The world is indebted to some remarkable human beings that, from time to time, have made such momentous contributions that have virtuously impacted the entire world, changing the way it interacts. Such is the case of Sir John Cowperthwaite (1915–2006).
The Scottish born economist and statesman was the chief architect behind Hong Kong’s spectacular rise from poverty to prosperity. He was Hong Kong’s Financial Secretary between 1961 and 1971, and a worthy disciple of Adam Smith (coincidently, also a fellow Scot—read our post The Scottish Connection).
By using a laissez-faire approach, refusing to impose trade tariffs, banning state subsidies, keeping taxes down, and reducing red tape to the extent that a new company could be registered with a one-page form, Cowperthwaite’s free-market and positive-non-intervention economic policies turned post-war Hong Kong into the thriving financial center it is today.
Sir Jonh was in terra incognita. An economic experiment of this sort had never been executed in this magnitude. Hong Kong, a British colony with a population of only 600,000 at the end of World War II, was suddenly flooded by Chinese refugees in the following years. By the 1960s, around Cowperthwaite’s time, Hong Kong had a population of over 3 million people, and still rapidly growing.
But how was it possible that a Financial Secretary could have such a profound and decisive influence in Hong Kong’s economic policy? With the benefit of hindsight, a very solid case can be made that Gandhi and his peaceful resistance paved the way for this to be possible. It was because of Gandhi that the British Empire was compelled to agree on India’s independence, and shortly thereafter, started retreating from its different colonies around the world. In Hong Kong’s case, in most likelihood, this implied a consistent and increasing detachment attitude from London, as long as things went well. This detachment allowed Cowperthwaite an incredible freedom to handle and even implement revolutionary and untested policies, like laissez faire, coupled with a minimum intervention from the state in business and society.
He took full advantage of a one-of-a-kind governance structure. The high respect he commanded was also crucial, particularly among both Hong Kong’s Chief Secretary, as well as Hong Kong’s Governor. Cowperthwaite’s influence in Hong Kong can be compared to General Douglas MacArthur’s in post-war Japan, a few decades earlier. In his first budget speech Cowperthwaite said:
“In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralized decisions of a government, and certainly the harm is likely to be counteracted faster.”
Cowperthwaite didn’t stop there, Sir John believed so strongly that government should not interfere in business that, when asked by Milton Friedman in 1963 about the scarcity of economic statistics in Hong Kong, Cowperthwaite answered: “If I let them compute those statistics, they’ll want to use them for planning”.
He was an incomparable economic practitioner, a visionary, and a great leader. In most likelihood, the Hong Kong miracle would not have existed without him.
It can be conjectured that Hong Kong’s success was vital in the rise of the other three asian tigers, and also served as a point of comparison for China, which Deng Xiaoping masterfully used. Cowperthwaite was without a doubt the father of the economic model behind the four Asian Tigers’ success. In just three decades, these exemplary countries managed to turn their very poor economies into some of the most affluent in the world. To be able to consistently and dramatically improve the living standards of a nation in just a few decades is a doable feat that all nations on earth should emulate. Unfortunately, multiple and often insuperable (in the short-term) obstacles stand in the way of it. Those obstacles have been so pervasive and powerful that very few nations have been able to capitalize on the four Asian tigers’ incredible road to success—China is a remarkable exception, though still a work in progress.