Leaving it to the market plus the rule of law

A quite interesting article that adds to our understanding of why China is in such a hurry to shut down Hong Kong: Why People in Hong Kong Have Incomes 5x Higher Than People in China’s Richest Province. It’s not long, but will give you quite an understanding of what has made the difference. But I particularly wanted to point out the principles that lie behind its success.

  1. Business Efficiency – The Hong Kong government established simple procedures for individuals to start their own enterprises. Entrepreneurs fill out a single page form and pay $25. That’s it. Businesses can open that very day.
  2. Small Government, Big Market– Per-capita spending on government in Hong Kong is less than half of what the average New Yorker spends to support the various levels of government.
  3. Open Trading Systems– Hong Kong has the world’s 10th largest trading economy, with no trade barriers or tariffs imposed on other countries.
  4. Low Taxes – A typical New Yorker loses about half his income to taxes. In Hong Kong, the government claims just 15 percent.
  5. Sound Money– As the U.S. undermines the dollar with dollar printing and years of quantitative easing, raising government debt to never before seen levels, Hong Kong maintains low debt and sound money. It carries a debt to GDP ratio of 38.67 percent compared to 104.17 percent in the U.S.
  6. Few Government Regs – While the U.S. has reactionary regulation with many business crushing consequences, Hong Kong has an environment of permissionless innovation that embraces the benefit of “innovation allowed,” which switches the burden of proof to those who favor preemptive regulation and requires them to explain why ongoing trial and error experimentation with new technologies or business models should be disallowed.
  7. Rule of Law–  The British, during their long rule over Hong Kong enforced, the “Rule of Law.” People who stole or killed were jailed, which left the people to flourish in a free law-abiding marketplace.

Most of it is about governments keeping out of the way, which was how we used to run our economies until modern macro rotted the minds of economic policy makers everywhere. Leaving it to the market plus the rule of law works wonders.

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29 Responses to Leaving it to the market plus the rule of law

  1. stackja

    HK will destroy CCP. HK must go.

  2. Dr Faustus

    Leaving it to the market plus the rule of law

    The key connectors: consistently applied law of tort and enforceable contracts.
    Missing concepts in the PRC.

  3. Open Trading Systems– Hong Kong has the world’s 10th largest trading economy, with no trade barriers or tariffs imposed on other countries.

    As with this point, it can be easy to achieve if it’s difficult to compete on labour costs. And associated with that are general living costs. It would be interesting to see a comprehensive breakdown on all costs associated with living in Hong Kong.

    That said, it is an good indication of what ‘small’ government can achieve.

  4. Fair shake of the Sauce bottle

    I note the lack of a defence infrastructure spend. Hmmm.

    But Love the $25 business start up fee, same day. Wow just wow. I am helping my son 15 yo set up a small business. Too hard. May leave Victoria soon because of it. Just way too hard than it should be.

  5. Dr Fred Lenin

    Less government ,greater prosperity and more freedom ,simple . Destroy career politics by only one term in a lifetime ,make it a part time job , with set payment and no super or pensions . Put all public employees on annual contract with performnce based salaries and self funded super, judges and all .
    There you go ,thats the start of the swamp draining , next we defund the left and globalist fascists and sort out the migrant scam.

  6. Roger

    The British, during their long rule over Hong Kong enforced, the “Rule of Law.” People who stole or killed were jailed, which left the people to flourish in a free law-abiding marketplace.

    What did the British ever do for us?

  7. struth

    HK got a taste for freedom.
    Not going to be a walk over, or should I say, run over (tanks).
    Also a densely populated place and this is to their advantage.
    When the proles are spread out over large areas like they are here and were in Russia, etc, the tyranny of distance means we’ve already been divided and are more easily conquered.
    They can drain a few High rises and put a million on the street.

