A Tribute to Sir John Cowperthwaite

On Saturday, January 21st of this year, one of the great figures of the twentieth century, Sir John Cowperthwaite, died in St. Andrews, Scotland at age 90.

John James Cowperthwaite was born on April 25, 1915 in Scotland. He studied economics at St. Andrew's University and then continued his studies at Christ's College, Cambridge. Upon graduation he joined the British Colonial Service and sent to Hong Kong. He, along with other members of the government were evacuated from Hong Kong as Japanese forces advanced on it during World War II. Cowperthwaite spent World War II as a British colonial administrator in Britain's African colony of Sierra Leone.

In 1945, following the end of World War II in the Pacific, Cowperthwaite was reposted to Hong Kong with orders to implement policies that would revive the war torn economy of the colony. Upon his arrival in the colony he noticed that, in the interim between the exit of the Japanese and the re-entry of the British – a period of minimal government – economic reconstruction had already begun through the efforts of individual citizens as they went about their daily business.

Observing that the process of reconstruction had begun in the absence of government and was proceeding without any government guidance, Cowperthwaite decided to follow a a laissez-faire policy of non-interference in the economy. There is a story told that at a nineteenth century meeting of businessmen and politicians in France, a member of the French government asked the businessmen what the French government could do to help the economy. The bureaucrat's question was answered with a resounding Laissez-faire, si vous plait! which roughly translates as Please leave us alone! The businessmen's plea was ignored in France but, a century later, Cowperthwaite successfully implemented a policy of strict laissez-faire that resulted in Hong Kong, over the course of a couple of decades, vaulting from a poor Asian trading port into a major manufacturing and world financial center with a standard of living that exceeded that of both its Asian neighbors and the mother country of England. In fact the GDP (Gross Domestic Product or value of the annual output of the economy) of this tiny Asian enclave exceeded that of both Britain and Israel combined.

While the rest of the world attempted to grow their economies through varying degrees of bureaucratic management with little or no success, the economy of Hong Kong skyrocketed. Countries like the U.S. which retained considerable economic freedom had good, but not spectacular, growth rates while countries like the Soviet Union and Communist China saw their economies stagnate and die under the dead hand of bureaucratic management.

In the early second half of the twentieth century Hong Kong was considered a miracle. But Hong Kong's success was due to neither luck nor divine intervention. Instead it was the result of Cowperthwaite's unwavering policy of laissez-faire. This is not to say that Cowperthwaite was a do-nothing bureaucrat. He worked hard and diligently to prevent Queen's ministers and bureaucrats from London and special interests in Hong Kong from forcing the government to intervene in the economy of Hong Kong. And, Hong Kong's success was no exception to the laws of economics. Other than a good harbor, Hong Kong had no natural resources and, at the end of World War II was as poor as the rest of Asia. The fact that it was small with a relatively homogenous population also offered no special advantages. Despite its small size, during the period of its rapid growth the colony was flooded with refuges from neighboring Communist China – causing its population to increase ten-fold. Still it grew, real income increased by 50%, the number of people in absolute poverty decreased steadily and disease and mortality rates declined to Western European levels. All of this was accomplished with low tax rates and minimal government social service programs.

While Cowperthwaite's achievement in Hong Kong was considered miraculous at the time, subsequent history has shown it to be simply sensible policy. Close upon the heals of Cowperthwaite's success in the then British Crown Colony of Hong Kong, Margaret Thatcher was elected Prime Minister of the mother country, Great Britain and, following policies similar to those of John Cowperthwaite, she soon transformed the British economy from stagnation to a major force in the world economy. Neighboring Ireland, long the poorest nation in Western Europe with a population steadily declining as its youth left for other nations turned itself into one of the richest nations in Western Europe within the span of a decade after abandoning the stifling regulations that were choking the economy and allowing the people the freedom to determine their own economic destiny. Former Soviet client states like Estonia, threw off the shackles of state planning and quickly made up for a half a century of economic decline with rapid growth.

Thanks in part to the changing political climate, John Cowperthwaite not only lived to see the success of his policies in Hong Kong but was rewarded with honors and a knighthood in recognition of his achievement.