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01 / 05
Centers of Progress, Pt. 27: Hong Kong (Non-Interventionism)

Blog Post | Economic Freedom

Centers of Progress, Pt. 27: Hong Kong (Non-Interventionism)

Introducing a city transformed by economic freedom and exchange.

Today marks the twenty-seventh installment in a series of articles by HumanProgress.org called Centers of Progress. Where does progress happen? The story of civilization is in many ways the story of the city. It is the city that has helped to create and define the modern world. This bi-weekly column will give a short overview of urban centers that were the sites of pivotal advances in culture, economics, politics, technology, etc.

Our twenty-seventh Center of Progress is Hong Kong during its rapid free-market transformation in the 1960s. After a lengthy struggle with poverty, war and disease, the city managed to rise to prosperity through classical liberal policies.

Today, the freedom that has been so key to Hong Kong’s success is being stripped away. The Chinese mainland has cracked down on the city’s political and civil liberties, leaving its future uncertain. But as my colleague Marian Tupy has noted, “No matter what lies ahead for Hong Kong, we should admire its rise to prosperity through liberal reforms.”

The area where Hong Kong now stands has been inhabited since Paleolithic times, with some of the earliest residents being the She people. The small fishing village that would later become Hong Kong came under the rule of the Chinese Empire during the Qin Dynasty (221–206 BC). After the Mongol conquest in the 13th century, Hong Kong saw its first significant population increase as Song dynasty loyalists sought refuge in the obscure coastal outpost.

Hong Kong’s position on the coast allowed its people to make a living by fishing, collecting salt, and hunting for pearls. However, it also left them under the constant threat of bandits and pirates. One particularly notorious pirate was Cheung Po Tsai (1786–1822), said to have commanded a fleet of 600 pirate ships before the government recruited him to become a naval colonel and fight the Portuguese. His purported hideout on an island six miles off the coast of Hong Kong is now a tourist attraction.

China ceded much of Hong Kong to Britain in 1842 through the Treaty of Nanjing that ended the First Opium War. As trade between China and Britain in silk, porcelain, and tea intensified, the port city became a transportation hub and grew quickly. That growth initially led to overcrowding and unsanitary conditions. Thus, it is unsurprising that when the Third Plague Pandemic (1855–1945) took some 12 million lives globally and devasted Asia, it did not spare Hong Kong.

In 1894, the Bubonic Plague arrived in the city and killed over 93 percent of those infected. The plague and resulting exodus caused a major economic downturn, with a thousand Hong Kongers departing daily at the pandemic’s peak. In total, around 85,000 of the city’s 200,000 ethnically Chinese residents left Hong Kong. The Bubonic Plague remained endemic on the island until 1929. Even after the Bubonic Plague departed, Hong Kong remained unhygienic and ravaged by tuberculosis, or the “white plague.”

Besides disease, life in Hong Kong was also complicated by war and instability on the Chinese mainland. In 1898, the Second Opium War (1898) brought Hong Kong’s Kowloon peninsula under British control.

The suffering in Hong Kong was well documented by journalist Martha Gellhorn, who arrived with her husband, the author Ernest Hemingway, in February 1941. Hemingway would later ironically refer to the trip as their honeymoon. Gellhorn wrote, “The streets were full of pavement sleepers at night … The crimes were street vending without a license, and a fine no one could pay. These people were the real Hong Kong and this was the most cruel poverty, worse than any I had seen before.” Yet things were about to get even worse for the city.

During the Second Sino-Japanese War (1937–1945), much of the material aid that China received from the Allied Nations arrived through its ports—particularly the British colony of Hong Kong, which brought in roughly 40 percent of outside supplies. In other words, the city was a strategic target. British authorities evacuated European women and children from the city in anticipation of an attack. In December 1941, on the same morning that Japanese forces attacked Pearl Harbor in Hawaii, Japan also attacked Hong Kong, starting with an aerial bombardment. The British chose to blow up many of Hong Kong’s bridges and other key points of infrastructure to slow the Japanese military’s advance, but to no avail.

