Replies

Hong Kong existed as an independent national economy for decades. Now how can that be? Before it was a special administrative region for China, it was a British Dependent Territory, and before that it was a British colony.

The same way that Hong Kong is still an almost completely independent economy! Look, I understand, given that you're against free trade in principle that you may not want to answer my question. But the answer is obvious: that Hong Kong's free market policies at home and abroad constitute the main reasons why it's so prosperous. Remember, the thirteen colonies revolted becuase their own economic independence was threatened; distance and development created that space. P.J. O'Rourke wrote a great book a while back called "Eat the Rich" that mentioned this and he talks about Hong Kong here as well:

Hong Kong was also fortunate in having a colonial government which included some real British heroes, men who helped of these the place stay as good as it was for a s long as it did. The most heroic of these was John Cowperthwaite, a young colonial officer sent to Hong Kong in 1945 to oversee the colony's economic recovery. "Upon arrival, however," said a Far Eastern Economic Review article about Cowperthwaite, "he found it recovering quite nicely without him." Cowperthwaite took the lesson to heart, and while he was in charge, he strictly limited bureaucratic interference in the economy growth or the size of GDP. The Cubans wont let anyone get those figures, either. But Cowperthwaite forbade it for an opposite reason. He felt that these numbers were nobody's business and would only be misused by policy fools.

Cowperthwaite has said of his role in Hong Kong's astounding growth: "I did very little. All I did was to try to prevent some of the things that might undo it."

He served as the colony's financial secretary from 1961 to 1971.In the debate over the 1961 budget, he spoke words that should be engraved over the portals of every legislature worldwide; no, tattooed on the legislators' faces:

….in the long run the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralized decisions of a government; and, certainly the harm is likely to be counteracted faster.

Even Newsweek has been forced into admiration: "While Britain continued to build a welfare state, Cowperthwaite was saying 'no': no export subsidies, no tariffs. No personal taxes higher than 15 percent, red tape so thin a one-page form can launch a company."

During Cowperthwaite's "nothing doing" tenure, Hong Kong's exports grew by an average of 13.8 percent a year, industrial wages doubled, and the number of households in extreme poverty shrank from more than half to 16 percent.

"It would be hard to overestimate the debt Hong Kong owes to Cowperthwaite," said economist Milton Friedman. And it would be hard to overestimate the debt Hong Kong owes to the Chinese people who sanctioned and supported what Cowperthwaite was doing or, rather, doing not. Because Hong Kong did not get rich simply as a result of freedom and law. Economics is easier than economists claim, but its not as easy as that. Chinese culture was a factor in Hong Kong;s success. And yet, almost by definition, Chinese culture must have been a factor in mainland China's failure. Culture is complex. Complexities are fun to talk about, but, when it comes to action, simplicities are often more effective. John Cowperthwaite was a master of simplicities....Hong Kong does not have import or export duties, or restrictions on investments coming in, or limits on profits going out. There is no capital-gains tax, no interest tax, no sales tax, and no tax breaks for muddle-butt companies that can't make it on their own.

http://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/2004_National_Trade_Estimate/2004_NTE_Report/asset_upload_file343_4771.pdf#search='Hong%20Kong%20independent%20economy'