MINNEAPOLIS (PRWEB) July 03, 2018
Jon Henschen’s June 29 Intellectual Takeout article, “Why People in Hong Kong Have Incomes 5x Higher Than People in China’s Richest Province,” takes a look at the island of Hong Kong, where for two decades, prosperity has followed economic freedom for the most economically free territory in the world.
Henschen’s article opens with some history, noting that Hong Kong was added to the British Empire after the Opium Wars and eventually transformed into a hub of Britain’s China trade. When Britain’s 99-year lease on Hong Kong expired in 1997, Hong Kong became a Special Administration Region (SAR) and officially a part of China, though it operates as an independent country.
According to Henschen, even with the economic success China has experienced in recent years, Hong Kong residents enjoy income that is four to five times higher than residents of China’s most prosperous region, Shanghai. When the United Kingdom turned over Hong Kong to China in 1997, China recognized Hong Kong’s economic superiority. It left Hong Kong’s economic system alone as to not kill the “golden goose,” which grew 180 times between 1961 and 1997.
Today, Hong Kong has an economy larger than Israel and Ireland. Its 7.4 million inhabitants are wealthier, on a per capita purchasing power basis, than Americans. It also boasts the world’s most service-oriented economy, the world’s most competitive economy, Asia’s second largest recipient of foreign direct investment and the world’s largest IPO market.
Henschen offers a recipe for what does Hong Kong has that many lesser economies lack, describing key attributes to the tiny island’s success. These include business efficiency, small government, an open trading system, low taxes, sound money, few government regulations and the rule of law.
During colonial times, British officials kept the peace but otherwise mostly left people alone to work, innovate, and find ways to prosper. Because of this tradition, Hong Kong today lacks micromanaging overlords who implement obstructionist rules, policies, procedures and regulations. This is a key part of its economic success.
The data shows that for 18 consecutive years, Hong Kong has been ranked #1 in the Heritage Foundation’s Economic Freedom Index. The top five rankings have remained largely consistent, with the exception of Ireland falling from 5th place to 6th. But one can also see that the United States has dropped dramatically—from 8th in 2010 to 18th today. Henschen asserts that a glimmer of hope, however, is emerging with the Trump administration making some much-needed cutbacks in economic hobbling regulations.
According to progressive and socialist economic theory, Hong Kong should have higher unemployment, homeless, and more people begging on street corners than, say New York. From this perspective, Hong Kong’s government is too small to effectively provide social services and regulatory oversight. Reality, however, conflicts with this assumption: Hong Kong has full employment, a labor shortage, and relatively few vagrants (though homelessness is on the rise).
The people of Hong Kong understand that a free market left alone is a market that will flourish. When governments grow large and become parasites upon the private sector, prosperity wanes. Government intervention into the markets via regulations nearly always causes unintended problems, which act as sand in the gears of commerce.
Jon Henschen is President of Henschen & Associates, an independent broker-dealer recruiting firm located in Marine on St. Croix, Minnesota. With more than 20 years of industry experience, Jon is a staunch advocate for independent financial advisors, and is widely sought after by both reps and broker dealers for his expertise and advice on independent broker dealer topics. He is frequently published and quoted in a variety of industry publications, including ThinkAdvisor, Investment Advisor Magazine, Wealth Management Magazine, Financial Advisor IQ, Financial Advisor Magazine, Investment News and others.