Following the Battle of Hong Kong, the Japanese occupied the city for three years and eight months (1941–1945). The Hong Kong University of Science and Technology refers to the episode as perhaps “the darkest period of Hong Kong’s history.” The occupying forces executed around 10,000 Hong Kong civilians and infamously tortured, raped, and mutilated many others. The situation prompted many Hong Kongers to flee, and the city’s population rapidly shrunk from 1.6 million to 600,000 people during the occupation. After the Japanese surrendered to American forces in 1945, the British returned to Hong Kong.

That same year, a 30-year-old civil servant from Scotland named Sir John James Cowperthwaite came to the colony to help oversee its economic development as part of the Department of Supplies, Trade, and Industry. He was originally assigned to go to Hong Kong in 1941, but the Japanese occupation forced his reassignment to Sierra Leone. When he finally arrived in Hong Kong, he observed a war-ravaged city in an even worse state of poverty than Gellhorn had described. It was appropriately nicknamed “the barren island.” With the entrepot business stalled, the British considered handing the seemingly hopeless city filled with war refugees back to China.

But Cowperthwaite had some ideas that would help transform Hong Kong from one of the poorest places on the planet to one of the most prosperous.

What was the miraculous intervention that he proposed? Simply allowing Hong Kong’s people to rebuild their shops, engage in exchange, and ultimately save themselves and make their city rich. Cowperthwaite trusted in the capabilities of ordinary people to run their own lives and businesses. He and his fellow administrators provided the city freedom, public security, the rule of law, and a stable currency, and left the rest to the people. To put it simply, he enacted a policy of doing nothing. That isn’t to say he actually did nothing; keeping the other bureaucrats in check kept him plenty busy. He would later claim one of the actions he was most proud of was to prevent collection of statistics that could potentially justify economic intervention.

Cowperthwaite rose steadily through the bureaucracy and eventually became Hong Kong’s Financial Secretary, a post he occupied from 1961 to 1971. During the 1960s, many countries experimented with centralized economic planning and high degrees of public spending financed by heavy taxes and large deficits. The idea that governments should attempt to steer the economy, from industrial planning to intentional inflation, was virtually a global consensus. Cowperthwaite resisted the political pressure to follow suit. From 1964 to 1970, Britain was ruled by a Labour Government that favored heavy-handed economic intervention, but Cowperthwaite ran constant interference to keep his compatriots from meddling with Hong Kong’s market.

As the Communist-controlled Chinese mainland violently purged any remnants of capitalism (among other things) during the reign of terror later called the Cultural Revolution (1966–76), Hong Kong went down a markedly different path.

In 1961, in his first budget speech, Cowperthwaite opined, “In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralized decisions of a government, and certainly the harm is likely to be counteracted faster.”

He turned out to be right. Once freed, Hong Kong’s economy became breathtakingly efficient and saw explosive economic growth. The city was among the first in East Asia to fully industrialize and just as rapidly moved to post-industrial prosperity. Hong Kong soon became an international center of finance and commerce, earning its nickname, “Asia’s World City.” Hong Kong’s economic rise dramatically improved the local standard of living. During Cowperthwaite’s tenure as Financial Secretary, Hong Kong’s real wages rose 50 percent, and the number of households in acute poverty fell by two-thirds.

When the Scotsman arrived in Hong Kong in 1945, the average income in Hong Kong was less than 40 percent that of Great Britain. But by the time Hong Kong was returned to China in 1997, its average income was higher than Britain’s.

Cowperthwaite’s successor, Sir Philip Haddon-Cave, named Cowperthwaite’s strategy the “doctrine of positive non-interventionism.” Positive non-interventionism became the official policy of the Hong Kong Government and remained so as recently as the 2010s. For years, the city boasted the world’s freest economy, with bustling financial and trade industries and a human rights record far superior to that of the Chinese mainland.

