Will Hong Kong Stay Free?


“If you want to see how the free market really works, this is the place to come.” Milton Friedman thus declared Hong Kong’s proudest boast, paying homage to what future commentators would deem the world’s freest economy.

It all began with Sir John Cowperthwaite, a British civil servant who was commissioned as colonial Hong Kong’s Financial Secretary from 1961 to 1971. At the height of the world’s full-blown communism and welfare statism, Cowperthwaite had the wisdom and audacity to initiate in Hong Kong a radical laissez-faire policy known as positive non-interventionism, which minimizes taxes and eliminates virtually all market regulations. He even forbade his staff to collect economic data, lest they become an excuse for meddling in the economy.

It was the scaffolding of a free society that unleashed the productive power of the hardworking men and women of Hong Kong, including many who fled from communist China seeking the freedom to better their lives. From 1961 to 1996, before Hong Kong’s handover to China, the average income soared from a quarter of Great Britain’s to four-thirds of it. When asked what he did to bring about Hong Kong’s economic miracle, Cowperthwaite answered, “I did very little. All I did was to try to prevent some of the things that might undo it.”

Today, the Hong Kong Special Administrative Region continues to enjoy zero tariffs and low taxes, and government spending is kept under 20% of GDP. The Heritage Foundation and the Wall Street Journal have ranked the city as the world’s freest economy every year since the index began in 1995. But all this does not mask the populist trends that are threatening to destroy Hong Kong’s freedom.

People Turning Left

During the Sino-British negotiations in the 1980s regarding Hong Kong’s future, the greatest fear of the people of Hong Kong was China’s communist rule. It was to maintain public confidence in the city’s future that the Sino-British Joint Declaration stipulated, “the socialist system and socialist policies shall not be practised in the Hong Kong Special Administrative Region” and “Hong Kong’s previous capitalist system and life-style shall remain unchanged for fifty years” after the 1997 handover. Under the “one country, two systems” arrangement, Hong Kong would be run by her own people and enjoy a high degree of autonomy.

Yet, undercurrents of what the Hong Kong people feared most began to surface in the years before the handover and have since grown in magnitude. Although Financial Secretary Sir Nathaniel Macleod sought to limit economic freedom in his 1992 tax-raising budget, the two largest parties in the Legislative Council had the resolve to oppose it, successfully forcing him to retract his plans. But in 2013, when legislator Paul Tse made a motion urging the government to lower taxes, an amendment that effectively castrated the motion was passed 49–4, attesting to how significantly the people and their representatives had turned to the left over the decades. And when a minimum wage was to be introduced in 2010, Tse was, heroically, the only one of the sixty legislators to vote against it.

The biggest irony of Hong Kong is that the vast majority of democrats, who claim to oppose Communist China, are themselves socialists, if not communists. People Power and the League of Social Democrats, two parties with a particularly outstanding presence in the legislature, embrace democratic socialism. Legislator Leung Kwok-hung, a hero of anti-Establishment movements, openly idolizes extreme communists Che Guevara and Leon Trotsky. His major criticism of the Chinese government is not that it is socialist, but that it is not consistent enough in its socialism.

The current Hong Kong administration, consisting mainly of civil servants with a colonial upbringing, has largely hoped to preserve the laissez-faire policies handed down from its pre-1997 predecessor. Most democrats, however, are calling for regulations of working hours and mass redistributive schemes such as universal retirement protection. It is no wonder that many of those who in the 1980s objected to Hong Kong’s handover to China for fear of socialism and communism are now equally opposed to the democrats for the same reason.

An Amoral Foundation

Hong Kong’s fundamental danger is that her economic freedom lacks a moral foundation of individual rights. A fishing village seized by Britain in the 19th century, Hong Kong never had a philosophical founding statement like the Declaration of Independence. Positive non-interventionism was introduced by colonial officials merely for economic expediency, not as a moral imperative to uphold man’s unalienable rights. There are respectable economists defending Hong Kong’s free market, but there is no philosophical leadership on the right.

The intellectual confusion arising from this philosophical vacuum has reached a visible climax in recent years. A Hong Kong Labour Party position paper in 2014 epitomizes this muddle:

“[Some people] think that if Hong Kong implements democracy, it will become a welfare state. . . The Labour Party believes that labor, welfare, social, economic and financial policies . . . should be decided by the people’s votes” (emphasis added).

