Sir John Cowperthwaite, who died at the age of 90 on January 21, 2006, was Hong Kong's Financial Secretary between 1961 and 1971. I had the honor of knowing him and learning from him. He was a principled and modest man, whose wisdom and courage of convictions greatly contributed to the spectacular rise of Hong Kong from poverty to prosperity. He will be missed.
I first met Sir John in 1999. As a postgraduate student at the University of St Andrews in Scotland, Sir John's alma mater, I was just beginning to be interested in economic development. Having spent a part of my life in Africa, I wanted to understand the reasons for the wealth and poverty of nations. Scotland proved a propitious setting for such a study. After all, Scotland gave birth to the liberal branch of the Enlightenment. Its leading lights included such giants of political and economic thought as Adam Ferguson, David Hume, and Adam Smith -- the celebrated author of The Wealth of Nations.
By the time I met Sir John, the success of Hong Kong had already been firmly established. Hong Kong was and is the world's freest economy and one of the greatest triumphs of the laissez-faire approach to economic development. Sir John arrived in Hong Kong in 1947. At that time, Hong Kong's residents were poorer than citizens of some African countries. The territory was small in size and had no natural resources. Many economists, Nobel laureate Gunnar Myrdal among them, predicted prosperity for Africa and a bleak future for Asia.
By the end of the 20th century, however, Hong Kong had become one of the most prosperous territories in the world. Economist Angus Maddison estimates that in 1950 Hong Kong's citizens were 40 percent poorer on a per capita basis than the citizens of the oil rich African country of Gabon. By 1998, Hong Kong's residents were over four times richer than the Gabonese. In the long run, in other words, Hong Kong's free market policies proved more important than Gabon's natural riches or its more advanced starting position.
At the time I started my studies, I did not know that the chief architect of Hong Kong's prosperity lived on the same street as I did -- a mere three houses away. Once I learned of his whereabouts, I sent him a letter asking him for a meeting. His affirmative reply, like so many of our future communications, came courtesy of the Royal Mail. Sir John was an old-fashioned man. When I finally met him, I found him to be modest but self-assured. While other colonial administrators throughout the British Empire were busy adopting statist economic policies, Sir John rejected the socialist zeitgeist. Heavily influenced by Adam Smith, Sir John let the Hong Kong economy grow unhindered by bureaucratic overreach. As he told me, "I came to Hong Kong and found the economy working just fine. So, I left it that way." Some 50 years after he first set foot in Hong Kong, Sir John was clearly enjoying seeing his policies vindicated.
In the best tradition of the British colonial service, Sir John made few public statements after his retirement, but he was eager to share his insights with the next generation of free market liberals. We spent hours talking about Hong Kong's 16 percent tax rate, business-friendly regulatory environment, lack of state subsidies, tariff-free trade relations with the rest of the world and other policies he promoted while Financial Secretary. Of all the policies that we discussed, one stands out in my mind -- if for no other reason than because it is so thoroughly counterintuitive. I asked him to name the one reform that he was most proud of. "I abolished the collection of statistics," he replied. Sir John believed that statistics are dangerous, because they enable social engineers of all stripes to justify state intervention in the economy.
At some point during our first conversation I managed to irk him by suggesting that he was chiefly known "for doing nothing." In fact, he pointed out, keeping the British political busy-bodies from interfering in Hong Kong's economic affairs took up a large portion of his time. Throughout Sir John's tenure in office, the British political elite tried to impose its own ailing socialist economic model on Britain's colonies, including Hong Kong. Sir John managed to quash all such attempts and Hong Kong benefited as a result. In 2004, the World Bank estimated, Hong Kong's per capita income adjusted for purchasing power parity (GNI PPP) was $31,510. Great Britain's 2004 GNI PPP was $31,460.
I conjecture that it was Hong Kong's obviously successful experiment with laissez-faire that helped to steel the nerves of Britain's Iron Lady, Baroness Thatcher, as she prepared to rescue her once-great country from the socialist rot. Hong Kong, a colony, lit the way for Britain, the homeland. Moreover, Hong Kong's success was vital in convincing the Chinese Communist Party that socialism was a historical dead end. Capitalist countries lead best when they lead by example, and what better example for a slave society of over a billion people than an island of freedom and prosperity right on its doorstep? Turning Hong Kong into an example worthy for China to emulate -- that, I believe, is Sir John's greatest legacy.
What about Sir John, the man? One story, I think, says it all. As a senior civil servant, Sir John was once presented with a sum of tax-payer money to upgrade his residence in Hong Kong. He refused. He told me that he could not accept a housing subsidy since that was a largess denied to other residents of the colony. In his personal conduct, just as in his economic policies, Sir John set the standard for future generations of public officials.
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