How free market was Hong Kong?

[Prateek_Sanjay]

Answer: Very.

http://www.economist.com/node/16591088

Interesting (and long) article in The Economist on Hong Kong’s free market history. Of course, there were many exceptions that would simply demolish the idea of Hong Kong being free market, but I had no idea just how far they still used to go otherwise when people of backbone were in charge. It is simply not observed in any other nation.

Back in the 1960s, every possible party (in Britain and China) tried to pressure Hong Kong into regulationism and industrial policy.

Not only were those demands vigourously refused, Hong Kong government managed to implement private property ownership in every single thing that you couldn’t imagine there would be in other nations.

Even public services were privately run. The government built piers for cross-harbour ferries, but the ferries, as well as the buses and the tunnels under the harbour, were put into private hands.

and then…

Two banks went bust in 1965, leading to calls for depositors to be made good by the government (which would then recover what it could from the liquidation of bank assets), for the introduction of deposit insurance and the creation of a government-backed industrial bank. Cowperthwaite dismissed all out of hand, saying the core of the financial system was sound. Depositors’ losses served as a lesson in moral hazard.

and then…

Defending his first budget, Cowperthwaite rejected subsidies for start-ups (“an infant industry, if coddled, tends to remain an infant industry”); cheap land for strategic businesses (anything but an auction “leads to an inefficient use of our resources”) and most of all, industrial policy (“better…to rely on the…hidden hand than trust the clumsy bureaucratic fingers”).

If this man, Cowperthwaite were an official in any other country, they’d have held elections early just to remove him. It is only in rare people that there could ever be an enormous passion to resist such statist tendencies.

And of course, it is only in rare people. It turns out that even Patten and Tsang have made so many concessions that it has come to the point that Hong Kong now is indistinguishable from any social democracy, and once full democracy is implemented, its free market will completely be a thing of the past. Currently, Hong Kong switched to a functional democracy, where each seat represents a different sector - one for medical sector, one for real estate, one for banking,.etc. There is a small portion of elected legislators only. So it seems that as they quietly drive out all old traditionalists of the free market, the democracy and the Leviathan state will come in hand in hand.

There were already signs a decade ago of everything crumbling under the new full fledged statism.

The entrance to the Cross-Harbour Tunnel, which was built in the 1970s under a private tender but reverted to government control in 1999, is permanently gridlocked, partly thanks to tolls that are too low, especially at peak hours.

[Merlin]

Thank you for the article. It gives one hope and it only enforces my believe that only very small states can be controlled. In what direction will they actually be steered depends on the strongest personality at hand. In practice, we need the whole world to be cantonized, in order for a small percentage of these cantons to be radically free market (and perhaps even anarchic).

[Caley_McKibbin]

15% property tax in a city is far from “free market”. But government spending as a % of GDP @ 14.5% is still about as low as it gets.