The U.S., Argentina, and the Importance of Long-Run Growth

April 18, 2024 by Dan Mitchell @ International Liberty

I’ve periodically tried to explain that even small differences in long-run growth can lead to immense benefits, including huge reductions in poverty.

To illustrate the importance of higher growth rates, I sometimes inform audiences that the United States today would be as poor as Mexico if the American economy had grown 1-percentage point slower over the past 130 years.

Needless to say, I then point out that we avoided that fate because we were fortunate enough to have decent economic policy.

But I also ask people to imagine how much richer we could be if we had great economic policy (sort of like Hong Kong before China’s crackdown) rather than decent economic policy.

I now have a new example to share. Here’s a fascinating tweet from Jason Furman, who was Chairman of President Obama’s Council of Economic Advisers.

As you can see, it does not seem like there has been a huge difference in per-capita economic growth between the United States and Argentina. But it turns out that 0.5 percentage points actually is enormous when looking at 100-plus years of data.

If you want even more evidence about why 0.5 percentage points of growth is important, the Economist reported a few years ago that Argentina was the world’s worst-performing economy over the past century.

That’s the high cost of Argentinian statism. Let’s hope President Milei can fix the problem.

P.S. Despite serving under President Obama (and despite sometimes being on the opposite side from me in debates), Furman is a rational Democrat.

P.P.S. Even though poor countries are supposed to grow faster than rich countries, the above chart is another example for my anti-convergence club.

How One Newspaper Called the Hong Kong Story Right From the Start

Wall Street Journal Figured It Out a Generation in Advance 

By IRA STOLL, Special to the Sun | July 5, 2021

Journalists celebrate themselves annually with Pulitzer Prizes for the best work published in the previous year. Often, though, a single year is too short a time span in which to judge journalism. A different and more distinguished prize might eventually be established and awarded for journalism published a decade, or perhaps even a quarter-century earlier. It can sometimes take that long to judge whether the reporters and editors got a story right.

In that spirit, I’ve lately been looking back at the American press coverage from 1984. That was the year that China and Great Britain issued their “Joint Declaration on the Question of Hong Kong.”..............The course of events in Hong Kong was not just entirely predictable; it was predicted, entirely, in advance, by the Journal editors with remarkable clarity: “It is in the nature of totalitarian regimes to control.”.........

The Journal, of course, proved to be right. The Joint Declaration of 1984 proved to be a stain on the legacies of both Thatcher and Reagan, about whom there is otherwise so much to admire. Let it be a reminder to President Biden, as he weighs future negotiations with Communist China, Iran, the Taliban, or even Syria or the Hamas leadership in Gaza, that any deal with such a regime is only as good as a free country’s determination and ability to enforce its terms.............To Read More.....

My Take - The Wall Street Journal may have been the only newspaper to have read the tea leaves correctly, but there were a great many who weren't in the information delivery business who did also.  I was one of them, this really was totally predictable.  As for writer's comment about Thatcher and Reagan; the question was then and still is this:  What exactly were they supposed to do?  The 100 year agreement was running out, and there was no way they could impose an independent Hong Kong on China, so what were their alternatives?   

There are times when leaders aren't left deciding between right and wrong.  They're left with deciding which wrong is the most right. While it's true that decision will eventually that comes back to haunt them, but that's the world as I see it, and a world that has to be dealt with.

Hong Kong passes new immigration law that could enable China-style exit bans

By James Griffiths, CNN April 29, 2021

Officials in Hong Kong will soon be able to block people from entering or leaving the territory, raising concerns over the possibility of mainland Chinese-style "exit bans" being used to prevent activists and former lawmakers from leaving. Authorities in mainland China routinely impose similar travel bans on dissidents and foreign citizens, including those facing civil cases, essentially trapping them in the country while a case winds its way through the Chinese court system. 

The United States government has previously denounced such bans as "coercive," saying they are used "to compel US citizens to participate in Chinese government investigations, to lure individuals back to China from abroad, and to aid Chinese authorities in resolving civil disputes in favor of Chinese parties."   In response to a CNN story earlier this year about potential risks for foreigners traveling to China, the country's foreign ministry said this was "completely inconsistent with the facts."........To Read More...

 

Jimmy Lai’s Greatest Scoop

Editorial of The New York Sun | April 17, 2021 

The prison sentence handed down to Jimmy Lai is likely just the beginning of the punishment the Chinese communists are going to mete out to the hero of Hong Kong’s pro-democracy movement. The 14-month stretch he’s just drawn is for participating in a peaceful demonstration by thousands. He still faces charges for fraud and violating the national security law. The 73-year-old family man may yet perish in prison.

(Go to the original like to see this excellent video)

We don’t know Mr. Lai well. The last time we conversed with him was in 2005 at a dinner honoring Milton and Rose Friedman and their idea of school choice. The several glancing encounters we’ve had with Mr. Lai over the years, though, leave us with an indelible impression of an extraordinary spirit — filled with an appreciation for the fact that economic prosperity depends on political liberty as much as economic liberty.................

This principle is the Achilles heel of communist China. Its hubris is that it will be able to realize its ambition for prosperity without political liberty. We’ve watched one regime after another pursue that illusion. None attained stability. The regime in Beijing is a classic. It has a veneer of stability. Its leaders, though, are afraid of Hong Kong and the free Chinese republic on Taiwan. They’re afraid of freedom and its tribunes...............

He told his colleagues that if small countries like South Korea and Taiwan could succeed the way they did, there was no reason why a large country like China couldn’t do the same. It was a major scoop, an early signal that the communist mandarins were going to try to open up their economy. Xinhua’s editor, though, missed the part about how South Korea and Taiwan eschewed communism in favor of democracy...............To Read More...

Catholic Hong Kong activist Jimmy Lai: ‘The Lord is suffering with me’

Hong Kong media tycoon and Apple Daily founder Jimmy Lai. 

