tim's experiment

The Heritage Foundation is traditionally described as a “right-wing US think tank”. This is presumably because “bunch of loony market fundamentalists” would take up too much space. This week the foundation announced again that Hong Kong topped its index of economic freedom. This was not a very stunning piece of news because Hong Kong has been similarly honoured for the previous 16 years.

In some places this would no doubt be greeted as a piece of welcome news. In Hong Kong it is so obviously idiotic that most people greeted it with derision. Even the back page of the Business Post, where you might expect to find this sort of thing taken seriously, greeted the news with scorn and satire. Those of us who live here know, of course, that Hong Kong is not a bastion of untramelled economic freedom. It is a festering hotbead of monopolies, du0polies and cartels, ruled by a government which does very well out of its control of land supply. The only people in Hong Kong who had a kind word to say for the Heritage folks were the Hong Kong government itself, which came out with a fawning, forelock-tugging welcome for the accolade, suggesting hilariously that, camong other obvious lies, the local administration seeks to “establish an appropriate regulatory regime to ensure the integrity and smooth functioning of a free market.”

One can of course see what the Heritage Foundation’s problem is. If you believe with a fervour usually reserved for more theological matters that economic freedom is conducive to happiness, prosperity, political freedom and a clean environment, then you have to produce some encouraging examples. Unfortunately most of the countries which are demonstrably successful in producing happy and contented citizens are places like Iceland or Denmark which not only regulate their economies but also have generous welfare provisions. One does not wish to make the United States the shining example, because the whole point of the exercise is to influence US policy in the direction of freer markets. So the Foundation needs a plausible specimen of prosperity which is neither nominally communist, which eliminates China, nor avowedly dirigiste, which takes care of the European candidates, as well as India and Brazil. So Hong Kong is it. The fact that this clashes violently with the established facts about how Hong Kong works can be glossed over. Most Americans know nothing about the rest of the world and the index is intended for their consumption.

 This would be a piece of harmless fun if the foundation could restrain itself from commenting on Hong Kong’s domestic matters, but it can not. The publishers of the index expressed misgivings about the minimum wage legislation and the prospect of some legal effort to ensure competition. Most of us would not give a fig if Hong Kong lost its top spot in the foundation’s index but no doubt the prospect will worry some people. Actually there seems to be a logical problem here. I understand that a minimum wage is an interference in the working of market forces. That is its purpose. But a law against anti-competitive practices seems to be something the foundation would welcome, if it was really concerned with the free play of the invisible hand, and not with fostering opportunities overseas for American business.

Hong Kong is not, by international standards, a tough place to do business. But some of the consequences of economic freedom call for remedial action. Being the place in the world where this point is least understood should not be regarded as flattering. And the degree of ease can be overstated. Certainly its very easy to set up an import/export company. On the other hand if you wish to open a restaurant…