Free economy looks less open from a cage home

PUBLISHED : Wednesday, 15 February, 2012, 12:00am
UPDATED : Wednesday, 15 February, 2012, 12:00am


Hong Kong remains the world's freest economy, according to the 2012 Index of Economic Freedom. However, it is worth considering exactly what this title means for the people.

According to British political theorist Isaiah Berlin, there are two types of freedom - positive and negative. Negative freedom is defined in terms of the absence of any external interference. So, in terms of economic freedom, interference can include things like taxation and a minimum wage.

Minimal taxes, therefore, imply a high degree of negative freedom. Essentially, people have more control over their finances. Indeed, strong proponents of this kind of freedom, such as Robert Nozick, view taxation as tantamount to forced labour and the welfare state as a form of theft.

Unless they need to be bailed out by the state, businesses obviously thrive on having a free economy. Indeed, the wealthier you are, the more likely you are to benefit from a lack of state economic interference.

The other form of freedom, according to Berlin, is positive freedom. This is defined as 'self-mastery', namely, the ability to do certain things. So, for example, while higher taxes might imply a lower level of negative liberty, they also enable certain portions of society to have things they wouldn't otherwise get without assistance from the state, such as health care, housing and food.

Strong positive freedom generally involves greater state intervention and generally benefits the more disadvantaged sections of society the most.

Hong Kong's laissez-faire economic policy is not only enticing to business; it has also benefited people more generally. The UN's 2011 Human Development Index, a comparative measure of life expectancy, literacy and standards of living, ranked Hong Kong 13th - putting its level of development just below countries such as Sweden (10), Switzerland (11) and Japan (12), but significantly above Singapore (26) and Britain (28).

Another index that Hong Kong also scores consistently highly in is the Gini coefficient for income inequality. This is something to be less proud of, especially when the city has the highest score of all the advanced economies in the world.

Negative economic freedoms defined by minimal regulation and interference can only take us so far because the 'trickle down' effect of wealth has its limits. Or to paint a starker picture, the low taxation rates and freedoms which enable some to buy limitless luxury goods mean very little when, having worked every day for the past 50 years, you have a wire cage to call home and your earning power restricts your dietary intake to one meal a day.

Rachel Tsang is a PhD candidate and has taught political theory at the London School of Economics