Architect of Prosperity: Sir John Cowperthwaite and the Making of Hong Kong

This is a fascinating and entirely readable economic history which contains many interesting lessons. As I am not an economist is skimmed a couple of chapters on the detailed trade figures in about 1955, but the rest is absorbing. The civil servants who crafted Hong Kong's economic governance were able to take a long term view, largely untroubled by pesky voters. However their classical light touch principles so plainly were successful that before long no one could seriously propose a radically different approach. They adhered to Adam Smith in vigorously preventing vested interests from capturing monopolies, they were personally incorruptible.

There's an interesting story here. But the picture presented is very narrow.The research and structure seem to be based almost entirely around archives of financial reports on government budgets. But that's about it.Neither sufficient human interest to be a good biography, or sufficient breadth to be a compelling history of Hong Kong's economic development.

A great read and book. But please do not put Amazon stickers on the cover as they are very difficult to get off. Thank you.

I thought I had done a review of this great book. Maybe it is on Amazon.com. If you are interested in how to run an economy for prosperity - get this book .... and read it. The stuff on Cowperthwaite starts about half way through, but it is well worth the wait.

a very inspiring book on how an economy should be run especially surprising considering just a very talented civil servant ran it. Our political masters should take the time to read it.

Heavy read but well worth the time

The news recently included reports about riots as Hong Kong’s new leader Carrie Lam was sworn in 20 years after Britain handed over the territory to China. Just before the riots broke out, Chinese President Xi Jinping had strongly affirmed China’s sovereignty over the ‘semi-autonomous region’. A few days before, despite the official policy of ‘one country, two systems’, China renounced the joint declaration it had made with Britain in 1984, guaranteeing Hong Kong’s rights, freedoms and legal system until 2047.A few hours after I had read about this, a package from Amazon arrived containing Architect of Prosperity which explains how one of those systems developed under the remarkable guidance of Sir John Cowperthwaite over some two decades before his retirement in 1971, the last of which he spent as financial secretary of Hong Kong. I had never heard of this quiet Scot, but given that the system he and his colleagues built is now under threat, it seemed a good time to find out more.In the introduction, the author quotes Mark Twain’s observation that ‘history doesn’t repeat itself, but it often rhymes’. The current rhyme in Hong Kong is dissonant. But there are many others in its recent history which politicians, regulators and economists across the world would do well to note and perhaps even to echo in practice.Neil Monnery has written an intellectual biography of this remarkable civil servant, and starts with his education. He studied classical economics and the author quotes Adam Smith’s view on the three things every government needs to do: to protect its citizens from internal and external threat; to enforce the rule of law; and to ‘erect and maintain certain public works and certain public institutions which it can never be in the interest of any individual, or small number of individuals, to erect and maintain’. This well-chosen citation can be seen to have guided Cowperthwaite throughout his career.He followed a few simple principles: to develop Hong Kong by making sure the horses of the economy were fit and strong before loading the cart of social welfare with goods; to grow tax revenue by growing the tax base rather than raising the tax rate; to allow the people themselves to make most of the decisions about how the economy should develop through a policy of ‘positive non-intervention’; and to budget conservatively, so that forecasts of surpluses were always exceeded and Hong Kong only had nice financial surprises.In 1945, Hong Kong was a waste land ravaged by the Japanese occupation, and could not even feed itself. The priority was reconstruction. The aims were therefore to restore normality, grow the economy, partly by encouraging immigration, and achieve financial independence from Britain. The economy was the horse, and its success allowed the rest to be achieved. There was no industrial policy or economic plan, and there were no subsidies or bail-outs for companies as there were in many other countries, including Britain. Funding of public works was very selective and undertaken with great care. However, Cowperthwaite was no free market dogmatist. He intervened carefully to fund water supplies, basic education and low-cost government housing, but always ensured that they benefited the needy and that those who could afford such services paid for them. The Cross-Harbour Tunnel was a public-private