 By News on the Net -- Catholic News Agency—— Bio and Archives--October 9, 2020

A recently arrested Hong Kong entrepreneur and media executive said this week that he plans to stay in Hong Kong to face criminal charges stemming from his support for democracy on the island territory. The executive, Jimmy Lai, said that the Chinese Communist Party wants to supplant religion with government control.

“When you lift yourself above your own self-interest, you find the meaning of life. You find you’re doing the right thing, which is so wonderful. It changed my life into a different thing,” Jimmy Lai said in an Oct. 5 interview.—More…

Chinese Communist Party Snared in a Multidimensional War

Austin Bay June 24, 2020

Communist China has decided it must crush Hong Kong because it knows the city presents an information-streaming ethnic, geographic, political and ideological alternative to the Chinese Communist Party’s authoritarian police state.
The CCP police state promises China’s citizens prosperity’s material goodies—cellphones, electric cars—in exchange for silently accepting communist dictates no matter how harsh and malign. Hong Kong, however, is not a promise. It is an existing democratic example of 21st-century Chinese prosperity.

Why add “information streaming”?........Information about Hong Kong’s political, economic, social and cultural vitality manages to spread throughout mainland China...........Recent economic news suggests China is teetering. A China-EU investment and trade deal has snagged. Bloomberg reported defaults “in all sectors” of China’s offshore bond market have exceeded $4 billion, double that during the same period of 2019..........Big Picture: The goodie-producing economic engine that braces the CCP’s domestic political strategy needs international markets. China’s domestic economy can’t sustain it..........

Border war with India: In the long run, it’s worse than Hong Kong. Asia’s two nuclear-armed giants contest Himalayan routes that make it easier for China to invade India. The unresolved 1962 Sino-Indian War revives............The CCP’s espionage and bribery wars suffer reverses...............Military pushback in the Pacific and Indian Oceans.............New Delhi tells Beijing, “your maritime economic supply lines can be cut..............To Read More....

My Take - I think this article confirms my positions in my piece, China Reset

The Economic Future of Hong Kong

May 26, 2020 by Dan Mitchell @ International Liberty

 I have applauded the incredible economic success of Hong Kong, which has long been ranked as the world’s most economically free jurisdiction. Well, given China’s recent decision to impose more controls on Hong Kong, I want to share this interview I did last October.

At the risk of patting myself on the back, I think everything I said still applies.  Especially when compared to what some others are saying. Writing for Bloomberg last October, Shirley Zhao and Bruce Einhorn seemingly want readers to think that low tax rates somehow are the cause of Hong Kong’s challenges.

Hong Kong has remained the world’s freest economy, thanks partly to low taxes and the rule of law. But widening inequality has also fueled the worst unrest the city has seen since the former British colony returned to China in 1997. …The combined net worth of the territory’s 20 richest people…is pegged at $210 billion… the city’s income inequality, as expressed in Gini coefficient, was the most for any developed economy in 2016… About 1 in 5 residents lives below the poverty line. …Lam is under pressure to soothe tensions and find ways to ease the housing crisis in the least-affordable market without rocking a tax regime that made Hong Kong Asia’s financial hub.

I disagree with much of their analysis.

As I noted in the interview, the problem with housing is caused by government ownership of land.  Moreover, I can’t resist pointing out that the assertion about 20 percent of the population living in poverty has been shown to be utter nonsense. That figure comes from “poverty hucksters” who deliberately conflate inequality with poverty (an example of the “Eighth Theorem of Government“).  And, speaking of inequality, Hong Kong historically has been a great place to be poor for the simple reason that it’s a great place to climb out of poverty.  Or, to be more precise, it’s been a great place to climb out of poverty. Whether that will still be true in the future depends on China.

I have no idea what Beijing will do, but I explained in the interview that it would be good for everyone if China took a hands-off approach to Hong Kong.

Why?

This chart, based on the Maddison database, shows that Hong Kong’s rapid growth rate has slowed ever since Hong Kong was transferred from British rule to Chinese rule. Since China has wisely not interfered with Hong Kong’s pro-growth economic policy, the most logical explanation for the slowdown is that entrepreneurs and investors are worried about what may happen in the future.

Needless to say, the best way to rejuvenate rapid growth is for Beijing to somehow display a commitment to economic liberty in Hong Kong (consistent with the one-country-two-systems approach).

P.S. As I warned in the interview, the United States should not goad China into any sort of crackdown, either political or economic.

P.P.S. The best-case scenario is a Singapore-style evolution in China, meaning sweeping economic liberalization and gradual political liberalization.

P.P.P.S. The worst-case scenario is backsliding by China on previous economic liberalization, combined with unfriendly relations with the western world.

Economic Lessons from Cuba and Hong Kong

January 28, 2020 by Dan Mitchell @ International Liberty
 

Back in 2014, I compared Hong Kong’s amazing growth with Cuba’s pitiful stagnation and made the obvious point that free markets and limited government are the right recipe for prosperity.

Especially if you care about improving the lives of the less fortunate.

Communists claim that their ideology represents the downtrodden against the elite, yet the evidence from Cuba shows wretched material deprivation for most people.

In Hong Kong, by contrast, incomes have soared for all segments of the population.

Today, let’s update our comparison of Cuba and Hong Kong. Law & Liberty has posted a a fascinating review of Neil Monnery’s book, A Tale of Two Economies, authored by Alberto Mingardi from Italy’s Bruno Leoni Institute.

As Alberto explains, the book is about how developments in both Hong Kong and Cuba were shaped by two individuals.

How important are key individuals in shaping the success or failure of economies? …Neil Monnery’s A Tale of Two Economies is in some sense a polemic against historical determinism, at least insofar as promoting economic reforms is concerned. It stresses the importance of two single individuals, one a great man for many, one an obscure official and political unknown to the most, in shaping the destiny of their respective countries. …Ernesto “Che” Guevara and John Cowperthwaite. …Monnery insists that both of them were “deep and original thinkers.” …The key difference between the two was perhaps that Cowperthwaite had a solid education in economics… Neither the way in which Hong Kong progressed, nor Cuba’s, were thus inevitable.

