Centers of progress (27): Hong Kong (non-interventionism)

Posted on January 8, 2023


An article from Human Progress

Our twenty-seventh Center of Progress is Hong Kong during its rapid transformation into a free market in the 1960s. After a long struggle with poverty, war and disease, the city managed to achieve prosperity through classic liberal policies .

Today, the freedom that has been key to Hong Kong’s success is disappearing. Mainland China has suppressed the city’s political and civil liberties, leaving its future uncertain. But as my colleague pointed out Marian Tupy, “Whatever Hong Kong’s future holds, we must admire its rise to prosperity through liberal reforms. »

The area where Hong Kong is today has been inhabited since Paleolithic times, with some of the earliest residents being the She people. The small fishing village that would become Hong Kong came under the rule of the Chinese Empire during the Qin Dynasty (221-206 BC). After the Mongol conquest in the 13the century, Hong Kong saw its first significant population increase, as Song dynasty loyalists sought refuge in this obscure coastal outpost.

Hong Kong’s position on the coast has allowed its people to make a living from fishing, salt collecting and pearl hunting. However, it also exposed them to the constant threat of bandits and pirates. Cheung Po Tsai (1786-1822) was a particularly famous pirate who is said to have commanded a fleet of 600 pirate ships before the government recruited him to become a naval colonel and fight the Portuguese. His hiding place presumed on an island six miles off the coast of Hong Kong is now a tourist attraction.

China ceded much of Hong Kong to Britain in 1842 through the Treaty of Nanjing which ended the First Opium War. With the intensification of the silk, porcelain and tea trade between China and Britain, the port city became a transport hub and grew rapidly. This growth first led to overcrowding and unsanitary conditions. It is therefore not surprising that the third plague pandemic (1855-1945) killed some 12 million people worldwide and devastated Asia, and did not spare Hong Kong.

In 1894 the bubonic plague came to the city and killed over 93% of the people. The plague and resulting exodus caused a major economic downturn, with a thousand Hong Kongers leaving the city every day at the height of the pandemic. In total, around 85,000 of the city’s 200,000 ethnic Chinese residents have left Hong Kong. The bubonic plague remained endemic on the island until 1929. And even after, Hong Kong remained unsanitary and ravaged by tuberculosis, or “white plague”.

Besides illness, life in Hong Kong was also complicated by war and instability on the Chinese mainland. In 1898, the Second Opium War (1898) brought the Kowloon Peninsula of Hong Kong under British control.

The suffering in Hong Kong was well documented by journalist Martha Gellhorn, who arrived with her husband, writer Ernest Hemingway, in February 1941. Hemingway would later quip that this trip was their honeymoon. Gellhorn writes: “At night the sidewalks were overrun with sleeping people…The offenses were street vending without a license and a fine that no one could pay. These people were the real Hong Kong and it was the cruellest poverty, worse than anything I had seen before. Still, things were going to get even worse for the city.

During the Second Sino-Japanese War (1937-1945), much of the material aid that China received from Allied nations arrived through its ports – particularly the British colony of Hong Kong, which brought around 40% of external supplies. In other words, the city was a strategic target. British authorities evacuated European women and children from the town in anticipation of an attack. In December 1941, the same morning Japanese forces attacked Pearl Harbor in Hawaii, Japan also attacked Hong Kong beginning with an aerial bombardment. The British chose to blow up many bridges and other key infrastructure in Hong Kong to slow the advancing Japanese army, but to no avail.

After the Battle of Hong Kong, the Japanese occupied the city for three years and eight months (1941-1945). The Hong Kong University of Science and Technology considers this episode to be perhaps “the darkest period in Hong Kong’s history”. Occupation forces executed approximately 10,000 Hong Kong civilians and tortured, raped and mutilated many more. The situation prompted many Hong Kongers to flee, and the city’s population rapidly declined from 1.6 million to 600,000 during the occupation. The British returned to Hong Kong after the Japanese surrendered to American forces in 1945.

In the same year, a 30-year-old Scottish civil servant, Sir John James Cowperthwaite, arrived in the colony to help oversee its economic development under the Department of Supply, Trade and Industry. He was originally scheduled to go to Hong Kong in 1941 but the Japanese occupation forced him to be reassigned to Sierra Leone. When he finally arrives in Hong Kong, he finds a war-ravaged city in a state of poverty even worse than that described by Gellhorn. It is rightly nicknamed “the barren island”. With business at a standstill, the British plan to return this seemingly hopeless city, filled with war refugees, to China.

