Monday, April 16, 2012
Monarchial Economic Success
First of all -no. They are not doing great, at least not anywhere near as great as most people think. In the first place, what economic progress there has been in China has been very limited in scope. The big urban centers on the coast are thriving but most of the rural areas in the interior are just as poor as they ever have been. Secondly, what economic progress there has been in these limited areas are (not surprisingly for a socialist country trying to allow limited capitalism) sustainable because they are basically tearing down certain areas to expand in other areas (which I don’t really have time to go into more at the moment). Finally, when you hear all of these reports with all the great numbers coming out of China, you should keep in mind that these reports telling you how great the state-run economy of China is … all come from the state of course. They have a vested interest in making things look as rosy as possible and we also know for a fact that they’ve been manipulating their currency, juggling the books and doing all sorts of tricks to make people think they are this big, economic powerhouse. Which, of course, is not to say that they are not, they are obviously a huge economy, however, everything is not nearly as good as many people outside of China seem to think.
The trouble is that in most countries maintaining a “free economy” is a constant struggle. When they hit a rough patch there are usually immediate calls for government intervention and yet when things are going well it makes people think the good times will last forever and they go on huge spending sprees. I’ve always said that one of the problems with capitalism is that it makes countries so rich that they think they can afford socialism. However, it seems clear from the numbers that the most prosperous countries are those in which taxes are low, regulations are few and people are able to keep more (or even most -imagine that) of what they earn. It makes me wonder at least why more people do not follow their example. Two places with a great deal of economic freedom, where investment is high and the environment is pro-business (and unemployment virtually unheard of) are the British Overseas Territory of the Cayman Islands and the Crown Dependency of the Isle of Man. Why wouldn’t the British at home want to emulate the success of these areas?
Some picky people might be inclined to point out that the areas mentioned are non-sovereign states without a resident monarch. In that case, we can see much the same success on the continent in places such as the Principality of Liechtenstein. In Liechtenstein (which is in a customs union with Switzerland) taxes are extremely low, regulation is very minimal and it is one of the most prosperous countries in the world. Almost during the reign of HSH Prince Hans-Adam II alone the little valley of Liechtenstein has gone from a country of subsistence farmers to a highly developed and modern economy with a very business-friendly environment that has attracted investors from around the world. The government takes in slightly more than it spends, unemployment is miniscule (crime virtually unheard of) and poverty is nonexistent. Banking has been a major industry in Liechtenstein because of the strict policy of respecting the privacy of customers but in recent years that has been changing, thanks mostly to threats from the European Union and other international bodies. Nonetheless, it remains one of the most free economies in the world and one of the most prosperous, a free market success story that has even caused many libertarians to marvel at this Catholic monarchy with a very powerful prince.
However, as we have touched on, monarchies such as Liechtenstein, Monaco, Andorra, the Cayman Islands and so on have all been attacked as “tax havens” with all sorts of unsavory business and/or banking practices being heavily implied about them. Relatively few people seem to notice how much envy probably has to do with this as such accusations are invariably made by countries which are bigger, more powerful but far, far less successful. In the case of Monaco it is a very old story with their status as a “tax haven” being used to criticize the principality just as the gaming industry once was when that was viewed as terribly distasteful and when Monaco was first given its famous description as “a sunny place for shady people”. Yet, instead of attacking these monarchial micro-states, other countries should instead be looking to their example. If they are upset that so many wealthy people and so many businesses are moving to Liechtenstein or Monaco they should perhaps try adopting some of the same policies to lure them back.
None, however, have had such long-term success as the former British Crown Colony of Hong Kong. Today it is officially a part of the People’s Republic of China but, seeing how successful Hong Kong was, the Red Chinese were smart enough not to mess with a good thing and kill their golden goose by imposing their own policies on Hong Kong which has, instead, been left to carry on as it had been before (at least in the economic sphere) the handover. What was the secret to the success enjoyed by Hong Kong? The short answer is the long-standing policy (going back to the British colonial period) of “positive non-interventionism” which is a fancy way of saying that government was kept to a minimum and people were allowed to pursue success as they saw fit and reap the rewards of their own decisions. The record of Hong Kong has been one of unqualified success and it remains one of the most wealthy and prosperous places on earth. Milton Friedman once called Hong Kong the greatest capitalist experiment in the world. Obviously, anyone who doesn’t like capitalism will not be impressed by that but the numbers do not lie. Hong Kong has been a major success and it is because the Red Chinese have not interfered with the successful system they inherited from the days when Hong Kong was under the British monarchy.