Economic Freedom: Hong Kong still in a class of its own

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Concern over Hong Kong losing its top ranking to nearby cities is valid, but Hong Kong remains by far the Number One in terms of economic freedom.


“If you make 10,000 regulations you destroy all respect for the law. – Winston Churchill

Nobody is happy where they are. Including Hong Kong.

Professor Robert “Bob” G. Lawson, author of the Fraser Institute’s Economic Freedom of the World (EFW) index, says when he travels the world, local free market advocates can’t believe how highly placed their jurisdiction is – including Hong Kongers. Doesn’t he know “insert local litany of government interventions here”?!

He explains that local groups might have their valid complaints, but everyone else is even worse. Furthermore, the numbers don’t lie and personal political favoritism is not part of the algorithm.

“The Hong Kong Government is the only government that routinely talks to us. They love my product and they love being No.1,” Professor Lawson says. “But they don’t understand I’m just the collector of data. The idea is to quantify free market, and the method is entirely data driven. All I do is to aggregate data that already exists and put it in one place.”

In the latest EFW, 157 countries were ranked under five big categories (Size of Government; Legal System and Property Rights; Sound Money, Freedom to Trade Internationally; Regulation) consisting of 42 variables on a 0-to-10 scale. 60% of the data collected are ‘hard data (such as government consumption, inflation, and use of military conscription)’ and the rest are ‘soft data (such as judicial independence and protection of property rights)’.

“The reality is that Hong Kong should be given a 12 out of 10 compared to the next country – Bob Lawson

It is hard to avoid all value judgements though, as Professor Lawson points out. For example, European governments may not be happy with the rankings which see high tax rates as a negative factor on economic freedom.

But Hong Kong still topped the list with an overall score of 8.97, followed by Singapore which scored 8.52. The 0.45 gap was mainly reflected in difference in size of the two governments. For the professor and his colleagues, it already meant a lot.

“Hong Kong is at its own class, and so does Singapore after it. Then comes the rest of the world. It [Hong Kong] is often at 9, 9.5, 10 [in terms of the different variables] and kind of pushes the world into a narrower band than the reality. The reality is that Hong Kong should be given a 12 out of 10 compared to the next country,” Professor Lawson says, praising the city’s low corporate tax, zero-tariff policy as well as a reliable legal system. “In fact, I didn’t need to do this index to know Hong Kong is No.1.”

While the data suggested no significant decline of Hong Kong’s performance, which many would argue otherwise given recent developments in the political front, it should be noted that the report was derived from data in 2013.

“All I can [report are] the numbers, and the numbers haven’t changed,” Professor Lawson says. Still, he does give his personal thoughts in this regards, believing that the city’s domestic politics, not Beijing, can be a bigger threat to economic freedom.

Another notable issue is that corruption was not singled out as one of the 42 variables, though it was indirectly linked to freedom to trade internationally, military interference in rule of law and politics, and integrity of the legal system. As Professor Lawson puts it, “following bad laws is worse than corruption.”