Eat the Rich: A Treatise on Economics (30 page)

Hong Kong’s per-capita GDP is $26,000. Average individual wealth is greater than in Japan or Germany. It’s $5,600 greater than what Hong Kong’s ex-colonial masters back in Britain have, and is creeping up on the U.S. per-capita GDP of $28,600. Besides Americans, only the people of Luxembourg and Switzerland are richer than those of Hong Kong. And these are two other places where capital is allowed to move and earn freely.

True, there has been an “Asian crisis” since the above statistics were compiled. The Hong Kong stock market has flopped. Indonesia, Thailand, Malaysia, South Korea, and maybe Japan are experiencing depressions. The entire business world of Asia is supposed to be in ruins. But a mere continent-wide financial collapse is unlikely to faze the people of Hong Kong.

Hong Kong’s economy was destroyed by the Japanese occupation of World War II, destroyed again by the UN embargo on trade with the Communists in 1951, and almost destroyed a third time by worry about the 1997 handover to China. The territory has been squeegeed by typhoons, squished by mudslides, toasted by enormous squatter-camp fires, and mashed by repeated refugee influxes. Hong Kong has no forests, mines, or oil wells, no large-scale agriculture, and definitely no places to park. Hong Kong even has to import water. So in Hong Kong they drink cognac instead, more per person than anywhere else in the world. They own more Rolls-Royces per person, too. So what if there’s no space at the curb? They’ll hire somebody fresh from the mainland to drive around the block all night.

Why did the British allow this marvel of free enterprise? Why did Britain do so little to interfere with Hong Kong’s economic liberty? This is especially hard to answer because, back in London, an ultrainterfering socialist Parliament had taken charge after World War II. This government would bring the U.K.’s own economy to a halt like a hippo dropped on a handcart.

Actually, the British did piss in the colonial soup when they could. The crown government held title to almost all the land in Hong Kong and the New Territories, and dealt it out slowly to keep sales revenues high. Thus the crowding in a place which, in fact, comprises some 402 square miles of dry ground—enough, in theory, to give everybody a bean-sprout garden. Instead, half the population is stuck in claustrophobic government housing. Then in the ’70s, one of Hong Kong’s thicker governors, Sir Murray Maclehose, set aside 40 percent of the colony as parkland—cramped comfort to the fellow living in 300 square feet with his wife, mother, kids, and their Tamagotchi pets.

But the British never tried to install a European-style Pampers-to-June Allyson welfare system in Hong Kong. Maybe the Labour M.P.s were unwilling to invest vast quantities of groundnut scheme–type pinko planning genius in a place that could be gobbled up at any time by the pinko planning geniuses across the border. Maybe the colonial administrators were overwhelmed by the number of refugees from pinko planning jamming into town. Maybe the mother country was too broke from ruining its own economy in the British Isles. Or maybe the Brits just didn’t care about pushing social justice down the throats of people who were, after all, only Chinese.

On the other hand, the British were not irresponsible. The “doing nothing” mentioned at the beginning of this chapter is a relative term. Laissez-faire isn’t Tanzanian administrative sloth or Albanian popular anarchy. Quite a bit of government effort is required to create a system in which government leaves people alone. Hong Kong’s colonial administration provided courts, contract enforcement, laws that applied to everyone, some measure of national defense (although the Red Chinese People’s Liberation Army probably could have lazed its way across the border anytime it wanted), an effective police force (Hong Kong’s crime rate is lower than Tokyo’s), and a bureaucracy that was efficient and uncorrupt but not so hideously uncorrupt that it wouldn’t turn a blind eye on an occasional palm-greasing illegal refugee or unlicensed street vendor.

The Brits built schools and roads. And the kids went to school because they knew if they didn’t, they’d have to hit that road. And the U.K. gave Hong Kong a stable currency, which it did totally by cheating—first pegging the Hong Kong currency to the British pound and then, when everyone got done laughing at that, pegging it to the U.S. dollar at a rate of 7.8:1. Now when there’s any money-supply dirty work to be done, Hong Kong can blame everything on Alan Greenspan.

