Asian Tiger 3:
Hong Kong

Today’s Hong Kong skyline as seen from Victoria Peak


Vivian Meier, May 23, 1959, from Victoria Peak

It is interesting that both South Korea and Taiwan were former colonies of Japan, and followed Japan’s road to prosperity. These tigers were striking, but miracles continued southwest of Taiwan in the British colony of Hong Kong which was an exception among the Tigers since it flourished with little government involvement or planning. Great Britain defended Hong Kong in the aftermath of the Chinese Revolution in 1949 but, due to its own acute postwar difficulties, was unable to spare resources for its colony. Indeed, even as the United States increased its commitment to Asia, Britain reduced hers, and it was perhaps this lack of attention in the 1950 and 1960s that contributed markedly to Hong Kong’s explosive growth and vigor.

Queen’s Street 1930s

One of the formidable problems facing the colony in the 1950s was reorienting itself away from a mainland focus when its Western trading partners embargoed all goods produced in China with the ascent of Mao. This economic reorientation took place dramatically when businessmen, who favored neither Mao’s communists nor Chiang’s Nationalists in Taiwan, emigrated from Shanghai in the tens of thousands. To Hong Kong Island, Kowloon, and the New Territories, established textile and shipping magnates brought their energy, families, money, and business acumen from the mainland, and gave Hong Kong an estimated ten-to fifteen-year head start over the rest of postwar Asia as an industrial producer in the late 1950s.

British Colonial Flag, 1959-1997

Several elements combined to make Hong Kong do unusually well in the 1950s and 1960s. The Hongkong and Shanghai Bank, as the name suggests, had deep commercial knowledge in both cities since its founding in 1865. In the post-Revolution years the bank extended itself aggressively to make loans, cover losses, and extend credit terms to traders, manufacturers, and entrepreneurs with prospects. Ninety-five percent of these represented small-to-medium size firms with fewer than one hundred workers (Schenk). It was these that diversified Hong Kong’s economy in the 1960s to clothing, electronics, plastics and other labor-intensive production mainly for export. And the population was young. Throughout this time, half of Hong Kong’s workforce was under the age of 25.

Sir Robert Black

Sir David Trench

In this environment of bank accommodation and a youthful population, Hong Kong acquired its modern identity as a place dedicated to money-making, with low taxation, and rigid control of public expenditure. Much credit for this identity must go to two Hong Kong governors during our period, Sir Robert Black (1958-1964) and Sir David Trench (1964-71).

However, it was under the direct policies of the Scotsman, Sir John Cowperthwaite, who was financial secretary from 1961 to 1971 that Hong Kong truly began its Rostovian “take-off” into modern prosperity. With Cowperthwaite’s stewardship, Hong Kong experienced a decade of stern and uncompromising free market principles that remains a Hong Kong habit to this day, with resistance to government debt and the “Welfare State.”

Here was homo economicus in action, a living laboratory of marketplace competition in the best spirit of Adam Smith and Milton Friedman – all at a time when the United States and large parts of Europe, including Britain, were trending toward rising governmental guidance in just about every aspect of their societies, not to mention the antithesis of free market movements occurring on the Chinese mainland at the time with the quizzical name of “The Great Leap Forward.”

Amidst free markets, Hong Kong Governors and administrations maintained a high level of civil liberties under the so-called “Basic Law” based on English common law. For his part, Cowperthwaite also overhauled the Hong Kong Civil Service to achieve one of the leanest, most courteous, and efficient bureaucracies in the world, with government departments reporting large surpluses year after year after year. In this, the British Parliament was pleased that the colony’s “policy of non-intervention” yielded self-sufficiency because the British taxpayer’s inability to assist Hong Kong financially was matched only by his disinterest in doing so.

Hong Kong, for its part, took it as a badge of pride that it seemed to need nothing but freedom to flourish. During the years of Black, Trench, and Cowperthwaite, real wages rose by 50 per cent, public education was 100% for the primary grades by 1966, and health services, though spare, improved steadily – with negligible aid from London. And when Sir John handed the financial reins to his successor, Sir Philip Haddon-Cave in 1971, the Hong Kong Annual Review predicted a “golden age” for the colony in various areas – a golden age made possible by the foundations laid by actions and policies of the 1960s.

Hong Kong’s first McDonald’s opens Jan. 26, 1975 in Causeway Bay
(South China Morning Post)

In fact, the results were, and continue to be, compelling. Between 1961 and 1997, Hong Kong’s GDP grew 180 times and per-capita GDP increased 87 times over to $48,717. Not only in general economic growth, Hong Kong’s vitality is no more vividly expressed than in its well-known and dazzling architectural skyline that climbs the hillside of the New Territories and so dramatically encircles Hong Kong Harbor. Brainpower plus youth plus freedom has yielded one of the highest qualities of life in the world for this tiger which grew from a cub in the 1960s, and – though now under ominous and serious pressure from Beijing – continues to do well after returning to Chinese control in July 1997.

Flag of Hong Kong used since July 1, 1997



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