Hong Kong Miracle
John Cowperthwaite was a British civil servant. He was in charge of Hong Kong as Financial Secretary from 1961 to 1971. From a website about him: “He was central to designing and implementing the economic policies that enabled Hong Kong’s remarkable post-war economic growth. When he arrived in Hong Kong in 1945 it had a per capita income of only 30% of its mother country, Britain. By the time Hong Kong was reunited with China in 1997 it had matched Britain’s gdp/capita. And now it is 40% higher.”
From an article about Hong Kong in Foundation for Economic Education in 2014 by Lawrence Read: “What makes [Hong Kong] 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.”
Here is more from Read:
A Scot by birth, Cowperthwaite attended Merchiston Castle School in Edinburgh and then studied classics at St Andrews University and at Christ’s College at Cambridge. 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.”
…To Cowperthwaite, the planner’s quest for statistics was anathema. So he refused to compile them. When Friedman asked him in 1963 about the “paucity of statistics,” Cowperthwaite answered, “If I let them compute those statistics, they’ll want to use them for planning.”
Hong Kong has consistently topped the economic freedom rankings. (That may change in the coming years depending on China’s recent interventions.) Its per capita income today is almost $50,000. (India is at $2,000.) Cowperthwaite’s policies of non-intervention and letting markets work laid the foundation for making Hong Kong an economic powerhouse and an island of prosperity.
Tomorrow: Part 5