I’ve written previously about the noble role of John Cowperthwaite.

Here’s what Alberto culled from the book.

Monnery points out that Hong Kong’s success happened not because Cowperthwaite and his colleague were trying “to plant an ideological flag,” but because they were “professional pragmatists.” …Then the success of relatively libertarian arrangements in Hong Kong perpetuated itself. …Cowperthwaite tested what he knew about classical economics when he “first arrived in Hong Kong, in 1945” and “was put in charge of price control.… He soon realized the problems with attempting to set prices low enough to meet consumer needs but high enough to encourage supply, and in a dynamic environment.” He opposed subsidies that he saw as “a brazen attempt to feed at the trough of government subsidies.” …Cowperthwaite is a hero to Monnery, who emphasises his competence, and even more, his integrity.

And I’ve also written about Che Guevara, but only to comment on his brutality.

It turns out he was also a lousy economic planner.

Guevara held office in a variety of capacities related to economic matters and took them seriously. In 1959, he took a three months trip to countries as different as India, Japan and Burma, to learn “how they managed their economy.” He was struck by examples of countries that succeeded in developing heavy industries and thought Cuba could do the same. …Guevara, who, once converted to Marxism, had swallowed the whole thing. Since he maintained that “the sine qua non for an economic plan is that the state controls the bulk of the means of production, and better yet, if possible, all the means of production,” he acted accordingly.

So what’s the bottom line?

Hong Kong and Cuba were roughly equal at the start of the process. Today, not so much.

To the reader of A Tale of Two Economies, it is rather obvious which lessons ought to be taken: “in the late 1950s, both economies had a GDP per capita of around $4,500 in today’s money. By 2018 Cuba had slightly more than doubled its GDP per capita to around $9,000 per person. But Hong Kong reached $64,000 per capita”—seven times Cuba’s, and even exceeding the UK’s as well.

Here’s my modest contribution to the discussion, based on the Maddison database.

P.S. Hong Kong still ranks as the world’s freest economy, though there are increasing worries about whether China will allow economic liberty in the long run.

Righteous Anger vs. Politics as Usual

January 25, 2020  By Shoshana Bryen

There is anger and then there is righteous anger. Peter Finch yelling out the window, “I’m mad as hell and I’m not going to take it anymore.”

From Iran, Iraq, and Lebanon, where parts of a whole are coming undone, to Hong Kong to Puerto Rico to France and Venezuela, people are mad as hell.

Consider Lebanon. Independent in 1943, but occupied by Syria from 1975-2005, and brought into Iran’s orbit through the creation of Hezb’allah in the early 1980s, the same constellation of politicians have held power since the end of the civil war in 1990. Americans appear to worry most about the security implications of Hezb’allah, a U.S.-designated terror organization with its own army and a drug/weapons/money racket in South America, pulling strings in Beirut. And worry, too, about the U.S. armed and trained Lebanese Armed Forces (LAF), working alongside and sometimes in cooperation with Hezb’allah. Hassan Nasrallah calls the LAF “a partner.”

But how did Lebanon come to this point and why are people angry now?..........To Read More....

Cartoon of the Day, Plus

When LeBron first made it big it was in Cleveland, and my town lauded and praised our home town boy making good.   When he left the first time he was such a jerk.  He spoke so disparagingly about Cleveland, he in effect spit on us. 

When he came back everyone jumped on the LeBron bandwagon, since he was gong to bring a championship to Cleveland.  I said he spit on us as he walked away and as far as I was concerned he was a jerk them and he's a jerk now.

After all the crap he's pulled I hope my fellow Clevelanders see him as I've seen him all these years.

He's contemptible.

As for the rest of the world? LeBron's terrible, horrible, no-good, very bad week.  Good news for LeBron! He may be making a little bit of money as protesters buy his jersey to burn in effigy......... More

China Seeks To Mollify Hong Kong With Bread, Circuses

By CLAUDIA ROSETT, October 14, 2019

Draconian rule having failed so far to shut down Hong Kong’s protests, the government here now hopes to distract the public with economic handouts and yet more exercises in official “dialogue.” That’s what to expect Wednesday, when Hong Kong’s chief executive, Carrie Lam, delivers her annual policy address.

That would be an insult to Hong Kongers, who have not been protesting by the millions in pursuit of bread and circuses. With great courage, they have been demanding things far more profound — freedom and the right to elect their own leaders.

Ms. Lam, and her superiors in Beijing, clearly wish to consign that ambition to the memory hole. While Hong Kong’s protesters have been chanting “Fight for Freedom,” China’s propaganda machine has been pushing out visions of the joys China has in store for them via Hong Kong’s integration into the nearby boom towns of the Pearl River delta, a region China dubs “the Greater Bay Area.”..........To Read More....

My Take - Make no mistake, the communist government in Beijing is going to use force to bring this to a halt.  They like the capital Hong Kong brings in, but they want to control everyone the way they do on the mainland also.  It's a philosophical imperative for all socialists.

They don't dare give in to the protesters because if they do this will spread though out China.  First thing you know the young in the other large cities will start to rebel and make demands.  If they allow that it won't be long before the communists are thrown out, and be assured, the communists understand that. 

They will perpetrate whatever violence is necessary to bring Hong Kong under control because communists care more about being in control than they do the good of the people.  That's history, and that history is incontestable.

Having said that.  China's economy is in danger.  Their banking system is a mess and the numbers they present are fraudulent, all sanctioned by the governmen, corruption is rampant, and their military spending is outrageous.  The ethnic Han that make up most of the population of China are not loved by the other ethnic groups, and those groups believe the government is illegitimate.  China isn't a homogeneous nation.  Of that massive two plus billion population most of them live in an area no larger than the land mass East of the Mississippi River in America.  The rest of China is either too arid or too mountainous to be all that productive, and the populations there hate the central government and are poor.

