•What are called overpopulation problems result from socialistic government practices that reduce the capacity of people to educate, clothe, house, and feed themselves
#49
“RESOURCE-POOR COUNTRIES NEED STRONG CENTRAL PLANNING TO DEVELOP”
BY LAWRENCE W. REED
Countries are well cultivated, not as they are fertile, but as they are free.
—Charles de Montesquieu
THREE CHEERS FOR HONG KONG, THAT TINY CHUNK OF SOUTHEAST ASIAN ROCK. For the twentieth consecutive year, the Index of Economic Freedom—compiled by the Wall Street Journal and the Heritage Foundation—ranks Hong Kong (HK) as the freest economy in the world. Its success is an intellectual embarrassment to the progressive ideology.
Though part of mainland China since the British ceded it in 1997, HK is governed locally on a daily basis. So far, the Chinese have remained reasonably faithful to their promise to leave the HK economy alone. What makes it so free is music to the ears of everyone who loves liberty: Relatively little corruption. An efficient and independent judiciary. Respect for the rule of law and property rights. An uncomplicated tax system with low rates on both individuals and business and an overall tax burden that’s a mere 14 percent of GDP (half the U.S. rate). No taxes on capital gains or interest income or even on earnings from outside of HK. No sales tax or VAT either. A very light regulatory touch. No government budget deficit and almost nonexistent public debt. Oh, and don’t forget its average tariff rate of near zero. That’s right—zero!
This latest ranking in the WSJ/Heritage report confirms what Canada’s Fraser Institute found in its latest Economic Freedom of the World Index, which also ranked HK as the world’s freest. The World Bank rates the “ease of doing business” in HK as just about the best on the planet.
To say that an economy is “the freest” is to say that it’s “the most capitalist.” Capitalism is what happens when you leave peaceful people alone. It doesn’t require some elaborate and artificial, Rube Goldberg contrivance cooked up by tenured central planners in their insular ivory towers. But if we are to believe the critics of capitalism, HK must also be a veritable Hell’s Kitchen of greed, poverty, exploitation and despair.
Not so. Not even close.
Maybe this is why progressives don’t like to talk about Hong Kong: It’s not only the freest economy, it’s also one of the richest. Its per capita income, at 264 percent of the world’s average, has more than doubled in the past 15 years. People don’t flee from HK; they flock to it. At the close of World War II, the population numbered 750,000. Today it’s nearly ten times that, at 7.1 million.
The news that the HK economy is once again rated the world’s freest is an occasion to celebrate the one man most responsible for this perennial achievement. The name of Sir John James Cowperthwaite (1915–2006) should forever occupy top shelf in the pantheon of great people. Some of us just write about ideas of liberty and free enterprise. This guy actually made them public policy for millions of citizens.
The late Milton Friedman explained in a 1997 tribute to Cowperthwaite how remarkable his economic legacy is: “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.”
A Scot by birth, Cowperthwaite attended Merchiston Castle School in Edinburgh and then studied classics at St. Andrews University and at Christ’s College at Cambridge. He served in the British Colonial Administrative Service in HK during the early 1940s. After the war he was asked to come up with plans for the government to boost economic growth. To his credit, he had his eyes open and noticed that the economy was already recovering quite nicely without government direction. So while the mother country lurched in a socialist direction at home under Clement Attlee, Cowperthwaite became an advocate of what he called “positive non-interventionism” in HK. Later as the colony’s Financial Secretary from 1961 to 1971, he personally administered it.
“Over a wide field of our economy it is still the better course to rely on the nineteenth century’s ‘hidden hand’ than to thrust clumsy bureaucratic fingers into its sensitive mechanism,” Cowperthwaite declared in 1962. “In particular, we cannot afford to damage its mainspring, freedom of competitive enterprise.” He didn’t like protectionism or subsidies even for new, so-called “infant” industries: “An infant industry, if coddled, tends to remain an infant industry and never grows up or expands.” He believed firmly that “in the long run, the aggregate of the decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is likely to do less harm than the centralized decisions of a government; and certainly the harm is likely to be counteracted faster.”
Ever since the days of John Maynard Keynes, economics has been cursed by the notion that human action should be distilled into numbers, which then become a “pretense to knowledge” for central planner types. In many collegiate economics courses, it’s hard to tell where the math leaves off and the actual economics begins. To Cowperthwaite, the planner’s quest for statistics was anathema. So he refused to compile them. When Friedman asked him in 1963 about the “paucity of statistics,” Cowperthwaite answered, “If I let them compute those statistics, they’ll want to use them for planning.”
If that sounds quaintly backward or archaic, let me remind you that the biggest economic flops of the past century were both centrally planned and infatuated with numbers. Whole ministries were devoted to their compilation because even lousy numbers gave the planners the illusion of control. But not in Hong Kong!
Statistics, no matter how accurate or voluminous, are no substitute for sound principles. Powered by an abundance of the latter under Cowperthwaite, the HK economy soared during his tenure. Writing in the November 2008 issue of The Freeman, Andrew P. Morriss noted that in his decade as financial secretary, “real wages rose by 50 percent and the portion of the population in acute poverty fell from 50 to 15 percent.” It’s hard to argue with success. After Cowperthwaite’s retirement in 1971, less principled successors dabbled in social welfare spending but they financed it through land sales, not increased taxation. Tax rates to this day are right where the old man left them.
