget deficit and almost
nonexistent public debt. Oh, and don’t forget its average tariff rate of near
zero. That’s right—zero!
This latest ranking in the WSJ/Heritage report confirms
what Canada’s Fraser Institute found in its latest Economic Freedom
of the World Index, which also ranked HK as the world’s freest. The
World Bank rates the “ease
of doing business” in HK as just about the best on the planet.
To say that an economy is “the freest” is to say that
it’s “the most capitalist.” Capitalism is what happens when you leave peaceful
people alone. It doesn’t require some elaborate and artificial, Rube Goldberg
contrivance cooked up by tenured central planners in their insular ivory
towers. But if we are to believe the critics of capitalism, HK must also be a
veritable Hell’s Kitchen of greed, poverty, exploitation and despair.
Not so. Not even close.
Maybe this is why socialists don’t like to talk about Hong
Kong: It’s not only the freest economy, it’s also one of the richest. Its per
capita income, at 264 percent of the world’s average, has more than doubled in
the past 15 years. People don’t flee from HK; they flock to it. At the close of
World War II, the population numbered 750,000. Today it’s nearly ten times
that, at 7.1 million.
Positive Non-Interventionism
The news that the HK economy is once again rated the
world’s freest is an occasion to celebrate the one man most responsible for
this perennial achievement. The name of Sir John James Cowperthwaite
(1915–2006) should forever occupy top shelf in the pantheon of great
libertarians. Some of us just write about libertarian ideas. This guy actually
made them public policy for millions of citizens….
… He served in the British Colonial Administrative
Service in HK during the early 1940s. After the war he was asked to come up
with plans for the government to boost economic growth. To his credit, he had
his eyes open and noticed that the economy was already recovering quite nicely
without government direction. So while the mother country lurched in a
socialist direction at home under Clement Attlee, Cowperthwaite became an
advocate of what he called “positive non-interventionism” in HK. Later as the
colony’s Financial Secretary from 1961 to 1971, he personally administered it.
“Over a wide field of our economy it is still the better
course to rely on the nineteenth century's ‘hidden hand’ than to thrust clumsy
bureaucratic fingers into its sensitive mechanism,” Cowperthwaite declared in
1962. “In particular, we cannot afford to damage its mainspring, freedom of
competitive enterprise.” He didn’t like protectionism or subsidies even for
new, so-called “infant” industries: “An infant industry, if coddled, tends to
remain an infant industry and never grows up or expands.” He believed firmly
that “in the long run, the aggregate of the decisions of individual
businessmen, exercising individual judgment in a free economy, even if often
mistaken, is likely to do less harm than the centralized decisions of a
Government; and certainly the harm is likely to be counteracted faster.”
… Statistics, no matter how accurate or voluminous, are
no substitute for sound principles. Powered by an abundance of the latter under
Cowperthwaite, the HK economy soared during his tenure. Writing
in the November 2008 issue of The Freeman, Andrew P. Morriss
noted that in his decade as financial secretary, “real wages rose by 50 percent
and the portion of the population in acute poverty fell from 50 to 15 percent.”
It’s hard to argue with success. After Cowperthwaite’s retirement in 1971, less
principled successors dabbled in social welfare spending but they financed it
through land sales, not increased taxation. Tax rates to this day are right
where the old man left them.
------------See also:
Free Trade 29: ASEAN and Education Competitiveness, November 16, 2013
Business 360 8: TPP, RCEP, SAARC and Free Trade, June 17, 2013
Free Trade 30: BIPOR and APTIR, January 03, 2013
Free Trade 31: FTAs, EPAs and the Heckscher-Ohlin Theorem, January 10, 2014
John Cowperthwaite, Statistics and Central Planning, January 23, 2014
No comments:
Post a Comment