  8. max

    Hong Kong was sold down in 1997

    China Is Getting Ready to Crush Hong Kong
    By Eric S. Margolis
    August 17, 2019

    This week, Hong Kong airport was besieged and shut down by thousands of young local demonstrators protesting China’s attempt to impose a new extradition law on Hong Kong that would allow Beijing to arrest Hong Kong residents for ‘anti-state’ activities.  The deal that Hong Kong’s former colonial Britain signed with China calls for ‘two-states, one nation,’ with considerable independence for the former island colony.
    But anyone who thinks China’s iron-fisted rulers will allow a scrap of paper to limit their influence over Hong Kong is dead wrong.  For them, Hong Kong is as much a part of China as Shanghai.  So, too, is Taiwan.
    The massive rioting in Hong Kong earlier this week set off alarm bells in Beijing, which runs an Orwellian police state on the mainland.  China’s hardline leaders rightly fear that the fracas in Hong Kong could incite other uprisings across China.  Everyone remembers the long, bloody Cultural Revolution of the 1970’s with its rampaging Red Guards.
    Perhaps more important, Chinese leaders study their nation’s history and draw lessons from it, unlike America’s history-free politicians.  For the Americans, history is what was on Fox TV the week before.
    What Beijing really fears is another Taiping Rebellion.  A nobody named Hong Xiuqan proclaimed himself the brother of Jesus and raised a vast peasant army to overthrow the ruling Manchu dynasty in Beijing.  Brutal civil war raged from 1850-1864 in which up to 100 million are believed to have been killed or died of famine.
    If this sounds completely crazy, think of all the Republican sycophants that call President Trump the reincarnation of the ancient Hebrew Queen Esther or a ‘Christian warrior.’  Bizarre behavior and beliefs are universal.
    China has warned the rioting Hong Kong students to cease their protests or face intervention by Beijing’s tough paramilitary police, which backs up the regular People’s Army.  Chinese armed police and soldiers are massing just across the border in Shenzhen, a mere taxi ride from downtown Hong Kong.
    If the Hong Kong students are not wise, they risk winding up in China’s penal camps, the ‘laogai.’  Large numbers of Muslim Uighurs from Xinjiang have been locked away in China’s western laogai.
    The airport riots now appear over but continue in Hong Kong’s streets.  If the People’s Police or Liberation Army do intervene in Hong Kong to impose China’s iron hand, they could spark another Tiananmen Square bloodbath.  But once Beijing’s forces impose martial law on Hong Kong its days of autonomy will be over.
    The type of repression China imposed on Tibet and Muslim regions could be repeated in Hong Kong.  There is absolutely nothing any of the world’s powers can do about it.  China will then turn its attention to ‘renegade province’ Taiwan.  Western politicians can huff and puff all they like but they are powerless to change the tide of events in Hong Kong.

    https://www.lewrockwell.com/2019/08/eric-margolis/china-is-getting-ready-to-crush-hong-kong/

  9. max

    The type of repression China imposed on Tibet and Muslim regions could be repeated in Hong Kong. There is absolutely nothing any of the world’s powers can do about it. China will then turn its attention to ‘renegade province’ Taiwan. Western politicians can huff and puff all they like but they are powerless to change the tide of events in Hong Kong.

    https://www.lewrockwell.com/2019/08/eric-margolis/china-is-getting-ready-to-crush-hong-kong/

  10. max

    The type of repression China imposed on Tibet and Mus regions could be repeated in Hong Kong. There is absolutely nothing any of the world’s powers can do about it. China will then turn its attention to ‘renegade province’ Taiwan. Western politicians can huff and puff all they like but they are powerless to change the tide of events in Hong Kong.

    https://www.lewrockwell.com/2019/08/eric-margolis/china-is-getting-ready-to-crush-hong-kong/

  11. max

    The massive rioting in Hong Kong earlier this week set off alarm bells in Beijing, which runs an Orwellian police state on the mainland. China’s hardline leaders rightly fear that the fracas in Hong Kong could incite other uprisings across China. Everyone remembers the long, bloody Cultural Revolution of the 1970’s with its rampaging Red Guards.
    Perhaps more important, Chinese leaders study their nation’s history and draw lessons from it, unlike America’s history-free politicians. For the Americans, history is what was on Fox TV the week before.
    What Beijing really fears is another Taiping Rebellion. A nobody named Hong Xiuqan proclaimed himself the brother of Jesus and raised a vast peasant army to overthrow the ruling Manchu dynasty in Beijing. Brutal civil war raged from 1850-1864 in which up to 100 million are believed to have been killed or died of famine.