As some point China's economy is going to collapse.  They can feed themselves, and they can defend themselves, but they can't fuel themselves and they can't create their own internal market because China isn't a natural capital generating nation since it's economy is being controlled by the central government.  Therefore their economy is an export economy, and any downturn will crush them. 

They're now spending huge amounts of money they don't have on their military in an attempt to impose an economic hegemony over the rest of Southeast Asia.  The belt and road initiative is part of that, but countries that signed on are now having misgivings, and rightly so. 

Communists are bullies and it's becoming obvious that intuitive is to benefit China at the expense of everyone else. 

UN Human Rights Council Scolds Hong Kong Activist After She Slams

By Patrick Goodenough | September 17, 2019

A Hong Kong legislator and pro-democracy activist went to the U.N.’s top human rights body in Geneva this week to appeal for action in the face of alleged police brutality, only to be reprimanded by the presiding officer.

Human Rights Council vice president Carlos Mario Foradori told Tanya Chan that her statement did not fall within the parameters of the agenda item being discussed – “Promotion and protection of all human rights.”

In her statement, delivered during a segment of the session devoted to non-governmental organization (NGO) representatives, Chan accused Hong Kong’s Beijing-backed authorities of endorsing “police abuse” against pro-democracy protestors. ............She ended by asking bluntly, “Why is China sitting here as a member of this Human Rights Council?”..........Elections are by secret ballot, and some of the world’s most repressive regimes have been voted onto the council, usually by large margins..............To Read More....

Cartoon of the Day

Regarding Hong Kong and China, the Best Option for Trump Is to…Stay Quiet?

August 14, 2019 by Dan Mitchell
 

A week ago, I wrote about the turmoil in Hong Kong and pointed out that a crackdown would be bad for China’s already-faltering economy.  I had a chance to again address the issue yesterday.

 

 

What made this interview different is that it included a discussion of what Trump should do.  My expertise is economics rather than diplomacy, but I speculated that public warnings and/or threats by Trump might backfire.  The Wall Street Journal opined today on this issue and they want Trump to be aggressive. Here are some excerpts.........To Read More....

 

My Take - I like much of what Dan writes, but he's right about one thing; his expertise isn't in diplomacy, or negotiations either.  As with all Libertarians they have some serious blind spots in their long range vision.  They all want tariffs to be dropped, but I keep asking why?  If tariffs are so bad, then why do all these countries apply them to the U.S.? If protectionism is so bad, then why do all these countries protect their industries in order to keep the U.S. out of their markets? 

 

I'm going off message next, and for a reason. I see this in a bigger context,which will be come obvious, at least I hope it will.

 

Bretton Woods is done, and we're going to advance America's agenda, and if the rest of the world doesn't like it, well, that's just too bad.  I think this is the perfect time for the Brits to leave the EU because it's my belief within the next ten years the EU will collapse, along with the world's economy.  Europe will be embroiled in massive civil strife predicated on Muslim immigration, the economic downturn, and the massive debt they've accumulated. 

 

Britain can make it without the EU, and any economic consequences will be met by cutting taxes and regulations, many of them imposed by the EU, but the Brits are going to have to get their Muslim immigration problem under control, and that can only happen when the government starts recognizing it has a problem, and stop pandering to these Islamists whose real goal is to destroy Western civilization in favor of Sharia, and we can see how well that's working around the world.

 

I also believe if Britain leaves the EU, the U.S. will create another "Bretton Woods" style agreement to make Britain's involvement with the EU far less important than Brussels thinks.  They're bluffing, they're scared and British leadership in the past didn't have the guts to act on it, and I have to believe those in leadership has some kind of pot sweetening agreements the rest of the nation has no share in.  We have the same kind here, with the same kind of decision making as a result. 

 

Sean Gabb notes in his piece. "Brexit: Is There a British Strategy? saying:

"........do not expect Britain after leaving without any agreement to be a friendly partner. We are the only great military power in Europe. We have one of the main financial centres. We have a close relationship with the Americans, the Indians and the Chinese, among others. It we showed willing, we could have a close relationship with the Russians. For the past five hundred years, we have specialized in making life difficult for anyone who wanted a united Europe. If we choose, we can make like very difficult indeed for what is left of the European Union."

 I believe the only nation that can withstand the coming worldwide economic collapse is the U.S. since America is the only nation in the world that can feed itself, fuel itself, arm itself, defend itself and create it's own internal market, without support from anyone else, and most importantly, the U.S. government has assets so large it can actually pay off the national debt by selling those assets.  Any country that becomes an American "favored nation" at the time will not have it as bad either. 

 

A crisis of civil strife is on the horizon, not only in Europe, but when the world's economy collapses, civil unrest is going to break out all over, including Russia and China.  The EU will revert to it's natural social paradigms of small countries, that still retain their own culture and even language differences, and immigrants that haven't integrated will be challenged in a most violent way.

 

At that point Hong Kong will be the least of anyone's worries. 

 

 

Hong Kong is a huuuuuuuge embarrassment for Democrats

August 18, 2019 By Monica Showalter

The turmoil in Hong Kong is a huuuuuuge embarrassment for Democrats. Hong Kongers are waving the stars and stripes, singing the national anthem, and issuing a global cry for freedom. For a Democratic party that loudly supports bend-a-knee leftists who hate the U.S. flag, such as Colin Kaepernick, that's a problem. And for a party that is trying to sell socialism to the U.S. public, well, thug-state China's got socialism in spades.

President Trump has taken flak for his response to the crisis, arguably so, but the real clown show is in what's coming from the Democrats.

Here's what Axios found when it tried to get answers from Democratic presidential candidates about what to do, particularly if the Chicoms get violent with the Hongkongers: ..........To Read More....

Hong Kong Crisis Starts To Look Like Prague 1968

By Paul Atkinson, Special to the Sun | August 16, 2019

A movement by an enclave in the communist bloc to grant its people the greater freedoms enjoyed in the West — that’s the drama playing out in Hong Kong today. Yet as youthful protestors wave American flags and sing our national anthem, American support for their cause is being tepidly expressed, at best.

