ABOUT THIS EPISODE

Neil Monnery, author of Architect of Prosperity, talks with EconTalk host Russ Roberts about his book--a biography of John Cowperthwaite, the man often credited with the economic success of Hong Kong. Monnery describes the policies that Cowperthwaite championed and the role they played in the evolution of Hong Kong's economy. How much those policies mattered is the focus of the conversation. Other topics include the relationship between Hong Kong and China and the irony of the challenges Hong Kong faced from U.S. and British protectionism.
English
United States

TRANSCRIPT

00:00:04welcome to Aecon talk part a library of economics and liberty I'm your host Russ Roberts at Stanford university's Hoover Institution our website is econ talk dot org for you can subscribe comment on this podcast and find links and other information related to today's conversation also find our archives
00:00:22we listen to every episode we've ever done going back to two thousand and six or email addresses male econ talk dot org we'd love to hear from today is September twenty eighteen and my guest is business consultant educator and author Neil moderate his director of ash ridge strategic
00:00:41management center at hold international business school before that he was a senior vice president and director at the Boston consulting group group his latest book is architect of prosperity is Sir John coppers weight and the making of Hong Kong which is our subject for today you're welcome to
00:00:58come talk thank you so what do you think to write this book most of us have never heard of John carpets wait %HESITATION he's not famous in the least he perhaps deserves to be and %HESITATION what cause you to think about writing and what did it take to
00:01:12actually write it given that there's not a lot of other biographies of the man and indeed I think it's thirty one so well I came across %HESITATION rely you I was worried off to the great crash as two of the problems that are caused by not having enough
00:01:29growth in the world and I wanted to see whether there were areas countries the like which should overcome battling had good levels of growth the moon I came across Hong Kong and as I learned more about Hong Kong this name coopers white %HESITATION campus way keeps coming up
00:01:47as the person who's responsible for the economic policy is %HESITATION on who really set the course for Hong Kong amounts what got me interested in it's a little background on on Hong Kong and coverage wait it's it's about %HESITATION a thousand square miles it's the size of Rhode
00:02:06Island for those you in America it's about three times bigger than New York city's five boroughs it's about fifty times the size of Manhattan and I was surprised at this in my mind it's just a little tiny rock with a lot of tall buildings but it has some
00:02:20actual up in space it is population tell me if I got this right at the end of World War two was about six hundred thousand and when it collapsed during the second World War food from for about million to four to six hundred thousand now and now is
00:02:35about seven and a half million that's right about three million in nineteen sixty so for those of us who don't have much background in the history of the island %HESITATION you know I know it was basically British and now it's Chinese %HESITATION talk about how it was run
00:02:54during the crucial period we're gonna be talking about which is post World War two %HESITATION until other hand over to the Chinese well it became British colony in about eighteen full in the eighteen forties is %HESITATION really he in many ways to support trade with China and in
00:03:11particular the opium trade but in the period we're talking about it was %HESITATION %HESITATION it's like a standard British colony %HESITATION run by governor %HESITATION supported by a set of civil servants %HESITATION many of whom were %HESITATION but some of it was sitting on the executive committee and
00:03:29then there are also unofficial members of of the executive committee on those of people who are appointed by the governor a typically local Chinese businessmen or something about %HESITATION we would balance house and give a bit of a sense as to what the local people thought goes is
00:03:45it was not a democracy in the normal sense of the word it was %HESITATION a company run by company and what kind of economic activity is there today it's famous for its banking and financial sector %HESITATION I was surprised to learn how economically active it was post World
00:04:01War two %HESITATION doing lots of other things yeah I mean it because of that original a basis of being %HESITATION %HESITATION entrepot ready for Chinese trade that's where the first hundred years of of of the economy well tell us a lot teller Lucia's when it entrepot is it's
00:04:19a it's a word that doesn't crop up much in American English rise so it's it's basically a trading hub %HESITATION so people trading will need to get stuff out of China all getting stuff into China would use it for warehousing shipping %HESITATION breaking goods things I laughed %HESITATION
00:04:37%HESITATION I'm I'm from that it had it started to build adjacent activities like shipbuilding and insurance and so on but in fact most about trade ended %HESITATION with on a lot of it ended with China when America %HESITATION impose sanctions on trade with China %HESITATION during the Korean
00:04:56War side %HESITATION %HESITATION facts about that in a sense destroyed about business in Hong Kong moved very quickly into trying to build a manufacturing base a million things like textiles but we make hang a mammal whack and so on and then it moved into electronics in the late
00:05:11to six days %HESITATION became very powerful in that radio news and a television and so on and then is as you say it's ended up being %HESITATION now by much of the bombs financial services on the services a call a me me is an interesting language back a
00:05:28minute ago I don't know but I don't think you intended to but it's a common language that we always use in these kind of contacts that somewhat misleading what you said Hongkong then moved into or maybe even said he said decided but but you implied it was sort
00:05:43of a top down decision of course one of the themes your book is that there's remarkably little economic planning of the %HESITATION standard kind does so the things you're talking about the move to textiles moved electronics those were the result of the independent decisions so hundreds or thousands
00:06:01of entrepreneurs and and business people many many or most I guess almost all Chinese very much so so so that is absolutely right so it's %HESITATION at various points people in governmental people in business suggested that it would be good to have some top down planning to see
00:06:19which side because they wanted to move into or whether or not they had %HESITATION grow in certain sectors to fall under that full they should be constrained in some way and when the %HESITATION I was the battle of ideas that can help with weight was so strong all
00:06:32now and really set the course for Hong Kong no glass in the top down fashion but rather allowing %HESITATION the virus on for knows the people who are deploying their own capital to make those decisions as to what to invest some of which what some of which didn't
00:06:47work March a bottom up %HESITATION entrepreneurial system and also very much allowing the you know the creative destruction of those industries that no longer %HESITATION will %HESITATION would competitive advantage because the compass white was always being %HESITATION assailed by Paris people who wanted him to intervene %HESITATION into
00:07:07a supporting one one sector or nothing he always turn them away and said you know if it's a good industry it'll work and if it's a bad habit street what works there were twenty nothing to do with me about I'm not was a very powerful stones %HESITATION through
00:07:23that period of the fifties sixties and others how long lost woods in one piece of that economic history wanna make sure a mansion and then we'll turn to covers weights roll on his various duties over this time post war period but one fascinating %HESITATION thing that happens all
00:07:38over this time period is that Hong Kong becomes a very very important exporter of of textiles and yarn and and %HESITATION and various stuff for making clothes and gets makes political challenges for the two great leaders of free trade in the post war era of the United States
00:07:59and and United Kingdom and yet %HESITATION they of course violate as they often do their own so called free trade principles %HESITATION for domestic political reasons to protect died the case of England I think it is at Lancaster sure blackish area like a sure and then in America
00:08:17I'm sure was the Carolinas and %HESITATION in that period probably although it still could be some textile activity in New England but the most of it moved to the Carolinas by that point it out and so here this irony the two leaders of the so called free trade