  12. struth

    Your link’s writer is pro market apparently.
    He doesn’t seem to understand the power of the market.
    There is much the rest of the world could do.
    It’s just that they won’t.

  13. Roger

    Western politicians can huff and puff all they like but they are powerless to change the tide of events in Hong Kong.

    Maybe so, but what happens after China imposes martial law is another matter.

  14. Percy Popinjay

    proclaimed himself the brother of Jesus and raised a vast peasant army

    As one does.

  15. max

    they had chance in 1997 to give people of Hong Kong to choose — well they did not do that then why now?

  16. Dr Fred Lenin

    The communist fascist unelected rulers of China will have to supress the spirit of freedom in HK ,their own people ill start to expect the same fredom ,and fredom is the mortal enemy of communist fascists and crony capitalistglobal fascists . Why do you think the unelected EU globalist fascists are trying to ubvert Brexit ,just as their fellow fascists are supressing HK .
    Socialist fascism ,Hitler,Stalin ,Mao ,Pol pot , NK Kims ,Castro ,Che , Mugabe , Xia Tusk ,Junkers there is no end to them ,w have them here aspirational dictators .

  17. struth

    Free world (so called) pick yer sides.
    Something you should have already done, and something you should not have to ponder about.

  18. The BigBlueCat

    max
    #3140993, posted on August 26, 2019 at 1:05 pm
    Hong Kong was sold down in 1997

    https://www.lewrockwell.com/2019/08/eric-margolis/china-is-getting-ready-to-crush-hong-kong/

    The BigBlueCat wonders about the legitimacy of handing back HK to a Chinese communist government borne of violent and bloody revolution when the Brits originally negotiated with another form of government …. water under the bridge I know, but it appears that Beijing couldn’t give a rats about Hong Kong or its people (in the same way they don’t care about Tibet or Taiwan).

    Fred Lenin is making some very pertinent points (in his own unique way). To Beijing, it’s not about freedom but about control. Same with Brussels. The ALP and the Greens are cut from the same cloth – thankfully Shortone gave himself the heave-ho after a disastrous electoral performance – but enough of them remain to be a threat to our way of life.

    Governments of any stripe are an assault on our freedoms – some are less bad than others t’is all. We should expect governments to protect our rights, not redefine what those rights are (or deny them outright). But in communist China, you have no rights unless the government tells you what they are, and if you disagree, then too bad. Sound familiar?

  19. struth:

    Free world (so called) pick yer sides.
    Something you should have already done, and something you should not have to ponder about.

    Perzakkerly.
    + eleventy gazillion.
    (Give or take a gazillion or two.)

  20. Struth:
    a little more seriously though, when your philosophy is based on the freedom of the individual, the choice is so simple.
    There’s no need for sophisticated arguments, calling the cat a dog, or any of the shit that Socialists have to roll in glitter to make their ideas marketable.

  21. Nob

    You can guarantee the Taiwanese are looking at this with trepidation.

    Who would come to their aid?

    http://worldpopulationreview.com/countries/countries-that-recognize-taiwan/

  22. max

    Let’s not get too starry-eyed about HK. The conglomerates dominate and strangle startups.

    The real villains are the real estate moguls. Government releases land in packages. Only the big realtors can afford to buy because billions of dollars are involved.

    They throw up an estate consisting of multiple tower blocks. They also own the two supermarket chains so they put in one of their own supermarkets and deny any competitors access. Same with pharmacies and real estate offices. I could continue.

    HK is basically run by cartels. Mind you, that’s true of many places.

  23. Ivan Denisovich

    From Steve’s linked article:

    When the United Kingdom turned over Hong Kong to China in 1997, China recognized Hong Kong’s economic superiority. It left Hong Kong’s economic system alone as to not kill the “golden goose,” which grew 180 times between 1961 and 1997……..

    During colonial times, British officials kept the peace but otherwise mostly left people alone to work, innovate, and find ways to prosper. Because of this tradition, Hong Kong today lacks micromanaging overlords who implement obstructionist rules, policies, procedures and regulations. This is a key part of its economic success.