But Cowperthwaite had some ideas that would transform Hong Kong from one of the poorest places on earth to one of the most prosperous.

What was the miraculous intervention he was proposing?

Quite simply, to allow Hong Kong people to rebuild their shops, engage in trade, and ultimately save themselves and enrich their city.

Cowperthwaite believed in the abilities of ordinary people to manage their own lives and affairs. He and his fellow administrators provided the city with freedom, public safety, the rule of law, and a stable currency, and left the rest to the residents. In other words, he adopted a policy of hands-off. That doesn’t mean he didn’t do anything, because he was very busy watching the other bureaucrats. He would later say that one of the actions he was most proud of was preventing the collection of statistics that could justify economic intervention.

Cowperthwaite rose through the ranks of the bureaucracy and eventually became Hong Kong’s Financial Secretary, a position he held from 1961 to 1971. During the 1960s, many countries experimented with centralized economic planning and a high level public spending financed by heavy taxes and large deficits. The idea that governments should attempt to steer the economy, from industrial planning to intentional inflation, is virtually the subject of global consensus. Cowperthwaite is resisting political pressure to go with the flow. From 1964 to 1970, Britain was ruled by a Labor government in favor of strong economic intervention, but Cowperthwaite constantly intervened to prevent his compatriots from interfering in the Hong Kong market.

While communist-controlled mainland China violently purged any vestige of capitalism (among other things) during the Reign of Terror later called the Cultural Revolution (1966-76), Hong Kong followed a markedly different path.

In 1961, in his first budget speech, Mr. Cowperthwaite said: “In the long run, the set of decisions made by businessmen exercising their individual judgment in a free economy, however often wrong, are less likely to cause harm than centralized government decisions, and harm is certainly likely to be reversed more quickly. »

He was right. Once liberated, Hong Kong’s economy became breathtakingly efficient and experienced explosive economic growth. The city was one of the first in East Asia to fully industrialize and enjoyed equally rapid post-industrial prosperity. Hong Kong has quickly become an international center of finance and commerce, earning it the nickname “Asia’s Global City”. Hong Kong’s economic boom has dramatically improved the local standard of living. During Cowperthwaite’s tenure as financial secretary, real wages in Hong Kong rose by 50% and the number of households in acute poverty fell by two-thirds.

When the Scot arrived in Hong Kong in 1945, the average income there was less than 40% of that in Britain. But when Hong Kong was returned to China in 1997, its average income was higher than Britain’s.

Cowperthwaite’s successor, Sir Philip Haddon-Cave, called Cowperthwaite’s strategy the “doctrine of positive non-interventionism”. Positive non-interventionism became the official policy of the Hong Kong government and remained so until the 2010s. For years, the city prided itself on being the freest economy in the world, with thriving financial and commercial industries and a human rights record far superior to that of mainland China.

Then, in 2019, Beijing began to demand the extradition of fugitives from Hong Kong to mainland China – eroding the independence of Hong Kong’s legal system. In response to the resulting mass protests, the mainland Chinese government implemented a brutal crackdown on Hong Kong’s political and economic independence. In July 2020, a new national security law imposed by the communist government in Beijing criminalized protests and removed several other freedoms previously enjoyed by Hong Kongers. Sweeping changes continue, including the overhaul of Hong Kong’s education system.

Hong Kong was returned to China on the condition that it remain autonomous until 2047. But the “autonomous territory” is unfortunately no longer truly autonomous.

From a starving city plagued by war and poverty to a shining beacon of prosperity and freedom, Hong Kong’s rise has illustrated the potential for limited government, the rule of law, freedom economy and fiscal probity. Unfortunately, the pillars on which Hong Kong’s success was built are now crumbling under the clenched fists of the Chinese Communist Party. Whatever the future of the island city, its transformation reflects all that people can achieve when they are free to do so. This historical political lesson deserves Hong Kong to be considered our 27th Center of Progress.

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Centers of progress (27): Hong Kong (non-interventionism)

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