Bryan Caplan  

Hong Kong: Statist at Heart?

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Hong Kong has had the freest economy in the world since 1970, the earliest year covered by the Economic Freedom of the World data set. Indeed, it's higher now under the Communists than it was in 80's! And it's hard to deny that Hong Kong has been an economic miracle since World War II. So even though Hong Kong was not a democracy before the Communist takeover, it's very tempting to believe that the people of Hong Kong would have voted to retain (if not initially adopt) the free-market policies they had.

"Public Attitude toward Laissez Faire in Hong Kong," a fascinating but overlooked 1990 paper by Lau Siu-kai and Kuan Hsin-chi (Asian Survey 30(8): 766-81, available on Jstor with subscription) shows this is just wishful thinking. Admittedly, the public in Hong Kong strongly supports the label of laissez-faire (literally translated as "noninterventionist economic policy"). When asked how they felt about the laissez-faire policy of the Hong Kong government, 1.8% strongly disagreed, 22% disagreed, 54% agreed, and 3.5% strongly agreed. I doubt you'd see numbers like that in the U.S.

But it turns out that Hong Kong's support for laissez-faire is only skin-deep. As soon as you ask people their opinions about specific interventionist policies - all of which, note the authors, "have either not been performed by the government or performed only very light or rarely," they show their true statist colors. A few examples:

Functions                                   SD     D      A      SA
Legislate minimum wage                      .8%    33.3%  54.3%  3.3% 

Control price of daily necessities .5% 26% 59.8% 8.6%
Tax rich more to reduce economic inequality .3% 15.9% 57.8% 16.9%
Protect local industry against .5% 13.9% 70.7% 4.8%
foreign competition
(SD="strongly disagree"; D="disagree"; A="agree"; SA="strongly agree")

To be blunt, it looks like the lack of democracy under British rule was a key component of Hong Kong's ascent. The policies worked wonders, but they never became democratically self-sustaining. In politics, people often resist policy change just because "things have always been this way," even if the results were never very good. But free-market policies apparently labor under a greater political handicap. Even if "we've always left these things to the free market," even if leaving things to the free market has worked in the past, it just isn't enough to win over public opinion.

Countless market-oriented intellectuals idolize Hong Kong but I've never heard of, much less met, a Hong Kong libertarian. Google confirms my impression, returning no relevant hits for "Hong Kong libertarian." I'd like to think, then, that Hong Kong's problem was a shortage of libertarian intellectuals to transform freedom by default into freedom on principle. But sadly, I suspect that wouldn't have been enough either.


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TRACKBACKS (2 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/307
The author at Simon World in a related article titled Daily linklets 12th July writes:
    Escape from your cubicle...a picture book for adults. Someone's going to need some glasses, all for the sake of a dubious world record (via Mia). America wants greater access to China's markets, saying Chinese firms have full access to American market... [Tracked on July 11, 2005 10:06 PM]
The author at Simon World in a related article titled Hong Kong libertarian writes:
    I've now re-read Bryan Caplan's piece Hong Kong: Statist at Heart (and thanks to Conrad for the pointer). There are several pieces that require a response.Hong Kong has had the freest economy in the world since 1970, the earliest year covered by the Ec... [Tracked on July 12, 2005 2:50 AM]
COMMENTS (8 to date)
Mike Linksvayer writes:

Interesting, but what level of support do similar measures enjoy in the US or Europe? I'd guess similar or even greater support.

The lack of people who use the word "libertarian" in HK may not be all that indicative of a lack of people who support freedom. I gather that use of the word to denote pro-market liberals has its origins in the US and is still most commonly used there.

Jason Tang writes:

That's an argument quite similar to the one that Dinesh D'Souza makes in What's so Great About America - colonialism was bad, but the end result is that the colonies are better off then they would have been without it.

I put myself in the firmly libertarian camp, and I live in Hong Kong, so maybe that counts - though I have largely been educated in the States. Part of the reason libertarianism isn't exactly a strong movement over here is that for pretty much all of our history, there hasn't been any sort of movement similar to the French Revolution, the enlightment, et cetera. Instead, we have dynasties that have ruled for a long time, and if there's one thing that Chinese are painfully aware of, its that its far better to keep your mouth shut and make money then to risk the ire of the dynasty-in-charge. Chances are, they're going to outlast you. The thing about Chinese culture (and other Asian cultures) in general is that they aren't particularly keen on the idea of libertarianism. There's an old Chinese proverb that says "Those in power will alwasy find a way to create policies, and those below will always find a way of dealing with them."