partnership, and Cowperthwaite refused to allow the government to build and run car parks.In 1948, Hong Kong was one of the poorest countries in Asia with GDP per capita of HK $19,000. It became the first of the ‘Asian Tigers’. Today it is about HK $340,000, a compound growth rate of 4.3%, and 40% higher than that of the UK. In 1946 its population was 600,000. Today it is 7.3 million. Maybe immigration is not so bad after all.Neil Monnery explains how Hong Kong developed from a trading entrepôt to a manufacturing base and developed one industry after another whilst weathering several major storms including the terrifying, blood-soaked series of upheavals which took place in its massive neighbor China, the devaluation of the pound sterling under Harold Wilson which almost wiped out Hong Kong’s reserves, and Britain’s entry into the EU and the raising of tariff barriers.Hong Kong’s British rulers achieved this without democracy. They often ascribed the remarkable achievements of this tiny territory to the people themselves and saw their task as simply to provide the conditions in which they could become prosperous and free. In his farewell speech of 1958, the outgoing Governor Sir Alexander Grantham put it in a way which sounds quaint today. The people, he averred, ‘are not taken in by catchwords like democracy. Not that democracy is not a very fine thing: it is. But many people make the mistake of regarding it as an end in itself, whereas it is only one of the means to an end, that end being individual freedom and liberty.’ Despite the non-democratic nature of its institutions, he claimed, ‘Hong Kong is one of the most live and let live places in the world. Liberty and freedom are actualities.’Neil Monnery tells this little-known story with great clarity and some wit. It is a thought-provoking read. Hong Kong seems to have been a state modelled on Plato’s Republic, ruled by the philosophers, the ‘lovers of wisdom’, who have no interest in power for themselves but a lot of interest in pursuing the general good, with all the trade-offs that involves. Not many people would advocate that today. It seems to me that it worked there then for three reasons:1. The rulers were of high ability and highly qualified, the product of a liberal education system and rigorous examinations. They were indeed an élite, but selected on merit, not family background (Cowperthwaite’s father was a government surveyor of taxes based in Edinburgh). Ironically, the state which has been ruled for longest by élite civil servants selected in a similar way is China. They ran the great Middle Kingdom for over 2,000 years.2. The rulers were dedicated to the interests of the territory of which they were stewards. Cowperthwaite and his colleagues had many disagreements with their colleagues in the UK and some real fights with the British government, for example over tariffs which would have stifled Hong Kong’s exports to the ‘mother country’. There was never any doubt about where their loyalties lay. Although they had the ultimate hold on power, they listened to and argued with the local ‘Unofficials’ who advised and challenged them before taking the final decision themselves. In that sense, Hong Kong was run more as an enlightened public company than a country, with a Board of benign Directors rather than dictators. The government of the people was not by the people, but it was for the people.3. As they were salaried civil servants paid by London, the rulers of Hong Kong were not open to the blandishments of lobbyists. They stood above all special interests. What little corruption there was was soon rooted out. Their hold on power was temporary but secure, simply a posting. And they seem to have had a set of personal values which included absolute integrity. Cowperthwaite refused to have the financial secretary’s residence redecorated at the taxpayer’s expense and turned down the offer of air conditioning on the grounds that it was not available to Hong Kong residents. No expenses scandal there.The author has his criticisms of Cowperthwaite, such as his failure to fully understand banking and hence to regulate the banks more tightly than he did. But overall, the record is extraordinary.Cowperthwaite died in Dundee in 2006 after a long retirement which he largely spent reading Ancient Greek and C18th French literature, and playing golf. He left a Hong Kong which was a vibrant as ever, but a Britain much changed and about to plunge into a financial crisis far worse than any he had known. Perhaps it is merciful for him that he did not live for another ten years. He comes across as man from a bygone age, with roots more in the C18th Enlightenment than the murderous C20th, one of a small group for whom the grand abstract ideas of liberty and freedom could still be summed up in the homely phrase ‘live and let live’.We should all be grateful to Neil Monnery for telling his tale with such a beguiling combination of critical sympathy and elegance. Reading that tale in 2017 is not only instructive but poignant.