Then in 2019, Beijing began requiring extradition of fugitives in Hong Kong to the mainland—eroding the independence of Hong Kong’s legal system. In response to the resulting mass protests, the mainland Chinese government implemented a brutal crackdown on Hong Kong’s political and economic independence. In July 2020, a new national security law imposed by the Communist government in Beijing criminalized protests and stripped away several other freedoms previously enjoyed by Hong Kongers. Sweeping changes continue, most recently with an overhaul of Hong Kong’s education system.

Hong Kong was returned to China on the condition that it would remain autonomous until 2047. But the “autonomous territory” is, sadly, no longer truly autonomous.

From a starving city plagued by war and poverty to a shining beacon of prosperity and freedom, Hong Kong’s rise exemplified the potential of limited government, rule of law, economic freedom, and fiscal probity. Sadly, the pillars upon which Hong Kong’s success was built are now crumbling in the tightening fists of the Chinese Communist Party. Whatever the future may hold for the island city, its transformation reflects how much people can achieve when given the freedom to do so. This historic policy lesson merits Hong Kong’s place as our 27th Center of Progress.

Our World in Data | Financial Market Development

Mobile Money Accounts Are Surging Globally

“Mobile phones and the Internet have enabled the growth of mobile money accounts in regions with limited banking infrastructure. These accounts provide simple financial services like deposits, transfers, and payments to hundreds of millions of people.

As this chart shows, the number of active mobile money accounts globally has grown from 13 million in 2010 to more than 640 million in 2023. This is based on data published by the GSM Association.

While the adoption of mobile banking was almost exclusive to Sub-Saharan Africa in the early 2010s, Asian countries have seen significant growth in recent years.”

From Our World in Data.

Blog Post | Financial Market Development

The Democratization of Investment | Podcast Highlights

Chelsea Follett interviews Jennifer Schulp about how technology and regulation are shaping the future of investment.

Listen to the podcast or read the full transcript here.

Tell me about some hopeful trends or progress we are seeing in the financial industry.

One of the most hopeful trends in the financial industry is broader access to financial investment. Traditionally, investment in the stock market has been limited to the wealthy. Investing in the stock market is really important because, over the past decades, the S&P 500 has returned approximately 8 percent per year, which is way more than other non-equity investments.

Financial access has improved tremendously over the last 50 years. In the mid-70s, to make a stock trade, you had to call your broker on the phone and tell them what you wanted to trade, and they would charge you something like $50. So, you didn’t want to place a trade unless you were placing a large trade because otherwise, the fee would overwhelm the trade. And you didn’t want to trade very often. All of it made it very difficult for regular people to invest in the stock market. Over the course of decades, those fees came down as there was additional competition brought into the brokerage space.

In the 1990s, we saw the rise of internet trading, which allowed you to place trades on your own. In 2015, Robinhood started offering no-commission trading on a phone app, which allows people to trade regularly without worrying about fees eating into their profits or adding to their losses. People can now take some money from each paycheck and put it in the stock market. That’s been huge. The entire brokerage industry is now moving towards phone access for easy, cheap trading, and that’s made a huge difference in the number and type of people accessing investment in the stock market.

In 2020, during the pandemic, we saw a massive rise in retail trading that many wrote off to people being bored while they were stuck in their homes. However, a lot of those investors have remained in the market, so what might have started as a pandemic-induced interest in the stock market has become part of a long-term trend towards additional retail trading that has brought in more racial minorities, more low-income people, and more young people.

Easy and cheap trading has also allowed people to experiment with the stock market and learn by doing. There was a study that came out not too long ago by FINRA and NORC at the University of Chicago that looked at the investors who opened accounts in 2020. And they found that those who stayed in the market showed an increase in their financial literacy. Having this access helped them allocate their capital better. So, we have more people invested in the larger economy, and they are getting smarter about it. The benefits will compound over time.

