Brexit Britain should learn from what Sir John Cowperthwaite did to transform Hong Kong

Brexit Britain should learn from what Sir John Cowperthwaite did to transform Hong Kong

The recent history of Hong Kong, from post-war to the British handover in 1997, and in contrast with the unsettled period of today, gives us in Britain important economic and political lessons. Beginning in an island, a port kept apart from the mainland by nature’s moat, such separation contains and incubates, leaving natural boundaries to fill with life and promise. 

In the case of Hong Kong, the separation from the mainland placed a physical distance from China beyond. The trading conflicts with Britain would result in an Asian entrepôt under British power for over a century and a half. There need not have been anything exceptional in a British trading outpost; a free port to better facilitate trade in the region. However, the principle of having a place for trade, and letting people and industry grow up and evolve around trade as the beating heart, is to establish a society around the means of its free and prosperous existence. 

There is of course more to life than trade, but without the means of exchange we are limited by our individual skills and by our finite and ever diminishing time. The realisation of difference across humanity, no matter what size or shape of a community, means that different skills are valued for their utility in relation to one another. Such is the basis for specialisation and trade. What could be more natural than to recognise and value difference? People master time by mastering particular skills, swapping their output for currency which they can exchange for the mastered skills of others. And so, in an exponentially shorter space of time, we can accumulate greater prosperity together by being different, than we can by being the same and alone. Prosperity is a better aim than subsistence, orienting oneself and a state in this regard, away from suffering, will therefore bring its own just rewards.

Much of Hong Kong’s post-war economic success is the legacy of a civil servant who rose to the position of Financial Secretary, Sir John Cowperthwaite. A Classical Liberal appreciation of economics, the writings of Adam Smith, was the foundation of Cowperthwaite’s education, and trade at the core of Hong Kong’s existence made this state and its Financial Secretary well suited. Cowperthwaite was philosophically rooted, and so his mastery of state finance and economics was greater than the that of the average functionary. The excellent book Architect of Prosperity by Neil Monnery charts Cowperthwaite’s experience and achievement through over 25 formative years for both man and state.

Post-wartime occupation, the situation in which Hong Kong found itself is far removed from our contemporary situation, and yet there are lessons we can learn. Regardless of whether this journey can be repeated, the principles Cowperthwaite employed have the backing of extensive empirical evidence over decades. Limited government was the model with low and stable taxation to create revenue ahead of spending commitments. An open economy with regulation at a minimum, government was limited to the fundamentals and natural monopoly, leaving greater space for people and industry to organise themselves.

Cowperthwaite was wise to the inevitability of growth in the public sector; such a growth would tip the balance away from private investment. He knew that greater private growth would lead to greater private prosperity, and therefore greater government tax revenue compounding over time. Cowperthwaite took the long view when it came to public services and he avoided intervention. He avoided policy which would reduce economic growth for future generations, and so he ran a surplus to prevent debt being passed to future taxpayers. He still ensured that the poorest could be exempted from tax or service costs and thus maintain a level of provision for those who needed it. Ultimately his sound stewardship of the state’s finances, his insistence on free trade alongside low rates of taxation, set the stage for Hong Kong’s economic growth that saw it eclipse Britain.

What lessons can we learn from today’s Hong Kong? We see that the ‘one country, two system’ model under Chinese rule is under strain. We see that an unaccountable political superior can be a tyranny when it comes to the rights of states and minorities. We see the old demarcation being eroded, and the trajectory may turn away from the two system approach which allows Hong Kong to prosper as a free market economy, even after the British handover. We see that there is consequence of the merging of a once economically autonomous state into another. Freedom is the cost, and the rule of law is under threat. Autonomy was a safeguard against the potential tyranny of unaccountable power; the people of Hong Kong have a lot to lose.

We should be thankful that Britain, our island, in a solemn act of self-determination, chose the course of autonomy as we voted to Leave the EU; for without autonomy, our freedom is at risk of unaccountable power beyond our shores. When our freedom is regained, we will be free to be different, to forge our sovereign and independent personality once more. Our businesses can trade with other countries untethered from the limitations and bureaucratic burdens of internal trading within a political bloc. 

As we adjust ourselves to the new-found possibilities, I hope our politicians learn from the legacy of the principled economic model of Sir John Cowperthwaite which generated the prosperity of Hong Kong. I hope our politicians seize the opportunity of autonomy for Britain and return autonomy to the people. The new Prime Minister can create economic prosperity through the limitation of government and the expansion of individual freedom. He can liberate our businesses from regulation and reduce the burden of taxation for all; let freedom be our speciality and prosperity be our reward.