    David Warren:

    My libertarian hero in this regard was Sir John Cowperthwaite KB CBE, financial secretary to Hong Kong through the 1960s, & perhaps the most significant figure in the recovery of the old Crown Colony from its condition at the end of the last World War. He pointedly refused to collect economic statistics. His reasoning was that, without numbers to play with, the “economic planners” would be at a loss. They were, & Hong Kong boomed……

    Let it be added that Hong Kong was remarkably free of crime throughout the period in question, comparing favourably even to booming yet placid Tokyo.

    https://www.davidwarrenonline.com/2013/07/14/truth-numbers/

  24. Sunni Bakchat

    Go back and have a look at Cowperthwaite. His governership in Hong Kong established many of the rules and systems that made it a huge success.

  25. Sunni Bakchat

    More on Sir John Cowperthwaite

    https://fee.org/articles/freedom-works-the-case-of-hong-kong/

    “The laissez-faire attitude of the Hong Kong government on economic matters was cemented by Sir John Cowperthwaite, the colony’s financial secretary from 1961 to 1971, whom Welsh called a “political economist in the tradition of Gladstone or John Stuart Mill” and the personification of “unreconstructed Manchester-school free traders.” Cowperthwaite had almost complete control of Hong Kong government finances and used it to implement his policy of “positive nonintervention.” Friedman gave Cowperthwaite a great deal of the credit for Hong Kong’s success, citing approvingly Cowperthwaite’s refusal to collect most economic statistics on the grounds that “[i]f I let them compute those statistics, they’ll want to use them for planning.” Jimmy Lai has a bronze bust of Cowperthwaite at his company’s entrance (as well as ones of Friedman and F. A. Hayek).

    Cowperthwaite deserves the accolades he has received. During his decade as financial secretary, real wages rose by 50 percent and the portion of the population in acute poverty fell from 50 to 15 percent. What is remarkable is that Hong Kong accomplished this with no resource other than its people. The colony had no real agricultural land, no natural resources, and even the one resource it did have—people—lacked much education. Indeed, few at the time thought that the masses of refugees who reached Hong Kong during the 1950s would amount to anything other than a burden for the state.

    Most remarkably, Hong Kong’s transformation occurred when social democrats ruled Europe and Lyndon Johnson’s Great Society dominated American politics, both reflecting the consensus among the political elites in Europe and North America that the welfare state and interventionist economic policies were the only sensible direction for advanced societies. Even in the developing world, interventionist economic policies like industrialization through import substitution, which relied on high tariff walls to protect domestic industries, were widely accepted. Tiny Hong Kong thus managed to adopt and hold to free-market and free-trade policies that ran counter to the policies of the British government and the consensus of policy analysts and development economists everywhere, and did it while perched precariously on the edge of a massive communist dictatorship in the midst of self-destructive policies like the Great Leap Forward and the Cultural Revolution.”

  26. John A

    The BigBlueCat #3141018, posted on August 26, 2019, at 1:42 pm

    The BigBlueCat wonders about the legitimacy of handing back HK to a Chinese communist government borne of violent and bloody revolution when the Brits originally negotiated with another form of government …. water under the bridge I know, but it appears that Beijing couldn’t give a rats about Hong Kong or its people (in the same way they don’t care about Tibet or Taiwan).

    BBC, there was nothing to be done. Government in China continued, ys differently, but diplomacy says you recognise the authority of the government in place regardless of how it’s organised or what its “flavour” happens to be.

    If the PRC action kills the goose that is currently laying the golden eggs, the result will be a dead goose and an impoverished nation.

    Sadly, we and most other nation’s governments will not be able to do anything.

  27. Eyrie

    I hope the Taiwanese have secretly acquired nuclear weapons.
    You can take us but your home land will disappear in nuclear hellfire. We will be EXPENSIVE.

  28. Chris M

    Yesss! I want President Trump to announce “Last month we finalised negotiations with Taiwan and have already transferred a significant number of medium range nuclear missiles which are now operational on the island…”

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