By James Pethokoukis

For decades, Hong Kong was a sort of ideological Camelot for conservatives and libertarians — a bastion of liberalism and market capitalism surrounded by communism. Bereft of natural resources, Hong Kong seemed to show that the greatest asset any nation could possess was freedom. As Marian L. Tupy, editor of HumanProgress, wrote in 2020:

For classical liberals, Hong Kong had been a beacon of hope for half a century. Peter the Great is said to have built St Petersburg to be “Russia’s window to the west.” Hong Kong was supposed to be liberalism’s window to the future. The city’s fabled wealth was built on four pillars of classical liberalism: limited government, rule of law, free trade, and fiscal probity. And, it worked! We hoped that the rest of the world would follow a similar path.

This admiration led to more than one thinkpiece over the years by folks on the right imagining a grand experiment of turning Washington, DC, into a Hong Kong on the Potomac, a place of low taxes — flat tax even! — light regulation, and entrepreneurial energy. And not just DC could stand to benefit, as this 2014 P.J. O’Rourke op-ed in The Wall Street Journal suggests:

Detroit is beautiful — though you probably have to be a child of the industrial Midwest, like me, to see it. As you may have heard, the city is in trouble. At the end of the 2013 fiscal year, Detroit had a balance sheet with liabilities of $9.05 billion. The city’s emergency manager, Kevyn Orr, estimates long-term debt at $18 billion. But I know how to fix Detroit, because it reminds me of another favorite place, Hong Kong. . . . Hong Kong economics would mean curtailing U.S. welfare and benefit programs, but Detroiters seem to have found the holes in the social safety net already. Forty-four percent are living below poverty level. They could, however, benefit from the jobs and commerce in a vibrant, tax-free Hong Kong economy.

During the debate leading up to the Brexit election, many Brexiteers on the right made the argument that by detaching from the EU regulatory superstate, an unchained Britain would return to its risk-taking, free-trading roots. London would become a sort of Hong Kong on the Thames.

With China again hosting the Olympic Games, I thought I would take a look at how Hong Kong was doing the last time the Games were in that country. Of course, in 2008, the Summer Games were all about Rising China bursting back onto the world stage with many in the West still hopeful it would fully follow other Asian nations such as South Korea and Japan into becoming a democratic capitalist society. That year’s Index of Economic Freedom from the Heritage Foundation ranked Hong Kong number one, including scores of above 90 (with 100 being the highest) in Trade Freedom, Fiscal Freedom , Property Rights, Labor Freedom. From that report:

The typical Asian country has notably lower scores in four factors: investment freedom, financial freedom, property rights, and freedom from corruption. This suggests that Asian countries could make the most progress by strengthening their banking and investment institutions, perhaps by enhancing transparency and corporate governance. Hong Kong is clearly blazing a trail for others to follow. With the top scores in four of the 10 factors, Hong Kong once again becomes the “poster economy” for economic freedom around the world.

Hong Kong stood about that index for 25 years until 2021 when Heritage excluded it because “developments in recent years have demonstrated unambiguously that [its] policies are ultimately controlled from Beijing.” By the way, China’s current index ranking is 156 or “repressed.” Again, from the Index of Economic Freedom:

Over the past five years, China’s economic growth has slowed with the largest deceleration occurring in 2020. China’s five-year average growth rate is now only about half of its level a decade ago. Economic freedom peaked in China in 2020 after a decade-long gradual climb. Those gains are now erased, thanks largely to plummeting scores for judicial effectiveness and fiscal health, and China has dropped into the “Repressed” category. Trade freedom remains relatively strong, but the lack of investment freedom and financial freedom are serious impediments to productivity growth and development.

With a continuing crackdown on the city-state’s (fast evaporating) freedoms under Chinese rule, the Chinese Communist Party is now remaking Hong Kong into an authoritarian example. Might there one day be a restoration? Tupuy:

Paradoxically, it was Lady Thatcher who, bowing to reality, acceded to the handover of the colony to the communist despots in 1997 — with the proviso that Hong Kong would remain autonomous until 2047. Perhaps she thought that time would transform China into a wealthy and free country. If so, she was only half right. Today, it is the newly enriched and confident mainlanders who are strangling the city’s freedom and vitality — 27 years ahead of schedule.

In the short to medium term, the clouds over the city are very dark. In the long run, who knows? Palmerston could not have predicted Hong Kong’s rise. Who are we to predict its destruction? Nothing is permanent — not even the tyrants in Peking!

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