00:08:31era are putting tremendous pressure in this during this time to limit Hong Kong's exports and Hong Kong although it wants to not do that is forced by its relative lack of power even though it's a Hong even if it's a British colony %HESITATION domestic British political %HESITATION import
00:08:54is such that right bad word %HESITATION significance is such that they have to be %HESITATION they have to deal with quotas in both the United States and England that's right I mean the textile industry really started up in the in the in the late nineteen forties %HESITATION as
00:09:10trying to %HESITATION itself turn tomorrow and communism many of the %HESITATION entrepreneurs in that sector decided to relocate into Hong Kong number dead and they brought with them skills and %HESITATION machinery and understanding granted mystery started to grow very rapidly %HESITATION and %HESITATION as you as you rightly
00:09:32point out both the UK and the US had large %HESITATION heritage %HESITATION textile industries which were complaining continuously around a how how could Hong Kong do it and they came up with the most remarkable set of hypotheses as to you know they were doing it but losing money
00:09:49or they were treating in some way %HESITATION where's the reality was there was simply you know using more efficient machinery and use it more hours per day and the like but I put it as you say a huge amount of pressure on the British and the American political
00:10:03system because they have to stay true to their involvement with gas and like to the World Trade Organization and so they have to get home come to voluntarily agreed to limitations in the the exports %HESITATION which which was also straightforward but %HESITATION how about million in the in
00:10:21the U. K. in the nineteen sixty is %HESITATION was very %HESITATION concern about that and Kennedy in the US %HESITATION who was running for election that getting elected very concerned also to keep that textile constituency so you're right these great bastions of free trade when it comes to
00:10:40the crunch not surprise and they %HESITATION find it very difficult to navigate to political and economic a course through these difficult as those of of dislocation of the domestic industry is a certain irony there obviously there's another irony which is that in many ways Hong Kong is is
00:10:58between a rock and a hard place one of those is China the other is the out of the U. K. with which is now twelve thousand miles away fifteen I don't know how far along way away thing which %HESITATION you go %HESITATION but there it's even though they're
00:11:14snug up against China they are involved with the rest of the world because of the nature of of their economic activity yeah very a very open economy %HESITATION connected %HESITATION to to to markets throughout the world but as you say %HESITATION from %HESITATION from a political strong standpoint
00:11:34been this difficult position of being a British colony and in a way even worse a British colony the how to have a clock ticking on it because there had been an agreement to hand back of the the %HESITATION key parts of Hong Kong to China in in nineteen
00:11:49ninety seven and so with time was passing through the sixties and seventies as hello increasingly concerned about what that would be as a house Hong Kong would get returned to China %HESITATION so yes a very a very complicated political situation and one which %HESITATION required %HESITATION under a
00:12:08certain amount of %HESITATION dexterity amongst the governor and %HESITATION yes civil servants and song in Hong Kong to manage politically yeah I would just mention one of my favorite lines from your book was %HESITATION that that nineteen ninety seven handover was negotiated in eighteen ninety seven I can't
00:12:28I I I wrote this down somewhere I can't seem to find the exact quote but eighteen ninety seven the the British negotiator decide in a hundred years because a hundred years is like forever but in nineteen ninety five or nineteen seventy five that was definitely not the case
00:12:49exactly exactly seem like great later the time but yeah for the people actually left dealing with that a hundred years later it was a great a great a great pressure in how to how to manage it into the system that is involved %HESITATION since nineteen ninety seven and
00:13:04for the last bit of background tell us about Mr Kerr persuade himself %HESITATION and he was Scottish %HESITATION Intel is what his responsibilities were in Hong Kong and when and when he retired and %HESITATION give us feedback on the man he he came from a middle class family
00:13:23%HESITATION who'd been involved in the things like a tax collection and so they installed in Scotland a lot of the people in involved in running the British I'm Bob does Ali came from Scotland and %HESITATION he he was one of them he was a very bright guy he
00:13:40he read the classics Latin and Greek %HESITATION of Santander's university got a first he then read the same a gain acts %HESITATION Cambridge but missed a game getting a first means good for those he loves Supergirl now %HESITATION fade into very well he he could reads %HESITATION Greek
00:13:58and Latin texts %HESITATION directly and he did through the rest of his life this one is also reading %HESITATION French tax in the eighteenth century French is also he he was very odd because I think if it hadn't been for the second World War he would probably have
00:14:13ended up Sir classics teacher a university or leading private school about the second World War intervened and %HESITATION he %HESITATION he then ended up %HESITATION trying to become a part of the civil service could that the Hong Kong could that cool which is a very elite form of
00:14:34%HESITATION civil servants who %HESITATION marked out for the house promotion in the light he he fortunately was on his way to Hong Kong as a gold %HESITATION captured by John the to the Japanese and so he didn't end up in Hong Kong otherwise he probably would have been
00:14:47in Thailand for the whole of the wall %HESITATION but instead arrived in nineteen forty five as the US Japan agape bills surrender gave the colony back to Britain and his first job was first substantial job was to try and get industry %HESITATION back on its feet and get
00:15:05supplies come again %HESITATION to the %HESITATION called in a and so he spent a little time actually running a department which %HESITATION was involved in trading involved in purchasing a rice %HESITATION fuel and the like and I think that was a very formative influence for him later on
00:15:23his life to see how difficult it was for a set of a civil servants to run a trading business from the lack he then became deputy financial secretary which is finance minister effectively between nineteen fifty one and nineteen sixty one and then he was financial secretary between nineteen
00:15:41sixty one and nineteen seventy one save about twenty five years he was up the central to the economic policy formulation of that was going on in Hong Kong %HESITATION both because of his role but also because of his intellect and his %HESITATION his strength of feeling about what
00:15:58the right approach walls for Hong Kong now is famous for its free market policies it's been held up by Milton Friedman and others as an exemplar of of of sort of a minimal laissez faire Adam Smith the in our state one of things I was surprised about in
00:16:18reading your book was how interventionists they were not turns out to not so interventionist but relative to what I had sort of believed %HESITATION been told and I you know if this were my own biases come in at being a free market person I'm always like the idea
00:16:32that Hong Kong's free market policies explain their great explosive growth %HESITATION but it's a little complicated so give us a summary of the role of government in this post war period say of coppers weights involvement say obviously right after the war there were some price controls those those
00:16:52go away but once that we we've gotten past the worst of the post war era the devastating we were covered they recover from the devastation of the war and and the island was was devastated %HESITATION and and a lot of the economic infrastructure was destroyed once that starts
00:17:09to come back try to describe how active or inactive %HESITATION government was it occurs as an irony here which is that there's a bunch of quote experts running the %HESITATION the place by not running it order by running at less than elsewhere or so tells give us a
00:17:30feel for how much running it they were doing yeah I think I think one of the things that some probably struck striking you from reading the book is on is that there are certain sectors where they get quite a large amount of involvement in different ways so for
