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The Hong Kong Experiment: Looking Backward and Forward

April 10, 2012

This Thursday, Patri Friedman will be speaking at TEDx San Francisco on the theme of what oceans and biological evolution can teach us about the societal ecosystem and how governments evolve. It will be his third time participating in a TEDx event; the video of his second talk, at the December 2011 TEDx Hong Kong, is now online.

Last time, Patri used the TEDx stage to explain how seasteading can disrupt the government industry and enable dozens of floating Hong Kongs, each with millions of prosperous citizens. “I like Hong Kong so much that I’ve spent the last 10 years trying to figure out how we can have more places like it,” began Patri, seemingly channeling his grandfather, the late Milton Friedman, who spent much of his career trying to persuade governments to act more like this literal shining city on near a hill.

In a 1997 article titled, “The Hong Kong Experiment,” the elder Friedman wrote:

“Economists and social scientists complain that we are at a disadvantage compared with physical and biological scientists because we cannot conduct controlled experiments. However, the experiments that nature throws up can be every bit as instructive as deliberately contrived experiments. Take the fifty-year experiment in economic policy provided by Hong Kong between the end of World War II and this past July, when Hong Kong reverted to China … in 1960, the earliest date for which I have been able to get [data], 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…

Milton Friedman went on to note that these figures are even more impressive when you consider how little land and natural resources were available in Hong Kong–its only geographical benefit was a harbor that linked its citizens to the global economy. However this isolated success story was in large part a result of a historical accident, in which the particular circumstances of post-WWII British colonial rule enabled a single administrator to implement free-market policies without major influence from special interests:

“The colonial office in Britain happened to send John Cowperthwaite 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.”

Although Patri echoes his grandfather’s praise for the region when promoting the vision of seasteading, his strategy for enabling more cities like Hong Kong differs from his grandfather’s approach in that it relies on neither persuasion of government officials nor the actors who influence them. Furthermore, the success of the seasteading movement does not depend on random historical circumstance, but rather the concrete actions of a dedicated group of individuals seeking solutions to mostly technical problems.

In the last half century, “the Hong Kong experiment” provided a real-life example of the power of the market to nearby countries like Singapore and Taiwan, much like seasteads will demonstrate the power of as-yet-undiscovered institutions in the first 50 years of this century. When seasteaders talk about our goal of establishing multiple Hong Kongs on the high seas, we are not just referring to freedom in a narrow financial sense. While high GDP is important factor in granting greater choice and autonomy to the citizens of a given country, it is even more importantly an effect of policies that leave people free to choose which systems govern their everyday lives.

Unfortunately, much of the world still has yet to apply the lessons learned from Hong Kong. Therefore, new experiments are needed to confirm that Hong Kong is not a fluke, and that the wealth of nations and cities stems from the harnessing of human ingenuity under benevolent rules, not from resource-rich land, tariffs, or five-year master plans. The Seasteading Institute and similar efforts have been established so that we don’t wait for the next natural experiment to prove this point.

This is a modified version of a post that originally appeared on the official blog of The Seasteading Institute.

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