Hong Kong
Hong Kong
Hong Kong has a place in history as a classic success story.
The success is well documented, not so well known is that it was due to one man- JJ Cowperthwaite. This is what he did:
JJ Cowperthwaite, who I will call Cooper Thwait arrived in 1945, he left 1971, for his last 10 years he was effectively, governor.
At the end of the Second World War, Hong Kong was “the barren island.” It had few natural resources, trade and infrastructure lay in tatters, the small manufacturing base had been destroyed, and income per capita was less than a quarter of its mother country, Britain. But when Hong Kong was handed to China in 1997 it was one of the most prosperous nations on Earth. By 2015, its GDP per capita was more than 40 percent higher than Britain's.
CooperThwait was instructed to help the refugees, and to grow the economy. He checked and found that both were doing well, and without government intervention.
What he did was to refine the functions of government to:
- protect freedom both from external and internal enemies,
- preserve law and order,
- enforce private contracts,
- foster competitive markets.
To achieve those functions three policy prongs were declared:
- Free market
- Stable currency
- Rule of law
That meant:
-Free market, no one needs permission to work. No permits to work, nor to employ, nor to trade.
-Stable currency, no printing of money or 'quantitative easing', no government debt, no tariffs, a hard currency, Saving money, investing are now practical, investment planning is easier without inflation.
- Rule of law, terms of voluntary agreements are enforceable. Buying, selling, and cooperating with an agreement that will be kept makes business smoother, thieves and vandals are caught and dealt with.
There was government but not much of it. [!]
The civil (public) service soon gained a reputation for efficiency, and for helpfulness. Registering a company did require a form, it was reduced to one (bilingual) sheet of paper.
When CooperThwait was asked, What is the key thing poor countries should do?
He answered: "Abolish the Office of National Statistics."
He refused to collect all but the most superficial statistics believing that statistics were dangerous: they would lead the state to fiddle about remedying perceived ills, and hinder the ability of the market economy to work. This caused consternation in Whitehall (~cf. W.DC). A delegation of civil servants was sent to Hong Kong to find out why employment statistics were not being collected. The story goes that they were on the first plane out.
Milton Friedman asked him in 1963 about the “paucity of statistics” CooperThwait answered,
“If I let them compute those statistics, they’ll want to use them for planning.”
.. [Note he said "use", not even "misuse".]
But did it work?
Some of the superficial stats-
1945 population 600,000
1955 a miserable place, one room per family in a multi-story
1960 average per capita income 28% of UK
1976 average per capita income 137% of UK
1998 population 6 million
Over his decade- Real wages rose by 50 percent and the portion of the population in acute poverty fell from 50 to 15 percent.
Real economic growth of 8.9% pa average.
Reserves HK$1 billion.
Tax rate 15%.
Year 2020, 2021, going, going..
JJ Cowperthwaite, 25April1915 – 21January2006
Hong Kong has a place in history as a classic success story.
The success is well documented, not so well known is that it was due to one man- JJ Cowperthwaite. This is what he did:
JJ Cowperthwaite, who I will call Cooper Thwait arrived in 1945, he left 1971, for his last 10 years he was effectively, governor.
At the end of the Second World War, Hong Kong was “the barren island.” It had few natural resources, trade and infrastructure lay in tatters, the small manufacturing base had been destroyed, and income per capita was less than a quarter of its mother country, Britain. But when Hong Kong was handed to China in 1997 it was one of the most prosperous nations on Earth. By 2015, its GDP per capita was more than 40 percent higher than Britain's.
CooperThwait was instructed to help the refugees, and to grow the economy. He checked and found that both were doing well, and without government intervention.
What he did was to refine the functions of government to:
- protect freedom both from external and internal enemies,
- preserve law and order,
- enforce private contracts,
- foster competitive markets.
To achieve those functions three policy prongs were declared:
- Free market
- Stable currency
- Rule of law
That meant:
-Free market, no one needs permission to work. No permits to work, nor to employ, nor to trade.
-Stable currency, no printing of money or 'quantitative easing', no government debt, no tariffs, a hard currency, Saving money, investing are now practical, investment planning is easier without inflation.
- Rule of law, terms of voluntary agreements are enforceable. Buying, selling, and cooperating with an agreement that will be kept makes business smoother, thieves and vandals are caught and dealt with.
There was government but not much of it. [!]
The civil (public) service soon gained a reputation for efficiency, and for helpfulness. Registering a company did require a form, it was reduced to one (bilingual) sheet of paper.
When CooperThwait was asked, What is the key thing poor countries should do?
He answered: "Abolish the Office of National Statistics."
He refused to collect all but the most superficial statistics believing that statistics were dangerous: they would lead the state to fiddle about remedying perceived ills, and hinder the ability of the market economy to work. This caused consternation in Whitehall (~cf. W.DC). A delegation of civil servants was sent to Hong Kong to find out why employment statistics were not being collected. The story goes that they were on the first plane out.
Milton Friedman asked him in 1963 about the “paucity of statistics” CooperThwait answered,
“If I let them compute those statistics, they’ll want to use them for planning.”
.. [Note he said "use", not even "misuse".]
But did it work?
Some of the superficial stats-
1945 population 600,000
1955 a miserable place, one room per family in a multi-story
1960 average per capita income 28% of UK
1976 average per capita income 137% of UK
1998 population 6 million
Over his decade- Real wages rose by 50 percent and the portion of the population in acute poverty fell from 50 to 15 percent.
Real economic growth of 8.9% pa average.
Reserves HK$1 billion.
Tax rate 15%.
Year 2020, 2021, going, going..
JJ Cowperthwaite, 25April1915 – 21January2006
There are some interesting aspects-
Economies go up and down with external circumstances, Hong Kong did the same with a clear long term up-trend.
In general, when a socialist gov comes in, there will be an upswing, people are excited, everything will now be fair with support for those out-of-work and for those who need health care. Free this and free that. The problem is not the cost (to start) but the change in behavior, inevitable, takes a decade or more, life styles and work discipline change. Then it can be seen, then it is obvious.
20th C Motors declined in months, same in real life but it is years.
Sub-cultures adapt to unemployment pay. Workers in health have more work, job prospects, overtime, they demand and get more pay. Health management grows, and grows. National well-being will have a clear upswing in the first few years, then declines, it is inevitable, it is next to impossible to stop. If a nation is tight-knit socially, then motivation takes longer to change -Sweden, The Netherlands- decline is inevitable tho' it is is slower.
Hong Kong could have gone that way.
The other very interesting point is that the success of Hong Kong was due to one (1) man. Pause for thought.
He insisted that changes be faster than anyone else wanted, although in reality his demands were still reasonable.
Unfortunately, it didn't last because in spite of the success, the society was already well in the grips of socialist false promises.