Whereas the Western concept of libertarianism ties both economic and personal liberty together, many Asians feel differently. Singapore is often considered a fine example of the so-called "East Asian Challenge to Human Rights" - you sacrifice social freedom in order to gain stability, but you open up economic freedom to allow things to grow. Works well if you get Lee Kwan Yu, less well if you end up with Mugabe.

Scott Ferguson writes:

When you're talking about Hong Kong and Singapore as being "successful" examples of trading democracy for economic liberty, have you considered that their limited geographic area makes it a lot easier for their autocratic ruling cliques to run them? The rulers are never far from the people. They can deal with problems quickly.

Contrast this with mainland China, whose gerintocracy seems at times to have only a fingernail grip on its regions. Too often the country seems on the verge of flying apart at the seams.

Daniel Slate writes:

This seems similar to the Pinochet Lesson in Chile. Leave a legacy of rule of law, free enterprise, and trade liberalization, and you get a goodly market economy. But not everyone is going to like it. Why? That's still something of open speculation, but I'd proffer this idea: prevailing conceptions of justice and exploitation can color otherwise rational choices. If people view democracy as a vehicle for legislating "leveling" of the supposed economic playing field through coercive wealth distribution or excessive regulation, then they will vote as such, even if the evidence argues strongly for reconsideration of such views.

Jason Tang writes:

Scott - just to clarify, I'm not saying that Hong Kong or Singapore is ideal (though I doubt Hong Kong fits into the "Singapore Model"). I'm just pointing out a common view over here. For most libertarians, social freedom is indistinguishable from economic freedom. It seems apparent that many Asians don't feel the same way - in fact, at the risk of making gross stereotypes, we prefer stability (or perhaps, the powers that be prefer stability). And the "Singapore Way" is supposed to be a fine model of how we can combine economic freedom with social stability. I'm skeptical myself, partly for the reasons you mentioned earlier, and partly for various other reasons. It also brings up an interesting question, if you have to choose, which one would you choose? Or is the choice utter nonsense, i.e. you can't have one without the other?

I think that many of Hayek's insights are non-intuitive (much like conditional probability), and Daniel's point makes me wonder - is it the case that democracies don't like open, free markets, its just that they're less hostile to them then other regimes.

Andrew Work writes:

It's true there hasn't been much of a community of libertarians in Hong Kong to date. We are gathering like minded people under the banner of The Lion Rock Institute. Check it out if you are interested and consider becoming a member.

On the posting itself, we conducted a survey of candidates for our legislative council in 2004. Most candidates agreed with statements supporting a mostly free market in principle. However, issue by issue they preferred high levels of wealth distribution and regulation. We predicted an interventionist LegCo and months later legislators voted (42-18) for a motion encouraging the government to establish a minimum wage/max working hours law. Forget Singapore, we're almost French!
Andrew Work

Lancelot Finn writes:

In the United States, our freedoms are protected by the courts. It's understood that if Congress does certain things-- like, say, making it illegal to insult President Bush-- the courts would overturn that law. Is that undemocratic? Or is it an essential condition for democracy? Answer: Yes.

One could conceive of a state where the government was believed not to have the right to set a minimum wage law, or to restrict foreign trade. If there were an attempt to prohibit people from working for $3/hr, or buy Japanese cars, those who wanted to do these things would take it for granted that it was within their rights to do so, and the state was exceeding its rights in trying to restrict these things. From the constitutional point of view, it would not matter in this hypothetical republic what the people's opinion was on the matter, because the state's powers would be circumscribed by the economic rights of its subjects.

In practice, it's hard to design this kind of state because the state has to tax in order to survive, and that muddies the water for economic rights.

Bob Lawson writes:

Richard Wong, the libertarian Economics Dept. Chair at the University of Hong Kong and Director of Hong Kong Center for Economic Research, used to joke that even he didn't know Hong Kong was a laissez-faire country until Milton Friedman told him about it when he went to study at the University of Chicago.

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