00:17:45example Hong Kong doesn't have the ability to collect enough walks up and says new and fresh water I'm not surprised that the needs to be a huge effort to build reservoirs and water collection of facilities and the like and the government becomes quite involved typically in a regular
00:18:04tree basis on some of that and their goal of two things like telephone %HESITATION of the telephone structure because they viewed view this is not true monopolist but in terms of the %HESITATION normal trading a call of the %HESITATION %HESITATION trading %HESITATION manufacturing the services and the like
00:18:25land as relatively light involved but %HESITATION usually use pop possibly some some level of regulation %HESITATION but even that is generally relatively light %HESITATION and if it's some places I get someone to problems and for example banking but %HESITATION by and large is a relatively light both within
00:18:43the app and allows that part of the economy to %HESITATION operates three markets are the domestic markets will because Hong Kong has always been a free polls and this new import duties or tariffs %HESITATION the world pocket was obviously very important in many sectors and provided the discipline
00:19:04for a high efficiency at the big thing for what %HESITATION for example the day exporter textiles to the US and the European Union as we talk about say there's a bad one of those sorts of parts the economy are all very much more %HESITATION left in the hands
00:19:20of the entrepreneur as %HESITATION a I'm I'm like everywhere I suppose there's a growing a provision of some of the social elements education health of the like old over in Hong Kong in in in general but has been slower in terms of that profession %HESITATION being put in
00:19:40place of and it has been elsewhere and indeed one of with whites %HESITATION key points his ready to try an intro about the foldable and thought about spills relatively slowly over time rather than being for example %HESITATION put in place for deficit financing of the like so %HESITATION
00:19:58I think overall it's it's I think it would still be fed say it's quite the government light or has been quite a lot government lights economy about fifteen percent of GDP fifteen twenty percent of GDP %HESITATION was spent by the government of the sort of pair it with
00:20:15talk about today that's probably I guess thirty to thirty five percent in the US and typically forty to fifty percent in Europe so still that but %HESITATION it's it's a smaller I mean could before it was not from manta kisti de do believe that there should be a
00:20:32couple uncertain that it should have certain important roles %HESITATION in in terms of %HESITATION providing %HESITATION general full %HESITATION basic support for people in the %HESITATION the likes but but it was the other smaller scale van was happening at that time in Europe and the tax system is
00:20:56that there's a ton of little taxes which she abolishes a bunch of them whenever they run a surplus %HESITATION he he gets rid of attacks on televisions or whatever it is but yeah the the larger more significant axes there's an income tax correct it's is it a flat
00:21:12tax above a certain amount is that the right description it's a it's a tax which tops out of fifteen percent of income tax during this period or lower got browsing %HESITATION from the time we talk about to about fifteen percent %HESITATION and if you were less than that
00:21:29you could pay both the lower rate and of course about half the population don't pay income taxes told so %HESITATION that's the that's the sort of level you need to %HESITATION I'm one of the interesting things about Hong Kong tax system throughout this period and on up to
00:21:47now is you got a separate tax on your income then you get a different tax on property %HESITATION earnings which bears no relationship it's all consolidated into your income earning part of the like so you have different schedules for tax which means that the overall tax rate is
00:22:06is is much lower because you got to allow each one and by the way that's not much different than the United States today although it's a little misleading about a third to half depending on how you define the denominator when you're looking at tax returns are actual people
00:22:26pay no income tax United States they do pay payroll tax though quite a quite a bit right all workers to the United States there lied to and told that that's to pay for their so security impacted goes into the government coffers to spend out the door pardon me
00:22:42for that courage honesty there %HESITATION but there's no payroll tax in Hong Kong from correct and the other part that I found extremely interesting we should gone into more detail is that even though the government's providing say education or healthcare it's not providing it universally and it's often
00:23:03charging for it so even though the government schools their government run schools they are there's a fee and I because I I know that because you mentioned it one point they cut it in half when things were times are good and start a little bit about how covers
00:23:19wait and by the way you pronounce it now covers waiting for its weight but that's because you're you mentioned before we started recording that it's not a hundred percent clear what his actual name is but Mr through April of you yeah Mr coverage wait %HESITATION he was very
00:23:34insistent on not %HESITATION providing welfare to the middle class and the rich through government services I think I think months absolutely one of his key believes he will he was passionately concerned with helping the most needy and society %HESITATION but was very worried third if %HESITATION facts start
00:23:54to creeping into providing a lot of support full middle income people that would both craze incentive problems %HESITATION but would also slow the growth rate is legit when something like this which is you know Hong Kong is clearly over this period a developing economy %HESITATION he believes that
00:24:12if the left with enough income to us in surplus to reinvest in the opportunities that will push up the growth rate but going forward and therefore he stops toxic lacked in order to provide free education for %HESITATION for the middle classes then that will be out the expense
00:24:30all future growth which he sees as central to his his mission if you like to try and push the gray three top in in in Hong Kong you education is actually the the the way the most dramatic %HESITATION because he he is he at one point says you
00:24:45know he believes education is a very good thing but even %HESITATION even good things have to be paid for and so his strong preference is not to provide universal %HESITATION university free educational indeed and nothing else Rosa to charge market prices and then to give complete subsidies to
00:25:03the most needy server does very targeted use of state funds taxation right is very well targeted on today's need it the most here various points loses that battle indeed lost that back then in due course in education %HESITATION but he is starting point is nearly always to say
00:25:22well let's try to be clear about what the market costs of these things are and try as far as possible to put that into the market price Bob's wallst getting %HESITATION %HESITATION subsidies old problems for those who are most in need and who couldn't otherwise afford it it
00:25:38it also affects for example is the the he has a very interesting %HESITATION sort of arguments about water provision come about water %HESITATION which you know if you if you want twenty four hour water provision in in Hong Kong %HESITATION in the fifties and sixties about so very
00:25:53much more expensive a set of capital expenditure that would be needed but if you wanted say water provision up four or five or six hours of the day and he's he says well you know I I I'm not sure that it's the right I mean to have a
00:26:07twenty four hour water provision huge amount of resources that we would be expended on that and it would make it at market prices unaffordable for the least well off in our society so he he would much much prefer for example even on something old provisions I will let
00:26:22the state %HESITATION into being to try and install the some basic level that can be afforded by even the most need in society and then allow the markets and private full is to provide things that are beyond that and always so his battles in defining the you know
00:26:39the the envelope with the state are are around those sorts of issues about who should be guessing at how much the truth the biggest thing is our way to do it %HESITATION while still allowing market forces to work I'm gonna read a quote for memories from a coach
00:26:53later as well but this one's related to what you just mentioned he says the following I find myself considered inhumane or on progressive or sometimes merely odd I serve my colleagues as well as members of the public when I suggest that it is not axiomatic that a twenty