What are some of those potential benefits?

Certainly better personal financial outcomes. Of course, some people are going to make poor decisions. You can’t say, “Because you put money in the market, you’ll be better off.” But for people looking for long-term investment options, the stock market is the greatest wealth generator we’ve ever seen.

I think this could also drive economic growth for a couple of reasons. One, investment gives people a stake in society and the economy, and that itself can drive growth. Two, having retail investors put money that might otherwise be under the mattress or in a low-interest savings account into businesses allows those businesses to flourish.

Are there any benefits for those who are trying to start businesses?

That brings up a new set of questions. What we’ve been talking about so far has been retail investment in public equities markets. But the stock market doesn’t generally provide startup capital. You have to be a mature company to want to bring an initial public offering that gets you listed on the stock exchange. Private market investing is where startup investing happens. And in the United States, far more money is raised in private markets than in public markets. The average person is not allowed to partake in private investment in the United States, as well as in most economies across the world. In the US, you need to be what’s known as an accredited investor, which essentially means you make more than $200,000 a year or you have a net worth of over a million dollars.

This is a very arbitrary standard. You could win the lottery tomorrow and suddenly become an accredited investor, and that doesn’t make you any smarter at investing than you were the day before. It doesn’t make you any more of a capable investor than someone who, say, studied startup investing in their MBA program but isn’t yet making enough money to be allowed to invest themselves. And all of this is a problem because it means the government is standing in the investor’s shoes and making decisions for them. Are they smart enough? Are they rich enough? Is this a good idea for them?

Let’s talk about entrepreneurs, as you asked. People trying to start businesses tend to turn to their community. They tend to raise money from the people that they know best. But if you are a minority or live in a rural or low-income area, you likely don’t know many people who meet that accredited investor standard. You’re already at a disadvantage in raising money and getting your business off the ground. That hurts entrepreneurs in less wealthy communities, the economy as a whole, and potential investors who don’t have the opportunity to share in the growth of that business.

The house recently passed three bills looking to reform the accredited investor definition; two have codified an SEC modification to the rule allowing people who have passed certain securities tests, such as brokers or investment advisors, to qualify as accredited investors, even if they’re not wealthy enough. The third bill is a bit broader; it opens up the testing concept to allow, if passed by the Senate and signed by the President, anyone who passes a test to be able to invest as an accredited investor. There will be costs associated with the testing, and it doesn’t get at the underlying paternalism, but it is a step in the right direction.

Could you talk about ESG?

ESG is actually two distinct concepts, and it’s important to identify which one we’re talking about. It can be broken down into a dichotomy that I’ve borrowed, which is value versus values investing.

“Value investing” in the form of ESG just refers to using environmental, social, or governance factors to analyze whether a company faces risks that might affect its financial performance. Where ESG sounds a little bit different is when we think about it as “values investing.” That kind of ESG is about sacrificing financial return to reach a certain outcome with your investment, like lowering carbon emissions. Of course, investors should be free to invest their money as they see fit. If they want to invest in saving the whales, they should have that opportunity. But it gets trickier when a company or asset management firm makes those decisions about what to do with their investors’ money without being upfront with them. That’s a question of disclosure and whether or not the funds are being clear with investors.

Government mandates are the key place to focus on here because, ultimately, the market should decide whether investing in ESG is the right way to go. Europe has decided, writ large, that the way to tackle climate change is to centrally plan how money will flow through the financial system to choke off funds for non-green investment. Supporting that is a host of European directives on sustainable finance that include a lot of disclosure by companies about how they, too, will meet net-zero goals. Europe has what we in the securities industry refer to as a “double materiality standard,” where European companies are not only supposed to disclose information that might impact the company’s financial performance but also how their company impacts society and the environment. All of this comes with pretty heavy costs.