Hong Kong was also fortunate in having a colonial government which included some real British heroes, men who helped the place stay as good as it was for as long as it did. The most heroic of these was John Cowperthwaite, a young colonial officer sent to Hong Kong in 1945 to oversee the colony’s economic recovery. “Upon arrival, however,” said a
Far Eastern Economic Review
article about Cowperthwaite, “he found it recovering quite nicely without him.”

Cowperthwaite took the lesson to heart, and while he was in charge, he strictly limited bureaucratic interference in the economy. He wouldn’t even let bureaucrats keep figures on the rate of economic growth or the size of GDP. The Cubans won’t let anyone get those figures, either. But Cowperthwaite forbade it for an opposite reason. He felt that these numbers were nobody’s business and would only be misused by policy fools.

Cowperthwaite has said of his role in Hong Kong’s astounding growth: “I did very little. All I did was to try to prevent some of the things that might undo it.” He served as the colony’s financial secretary from 1961 to 1971. In the debate over the 1961 budget, he spoke words that should be engraved over the portals of every legislature worldwide; no, tattooed on the legislators’ faces:

Even
Newsweek
has been forced into admiration: “While Britain continued to build a welfare state, Cowperthwaite was saying ‘no’: no export subsidies, no tariffs, no personal taxes higher than 15 percent, red tape so thin a one-page form can launch a company.”

During Cowperthwaite’s “nothing doing” tenure, Hong Kong’s exports grew by an average of 13.8 percent a year, industrial wages doubled, and the number of households in extreme poverty shrank from more than half to 16 percent.

“It would be hard to overestimate the debt Hong Kong owes to Cowperthwaite,” said economist Milton Friedman. And it would be hard to overestimate the debt Hong Kong owes to the Chinese people who sanctioned and supported what Cowperthwaite was doing or, rather, doing not. Because Hong Kong didn’t get rich simply as a result of freedom and law. Economics is easier than economists claim, but it’s not as easy as that. Chinese culture was a factor in Hong Kong’s success. And yet, almost by definition, Chinese culture must have been a factor in mainland China’s failure. Culture is complex. Complexities are fun to talk about, but, when it comes to action, simplicities are often more effective. John Cowperthwaite was a master of simplicities.

Yeung Wai Hong, publisher of Hong Kong’s most popular Chinese language magazine,
Next,
has suggested erecting an heroic-scale statue of John Cowperthwaite. (To be paid for by
private
subscription, thank you.)

In less than one lifetime, Hong Kong created the environment of comfort and hope that every place on earth has been trying to achieve since the days of
homo erectus
in the Olduvai Gorge. And Hong Kong’s reward? It has been made a “Special Administrative Region” of the People’s Republic of China.

At midnight on June 30, 1997, the British sold six million five hundred thousand souls. No, gave them away. Nearly a Londonful of individuals, supposed citizens of the realm that invented rights, equity, and the rule of law, got Christmas-goosed in July. Hong Kong was on the cuffo, a gimme, an Annie Oakley for the mainland Communists.

At the stroke of 12, I was watching TV in my Hong Kong hotel room. The handover ceremony was being broadcast from the hideous new convention center three-quarters of a mile away. A British military band wearing hats made from Yogi and Smokey and Poo played “God Save the Queen.” The Union Jack went south. Prince Charles had just given a little speech. “We shall not forget you, and we shall watch with closest interest as you embark on this new era of your remarkable history.” In other words, “Goodbye and bolt the door, bugger you.”

Outside, on my hotel-room balcony, the floodlit convention center was all too visible on the harbor front, looking like somebody sat on the Sydney Opera House. Directly below the balcony, a couple thousand not very noisy protesters stood in the rain in Statue Square, looking like somebody was about to sit on them. They were listening to democracy advocate Martin Lee. Mr. Lee was a member of the first freely elected legislature in the history of Hong Kong. And the last. It was unelected at midnight. Mr. Lee was speaking without a police permit. And speaking. And speaking. Every now and then a disconsolate chant of agreement rose from the crowd. Mr. Lee kept speaking. No one bothered to stop him.

Back inside, on the TV, president of China Jiang Zemin was speaking, too—introducing himself to his instant, involuntary fellow countrymen with a poker-faced hollering of banalities in Mandarin. “We owe all our achievements most fundamentally!!! To the road of building socialism!!! With Chinese characteristics!!! Which we have taken!!!” he said, interrupting his speech with episodes of self-applause, done in the official politburo manner by holding the hands sideways and moving the fingers and palms as if to make quacky-ducky shadow puppets.