00:27:10four hour supply in all circumstances must be our media Dame I cannot myself see any grounds for the belief that a twenty four hour domestic water supply is an an alien of all right of civilized man it may be if you can afford it and is prepared to
00:27:25pay the price so I give you a you know as you as you said if I mention it gives you a really good look into his Las fee of a government very very odd and aggressive by modern even the even his day which I think is what's one
00:27:41of the fasting things about the book is that he's a spouse saying a fairly limited fuel government at a time when the world is very much turning toward first deficit spending carousel Connor circle collectivity as well to help get rid of recessions or downturns as well as an
00:28:00increasing role for government especially in his home %HESITATION yeah market of the United Kingdom where government is nationalizing so coming much more socialistic and he's standing really as work the tide of of economic history at it so even though right what else what I found testing it about
00:28:18the book is that even though it isn't a free market paradise I think it's been portrayed by some it relative to the rest of the world its way out of step exactly in another important thing is he's not doing it just because he's mean old horror I'm calling
00:28:35it anyway %HESITATION he's doing it because he believes that if the state of the the level of spending %HESITATION the the status and gaze with is low %HESITATION that will enable more funds to stay in the private sector and he hopes %HESITATION believes that those will be reinvested
00:28:52in good to %HESITATION capital projects and through that economic growth will be higher and left for his his his belief is that by being constrained in the near term you can have a set of positive effects in the longer term %HESITATION and he's very struck by the power
00:29:11of %HESITATION you know compounding %HESITATION of the light curtains %HESITATION therefore understands that if you can get the growth rate today that will have greater facts wages over the long term %HESITATION great effects for employment I mean if if if you remember this is the time when China
00:29:27is going through its Cultural Revolution %HESITATION with a lot of %HESITATION refugees turning up on the doorstep in Hong Kong every day and he's whining about well how do I get in you know how we as a society can employ these people and how they gonna find a
00:29:41role and so he's got a very different %HESITATION trade awful set of preferences whereas I think the molten politician wants to give satisfaction now on a wide range of issues he's sort of saying well actually if we hold back on that %HESITATION we may be able to get
00:29:57high levels of growth we would otherwise have and we sort of need those to deal with the large influx of people to deal with aspirations to deal with the I'm spending that we as a society we want to have just as an aside we recently had an episode
00:30:11%HESITATION with Frank to Qatar on %HESITATION Mao's great famine which is roughly this during this period in his right eye in nineteen sixty one I think they have a lot of the famine but but covers weights involved before that during it after and I just a technical question
00:30:28how easy or hard was it to get into Hong Kong during this time period what were the immigration %HESITATION I'm sure there are a lot more people want to get get there than could but a lot did so how was that managed when they went through it when
00:30:46three swings %HESITATION server as points %HESITATION prime trial to see to the coach revolution it was relatively easy %HESITATION %HESITATION to to get into Hong Kong has long long blonde border %HESITATION with with China by that time %HESITATION but it tightened up enormously because there was a huge
00:31:03wave during the Cultural was as as you know from lots of pop costuming the effect on people in China of the cult revolution was was was very wiring %HESITATION with many people dying in spite of starvation in the live concert that was a great to mom to try
00:31:19to try to get into Hong Kong %HESITATION so that was managed %HESITATION as best they could actually technically I think it it's it's actually the great leap forward that leads to the fan yeah the culture Lucien's the the next now this %HESITATION stop but but cover threats in
00:31:36there during that too so it's all right yeah yes I thought try he I mean the first one of course was the hundred flowers campaign in fifty six wet when miles said he'd like to get sort of feedback but then he didn't really like the feedback he calls
00:31:50about about sort of and it %HESITATION and then there was a great leap forward %HESITATION which was the the more I wanna than than the coach revolution but I think it's very it's almost a fascinating contrast between what's going on in Hong Kong at that time %HESITATION where
00:32:06just a few miles away across %HESITATION you know that border that point %HESITATION that is very different set of policies being enacted so you you can contrast the you have the the success if you like over this paired in Hong Kong with some of the issues the trial
00:32:23about that time and of course there is selection bias that Iran cars getting somewhat I mean it's not obvious which way it goes because Hong Kong's getting both the most entrepreneurial people probably because there's very little scope for entrepreneurial activity in China at this time but they're also
00:32:42getting just poor pitiful people who are getting abused now courses you say they're different Isaac again in an hour it was hard for them to get in %HESITATION all this raises a fastening question which %HESITATION we could spend the rest of time on I don't want to but
00:32:57it but it it needs to be mentioned which is the following but I'm I'm an American I've been to a lot I've been to England and when I go I'm struck by how an easy young young people are with C. R. colonial heritage of of British policy so
00:33:23for example might be my favorite example as I mentioned there before is the British Museum it's %HESITATION it's basically the just just it's a bunch of looting and Spencer after that the board yeah army I did over armed forces that over time and but it that's about that's
00:33:40the embarrassing downside part shameful %HESITATION the positive thing is they've preserved at all for the world and displayed in a magnificent way which is why they refused to give back the Elgin marbles if that's how you pronounce ultra it's so which of the Greek %HESITATION sculptures from the
00:34:02%HESITATION Parthenon for could have that right he I think I think that's right %HESITATION but anyway it's magnificent and it's also not so nice that England has become the storehouse of cultural history at the same time in its administration of its various colonies well that night states yeah
00:34:24we we didn't like it so we had a revolution and and we got called freedom other places took a lot longer a lot of people died a long way they're warriors terrorists bad policy %HESITATION some people defended it as a form of of paternalistic necessity because the rest
00:34:40of the world was too uncivilized and we look back on that now most westerners I think with shame which is understandable any yet in Hong Kong doesn't on as far as I can tell in this period that we're talking about we're not talking about eighteen fifty one England
00:35:00wage war against China's took stuff we are able ally Congo and but in the administration itself I kept thinking what they what were they trying to do what was there you know any can now so are they maximizing what were their goals %HESITATION was it took it sounds
00:35:18like it was to raise the living standards of the people who live there which makes and they were not a democracy they did have this the on officials are the the advisory board but they were just advise report %HESITATION what was it benign dictatorship was it %HESITATION kind
00:35:39hearted day eight it's weird to be reading about Mr coverage wait who's the a bureaucrats bureaucrats a great mind but still he's just he's there is run in the economy may be with us very light hand when he's not trying to get reelected so it doesn't have to
00:35:56count out anybody and yet you do have to ask you know what was success for him and and who look who's his what we're in center city face it's a long rambling intro questions so responded there is like a but I think you're right there's a there's a
00:36:13there's a mix of unease about some of the elements of %HESITATION certainly that earlier %HESITATION colonialism %HESITATION I'm not I'm not told one level so you pans out into the spirit and we we have a I think a on these about Bob and also on these about the
00:36:32%HESITATION limited democracy that existed in Hong Kong but I think there's also an interesting is exactly the same as an interesting element to the story particularly over this period where I I think having it read through the archives and some I think they were mostly quite good motives