 

As Communist China’s strongman, Xi Jinping, deploys his troops at the border of the former British Crown Colony, clearly threatening armed intervention, the best President Trump has offered is to urge him to “quickly and humanely solve the Hong Kong problem.” To what “problem” is the president referring? What prior example of the regime’s humanity is he summoning?

It may be that there’s more going on behind the scenes than Mr. Trump has let on, but he at least appears not to grasp that it’s China’s intent to systematically strip the city of its special status guaranteed by the Sino-British declaration of 1984. That parchment supposedly guaranteed that Hong Kongers “rights and freedoms, including those of the person, of speech, of the press, of assembly, of association” would be “protected by law.”

They are, though, communists. So as the fate of millions hangs in the balance, let us recall the anniversary of another communist assault on democracy in the territory of one of its semi autonomous constituencies. On August 21, 1968, a quarter million Soviet and Warsaw Pact troops entered Czechoslovakia to crush the movement known as the Prague Spring............To Read More....

Trouble in Hong Kong

Will China intervene?

August 14, 2019 Joseph Klein

Protests in Hong Kong have escalated for weeks over mounting concerns that Hong Kong’s government is allowing Hong Kong's autonomy and its residents’ personal freedoms to erode under pressure from mainland China.

When the territory was returned to China by the United Kingdom in 1997, China had promised to respect Hong Kong’s special status under a "one country, two systems" policy. Fulfillment of that promise appears to be slipping away, prompting massive numbers of demonstrators to take to Hong Kong’s streets. Crackdowns by Hong Kong’s police have been met with more protests, most of which have been relatively peaceful but have been accompanied by some violence.

The most recent protests this week have involved civil disobedience as thousands of people managed to shut down Hong Kong International Airport two days in a row. Riot police moved in and clashed with protesters at the airport on Tuesday. Tensions boiled over as a policeman was observed by a journalist drawing his gun and aiming it at protesters after he was attacked by his own baton that had been taken from him.

Hong Kong's highly unpopular chief executive Carrie Lam, whose proposal to extradite Hong Kong criminal suspects to mainland China touched off the protests months ago, warned that the city risked sliding into an “abyss.” She added, “A lot of residents go out and return to the city [through the airport], and many tourists and business people use this transport hub. Hong Kong’s reputation, as a safe society that respects the rule of law, will be in a very dangerous [situation].” Her words have fallen on deaf ears........To Read More....

Hong Kong’s Tenuous Future

August 7, 2019 by Dan Mitchell @ International Liberty

(Editor's Note:  Dan is being intelligently cautious about the outcome of this, but I will state categorically I believe that if these demonstrations continue, or worsen into violence, Xi will crush Hong Kong no matter the economic consequences.  His primary concern is holding on to power, and he will use any force necessary to do that.  Economics is now, and will always be, secondary to power for communists, socialists, progressives, or any other from of leftist tyranny you can name, because that's the only moral foundation that's consistent to the left.  Do whatever it takes to get power and hold it.  Power, is the key to understanding the left and why they do the things they do and take the positions they take! RK)

 

For libertarians, there aren’t many good role models in the world. There are a few small jurisdictions such as Bermuda, Monaco, and the Cayman Islands that are worth highlighting because of strong rule of law and good fiscal policy. There are also a few medium-sized nations that are – by modern standards – very market-oriented, such as Switzerland, Singapore, and New Zealand.

But Hong Kong generally gets top rankings for economic liberty. Which helps to explain why I’m so worried about a potential crackdown by China.



As I noted in the interview, intervention by Chinese security would not be good news for Hong Kong.

But it also would be bad news for China’s economy. Especially since it already is dealing with the adverse consequences of both internal statism and external protectionism.

Indeed, the only reason I’m not totally pessimistic is that the power elite in China doubtlessly would experience a big loss in personal wealth if there is a crackdown.

That being said, I can’t imagine President Xi will allow China’s implicit control over Hong Kong to diminish. So I’m reluctant to make any prediction.

But I very much hope that Hong Kong will emerge unscathed, in part because I don’t want to lose a very good example of the link between economic liberty and national prosperity.

Marian Tupy, writing for CapX, explains that Hong Kong is a great role model.

In 1950, …compared to the advanced countries of the West, Hong Kong was still a relative backwater. …the average resident of the colony earned 35 per cent and 25 per cent compared to British and American citizens respectively. Today, average income in Hong Kong is 37 per cent and 3 per cent higher than that in the United Kingdom and America. …Unlike some British ex-colonies and the United Kingdom itself, Hong Kong never experimented with socialism. Historically, the government played only a minor role in the economy… The territory kept taxes flat and low… The territory followed a policy of unilateral trade liberalisation, which is to say that the colony allowed other countries to export to Hong Kong tariff-free, regardless of whether other countries reciprocated or not. …In 1755, the great Scottish economist Adam Smith…wrote, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice…” Hong Kong prospered because it followed Smith’s recommendations.

Here’s his chart showing how Hong Kong has surpassed both the United Kingdom and United States in terms of per-capita economic output.

In a column for the Wall Street Journal, Jairaj Devadiga explains a key factor in Hong Kong’s success.

Sir John Cowperthwaite was Hong Kong’s financial secretary from 1961-71 and is widely credited for the prosperity Hong Kong enjoys today. An ardent free-marketeer, Cowperthwaite believed that government should not try to manage the economy. One salient feature of Cowperthwaite’s policies: His administration didn’t collect any economic data during his tenure. Not even gross domestic product was calculated. When the American economist Milton Friedman asked why, Cowperthwaite replied that once the data were made available, officials would invariably use them to make the case for government intervention in the economy. …Without data, busybody bureaucrats had no way of justifying interference in the economy. In Cowperthwaite’s Hong Kong, the government did only the bare minimum necessary, such as maintaining law and order… The rest was left to the private sector. …When asked what poor countries should do to emulate Hong Kong’s success, he replied, “They should abolish the office of national statistics.”

