Montreal, October 29, 2006 No 199

 

WORD FOR WORD

 

Alex Singleton is the
Director-General of the Globalisation Institute,

 
 

SIR JOHN COWPERTHWAITE, THE MAN WHO BROUGHT FREEDOM TO HONG KONG *

 

by Alex Singleton

 

          Sir John Cowperthwaite was the main figure responsible for Hong Kong's economic transformation, lifting millions of people out of poverty. While scholars like Milton Friedman and F.A. Hayek put an intellectual case for the free markets, it was Cowperthwaite who provided the textbook example showing laissez-faire policies leading to swift economic development. His practical example provided confidence to the Thatcher and Reagan governments, and was a key influence in China's post-Mao economic liberalisation.

 

          Cowperthwaite read classics at St. Andrews and Christ's College, Cambridge. While waiting to be called up by the Cameronians (Scottish Rifles), he went back to St. Andrews to study economics. This Scottish education imbibed him with the ideas of the Enlightenment, especially the work of Adam Smith, who had been born nearby in Kirkcaldy. He was a liberal in the 19th century sense, believing that countries should open up to trade unilaterally. In 1941, he joined the Colonial Administrative Service in Hong Kong. When it fell to the Japanese, he was seconded to Sierra Leone as a district officer, before returning in 1946 to help the colony's economic recovery. "Upon arrival," the Far Eastern Economic Review put it, "he found it recovering quite nicely without him." He quickly worked his way up the ranks and was made Financial Secretary in 1961, in charge of its economic policy for a decade.

          When he became Financial Secretary, the average Hong Kong resident earned about a quarter of someone living in Britain. By the early 90s, average incomes were higher than Britain's. Cowperthwaite made Hong Kong the most economically free economy in the world and pursued free trade, refusing to make its citizens buy expensive locally-produced goods if they could import cheaper products from elsewhere. Income tax was never more than a flat rate of fifteen percent. The colony's lack of natural resources, apart from a harbour, and the fact that it was a food importer, made its success all the more interesting. Cowperthwaite's policies soon attracted the attention of economists like Milton Friedman, whose television series Free to Choose featured Hong Kong's economic progress in some detail.

          Asked what is the key thing poor countries should do, Cowperthwaite once remarked: "They should abolish the Office of National Statistics." In Hong Kong, he refused to collect all but the most superficial statistics, believing that statistics were dangerous: they would led the state to to fiddle about remedying perceived ills, simultaneously hindering the ability of the market economy to work. This caused consternation in Whitehall: a delegation of civil servants were sent to Hong Kong to find out why employment statistics were not being collected; Cowperthwaite literally sent them home on the next plane back.
 

"Cowperthwaite made Hong Kong the most economically free economy in the world and pursued free trade, refusing to make its citizens buy expensive locally-produced goods if they could import cheaper products from elsewhere."


          Cowperthwaite's frugality with taxpayers' money extended to himself. He was offered funds from the Hong Kong Executive to do a much needed upgrade to his official residence, but refused pointing out that since others in Hong Kong did not receive that sort of benefit, he did not see why he should.

          Cowperthwaite's hands off approach, and rejection of the in vogue economic theory, meant he was in daily battle against Whitehall and Westminster. The British government insisted on higher income tax in Singapore; when they told Hong Kong to do the same, Cowperthwaite refused. He was an opponent of giving special benefits to business: when a group of businessmen asked him to provide funds for tunnel across Hong Kong harbour, he argued that if it made economic sense, the private sector would come in and pay for it. It was built privately. His economic instincts were revealed in his first speech as Financial Secretary: "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 centralised decisions of a government, and certainly the harm is likely to be counteracted faster."

          His ability to pursue policies which, at the time, were deeply unfashionable, was helped by having supportive Hong Kong Governors, Sir Robert Black and Sir David Trench, who both had free market sympathies. Moreover, Cowperthwaite was formidable at arguing his case: as Dennis Healey recalled: "I always retired hurt from my encounters with the redoubtable Financial Secretary."

          From 1972 to 1981, Cowperthwaite was an advisor to Jardine Flemming & Co in Hong Kong. He retired to St. Andrews with his wife Sheila and was an active member of the Royal & Ancient. For many years, he spent six months of the year with his wife traveling the world visiting friends and relatives. He was an old school civil servant and, much to the frustration of economists, resisted requests to write an autobiography about his time in Hong Kong, believing that his duty was to serve, not to reveal the minutiae of government business.

          John James Cowperthwaite KBE OBE CMG, Financial Secretary of Hong Kong, born 25 April 1915; died 21 January 2006.

 

* This obituary was first published on the Globalisation Institute's Blog on 31 January, 2006, and in The Guardian on February 8, 2006.

 

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