… is from page 163 of Columbia University economics professor Arvind Panagariya’s superb forthcoming book, Free Trade and Prosperity:
Industrialization in Hong Kong took place under a wholly free trade regime, with trade playing a central role in it.
DBx: Despite having virtually no ‘natural resources,’ Hong Kong today is among the wealthiest places on the planet.
What does Hong Kong’s experience prove? Alas, social and economic complexity being as enormous as it is, very little – if “prove” is taken literally.
Skeptics of free trade and free markets can assert that the people of Hong Kong would today be even richer than they currently are had the state there imposed more restrictions on, and given more conscious direction to, their commercial activities. And because Hong Kong has never been without some modicum of government, these skeptics can assert also that Hong Kong’s prosperity arose as a result of what little intervention that government did rather than because of that government’s general laissez faire stance.
Alternatively, skeptics of free trade and free markets can claim to identify something unique, in time or in place or in both, about Hong Kong – a uniqueness that counsels against generalizing that experience to other countries and to other time periods.
Social and economic complexity being as enormous as it is, skeptics can always offer some reason, however specious in the eyes of the wise, for why the experience of Hong Kong ought not be interpreted as justification for rejecting industrial policies and protectionism.
But what such skeptics cannot deny is that by historical standards the economy of Hong Kong is highly successful, and that this success arose in a regime of very little state intervention and under a policy of nearly pure unilateral free trade.