Amen.

When you give data to politicians and bureaucrats, they generally find something they don’t like and then can’t resist the temptation to intervene.

Now that we’ve looked at some of the factors that enabled Hong Kong’s prosperity, let’s consider what may happen if there’s a crackdown by China.

Professor Tyler Cowen shares a pessimistic assessment in his Bloomberg column.

Hong Kong has been a kind of bellwether for the state of freedom in the wider world. …By 1980, Milton Friedman’s “Free to Choose” series was on television, portraying Hong Kong as a free economy experiencing huge gains in living standards. The skyline was impressive, and you could get all the necessary permits to start a business in Hong Kong in just a few days. The territory showed how Friedman’s theories worked in the real world. Hong Kong stood as a symbol of a new age of freer markets and growing globalization. …Hong Kong still ranks near or at the top of several indices of economic freedom. But…[n]ot only is there the specter of Chinese intervention, but there is also a broader understanding that the rules of the game can change at any time… Meanwhile, many Hong Kong residents know their behavior is being monitored and graded, and they know the role of the Chinese government will only grow. …Freedom is not merely the ability to buy and sell goods at minimum regulation and a low tax rate, variables that are readily picked up by economic freedom indices. Freedom is also about the…legitimacy and durability of their political institutions. …Circa 2019, Hong Kong is a study in the creeping power and increasing sophistication of autocracy. While it is possible there could be a Tiananmen-like massacre in the streets of Hong Kong, it is more likely that its mainland overlords will opt for more subtle ways of choking off Hong Kong’s remaining autonomy and freedoms. …right now, I would bet on the Chinese Communist Party over the protesters.

If Cowen is right, one thing that surely will happen is that money will flee.

And that may already be happening. Here are some excerpts from a Bloomberg report.

Private bankers are being flooded with inquiries from investors in Hong Kong…wealthy investors are setting up ways to move their money out of the former British colony more quickly, bankers and wealth managers said. A major Asian wealth manager said it has received a large flow of new money in Singapore from Hong Kong over recent weeks, requesting not to be identified due to the sensitivity of the issue. One Hong Kong private banker said the majority of the new queries he receives aren’t coming from the super-rich, most of whom already have alternative destinations for their money, but from individuals with assets in the $10 million to $20 million range. …The extradition fight reinforced concerns among Hong Kong investors and democracy advocates alike that the Beijing-backed government is eroding the legal wall separating the local judicial system from the mainland’s. …The recent demonstrations are the latest trigger in a long process of Chinese money flowing to Singapore, London, New York and other centers outside Beijing’s reach. …“Hong Kong has shot itself in the foot,” said Chong, a Malaysian who has permanent residency in both Hong Kong and Singapore. “Can you imagine Singapore allowing this?”

And keep in mind that big money is involved. Here’s a chart that accompanied the analysis.

Looking at these numbers, I want to emphasize again that China also will suffer if a crackdown causes money to flee Hong Kong.

Which is President Xi should resist the urge to intervene.

I’ll close with this visual depiction of Hong Kong’s amazing growth.

Let’s hope Beijing doesn’t try to reverse this progress.

(Editor's Note:  There's a picture here I can't reproduce.  Please follow the link to see it.  RK)

P.S. You’ll notice that I didn’t advocate for democracy, either in this column or in the interview.

That’s because I’m more concerned with protecting and promoting liberty. Yes, it’s good to have a democratic form of government. If I understand correctly, there’s also an empirical link between political freedom and economic freedom. But sometimes democracy simply means the ability to take other people’s money, using government as the middleman. That’s why the people of not-very-democratic Hong Kong are much better off than the people of democratic Greece.

Hong Kong teeters on the edge of a mass slaughter

August 4, 2019 By Thomas Lifson

While Americans are focusing on two horrible mass shootings in our country, the situation in Hong Kong is getting downright scary. The people there have been officially warned that troops will fire upon them, via a video posted to the official social media account of the People’s Liberation Army portraying PLA troops shooting at rioters.........To Read More....

My Take - And what exactly does the NYT think America should do about it?  Let's face it, Xi doesn't  care what anyone thinks.  If he starts shooting people down in Hong Kong's streets it will further impact his economy negatively.  He knows that.  He also knows that if Hong Kong independence becomes a focal point for the rest of China's society he could find himself in trouble, and out of power.  That's his real focus. Keeping himself and his tyrannical political machine in control.  He doesn't care what you call it either. 

Call it communism, socialism or whatever you wish to call his government, it's his government, and he intends to make sure it remains his government having turned himself into another Mao.  He doesn't care how many people he has to kill, he doesn't care if a failing economy causes starvation any more than N. Korea's lunatic leadership cares about their starving masses. He cares only about the one thing all leftist dictators care about.  How to get and hold power. 

Will the international community respond to mass violence against Hong Kong residents negatively? Not much more than token jabbering.

Recently China has come out and decided that forcing Muslims in China to eat pork and drink alcohol will prevent terrorism. Both alcohol and pork consumption are proscribed by the Koran. What was the world's response? Sixteen Muslim nations decided it was just fine, including Turkey's leader Ergogan, who decided his economic relationship with China was far more important than some silly law in the Koran. Now if women were to start refusing to wear the hijab in Iran, then that would require big prison sentences. But Muslims forced to eat pork and drink alcohol in China, wellllllll.....what's the big deal?

Twenty two countries sent a letter to the United Nations condemning this action by the Chinese government, but they were incapable of getting one Muslim controlled nation to sign on to the letter. If he can get Muslims to agree that forcing other Muslims to disobey the Koran, he believes he can get the rest of the world to ignore any mass slaughter his troops carry out in Hong Kong. 

What did the world do when China forced Christians to replace Jesus pictures with images of Mao and Xi Jinping? Nothing!

