Anti-Poverty Programs and the Lessons of Hong Kong ... Sir John James Cowperthwaite and the Wonder of Free People in Free Markets

Here's a great story about Sir John James Cowperthwaite, Milton Friedman and the magic of free people in free markets building strong and stable societies.

Go for Bust, Mr. Romney tells this delightful story about competitive capitalism:

" . . . symbols play an important role in politics. Now Mr. Romney has given us another by choosing as his running mate Paul Ryan, the market-minded Republican congressman from Wisconsin.

In this spirit, let me suggest a man whose bust (in the White House) would be a good companion for Mr. Ryan. His name is Sir John James Cowperthwaite.

In America, Cowperthwaite's name languishes in obscurity. That should change. Cowperthwaite was the Hong Kong financial secretary whose free-market convictions helped the war-weary colony grow into an economic powerhouse. Milton Friedman once explained the significance of this example:

"Hong Kong's been very useful to me and it would be hard to overestimate the debt Hong Kong owes to Cowperthwaite."

Friedman first traveled to Hong Kong in 1955, when it was flooded with refugees from Communist China and life, he wrote, was "miserable" for most of its inhabitants. He returned again in 1963, when things had improved, and there he met Cowperthwaite. Asked why he forbade officials from keeping numbers even for things such as gross domestic product, Cowperthwaite told Friedman . . . "If I let them keep statistics," he said, "they can only misuse them."

Cowperthwaite wasn't one for speeches or economic papers. So most of his philosophy must be gleaned from debates in Hong Kong's Legislative Council, where he used his formidable skills to fend off the latest hare-brained scheme for taxing Peter to subsidize Paul.

On subsidies to keep water prices low: "I see no reason, for example, why someone who is content with an economical cold shower should subsidize someone who is able to luxuriate in a deep hot bath."

On taxes: "Economic expansion remains the door to social progress, and I am convinced that in our circumstances low taxation can in general produce a greater growth in revenue than can tax increases."

On picking winners: "A desirable industry was, almost by definition, one which could establish itself and thrive without special assistance in ordinary market conditions."

In a 1997 article in National Review, Friedman summed up what the principles he and Cowperthwaite shared did for Hong Kong.

"[I]n 1960," he wrote, "the earliest date for which I have been able to get them, the average per capita income in Hong Kong was 28 percent of that in Great Britain; by 1996, it had risen to 137 percent of that in Britain. In short, from 1960 to 1996, Hong Kong's per capita income rose from about one-quarter of Britain's to more than a third larger than Britain's. It is easy to state these figures. It is more difficult to realize their significance. Compare Britain—the birthplace of the Industrial Revolution, the nineteenth-century economic superpower on whose empire the sun never set—with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country."

Mr. Ryan would cheer. Like Cowperthwaite, he appreciates that the world's most effective antipoverty program is a free market. . . .

If Cowperthwaite had a credo, surely it was the opposite of "You didn't build that." For him, Hong Kong was all about the enterprises ordinary people can build for themselves if only given the freedom. As he told me at that same lunch in 1996, "I did very little. All I did was to try to prevent some of the things that might undo it."

What a splendid thing it would be for a president to have the bust of such of man in the Oval Office, a pointed reminder of modesty in a Washington prone to assuming it knows how to spend the people's money better than the people themselves. 

Summing Up

Statistics don't lie, but people do. Beware of people using statistics to "prove" something which doesn't pass the smell test of common sense.

Government doesn't create prosperity, but people do. Beware of people using government to help solve problems when the help being offered through government intervention doesn't pass the smell test of common sense.

Free people acting freely in free markets to create MOM for themselves and their colleagues will create abundant prosperity for an entire society.

Mr. Cowperthwaite proved that in Hong Kong, Mr. Friedman taught that across the world, and all Americans should know that by now.

How else could we have become the most free and most prosperous nation on earth?

If not yet over, the era of big government needs to end.

Current Democratic Party favorite President Bill Clinton reminded all of us about that simple truism in 1996, even though he evidently "forgot" to mention it in Charlotte this past week.

Thanks. Bob.