The United States is now considering how far to follow Europe down that line. The Securities and Exchange Commission (SEC) has proposed a sweeping climate risk disclosure framework. It’s different from the European framework in that the SEC at least recognizes that they don’t get double materiality; the SEC is only allowed to require companies to disclose information that investors might find useful in deciding whether to invest in the company. However, the SEC’s climate risk disclosure rule goes well beyond that. It would require all US public companies to disclose an awful lot of information about climate risk, including scope one, scope two, and, for many companies, scope three, greenhouse gas emissions. What’s important here is that this type of disclosure is not a small undertaking. It’s going to be a massive drag on public companies.

You also oppose government rules that would restrict voluntary ESG-related disclosures. Can you tell me about that?

Sure. There’s been some legislation introduced, some of it passed, from state-level Republican legislatures that prohibits the use of ESG in investment. But this broad prohibition is also not the right answer. In fact, it is itself values-based and seeks to impose an ideology onto investing.

In addition, there are real costs to blanket prohibitions of ESG. One is that ESG as value investing can sometimes yield better returns. Pensions in some states that have introduced legislation to prohibit the consideration of ESG factors have released analyses showing that over the course of 10 years, the pensions might be losing billions of dollars in returns by having their investment pool artificially limited.

Another example is Texas, which prohibits localities from doing business with financial firms that are, quote, “boycotting the fossil fuel industry.” A study done not too long ago showed that the cost of municipal borrowing has gone up in Texas because many firms exited the market, meaning taxpayers in Texas are now paying more for municipal building projects. We shouldn’t forget that narrowing the scope of investment opportunities also narrows the opportunities for growth.

Could you speak about the potential impact of AI on investment and the financial industry?

Many people don’t understand how much AI is already part of the investment industry. For example, AI is already involved with investment research, predicting stock value, and portfolio management. That’s all going on behind the scenes.

I think that there’s real potential with respect to financial advice. AI could make investment advice as accessible as trading on your phone is today. For a long time, we’ve had what are known as robo-advisors, which are essentially chatbots with a narrow tree of advice based on a set of questions. More sophisticated large language models could give individualized investment advice that considers all sorts of circumstances at a very low cost. In the future, you may be able to go on your computer or phone and tell the LLM, here’s what my investments look like; what should I do next? That’s powerful stuff, assuming that the regulators allow something like that to happen.

The Human Progress Podcast | Ep. 50

Jennifer Schulp: The Democratization of Investment

Jennifer Schulp, the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, joins Chelsea Follett to discuss how technology and regulation are shaping the future of investment.

Blog Post | Science & Technology

AI Is a Great Equalizer That Will Change the World

A positive revolution from AI is already unfolding in the global East and South.

Summary: Concerns over potential negative impacts of AI have dominated headlines, particularly regarding its threat to employment. However, a closer examination reveals AI’s immense potential to revolutionize equal and high quality access to necessities such as education and healthcare, particularly in regions with limited access to resources. From India’s agricultural advancements to Kenya’s educational support, AI initiatives are already transforming lives and addressing societal needs.


The latest technology panic is over artificial intelligence (AI). The media is focused on the negatives of AI, making many assumptions about how AI will doom us all. One concern is that AI tools will replace workers and cause mass unemployment. This is likely overblown—although some jobs will be lost to AI, if history is any guide, new jobs will be created. Furthermore, AI’s ability to replace skilled labor is also one of its greatest potential benefits.

Think of all the regions of the world where children lack access to education, where schoolteachers are scarce and opportunities for adult learning are scant.

Think of the preventable diseases that are untreated due to a lack of information, the dearth of health care providers, and how many lives could be improved and saved by overcoming these challenges.

In many ways, AI will be a revolutionary equalizer for poorer countries where education and health care have historically faced many challenges. In fact, a positive revolution from AI is already unfolding in the global East and South.