What did the world do when China decided it should pick China's Catholic Bishops? Nothing!  Why?  The Pope signed off on it.  Irrespective of the fact it was "both a violation of the Church’s own canon law and a prescription for a puppet episcopate".  The world did nothing. 

China will crack down on Hong Kong irrespective of any international kick back.  The only negative for the Chinese government is Hong Kong will never again be the cash generator for China it is now, and the reason why is this crackdown will be the ultimate slippery slope to same kind of total control they exert in the mainland. 

A Return to Tiananmen, Part II: The Ending of Hong Kong

by Peter Zeihan on July 4, 2019 @ Zeihan on Geopolitics

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Hong Kong has been one of the most important economic locations on the planet for over a century.

China has always had problems holding together, but it has also always been a land of opportunity for outsiders who held a logistical and technological edge. Few powers in history have held a sharper edge than the British Empire. Hong Kong sits at the mouth of the Pearl River Delta, and in dominating HK the Brits were able to exploit the cheap labor of the lower basin, while also controlling any exports from the broader Pearl. It was a strategy the Brits had used to great success in locations as diverse as Suez, Calais, the Gambia, Durban, Charleston, and New York City.

As Mao’s de facto alliance with the Americans took form in the 1970s, British Hong Kong became internationalized. The Hong Kongers would use foreign tech and capital – repeating a pattern that stretched back literally a millennium – to create products for export.

In the late 1980s then-British Prime Minister Margaret Thatcher negotiated the transfer of Hong Kong to the Chinese mainland and a new chapter began. Hong Kong shifted from being a manufacturing base to being a financial and logistical hub. The same foreign tech and cash came in, but HK used its already-sophisticated managerial skills to funnel it into the lower Pearl.

That’s the economics. Here’s the politics:

It is not an oversimplification to say the Chinese Communist Party is obsessed with national unity. The “country” of China has historically not held together well, and Hong Kong was no expectation. For most of Chinese history, the southern coastal cities from Shanghai south to Hong Kong were integrated more with the wider world than with their own countrymen. But with the Order’s advance in the late 1940s, the imperial age ended and Maoist China was able to establish control over the entire coast… aside from Hong Kong. The handover from London to Beijing in the 1990s brought Hong Kong into the fold as well.

But there was a poison pill.

The British ran Hong Kong like the imperial territory it was. While the Americans forced the Brits to divest nearly all their empire, the Americans made an exception when it came to Hong Kong. It would have been ludicrous to squander the intelligence opportunities of having British control of such a rich and strategically located bit of allied territory. But when it became obvious to Thatcher that handover was inevitable, the Brits started democratizing Hong Kong. In the aftermath of the June 1989 Tiananmen massacre, the effort intensified. When the handover finally occurred in July 1997, Hong Kong was a full-fledged democracy (albeit one who obviously had no say as to which country it would be associated with).

Thatcher hardwired into the handover treaty a looooong political transition period. While Hong Kong would immediately and officially become “Chinese” territory in 1997, its political system would remain largely self-governing for another half-century. An island of democracy in a sea of authoritarianism. The Chinese call it One Nation, Two Systems.

Say what you will about Thatcher, she was very good at monkeywrenches.

So long as the Chinese economy performed well, Two Systems was an annoyance Beijing was willing to tolerate. But things have changed:

First, the Chinese export-led system has peaked. Global demographics have turned negative and global consumption can no longer absorb exports on the scale China can churn out.

Second, the Chinese financial system is in dire straits. Lending in China isn’t like lending in most places where you… well… have to pay back the loan. In China the government banks funnel cheap credit to firms who guarantee high employment, and to hell with profitability. The goal is to keep everyone in a job so they don’t protest. A side effect of this policy generates scads of subpar quality products that no one needs. China then dumps those products on the international market. Not only can the global market no longer absorb all the Chinese stuff, the financial model has pushed to the point that there are so many debt bombs on the foundations of so many sub-sectors that it would make the bad actors of the US financial crisis blush.

Third, Chinese demographics have peaked. Replacing global demand with Chinese demand was never really an option, and in 2019 it became obvious that Chinese demand was plateauing. Automotive sales – typically the purest indicator of customer demand – have dropped more than most countries do during heavy recessions. Blame the One Child policy – China is running out of twentysomethings. That’s driving labor costs up at the same time it is driving consumption down.

 

 

Fourth, the friendly geopolitical environment that China has thrived under – that all-important American-led Order – is in its final days. Much of what has brought China rapid economic development – foreign technology and capital, bottomless global markets, endless raw material imports – is ending. With local markets insufficient to replace global markets, the Chinese hold an economy designed for the 1990s that has no place in today’s world.

  

Fifth, the Americans are formally and directly targeting Chinese industrial and trade policy. U.S. Trade Representative Robert Lighthizer has already dusted off plans to triple the total American tariff load on China as soon as he gets the go-ahead from his boss. There may be a bit of an American-Chinese trade truce in place, but I doubt it will last much longer than the last two (which each lasted about 75 days).

  

Sixth, an oil crisis is brewing in the Persian Gulf. Should the Americans do anything to impinge upon Persian Gulf oil flows – and “anything” includes leaving – China faces an energy crisis far worse than what the Americans struggled through in the late 1970s and early 1980s. Some two-thirds of China’s oil is imported, with over half of that coming from the Gulf. China’s navy is utterly incapable of convoying what it needs should convoys become necessary.

  

The Chinese leadership is fully aware of all these concerns and is fully aware that the Chinese ship of state can no longer sail in its current direction. President Xi Jinping – rightly – fears for the future of the unified Chinese state. To that end Xi spent the bulk of his six years in office to date eliminating anyone in the Communist Party who was willing to defy him under the guise of an anti-corruption purge. The effort was done with more than a bit of side-eye to smashing any sort of regional autonomy. Now’s he’s working on new tech-heavy programs designed to purge dissent throughout wider society. The jury is still out on how successful that will be, but it points to the it's-not-paranoia-if-they’re-really-out-to-get-you feel of the Party at the moment.