00:36:49%HESITATION from the people involved you you come all the Seahawks whether they should have been involved with that should have the most self determination of stone %HESITATION the wrong but I think actually many of the motives of people I compass way to various governments arrest points all on
00:37:06to try and do a good job for the Hong Kong people in the fairly clear and %HESITATION if I could find a clear way and and often when they clash with %HESITATION the British government or with %HESITATION senior politicians will see the British civil servants but located in
00:37:25Britain they very much take the side of the Hong Kong people in the long term side phone calling people and %HESITATION Michaels is a lot of problems over over time because they they actually %HESITATION you know on for example how much how much people likely should pay for
00:37:40defense %HESITATION they would have complete arguments with the British civil service saying well we you know we don't think local people who should pay that much installed so it definitely created a little bit for themselves %HESITATION a bit of an objective %HESITATION to try and do well for
00:37:58the Hong Kong people to maximize the progress of our society %HESITATION but is it this is a very much in in enabling facilitating way that's not to say that you know if that was true obviously as you were saying that I was obviously not true at all times
00:38:16and in all places of say you know I or places where there was enormous resource resource extraction or yeah yeah so this is definitely not an attempt to collect the say here this is a good bottle of government to affect the things the subject it is an interesting
00:38:34Perry was a quite a stable economic policy all for some odd reason this happens %HESITATION but here's what happens because you have that economic policy being stable %HESITATION how full full by fifty is also the but has been %HESITATION and it is a site the old set of
00:38:51circumstances that have allowed such stability and economic policy that is what gives it its with part of the interest in terms of the bachelor experiment that came out of %HESITATION so you think about it save China in eighteen fifty and and England in eighteen fifty verses China in
00:39:10nineteen fifty and England in nineteen fifty in in a later period I mean China was a very un modern country in eighteen fifty it it it had an enormous %HESITATION probably I stand living well to the restaurant for a while then it closed itself off from the rest
00:39:28the world this is my simple narrative and they kind of stagnated in the rest of world had the this revolution and all of a sudden we're nineteen fifty and finally trying to get some a big place and it's hard to run a country you don't really run China
00:39:47and in any real sense even today I'm not sure you can run China Eminem at the time I'm just about just figure out what's going on we are given the state of technology and and and and understanding but it some point it's pretty clear that now is is
00:40:03in charge and that China is a growing or wants to be a growing power in the world and it's weird that they didn't just take the island over now I know they don't want a war with it with England in nineteen fifty or nineteen sixty but when you
00:40:18talk about the defense of the island York what is it is the bridges the British fleet sit near there to try to do is get to do anything if China we want it now I think I think %HESITATION off the sofa Sir prior to nine frontal sexual tool
00:40:32that was %HESITATION the concept to defend it but the at Churchill before the second World War %HESITATION %HESITATION knew perfectly well the Hong Kong was indefensible %HESITATION in about point from Japan but the same is the same is true late from from China and if China had wanted
00:40:50to take it back by force ready left off the off the side will pull that would have been possible side %HESITATION I don't think it would have been defendable %HESITATION and and %HESITATION at the at that time we were talking about in terms of the %HESITATION culture revolution
00:41:04the beginning of the cultural pollution in the so sixty six sixty seven period %HESITATION the British government even had a plan as to how they would evacuate Hong Kong %HESITATION and %HESITATION retreat from Hong Kong should that happen %HESITATION China also had power for some to cut off
00:41:23the water supply and the like so that you know most of the fatty precarious situation required %HESITATION having trying to at least on side or at least to the extent the doubletree invade %HESITATION in that period of units of St nineteen sixty all what's fifty I understand that
00:41:41you wanted to sell stuff into China and you wanted to take stuff from China tea and other things but yeah in nineteen fifty you start to think the choirmaster thinking what to sing when care one of the reasons is such that they don't I mean in in in
00:41:57my store soon in the nineteen fifties the fifties and sixties Britain is %HESITATION getting our kids retreat to the case for treating so it it's it's it's all in Hong Kong is the only east of sue is this little phrase walls %HESITATION major colony that it remains %HESITATION
00:42:13Singapore %HESITATION is %HESITATION you notice is given independence has almost all the %HESITATION places %HESITATION leaving really just Hong Kong so again it's a it's a normally %HESITATION in many ways the class was retained and I think that's partly because of the original treatise that said it would
00:42:32be British until nineteen ninety seven %HESITATION and also you the strength of feeling and Hong Kong %HESITATION and the number of people in Hong Kong who did not wish to point Chinese yeah yeah yeah so %HESITATION %HESITATION so I I think it is an anomaly there was you
00:42:49know anything it's that full something that ran its course for longer than %HESITATION based based %HESITATION Colin is %HESITATION date %HESITATION rob a grand plan if you like in that paired it's funny you were when I was talking about the British colonial period ours I was thinking in
00:43:07the back of my mind of the white man's burden director Kipling palm and when you say east of Suez Kipling doesn't get enough exposure on econ talk so I'm gonna do this from memory I can't %HESITATION I'm gonna gonna have maybe it'll help me that the line in
00:43:22its from the road to Mandalay I think he says send me somewhere east of Suez were the best is like the worst were there ain't no ten commandments and a man can raise a thirst right so there was a breast thank you well I could be treated you
00:43:36don't really know but yeah but %HESITATION in I could remember ten commandments **** reciting it but %HESITATION there was a different time to as being of course eight need dropped out east of Suez which was India %HESITATION %HESITATION all the other areas Singapore Singapore Hong Kong what what's
00:43:57a British activity east of Suez were so %HESITATION I think interests that shot I would speculate that America actually was much king of the Britons retain home call I think you're right %HESITATION because it's how I mean the largest consulate that America had in the world was Hong
00:44:16Kong %HESITATION about time so %HESITATION I I think there was probably some listing activity going on they had a lot of employees we they probably weren't just stamping things they probably would say so %HESITATION I I think that that that about time where where if you remember the
00:44:33reason for mentioning soon his was obviously America didn't support Britain from sweating Brigham femmes a tried to retake control of service about led to the cook if if you live but the strategic of an inability to retain the empire east of incidents but I think America had a
00:44:52slightly different view on on the value of of of Hong Kong so if there's a aside from the for that and I encourage listeners to watch the first season of the crown the Suez Canal %HESITATION crisis is is covered in some detail on how accurate is the is
00:45:10pretty accurate like this well not quite accurate it's a great program by the way I look but I have no interest in British royalty and I found it %HESITATION I couldn't stop watching as final I I feel who in a food maker who met like a series of
00:45:26this but actually it's compulsive Fernandes anyway OB back to back to Mister Garbus light %HESITATION one of the most entertaining %HESITATION parts of the book is the %HESITATION it is the dog that doesn't bark the dog doesn't bark in this case I keep waiting I'm reading your book
00:45:44and things went to go talk about GT pay and frozen in some measurement of it you know he's the as you say is very focused on growth and I think actually was whether you know sometimes people say one thing and don't do and don't do it but %HESITATION