The big men on the convention-center podium—Jiang, Prime Minister Li Peng, and Foreign Minister Qian Qichen—seemed to have made their own suit jackets at home.

Tung Chee-hwa, the Beijing-appointed chief executive of the new Hong Kong Special Administration Region, came to the microphone next, making pronouncements that combined a political-reeducation-camp lecture (“Our thoughts and remembrance go, with great reverence, to the late Deng Xiaoping”) with a Dick Gephardt speech (“We respect minority views but also shoulder collective responsibility…. We valueplurality but discourage open confrontation. We strive for liberty but not at the expense of blah, blah, blah.”).

This also was said in Mandarin, which is not the native tongue in Hong Kong. In fact, no one uses it there, and having the HK chief executive lipping away in an alien lingo was like hearing an American politician speak meaningless, bizarre…it was like hearing an American politician speak.

Outside on the balcony again (covering the Hong Kong handover required a journalist to give his utmost—what with AC-chilled binocs fogging in the tropical heat and a minibar running low on ice) I watched the HMS
Britannia
pull away from the convention-center dock. A nondescript, freighter-shaped vessel painted white,
Britannia
looked to be more an unfortunate cruise-ship choice than a royal yacht. It steamed through Victoria Harbor, hauling butt from now foreign waters. On board were the last British governor of Hong Kong, the aristocrat currently known as Prince of Wales, any number of other dignitaries, and, I hope, a large cargo of guilt.

Would the limeys have skipped town if Hong Kong was full of 6.5 million big, pink, freckled, hay-haired, kipper-tucking, pint-sloshing, work-shy, layabout, Labour-voting…Well, in that case…

Maybe Hong Kong just wasn’t one of those vital, strategic places worth fighting for—like the Falklands. Maybe the Poms only intervene militarily where there’s enough sheep to keep the troops entertained.

Why didn’t the British give some
other
island to China. Britain, for instance. This would get the U.K. back on a capitalist course—Beijing being more interested in moneymaking than Tony Blair. Plus, the Chinese have extensive experience settling royal-family problems.

Or why didn’t Britain sell England to Hong Kong? Hong Kong can afford it, and that way anyone who was worried about the fate of democracy in the Special Administrative Region could go live in Sloane Square, and the rest of England could be turned into a theme park. There’s quaint scenery, lots of amusements for the kiddies (“Changing of the Wives” at Buckingham Palace is good), and plenty of souvenirs, such as, if you donate enough money to the right political party, a knighthood.

But this didn’t happen. And the people of Hong Kong (unless they were very rich) were stuck in Hong Kong. Sure, they had British passports. But these were “starter passports”—good for travel to…Macao. Of course, they could have gotten passport upgrades. For a million Hong Kong dollars, they could have gone to Toronto. Very fun.

Oh, let’s give the limeys a break. It’s not as if we Americans gave a damn, either. We could have threatened to stealth-bomber the Red Chinese or, for that matter, Margaret Thatcher when she started gift-wrapping Hong Kong for Deng Xiaoping. We could have told China to go kiss Boris Yeltsin’s ass if it wanted to be a most-favored nation. And we could have handed out 6.5 million green cards.

Imagine 6.5 million savvy, hardworking citizens-to-be with a great cuisine. What a blessing for America. And how we would hate them. Pat Buchanan would hate their race. The AFL-CIO would hate their wage rate. The NAACP would hate their failure to fail as a minority. And Al Gore would hate 6.5 million campaign contributors who didn’t have to sneak pro-free-trade money to the Democratic National Committee anymore but could go right into polling booths and vote Republican.

The surrender of Hong Kong was a shameful moment. But if you missed Martin Lee’s soggy peroration in Statue Square, you might never have known it. The stock market was still on a swell, up 30 percent from a year before, with bulging, steroidal gains in the so-called red chips, the mainland holding companies promoted by the ChiComs. Trade and foreign investment were at unexampled heights. No one was running from the real-estate market. Tiny condominiums in unglamorous districts were going for $500,000.