Who made this city prosperous?

PUBLISHED : Saturday, 03 June, 2006, 12:00am
UPDATED : Saturday, 03 June, 2006, 12:00am

The family of the late police sergeant Hon Sum, who acquired a fortune through corruption, reached an out-of-court settlement with the Department of Justice this week to return $140 million worth of assets.

Rampant public graft and corrupt officials like Hon were commonplace in the days when colonial rulers took a laissez-faire approach. It is ridiculous that some today attribute Hong Kong's post-second-world-war economic miracle to the colonial government's laissez-faire policy, and even hail officials such as Sir John James Cowperthwaite and Sir Philip Haddon-Cave as important figures contributing to the city's success.

Mainstream economists, including monetarist Milton Friedman, see Hong Kong's remarkable economic growth as a result of free trade. However, Jonathan Schiffer, a senior analyst at the international rating agency Moody's, suggests quite the opposite - that government intervention was the key to the city's success.

Hong Kong's unique experience is not only a matter of coincidence, but was indeed made possible by a number of social and historical factors. First, it received an influx of immigrants because of the post-war disturbances in mainland China. That provided cheap labour, capital, entrepreneurs and skills, triggering industrialisation in the city.

Second, the United Nations imposed an embargo on trade with mainland China during the Korean war, halting Hong Kong's role as an entrepot. It was forced to industrialise.

Third, the switch of western countries to capital-intensive industries after the second world war enabled Hong Kong to develop labour-intensive industries, such as plastics, textiles and electronics.

Fourth, Hong Kong had no industrial policy in the post-war period, and the government had not anticipated the city's unprecedented economic prosperity. The so-called laissez-faire policy was unintentional, but it did help lead to the prosperity of local industries.

The British pursuit of free trade, however, was not unintentional. Hong Kong served as the British stepping stone to trade with China. So the adoption of free trade in a city that lacked resources was clearly favourable to the British. But there wasn't much free competition in colonial days, since most of the important and lucrative firms were in British hands.

Owing to the political uncertainty in China, the British decided to leave Hong Kong as it had been during the post-war period. That loose governing style was applied in industry, politics and society in general.

It was only after the outbreak of the 1966 riots that the colonial government became determined to make changes. It then became clear that official corruption would not have been so widespread if the government had not relied on Chinese officials to oversee the local population during the early colonial regime.

Hong Kong's economy took off in the 1960s, and its economic growth exceeded that of anywhere else in the world during the 1960s and 1970s. It is worth noting that the colonial government started to intervene in the city's economy in the late 1960s in terms of infrastructure, housing and social policies.

It was former governor Lord MacLehose who laid the foundation of the city's economic prosperity and turned it into one of the wealthiest places in the Asia-Pacific region.

Hong Kong's success cannot be wholly attributed to the laissez-faire policy or particular colonial officials. As historian Nigel Cameron puts it: 'Hong Kong, from its inception, had more luck than its government had foresight.'

Without the hard work and flexibility of the Hong Kong people and the competitive edge offered by China, the British would not have accomplished such an economic miracle.

Albert Cheng King-hon is a directly elected legislator



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