Thirty-five years ago, Rose and Milton Friedman traveled to Hong Kong to film some segments of their 10-part PBS series “Free To Choose.” The reason is that Hong Kong had then what it still has today: the world's freest economy. It's an economy based on secure private property rights, low taxes, an independent and honest judiciary, free trade and few government regulations.
The Friedmans correctly used Hong Kong as an example of the beneficial power of individual freedom. Hong Kong has no natural resources to speak of except its large harbor. And that harbor, combined with freedom and a robust bourgeois culture, has made Hong Kong one of the wealthiest places on the planet. It's a place where free trade and voluntary market exchanges reign.
This economic freedom has raised Hong Kong's annual per capita income today to equality with that of the United States. At about $53,000 (U.S.), that income per person is nearly 50 percent higher than in France. When the Friedmans were in Hong Kong in 1979, France's per capita income was 30 percent higher than Hong Kong's. Yet as the Friedmans explained, Hong Kong's economy was expanding impressively. France's was not.
Over the past 35 years, the French have continued to embrace heavy state involvement in the economy while the people of Hong Kong have continued to rely upon free markets.
Hong Kong's success disproves many tenets that most intellectuals — including many of my fellow economists — believe to be true about economic development.
Hong Kong received almost no foreign aid, so such assistance doesn't explain Hong Kong's success. Nor does lack of population pressure. With 6,650 persons per square kilometer, Hong Kong is one of the most densely populated places on Earth.
And, of course, being a thoroughly free economy, Hong Kong's development is not the result of its government protecting “strategic” industries from foreign competition. No such protection occurred. Instead, Hong Kong's people have long been, as they remain to this day, free to spend their money as they choose.
This free trade obliges entrepreneurs and businesses in Hong Kong to specialize in producing what they produce best and at lowest cost. This happy outcome is reinforced by the fact that businesses in Hong Kong — knowing that the state does not dispense tariffs and other barriers against foreign competition — waste no time or resources lobbying politicians for such special privileges. Businesses' efforts and inputs are devoted exclusively to building better mousetraps as judged by the only people who matter: consumers.
Of course, as today's protests in Hong Kong reveal, the people there do confront real challenges. The government in Beijing — in “kinda, sorta” control of Hong Kong since 1997 — fears especially the civil and press freedoms long enjoyed by the people of Hong Kong.
Let's hope the democracy movement in Hong Kong succeeds in preventing Beijing from suppressing those freedoms. But let's also hope the people of Hong Kong never come to mistake democracy for freedom. As Hong Kong's own history proves, true freedom involves far more than the privilege of voting in political elections.