(Editor’s Note: The original version of this essay appeared in FEE’s magazine, The Freeman, under the title, “The Man Behind the Hong Kong Miracle” in February 2014).
SUMMARY
•Hong Kong, a small rock with little resources but still a lot of economic freedom, shows that freedom goes a long way to ensuring progress no matter how few your resources are
•The biggest economic flops of the past century were both centrally planned and infatuated with numbers—in spite of being resource-rich
#50
“PEOPLE LOVE THE ROBIN HOOD STORY BECAUSE HE TOOK FROM THE RICH TO GIVE TO THE POOR”
BY B. K. MARCUS
We are the sons of these serfs, of these tributaries, of these bourgeois that the conquerors devoured at will; we owe them all that we are.
—Augustin Thierry
A CARRIAGE IS BROUGHT TO A HALT ON THE ROAD TO NOTTINGHAM. THE NOBLES within peek past the curtains to see bandits on all sides. They scan the grimy faces of the hostile woodsman to see if they can recognize that famous outlaw, that protector and avenger of the poor and downtrodden, that paragon of armed social justice, that singular personification of class conflict: Robin Hood.
Generations have grown up with a heroic ideal of robbing from the rich and giving to the poor. Robin Hood’s hawk-eyed archery and fierce swordplay make him popular with kids, and his social conscience endears him to their parents.
Only those who are particularly wary of an apparently “progressive” message in the legend take exception. Socialists, of course, make the m
ost of Robin Hood as a hero of the underclass and a medieval precursor to modern Marxist class theory.
Because Robin Hood is a centuries-old folk hero and not a historical figure, each generation has been able to reinterpret the legend to fit its agenda. It was only in the nineteenth century, for example, that Robin Hood amended his modus operandi to include giving to the poor. But if we look to the era in which his legend first “became genuinely popular,” according to historian Simon Schama, we’ll see that the classes in conflict don’t neatly fit the Marxist theory. They do, however, fit the older, now mostly forgotten libertarian class theory of French and American classical liberals.
Robin Hood’s story is now commonly set in the late 1100s while King Richard the Lionheart is away, fighting in the Crusades, but our earliest written record of the legend appears some 200 years later, at a time of drastic changes in the lives of both rich and poor—and in the relationship between the two.
The Black Death reached English shores in 1348, killing almost half the population by 1350. The survivors were, of course, devastated. Not only had they lost their friends and families; they lost any sense of order in the world. The Middle Ages were marked by a belief in permanence and predictability. For the commoners who made up more than 90 percent of the English population, the details of one’s life would have resembled those of one’s grandparents and could be expected to be the same for one’s grandchildren. Then everything changed.
The population became drastically smaller—especially among working people—but there was just as much gold, as many acres of farmland, and as many buildings and other artifacts of pre-plague England. There was, in short, the same amount of wealth in pre- and post-plague England, and only half as many people to possess it.
With fewer peasants to till the soil, landlords had to compete to attract the surviving labor. After many generations on the same few acres of land, healthy field workers were suddenly uprooting and moving to wherever they found the best opportunity. Market forces made the lives of working people immeasurably better—and the nobles who lost the bidding wars for their services didn’t like it.
As happens in every era of dramatic change, the economic has-beens appealed to the coercive power of the State to return conditions to a comfortable status quo ante.
The Statute of Labourers (1351) made it illegal for peasants to accept wages that were higher than pre-plague levels. Meanwhile, food prices skyrocketed, as we should expect from a doubling of the supply of money relative to food supply.
The poor, forced to endure hunger and shortages, could see ever more clearly that the source of their suffering was not just bad weather or pestilence; it was a political class growing rich from peasant labor.
And if the Black Death had destroyed the survivors’ belief in the security of an unchanging life, it also led them to question the supporting ideology of feudalism. The doctrine of the Great Chain of Being, which gave divine sanction to the aristocracy’s superior position in society and in the economy, suddenly seemed as uncertain as everything else.
An oppressed people with a clear enemy and a belief in the reality of change is a recipe for revolution.
In 1381, in response to a new poll tax to pay for foreign war, thousands of commoners took up arms and advanced on London. The uprising is remembered as the English Peasants’ Revolt, but as Schama notes in A History of Britain, “The ‘Peasants’ Revolt’ of 1381 was, in fact, conspicuous for the absence of peasants.”
The rank and file may have come from the bottom of the social hierarchy, but the leaders of the revolt were merchants and lawyers:
the sort of people, in fact, who . . . had a bit of money and sometimes even a smattering of book learning. Their trades put them in touch with worlds beyond their parish, and they knew how to make an army out of those one rung down on the social ladder. (A History of Britain, vol. 1, p. 246)
In the BBC documentary version of his book, Schama asks and answers a key question for our understanding of the era and culture that produced the legend of Robin Hood:
Was this a class war, then (a phrase we’re not supposed to use since the official burial of Marxism)? Yes, it was.
