Last week, Hong Kong was again basking in the glory of being labelled the world's freest economy, by the US-based Heritage Foundation. It is easy to be cynical about league tables of this sort, since they necessarily involve considerable subjectivity. One should also bear in mind that the producers of this particular study have an avowed mission to promote conservative public policies. However, their methodology is transparent and, although one might quibble endlessly about the details, the results seem plausible.
Anyway, the mantle of 'the world's freest economy' is surely no more egregious than the government's own designations of Hong Kong as 'City of life', 'Asia's World City' or 'Asia's cyber city for the cyber century' - the last appears on the government's website but, understandably, in view of the Cyberport experience, does not seem to be given much of an airing elsewhere.
The foundation's report (note that it is only about economic freedoms, not political ones) draws attention to a correlation across the globe, in broad terms, between its freedom index and standards of living, as measured by income per head in terms of purchasing power. The intended message is clear: freedom promotes prosperity. But freedom is not, of course, the sole determinant of prosperity. If it was, Hong Kong would be top of the standard-of-living table, too. But it is not. One might even mischievously turn this round to argue that Hong Kong is underperforming, relative to the potential which its supreme degree of freedom presents; there are other, less free economies which do better.
In fact, in the report there are 17 countries where living standards are higher than, or at least the same as, Hong Kong's, but which have inferior freedom ratings, albeit clustered towards the top end. This suggests that, beyond a certain point in the rankings, there may be little or nothing to be gained from advancing. Wherever you are in the top 20, the economy may perform just as well. On that basis, there should be no reason for Hong Kong to strain too hard to stay at the top, except, of course, for the pleasure of being ranked above Singapore in something.
It is also notable that, for all those 17 countries which match or out-perform Hong Kong in living standards, their inferior freedom ratings are in part explained by higher (worse) scores on 'fiscal burden' (measured by reference to rates of salaries and profits tax, and growth of government spending); and more than half have higher scores on 'government intervention' (defined as control over, or consumption of, resources).
This may indicate that higher taxation and greater government involvement in the economy can, within reasonable bounds, be a positive rather than a negative influence. Many would say that this is intuitively obvious, provided that revenue is sourced sensibly and spent wisely. For Hong Kong, this would imply that we need not necessarily shy away, behind a slogan of 'small government', from broader or steeper taxes, or from, say, additional measures to assist the poor and disadvantaged, or to improve standards in health and education.
