While reading up on Laissez-faire success last night, I stumbled upon an article written in 1998 by Milton Friedman, the Nobel Prize laureate who advocated free markets.

The subject of the article:  Hong Kong and its free market success.  You see, a funny thing happened in Hong Kong even while it remained subservient to Great Britain:  they sent a capitalist over to run things.

The colonial office in Britain happened to send John Cowper-thwaite to Hong Kong to serve as its financial secretary. Cowperthwaite was a Scotsman and very much a disciple of Adam Smith. At the time, while Britain was moving to a socialist and welfare state, Cowperthwaite insisted that Hong Kong practice laissez-faire. He refused to impose any tariffs. He insisted on keeping taxes down.

…

in 1960, the earliest date for which I have been able to get them, the average per capita income in Hong Kong was 28 percent of that in Great Britain; by 1996, it had risen to 137 percent of that in Britain. In short, from 1960 to 1996, Hong Kong’s per capita income rose from about one-quarter of Britain’s to more than a third larger than Britain’s. It’s easy to state these figures. It is more difficult to realize their significance. Compare Britain—the birthplace of the Industrial Revolution, the nineteenth-century economic superpower on whose empire the sun never set—with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country.

I believe that the only plausible explanation for the different rates of growth is socialism in Britain, free enterprise and free markets in Hong Kong. Has anybody got a better explanation? I’d be grateful for any suggestions.

Friedman goes on to compare Hong Kong to Israel, a bigger country with more natural resources, which also saw a wave of immigration in the fifty years between the 40’s and the 90’s (the reason for immigration to Hong Kong?  A giant communist country nearby).

Israel, starting at a 60% higher income per capita over Hong Kong in 1960, fell to 40% less than Hong Kong in 1990.

Again, the most plausible explanation is that Israel followed a socialist policy and Hong Kong a free market policy. Government spending in Hong Kong was, at its maximum, about 15 percent of national income. Government spending in Israel was at times close to 100 percent of national income.

Is it “greedy” to want lower taxes on the rich and less government spending?  Given the example of Hong Kong, in which small regulations and free markets brought the city to prosperity, and the relative failure of larger, more socialist economies, which policy would really help improve peoples’ lives?