But was it really? Schama makes it clear that the class theory he has in mind is Marxist, and Marx makes clear that the inescapable root conflict is between socioeconomic classes—specifically between rich and poor—no matter what system led to the creation and distribution of wealth.
The Communist Manifesto opens with these lines:
The history of all hitherto existing society is the history of class struggles. Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed. . . .
In “Classical Liberal Roots of the Marxist Doctrine of Classes,” historian Ralph Raico writes, “On examination these opposed pairs turn out to be, either wholly or in part, not economic, but legal, categories.” (That is, categories created by political privilege.)
Not only can we see that that the Peasants’ Revolt was a battle between the productive class of commoners and the specifically political class that fed off their production; this division of sides was also clear to the rebels themselves:
“They were emphatically not a rabble,” writes Schama:
En route [to London], their targets had been carefully selected: estates belonging to tax collectors or prominent members of the royal council. . . . Any document bearing the green wax seal of the Exchequer was marked for destruction. It was an army that knew what it was doing.
If the Peasant’s Revolt had been a class war in the Marxist sense, we would have seen the so-called peasants targeting wealth in general. Instead, we see a rebellion led by an emerging bourgeoisie targeting the machinery of the oppressive State.
Marx was not, however, the originator of class theory, and his is not the only version of class war that can describe the events of 1381. As he wrote in a letter, “Long before me bourgeois historians had described the historical development of this class struggle and bourgeois economists the economic anatomy of the classes.”
The “bourgeois historians” were French and American classical liberals: Charles Comte, Charles Dunoyer, Augustin Thierry, and other disciples of Jean-Baptiste Say in France, and John Taylor of Caroline, William Leggett, John C. Calhoun, and other Jeffersonians in the United States. And their theory, unlike Marx’s revision, divided the people into a productive economic class and a parasitic political class: tax payers and tax consumers. Historically, these classes correlated (not coincidentally) to the oppressed poor and the oppressive rich, but the liberal class theory did not treat the distribution of wealth as the source of inevitable conflict; the historical division of the rich and poor was in fact a result of the political class’s coercive exploitation of productive people pursuing voluntary exchange in a free market.
We advocates of such voluntary exchange too often resist Robin Hood’s rob-from-the-rich morality, as we resist any talk of fundamental conflicts of interest between different classes. But the targets of Robin Hood and his merry men—like the targets of the Peasants’ Revolt—were rich from plunder, not production.
Like the radical liberals of the nineteenth century, the “peasant” rebels of the 1300s—when Robin Hood’s exploits fired the imagination of an oppressed people—recognized that their enemies were the tax collectors, legislators, and all other members of the political class.
Our intellectual tradition not only offers an older, sounder class theory with greater explanatory power than the now more familiar Marxist theory; it lets us join the English rebels in embracing Robin Hood as a hero of the productive class.
(Editor’s Note: The original version of this essay appeared in The Freeman in June 2014.)
SUMMARY
•Generations have grown up with a heroic ideal of Robin Hood robbing from the rich and giving to the poor but it was only in the 19th Century that he amended his modus operandi to include giving to the poor.
•Market forces
emerging with the breakdown of feudalism in the late Middle Ages made the lives of working people immeasurably better—and the nobles who lost the bidding wars for their services didn’t like it
•The targets of Robin Hood and his merry men were rich from plunder, not production
#51
“GREEDY CAPITALISTS TAKE ADVANTAGE OF PEOPLE IN NATURAL DISASTERS; PRICE CONTROLS ARE THE ANSWER”
BY DONALD J. BOUDREAUX
THE IMMEDIATE AFTERMATH OF A NATURAL DISASTER INEVITABLY BRINGS MUCH higher prices for staple goods, such as lumber, batteries, fuel, and bottled water. Just as inevitably, these higher prices are roundly decried as unjust and inexcusable.
Such price hikes are slapped with the derisive name “price gouging.” And even people who typically endorse markets often call for it to be outlawed. A recent example comes from Times of India columnist Swaminathan Aiyar, who describes himself as a market liberal. In his January 9, 2005 column, Aiyar condemned the price hikes that followed the devastating 2004 Asian tsunamis, referring to them as an additional tragedy visited upon already-suffering victims.
This interpretation of the price hikes is as unfortunate as it is mistaken. Let’s review here some basic economics of “price gouging.” Prices are not set arbitrarily. They are what they are for a variety of reasons. These reasons are summarized by the two words “supply” and “demand.” Prices reflect existing conditions of supply and demand. If the price of bottled water rises, it does so either because supplies have fallen or because people’s demand has risen. In the wake of natural disasters, both of these effects kick in strongly.
A natural disaster destroys inventories, vehicles, and infrastructure (including water-treatment plants and roads). Existing stocks of bottled water and of close substitutes, such as tap water, are reduced. Also reduced is the flow of supplies of water. Many of the roads and vehicles ordinarily used to carry bottled water to market are now destroyed. Less bottled water makes it to market in the devastated region. In short, supply falls significantly.
Excuse Me, Professor: Challenging the Myths of Progressivism Page 22