00:45:59he was focused on gross %HESITATION and I couldn't understand why you didn't give a same data and I came to this passage %HESITATION which I have to confess I love dearly this is quote from the book throughout his time in government copper sweet refused to compile and distribute
00:46:15official data for economic output for most of his tenure as financial secretary he simply batted away requests for the data when Milton Friedman visited on Connie early nineteen sixties he ask CalPERS way why there was such limited information on national income and then you quote of of freedom
00:46:35and free Belichick is free to choose and is he right CalPERS which I think is Freeman covers wait explained that he had resisted requests from civil servants to provide such data because he was convinced that once the data was published there will be pressure to use them for
00:46:51government intervention in the economy that's right he he %HESITATION he was constantly under pressure because if I remember GDP type statistics start to become common common currency just before the second World War and %HESITATION since as you say he he he was articulate and that he was interested
00:47:12in growth people not not unrealistic but not not for him unfairly civil can you give me some measurements of fat to which he got he set ups and not not in the city he did the very bureaucratic we seek out some poor academic %HESITATION his name but he
00:47:31said the non setting up the study I think this was in about nineteen sixty to sixty two %HESITATION I've set up a study to look at the feasibility of collecting that type of information %HESITATION and when you read the read the files in the archives you can see
00:47:48%HESITATION three complete paying the gap with white walls to this poor man %HESITATION and and he was constantly send the impact is dross and say well I don't really understand this abyss needs further building so you come nineteen sixty nine seven years later he either and %HESITATION Executive
00:48:05Council said well %HESITATION yes the %HESITATION the professor of Austin's having difficulty with coming to closure on on how we would do it I might you know I think that's because it's not really useful information to collect and so on so if this is poor academic was those
00:48:20lined up to be the fall guy boot camp so it was I have had a reason not to use as you as you pointed out which was he knew that GDP tight data ready came along with the new deal %HESITATION with %HESITATION canes and he was convinced the
00:48:39%HESITATION if you if you start to collect in the state of than breast points people say well he's doing very well we could spend more or GDP is not doing very well that we must intervene on there for we should spend more spend more %HESITATION strangely enough it's
00:48:52always spend the full of left was very %HESITATION clear in his own mind about what the second order impact walls of collecting the data and so he said well I'm also going to that doesn't affect on the thing %HESITATION we will have the same policy whether it says
00:49:07is nine thousand dollars harmless %HESITATION it went what effect what we do is government %HESITATION so that was the point point quite yet once once he'd gone %HESITATION his successful gave way a little bit on my own started collecting the data the last night we we we %HESITATION
00:49:24and up with today but %HESITATION that is fascinating point to the IP use probably proof right actually yeah I have to a lot of my listeners are all of you out there are %HESITATION economics grad students and %HESITATION economists practicing economists of various kinds and I think it's
00:49:42a matter of a complete faith in our profession that data and numbers are crucial for designing economic policy and I'm somewhat sympathetic to that I understand that but I think we've neglected the reality that it also comes with a cost and one of the cost is that GDP
00:50:00is one thing it's not easy to measure to do the best you can so many things we measure measured poorly in accurately and in ways that are easily distorted and %HESITATION it's a it's a complicated thing it's not straightforward I I think it's probably a net good that
00:50:16we measure a lot of things in the U. S. economy but it does come at a cost and it does it is a way that few walls %HESITATION demand for interventionism and the day to give it a site that demands a scientific Pattanam my fingers right after I
00:50:34think the the existence of that type of data %HESITATION in a way it must have the second will perfect to people that for one to two managers and influence sets and do stuff with that %HESITATION and and oversee the best office would be you collect the data from
00:50:50the U. you'll terribly calf about resisting those precious but being humans that's not always possible and I think it's probably pronounce patina but pro college eyes for that I want to read a couple of excerpts from the book of from CalPERS waits on words that I thought were
00:51:05so extraordinary %HESITATION applause after each one and you can %HESITATION you can add footnote or %HESITATION cabbie out or whatever you'd like %HESITATION yeah the first is %HESITATION about it attacks on not Chinese prepared to budge duties that is %HESITATION terrace on Chinese compared to back out cover
00:51:25sort this is from the book covers weights believe in reasonable tax rates was illustrated most micro level by change he made the previous year to duties on Chinese prepared tobacco he noted that his experiment in reducing the duty had increased the yield from a hundred and ten thousand
00:51:40dollars to one point two million when the un officials replied to the budget lead one of the officials in the advisory committee would underline the benefits of lower tax rates quote the reduction in the rate of duty has resulted in a ten fold increase in revenue this gratifying
00:51:56result amply proves that a reasonable rate of duty rather high when ultimately brings in the revenue is sound policy to lay down a rate at which people could be induced to obey the law rather than to break it so it is an aside here is you know this
00:52:13is a up a lot of people believe we cut tax rates will raise more revenue don't think that's true in America to current level of tax but there is a level of tax which of set high enough a reduction can increase revenue and through this mechanism which is
00:52:27to get rid of the black market and have people make legal activities are now taxable yeah I mean comfort was extremely keen I mean he was a British civil servant so he was he was extremely clean the people pay the taxes and %HESITATION put a lot of effort
00:52:43into enforcement %HESITATION box in his head the quid pro quo was that this is a level which absolute crated bactrim courage went so you had to do the right thing rather than to turn to the black market and I think time and time again when he %HESITATION acted
00:53:00on these things he you have the result you've just mentioned I think it's also interesting he you know he could be %HESITATION you're treated people in combat out again and he will get the number of his ideas simply by wandering around a listing to people he if you
00:53:13have a lot of friends %HESITATION in the virus community is Chinese %HESITATION Asian Indian and so on %HESITATION British and in Hong Kong and he would listen to the issues the what will happen again would develop policy on that in many ways rather than an first principles he
00:53:30loved going back to first principles yet what why would someone behave the way they are let's see could work that out he could work out you know how to regulate or not regulate how to tax lots tax %HESITATION another thing to write this at this home Kong as
00:53:44a story of having a very fast growing revenues %HESITATION really across all of the major tax there is very good relatively low levels of tax the next example is from his view of parking which I enjoyed immensely here's the quote he was concerned that providing government car parking
00:54:04spaces at below their full cost would stifle the construction a private parking indeed he was worried that that was already happening and he wondered if it was preventing private capital for meeting the needs of the growing car on a public noting that quote one trouble is when government
00:54:19gets into a business it tends to make it on economic for anyone else you you continue on this relatively minor issue covers for a combined a fairly detailed knowledge of the economics of car parking with some insights into the affect of government involvement had no problem applying his
00:54:34broader framework to specific issues primers clear that the government did not need to involve itself in car parking and if it did because the owner its ownership of land in a full market price should be charged yeah I mean that was his way of dealing with things he