Interesting book. Doesn't meet the expectations of the gushing praise on the back sleeve. Most of the meat seems to come from minutes of budgetary meetings.If you want to pander your confirmation bias to ‘laissez faire’, then worth a read.Would have been nice to have more comparison with other places that had similar meteoric rises (like Singapore), and places closer by with different governance (Macao?).Skips over descriptions of poverty, so we don’t really know how much the first post war generation suffered through foregone consumption in order to build a better state in the future. I suspect at the start there was a large human cost to build the greatness of HK and this is arguably justified by the outcome - but we don’t really know about it from this book.I would have liked more analysis of the big challenges (like massive immigration, an issue that confronts us today) and how they were handled with limited funds. A lot of detail of the political choices of the allocation of limited government spending is hidden, usually described as spending on "public works". The book stays away from politics and concentrates on the financials and economics (purposely) but it means we miss out on understanding the colonial administration's effectiveness in deploying its limited resources.

First, the amount of detail the author went into regarding Cowperthwaite's personal life and Hong Kong's economic life were a little more than I bargained for. Not saying that's a bad thing. The author lays out compelling evidence to defend the classical ideas of small government and low taxes. If you end up reading this book you'll probably ask yourself about the feckless policies of our own Federal Reserve and the big government zealots (in both parties) representing us in Washington. I believe the best way to give you a flavor of Cowperthwaite's economic policy is to cite a paragraph from the inside cover of the book:"Around the world, post-war governments were turning to industrial planning, Keynesian deficits, and high inflation to stimulate their economies. How much did the civil servants in Hong Kong adopt from this emerging global consensus? Virtually nothing. They rejected the idea that governments should play an active role in industrial planning, instead believing in the ability of entrepreneurs to find the best opportunities. They rejected the idea of spending more than the government raised in taxes, instead aiming to keep a year's spending as a reserve. And they rejected the idea of high taxes, instead keeping taxes low, believing that private investment would earn high returns, and expand the long-term tax base."

Purchased this book based upon The Economist's recommendation. It is well written and comprehensively covers Sir John Cowperthwaite's time in Hong Kong. Though I knew some of the colony's history, it was interesting to read about the various fiscal, monetary, and other crises that challenged and ultimately strengthened the colony. The author frequently teased comparisons of how HK handled these matters vs. how they were handled in Britain, Singapore, and other colonies. The book could have done with more of this analysis and perhaps less quoting of Sir John, the latter of which became repetitive and often covered the same concepts. I also found the ending to be a disappointing and almost slapdash close to an otherwise good book.

There are two interwoven elements to this book: a biographical sketch of John Cowperthwaite and an economic/financial history of post-war Hong Kong. Both are flawed.The biographical sections cover the basics: born, educated, married, career, retirement, death. But I never got much sense of Cowperthwaite's personality. He liked golf; he loved his dogs; his wife was a talented amateur painter. That's about it. I appreciate that author Neil Monnery did his homework, but it wasn't very interesting and I don't think it adds anything to the second element of the book, the economic policy part.Monnery is up front about his policy preferences: free trade, limited regulation, small government, low taxes, and then he ASSERTS that these are the causes of Hong Kong's success. Just to be clear, I have NO DOUBT that good economic policy contributed to Hong Kong's success—but this book doesn't really present a reasoned argument. And in some cases, the information given (or easily available) undermines Monnery's points.For example, he starts the book by pointing how Hong Kong did better than Great Britain and immediately implies that his preferred policies must have been the cause. It's not until page 304 that he admits that a) Britain was saddled with a large debt because of World War II and b) British military expenses continued to be high because of the Cold War. (I believe the specific numbers are around GB: 10% of GNP, Hong Kong <1%.) That makes a big difference. Another problematic example is Monnery's embarrassed treatment of public housing. He claims Hong Kong as an example of "small government" but the public housing program was massive. By the time Cowperthwaite left, over a million people had moved into public, subsidized housing, roughly 25% of the population. I find it difficult to describe that as "small government" or "free market economics." (If the US decided to build subsidized housing for one-quarter of its population—that's over 70 million people—would YOU describe that as "small government"?)Many issues like this can be identified from the information given in the book—which is to the book's credit, but not to the author's since he seems not to realize that he's undermining his own thesis.Overall, this isn't a great book, but it may have some information not easily available elsewhere, and Cowperthwaite deserves some recognition. I was wavering between two and three stars, and finally decided that I can't honestly describe this as "above average."

A great story of how Hong Kong became great!

This is a good book!