  

Enter the Hong Kong protests of recent weeks.

  

Part and parcel to Xi’s efforts to preserve national unity is to lock down Hong Kong. In partial violation of the Two Systems policy, Xi pushed an “extradition law” on the Hong Kong government which would enable any mainland Chinese judicial entity – all of which are arms of the Chinese Communist Party – to issue arrest warrants for any Hong Kong citizen. China’s security services already kidnap Hong Kongers and smuggle them back to the mainland as they need to, but with the new law any local magistrate could force the abduction of anyone in broad daylight. (Such legal authority already exists within mainland China for everyone else.)

  

The Hong Kongers, realizing the extradition law’s adoption would mean the end of their special status some three decades early, have resisted. And protested.

  

The timing is far from coincidental. Beijing is ratcheting down on Hong Kong because it fears for the unity of the Chinese state as a whole. Hong Kong is resisting because it doesn’t want to be part of the Chinese state. The primary rationale for Xi’s new law is to keep the country together. The Hong Kongers’ rebellion is largely because of the new law. And now the phrase “Hong Kong is not China” keeps popping up in the protests.

  

Something’s gotta give, and it isn’t going to be Beijing.

  

The question, as it seems to be with everything, is timing. Much of the Chinese government’s actions these days – as regards Trump and trade talks, or Japan and territorial disputes, or Iran and oil – seems to be about buying time, but that time may be running out. On July 1, a group of Hong Kong protestors stormed the local legislative assembly with a degree of intensity that was new for the protests. This was less families-with-children-in-strollers and more clubs-and-pipes-of-the-Antifa-type. In the aftermath some of the graffiti caught my attention: “It was you who told me peaceful marches did not work.”

I don’t have the insight to know who spawned this particular action of vandalism.

  

Was it the leaders of what have so far been a hyper-organized protest movement? Are they testing the waters for a new push?

  

Was it some imported anarchists who just love a good riot?

  

Was it a false flag operation launched from the mainland to justify a crackdown?

  

Was Beijing aware the storming was imminent, and yet did nothing so that the radicals would provide a justification for their own destruction?

  

I don’t know. And unfortunately, it doesn’t really matter. Whoever thought that ransacking the assembly building was a good idea has crossed the Rubicon. Whether you view the true power in China as President Xi, the government in Beijing, or the Chinese Communist Party, it cannot tolerate this sort of action in Hong Kong – especially at this time. No matter what your view of Chinese history is, no matter what your view on Xi’s personal vindictiveness might be, the Hong Kong protests have become a threat to national unity. A new crackdown is imminent.

  

The scale of what’s about to happen is difficult to grasp:

  

At their peak, the Tiananmen protests involved 300,000 people, mostly students. The Chinese government sent in nearly as many troops to crush the movement. Fatality reports varied wildly from zero (the number Beijing proffered) to 10,000 (the estimate of the British embassy).

  

In Hong Kong, the protestors have regularly managed to get a million people out in the streets, a figure that has swelled to two million on several occasions. They aren’t just young people. They are families. Retirees. Bankers. Lots of people who normally never protest. I’ve not seen anything like this since the broad-spectrum Iranian protests that dislodged the Shah back in 1979. It is a huge proportion of Hong Kong’s total population (less than 7.5 million).

  

Ending the protests means nothing less than a full military invasion and occupation of the island. And unlike the Tiananmen massacre where reports of the military operation made it out piecemeal, in today’s social media age Hong Kong’s fall will be broadcast live for the world to see. It will be like Japan’s 2001 Sendai earthquake, but with a wall of tanks instead of a wall of water.

  

This all feels… momentous but I can’t quite put my finger on the implications. I’m a context guy and for this I just don’t have any. I cannot think of a military crackdown in a first-world economy in modern times. In the United States the last one was the Kent State shooting in 1970, but that was only a few hundred students and 67 bullets. Paris in 1968 got pretty messy, but the violence there was…what, three orders of magnitude less than what’s imminent in Hong Kong. I’ve got to go back to the riots in Europe in the 1930s at the height of the Depression. The norms of our age are breaking apart and we’ve not yet developed the frames of reference to process what’s coming.

  

For the immediate future, the bottom line is that while Hong Kong lacks the size and reach and means to export its protest movement to the mainland, the CCP certainly has the size and reach and means to export its forces to Hong Kong. China’s information control systems are sufficient – and the grip of the CCP strong enough – to prevent meaningful contamination of the mainland political system. The protests will not only fail, they signal the end of Hong Kong.

  

Hong Kong is about to become an absolutely horrible place to be. The degree of Chinese… reconstruction of the island will be on par with the cultural genocide already being imposed upon the Uyghurs of China’s western Xinjiang region. It won’t last a week or a month or a year. We’re looking at something that will last at least a decade.

  

That will have deep implications for anyone doing business in the country.

  

At a minimum every ongoing reservation about operating in China is about to get a hard underline. Foreign business magnates like Tim Cook have so far been able to ignore the ethical implications of their firms’ China dependency. It is difficult to see that continuing in light of what’s about to occur.

  

And it isn’t simply about ethics. Many of the financiers that make Hong Kong work are Chinese citizens. Whether Bank of America or whoever is willing to stay in a place where their workers disappear is… questionable. But it doesn’t end there. It’s not just Chinese citizens; the extradition law also applies to foreigners. These companies are used to working in China, so it’s not that the Chinese system is so scary that they can’t stomach the country. It’s that none of these companies have tried to operate in China during an active crackdown.

  

The coming violence and occupation will utterly remove Hong Kong from the global network of logistical and financial hubs. Hong Kong has been China’s primary entry point, China’s primary export point, and most capable financial center. Its end takes the gem out of the Chinese crown, as it were. For the past thirty years, China has provided foreign investors with scale, cheap labor, security and local expertise. The ending of Hong Kong damages all that and more.

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