00:54:49would he would really he he had a set of philosophy that I think to rise from classical economics and understanding why people behave the way they do and he would then apply it in great detail whether that be call pocketing our I remember one budget he started going
00:55:09on about %HESITATION a sports facility that will build things a completely trivial thing thing where he he had some feel for the numbers of what it cost to build a different spec levels that you could have I mean he he dived into these things %HESITATION but he he
00:55:26was ready always trying to get a bottom up sense of the underlying microeconomics if you live in a house this work out of people pay what are the costs %HESITATION there with the government's involved what happens how does the distal incentives how does the distort capital allocation he
00:55:43he was very interested in in trying to work his way through that %HESITATION however small the issue I mean sometimes it helps it was for much bigger issues on Wall macroeconomic scenes but but he was absolutely happy delving down into a call blocking on the like in the
00:56:00last quote because this is just such an example the economic way of thinking %HESITATION I regard education is a good thing but we must still ask what a good thing costs how much but we can afford and who's going to pay for it yeah can you imagine a
00:56:15politician today crime outlined they had a big years of not caring about the children %HESITATION that now it is we as you mentioned %HESITATION copper to a successor did start to measure some aspects trying to measure GT pay an income %HESITATION people gone back to reconstruct those measures
00:56:38and if there's been an enormous transformation in in Hong Kong Serra living over this period and subsequent to it %HESITATION what do you want to give campers wage policies credit for some of that for setting a tone that his successors even though they debated to some extent they
00:56:53still kept something of the same tone one of things you don't have is I mean you have a lot of we have a lot of data on average income problem is the average income is course distorted by people to high end so you can have some incredibly wealthy
00:57:07financial folks coming in Arkham pulling up the average where is the median might be stacked and or or not moving at all with any information about what's happening to the poorest people because again when I think of a free man I think Milton Friedman's defense of Hong Kong
00:57:22his claim was that the the supporters people's thrived through the policies that were through that policies that we're talking about any we don't seem to have any real measure that is are any measure them the any of the any day trying all says that if you look at
00:57:38the I think it's the bottom decile of us is the top decile in Hong Kong %HESITATION about so factor they see nothing which is roughly the same as Singapore on believe that sixteen for the U. S. so it it is a probably a slightly less equal society of
00:57:53and the U. S. by a by a by a bit %HESITATION yeah I think I think that what one of the things though that is very important %HESITATION the first only once again five debate is to understand housing costs %HESITATION because one of the most interesting elements of
00:58:11wear on corners deviated from the free market approach is in housing and %HESITATION about half the population in Hong Kong is housed in government built Ron accommodations and for the people who live that they spend on average about nine percent of the income on housing whereas if you
00:58:31were living in the U. K. a you would be spending two or three times that amount of a substantive your income so there's a very an interesting issue of how they've %HESITATION through government intervention %HESITATION made housing much more affordable for many in society so you need to
00:58:49you due to build out at but but I agree that would be a very interesting %HESITATION for the for the peace will not assist look out so I'm not so interested in a quality %HESITATION I'm more interested in in the potential for improvement among the poorest people in
00:59:03my my impression is that there are opportunities did improve dramatically over this time period but %HESITATION yeah yes Sir I I just add a ironic now to our premiums use the word ironic and he's my third time apologize for that but %HESITATION the last day that I saw
00:59:20on the United States the top fifth turns seventeen times the average income of the top fifth was seventeen times the average of the bottom fifth okay however and this is why up carbs wait didn't trust the collection of numbers that that's a very large gap obviously %HESITATION you
00:59:42could debate whether it's good or bad but still seems kind of large I suspect is larger than it was in nineteen twenty seven United States but hundred say hunt roughly a hundred years ago however this is shocking %HESITATION in the average house this is household income the top
01:00:01three S. has a let listers thing for second guess how many earners there are in the top fifth of the household income distribution well turns out it's over to two point in the data I remember now %HESITATION it was two point oh for what could have more than
01:00:18two arm as well yeah of my high school a son who did some work over the summer so we as a little bit to the household I'm not very much but he still had something so there's about but it's over to because most of the people on the
01:00:31top this have a husband and wife and who are there working I guess how many earners there are in the average household typical household in the bottom fifth there is about point four five less than one because most of them are all elderly or young or retired or
01:00:50on welfare their single the not married %HESITATION so there's about five times the number of earners in the top than there is in the bottom so if you correct for that the top fits to the benefit is really seventeen it's for like four or three so it's some
01:01:10numbers are tricky and just what your your point has to be right but you know you need to make a claim on the soul thank you need you need to dig into them in some detail because %HESITATION yeah they'll be they'll be affects about they'll be housing cost
01:01:23issues the bill's going to things that you you know how you would need to adjust stories know about in order to be clear as to what the facts %HESITATION people cycling in amounts of the different different %HESITATION quintiles in song and the I'm glad you mentioned housing image
01:01:39bring it up %HESITATION did they charge for %HESITATION yes yet so you say %HESITATION %HESITATION just crazy given all the things you've said before we've said before about his philosophy well he he was he wanted that they provided it for that they charge you I understand but that
01:01:53they built like wouldn't let the private sector build housing for poor people it's just surprising it is it's very interesting I'm I'm I'm not calm I I and I can't quite get to the ball through my mind about this which is that the committee also market failure in
01:02:08the provision of housing prior to some there was some files in some shanty towns %HESITATION in the in the %HESITATION late fifties and early sixties and not ready because the government said well we have we have to deal with this from a safety perspective not just from an
01:02:25economic perspective we you know we come out of it at this level of people being exposed to danger lab up suits are actually a lot of the momentum was a political one around safety but the way that people's way tend another surround him sort of prejudice the civil
01:02:42we we therefore need to build houses that are very low cost %HESITATION so they tend to be quite small particularly early versions in the fifties and sixties and now is a lifestyle %HESITATION footage as if piety yeah it's like a but but but but %HESITATION but also to
01:03:00read it and at the end of the cost lance %HESITATION people can afford to pay and ends in capital white spot insistence on the return on capital of the government is put in so he thought squaring that circle %HESITATION constrains you quite a lawsuit and so you're what
01:03:18type of housing you can build but I called quite work out why the market find it was so great that that pose that walls and has pretty much remains %HESITATION driven by government %HESITATION that's a huge private %HESITATION construction industry in Hong Kong building expensive accommodation when you
01:03:37look at some of these charts about what's the most expensive place lives to live in the world Hong Kong is often tools to talk but that's not true if you live in government accommodation a sense the game one of those problems with data which is that's okay people
01:03:52measuring is its market constructed markets %HESITATION build and he told people on common I'm I've been in Hong Kong %HESITATION in the all cops on I often off people about the house and they they think it's brilliant because they end up spending %HESITATION really quite modest amounts of
