Commentary

How Hong Kong Can Build A Great Society

The South China Morning Post on March 11, 2004.>
One of the greatest liberals of the last century, F.A. Hayek, wrote his classic The Road to Serfdom 60 years ago to warn against the dangers posed by post-war socialism. He believed with David Hume that “it is seldom that liberty of any kind is lost all at once”.

To stem the growth of big government and the erosion of economic and personal freedom that accompanies that growth, Hayek argued passionately for a liberal international order grounded in limited government, free trade and the rule of law. His message is as relevant today as it was in 1944.

Hayek’s vision of a market-liberal order with private property, freedom of contract and limited government rested on the work of Adam Smith and other 18th-century liberals. A central concept in that body of work is the notion of spontaneous order, or what Smith called a “simple system of natural liberty”. According to Smith, when “all systems either of preference or of restraint” are abolished, “the obvious and simple system of natural liberty establishes itself of its own accord”.

In such a system, “every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way, and to bring forth his industry and capital into competition with those of any other man, or order of men”. Smith dismissed central planning as a utopian vision because “no human wisdom or knowledge could ever be sufficient” to direct resources towards “the employments most suitable to the interest of the society”.

The duties of the sovereign are definite and few: first, protect “society from the violence and invasion of other independent societies”; second, safeguard “every member of the society from the injustice or oppression of every other member of it”, as much as possible; and third, erect and maintain “certain public works and certain public institutions”. When government is limited to those core functions, “a great society” will emerge.

In 1850, Frederic Bastiat, a well-known French liberal, wrote: “It is under the law of justice, under the rule of right, under the influence of liberty, security, stability and responsibility, that every man will attain to the full worth and dignity of his being, and that mankind will achieve … the progress to which it is destined.” Hayek grasped these liberal principles and, in The Road to Serfdom and other works, expounded them and warned against creeping socialism in the west.

He understood that substituting socialist ends - in particular, “freedom from want” - for capitalist means - competition and choice - would destroy the very freedom necessary for a great society. Under economic liberalism, the individual, not the collective, is at the centre, and consent rather than coercion is the organising principle.

Attempts to plan economic life and achieve “social justice” wrought havoc in the 20th century. The Soviet Union and the People’s Republic of China learned the hard way that Marx was wrong and Hayek was right. What still needs to be emphasised, however, is Hayek’s message that “political freedom is meaningless without economic freedom”.

When private property rights are violated and economic freedom is attenuated by various forms of government intervention, our other freedoms are threatened. The Jews in Nazi Germany first had their economic liberties violated. The rest of the horrors followed.

Any infringement of economic liberty must be nipped in the bud. Hong Kong’s phenomenal success is due to its adherence to economic liberalism, as advocated by Sir John Cowperthwaite, Hong Kong’s financial secretary from 1961 to 1971. His advocacy of the principle of nonintervention, and insistence on limited government under the rule of law, created the freedom for individuals to trade and to prosper. But that does not mean Hong Kong’s future is secure. Constant vigilance is necessary to prevent the erosion of the principles of a market-liberal order.

As Nobel laureate economist James Buchanan has written: “Liberals should not lean back and say, ‘our work is done.’ The organisation and the intellectual bankruptcy of socialism in our time has not removed the relevance of a renewed and continuing discourse in political philosophy. We need discourse to preserve, save, and recreate that which we may, properly, call the soul of classical liberalism.”

Many emerging market countries still have a long way to go before they reach the level of economic and personal freedom envisioned by Hayek. Many developed countries, including the United States, have expanded the welfare state without recognising the danger it poses to the future of freedom.

The challenge for Hong Kong in the 21st century is to hold on to and strengthen economic freedom and limited government while at the same time creating a constitutional democracy that supports, rather than erodes, liberal principles.

James Dorn is vice-president for academic affairs at the Cato Institute in Washington and author of The Rise of Government and the Decline of Morality.