In other words, they believe that a majority has the right to vote a person’s property and freedom away from him. Observe the picture of an amoral society that is being painted. The picture is that “society,” as a whole, stands above and beyond moral law, that “society” can dispose of individuals’ property without restraint, and that an individual may exist and act only at the mercy of “society.” What the democrats do not understand is that individual rights are not subject to a public vote.

Curiously, it is the pundits of such collectivist doctrines who are posturing as “freedom fighters,” while genuine defenders of freedom are labeled as “pro-government” and vilified as “pro-Communist.” When the social democrats proudly utter Thomas Jefferson’s proclamation “when tyranny becomes law, rebellion becomes duty,” perhaps they do not realize that the redistributive programs they advocate are precisely what Jefferson would consider tyrannical.

The democrats in Hong Kong seem to think that freedom consists of the opportunity to take part in collective decision-making so that “the people” are “free” to determine society’s course. This peculiar notion of “collective freedom” comes, of course, from the “general will” concept of Jean-Jacques Rousseau, whom renowned philosopher Sir Isaiah Berlin called “one of the most sinister and most formidable enemies of liberty.” If such a socialist doctrine were to take hold in Hong Kong’s government, individual rights would be violated on a much more colossal scale than the current administration could ever conceive.

Indeed, the stealing of the “liberal” rhetoric by its antagonists, in one way or another, is not uncommon in the disintegration of free societies. The United States of America, the first free country in world history, was founded on the principle of individual rights, not majority rule. Beginning in the Progressive Era, however, the center of America’s political rhetoric shifted from “freedom” to “democracy,” paving the way for a welfare state in which everybody is enslaved to everybody – and that is now being called “liberalism.” Had America remained truthful to liberty, the rest of the world – including Hong Kong – would have been able to draw inspiration from her in the struggle against socialism. Today, if you ask people in Hong Kong to define America’s core values, they will almost invariably answer “democracy” instead of individual freedom.

In a few months’ time, Hong Kong’s Legislative Council will be voting on a constitutional reform proposal to elect the Chief Executive by universal suffrage for the first time in 2017. Whether or not the proposal succeeds, popular influence on public policy will only keep growing. In these critical times, let us not forget that the “two systems” of mainland China and Hong Kong refer to socialism and capitalism, not to oligarchy and democracy. The difference between oligarchic socialism and democratic socialism is merely the difference between murder and suicide. One does not escape murder in order to commit suicide.

What Must Be Done

The only sustainable way to guard against socialism is to limit government by constitution. Fortunately, this is what our forebears have devised in Hong Kong’s mini-constitution, the Basic Law. Though far from foolproof, the Basic Law provides that Hong Kong shall “[take] the low tax policy previously pursued in Hong Kong as reference,” “follow the principle of keeping the expenditure within the limits of revenues in drawing up its budget,” and “pursue the policy of free trade.”

To date, these capitalist prescriptions in the Basic Law have not been invoked to challenge the government’s policies. If the day should come when the perpetrators of socialism prevail in Hong Kong, the remaining believers in freedom must rise and file constitutional challenges to the government’s spending and intervention programs. If even Hong Kong’s independent courts do not safeguard the people’s economic freedom as recognized in the Basic Law, then the fight may well be over. But I still have confidence in Hong Kong’s judiciary and its commitment to upholding the Basic Law.

I believe there is much promise left in Hong Kong. She is still the freest economy in the world and will remain an international business center in the years to come. Thirty-one years ago, Britain and China declared that Hong Kong’s capitalist system and way of life should remain unchanged for fifty years following the 1997 handover. Discussions over Hong Kong’s post-2047 future will likely begin by the early 2030s. Hong Kong must strive to maintain a high degree of autonomy under “one country, two systems” and to strengthen the Basic Law’s protection of her laissez-faire capitalism beyond 2047. Much like the past half century, Hong Kong will remain a beacon to all nations on Earth that wish to bring freedom and prosperity to their people.

Andy Loo is a junior from Hong Kong. He is majoring in the Mathematics Department and can be reached at aloo@princeton.edu.

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