Improving Equality through Education and Health Care

In India, agricultural technology startup Saagu Baagu is already improving lives. This initiative allows farmers to increase crop yield through AI-based solutions. A chatbot provides farmers with the information they need to farm more effectively (e.g., through mapping the maturity stages of their crops and testing soil so that AI can make recommendations on which fertilizers to use depending on the type of soil). Saagu Baagu has been successful in the trial region and is now being expanded. This AI initiative is likely to revolutionize agriculture globally.

Combining large language models with speech-recognition software is helping Indian farmers in other ways. For example, Indian global impact initiative Karya is working on helping rural Indians, who speak many different languages, to overcome language barriers. Karya is collecting data on tuberculosis, which is a mostly curable and preventable disease that kills roughly 200,000 Indians every year. By collecting voice recordings of 10 different dialects of Kannada, an AI speech model is being trained to communicate with local people. Tuberculosis carries much stigma in India, so people are often reluctant to ask for help. AI will allow Indians to reduce the spread of the disease and give them access to reliable information.

In Kenya, where students are leading in AI use, the technology is aiding the spread of information by allowing pupils to ask a chatbot questions about their homework.

Throughout the world, there are many challenges pertaining to health care, including increasing costs and staff shortages. As developed economies now have rapidly growing elderly populations and shrinking workforces, the problem is set to worsen. In Japan, AI is helping with the aging population issue, where a shortage of care workers is remedied by using robots to patrol care homes to monitor patients and alert care workers when something is wrong. These bots use AI to detect abnormalities, assist in infection countermeasures by disinfecting commonly touched places, provide conversation, and carry people from wheelchairs to beds and bathing areas, which means less physical exertion and fewer injuries for staff members.

In Brazil, researchers used AI models capable of predicting HER2 subtype breast cancer in imaging scans of 311 women and the patients’ response to treatment. In addition, AI can also help make health resource allocations more efficient and support tasks such as preparing for public health crises, such as pandemics. At the individual level, the use of this technology in wearables, such as smartwatches, can encourage patient adherence to treatments, help prevent illnesses, and collect data more frequently.

Biometric data gathered from wearable devices could also be a game-changer. This technology can detect cancers early, monitor infectious diseases and general health issues, and give patients more agency over their health where access to health care is limited or expensive.

Education and health care in the West could also benefit from AI. In the United States, text synthesis machines could help to address the lack of teachers in K–12 education and the inaccessibility of health care for low-income people.

Predicting the Future

AI is already playing a role in helping humanity tackle natural disasters (e.g., by predicting how many earthquake aftershocks will strike and their strength). These models, which have been trained on large data sets of seismic events, have been found to estimate the number of aftershocks better than conventional (non-AI) models do.

Forecasting models can also help to predict other natural disasters like severe storms, floods, hurricanes, and wildfires. Machine learning uses algorithms to reduce the time required to make forecasts and increase model accuracy, which again is superior to the non-AI models that are used for this purpose. These improvements could have a massive impact on people in poor countries, who currently lack access to reliable forecasts and tend to be employed in agriculture, which is highly dependent on the weather.

A Case for Optimism

Much of the fear regarding AI in the West concerns the rapid speed at which it is being implemented, but for many countries, this speed is a boon.

Take the mobile phone. In 2000, only 4 percent of people in developing countries had access to mobile phones. By 2015, 94 percent of the population had such access, including in sub-Saharan Africa.

The benefits were enormous, as billions gained access to online banking, educational opportunities, and more reliable communication. One study found that almost 1 in 10 Kenyan families living in extreme poverty were able to lift their incomes above the poverty line by using the banking app M-Pesa. In rural Peru, household consumption rose by 11 percent with access to phones, while extreme poverty fell 5.4 percent. Some 24 percent of people in developing countries now use the mobile internet for educational purposes, compared with only 12 percent in the richest countries. In lower-income countries, access to mobile phones and apps is life-changing.

AI, which only requires access to a mobile phone to use, is likely to spread even faster in the countries that need the technology the most.

This is what we should be talking about: not a technology panic but a technology revolution for greater equality in well-being.