Jan 14, 2011

The story of Hong Kong: A Free Market Odyssey

"Hong Kong at night."   Source: Wikipedia
Heritage Foundation has released its annual report on economic freedom around the world for 2011. Hong Kong, the 'fragrant harbor' still reigns as the freest economy in the world with a score of 89.7 out of the possible 100. Hong Kong serves as an example of how markets, if allowed to work freely, can create a truly dynamic and prosperous society. With its area spread over just 1104 square kilometers and nothing to its stock of natural resources except a harbor, Hong Kong has created one of the most affluent societies in the world with a  population of more than 7 million people (6,349 people per sq. km) who earn an average of $42,748 (PPP) in a year.

There is a general perception that Hong Kong developed because it was a British colony and there is a similar perception (which too is just a myth) about India in Nepal. From general public to so called intellectuals and even civil servants (as far as I have met) share this perception. However, if we look at the facts, during 1960s , Hong Kong followed a path that was highly contrasting to UK. When UK was succumbing to socialism and had almost turned to Soviet Kingdom, Hong Kong resisted the socialist temptations and kept its economy free which is the reason why its economy grew steadily over the decades without any serious setbacks. The fact that per capita income of Hong Kong is higher than the per capita income of United Kingdom by a whooping $8129 alone proves that United Kingdom has nothing to do with Hong Kong's progress. Instead, had United Kingdom learned something from its colony, it would have been better off.

Contrast Hong Kong with Nepal, which is considered a very rich country in terms of natural resources  with an area of 1,47,181 sq. kms and more than 25 million people. A Nepalese citizen on an average earns just $1,205 per capita (PPP). Nepal ranks 146th in the above mentioned economic freedom index with a score of 50.1 out of 100 for the year which is worse as compared to last year when it ranked 130th with a score of 52.7. I wonder what Nepal would be like if it followed the right path, like Hong Kong, believing in the ability of free individuals to innovate and prosper rather than encumbering their efforts through state intervention and failing to maintain the basic requisites for a free society, rule of law and maintaining peace and order. With the growing trend just in the opposite direction, I find very little reasons to be hopeful.