01:04:07income than the average is nine percent across the whole of states %HESITATION of their income being spent on housing which is which is a pretty good price it is safer cars on school it given his philosophy you think he would of %HESITATION I assume the those thatched tragedy
01:04:27which Sherman reading about the book of those fires created tremendous clamour to quote do something one thing to do is to build housing which is going to eventually as carpet would have admitted gonna create an impression that there's a market failure because as the government crowds out all
01:04:44the private incentive to build low income cheap small housing now it can be easy to say that is a failure but %HESITATION notice which what would happen if you'd step back and instead puts a fire regulation or he may have felt that was in would not look sufficiently
01:05:02strong enough I don't know it and there must have been a a lot of dinner table discussions in the car with red household about that that %HESITATION break with his philosophy and I'm I think on on that one because it was so dramatic it was a a font
01:05:15lot of people got killed it was on Christmas day in nineteen fifty three I think and answer because of that I think the political pressures yes I would have been very high so I don't think it was in his up and decision he he he spends a lot
01:05:29of time trying to say what we need to be clear about what the standards and sizes and costs are we need to and return on capital %HESITATION are David he would have led with that policy %HESITATION I think most people led by the governor and press of the
01:05:43of the other people %HESITATION so he was he wanted to try and maintain the economic incentives in that sector as much as possible %HESITATION but but I digress really is so long and so successful that it is quite interesting as to which is the check in on the
01:05:58act the market value or the government involved but %HESITATION it's it's clearly very big %HESITATION unsubstantial but having said that is as you point out in the books for most of this time period %HESITATION government expenditure on actual things as opposed to transfers on goods and services is
01:06:16is under ten percent farmed out Rackley is about life as a fraction still but it's it's an interesting it's an interesting exception the other thought I had it on the poverty issue and the impact of the gross on the poorest people there is migration the fact that so
01:06:31many people wanted to live there suggest it was a pretty pleasant place and they were mostly rich people in the early days they were poorest of the poor a lot of them and they felt this was a place they could get ahead presumably on the house you may
01:06:43help tunes I think yeah I mean obviously the the the the false %HESITATION influx of refugees and some would go into jobs like textiles %HESITATION so you so very much low paid %HESITATION three to two or three shifts often three shifts of work %HESITATION and that was absorbing
01:07:02the people was one of the issues that could quite and the others were concerned about around they will if we have in this is about as great because you know that'll help deal with some people who are coming up beside the road routes of the biological people closest
01:07:15to talk about millions of people have one last thing on the economy wind I I as I was reading the book I happened to come across the %HESITATION gifts on Twitter of %HESITATION about five seconds long if I remember correctly I'll try to find a link to it
01:07:33%HESITATION with the episode six it say up it's a high speed animation of the transformation of one Vista of Hong Kong %HESITATION yeah yeah yeah in it in the first visit it's probably over maybe nineteen sixty to the present roughly in the first fist it looks like you're
01:07:48looking at a large enormous swamp for almost way some kind of wasteland some kind of C. area low swampy area and in by the present in the five second you watch it it's transformed into this ridiculous modern %HESITATION cornucopia of high rise buildings apartment presumably and other and
01:08:11office buildings and how much of that do you want to give to Mr Mr Capra's wait that transformation of course some of that comes from Chinese growth over this time period the Chinese economy waking up %HESITATION in its modernization it's somewhat capitalist bent investment from around the world
01:08:29coming in pouring in there %HESITATION but coverage right leaves in nineteen seventy one I am sure look better in nineteen seventy one than it did in nineteen fifty one %HESITATION nineteen sixty one many became finance secretary but the last forty years really extraordinary yeah I mean the value
01:08:46they are extraordinary but they are a continuation actually one of the things that I found interesting is that %HESITATION if you follow through off the campus wide has left his his philosophy is still embedded in %HESITATION many budgets and a macro economic policy is the like even to
01:09:03the current day so you you find its %HESITATION virus points %HESITATION financial new financial sectors will say well I'm I'm absolutely going to stick to things like for example not running a budget deficit I'm gonna keep the state relatively small and taxation levels of no higher than they
01:09:20were when he left so I think he he created such a success if you live that is tended to you mean the financial sector is to refer a new five seconds to refer back to that and and and argue that they are continuing that and they still in
01:09:36Hong Kong have a relatively %HESITATION blue state involvement is slightly higher the money capital I laughed but it's it's momentarily and I did %HESITATION during the course of of %HESITATION working with this book I did talk to the current financial secretary Hong Kong and he he would say
01:09:52this great continuity between the palaces the account with weight %HESITATION suited his time and the ones that are being pursued now so so I think that is one of the fascinating things about it it's a fifty year relatively consistent set of economic policies and the results that Ralph
01:10:10but so we can we can look at %HESITATION and if anything the growth rate slightly lower as a percentage but you might well expect that %HESITATION in the last twenty years than it was in the in the twentieth around campus white but %HESITATION I would tend to focus
01:10:25so much on the computer to see if you if you read the budget will have done this read read the latest budget %HESITATION for a phone call it could have been written by capital flight much of it is similar there's more of a known to %HESITATION doing dealing
01:10:39with some of the social issues but let some of the fundamental %HESITATION beliefs about activation a non government expenditure and deficit financing of the like then quite similar to the way they were in the nineteen sixties and some to let's close with that related question of that which
01:10:57is in nineteen ninety seven %HESITATION somewhere east of Suez because nothing needs to Suez after this %HESITATION they hand over the the territory to the Chinese what changed legally if anything obviously a lot and what change actually to the best of your ability to summarize that well I
01:11:24I I think what happened in nineteen ninety seven is all this the full sovereignty were the two %HESITATION China %HESITATION but China agreed to %HESITATION to have what we call to get one one one nine country two systems and said the prepared to fifty is the nature of
01:11:43all of the Hong Kong on a million society would have some protection on that were set of protections laid out in what was called the basic treaty in theory those will run off %HESITATION for fifty years and they include things for example like %HESITATION %HESITATION conservative %HESITATION Old
01:12:03World Cup Porsches %HESITATION fiscal policy %HESITATION low taxation right so they're embedded in the basic treated %HESITATION what sort of going to be interesting over then over over over the and on I guess what twenty isn't lap fifty a a transition %HESITATION China may well want to look
01:12:25good have greater the convergence and depending on how they do that on what they do it'll be interesting to see how that affects %HESITATION the policy is not full the economic outcomes full for Hong Kong but in the in principle it it's it's it should retain much of
01:12:42its characteristics of the hands of the PYD we can talk about my guest today has been Neil Monterey his book is architect of prosperity no thanks for being part of a contact this is econ talk part of the library economics and liberty for Mari contacted econ talk dot
01:13:08org or you can also comment on today's podcast and find links in readings related to today's conversation sound engineer free Cantacuzino yet I'm your host Russ Roberts thanks for listening talk to you on Monday

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