John Cowperthwaite: the thinking civil servant behind Hong Kong's success

 

Alex Singleton

When Sir John Cowperthwaite, who has died aged 90, became financial secretary of Hong Kong in 1961, the average resident earned about a quarter of someone living in Britain. By the early 1990s, average incomes in the colony were higher.

Cowperthwaite made Hong Kong the most economically free economy in the world and pursued free trade, refusing to make its citizens buy expensive locally-produced goods if they could import cheaper products. Income tax was never more than a flat rate of 15%. The colony's lack of natural resources, apart from a harbour - and the fact that it was a food importer - made its success all the more interesting. Cowperthwaite's policies attracted the attention of economists like Milton Friedman, whose 1980 television series Free to Choose featured Hong Kong's economic progress in some detail.

Asked what the key thing poor countries should do, Cowperthwaite once remarked, "They should abolish the office of national statistics." He refused to collect all but the most superficial statistics, believing they led the state to fiddle about remedying perceived ills, thus hindering the working of the market. This caused consternation: a Whitehall delegation was sent to find out why employment statistics were not being collected, but the financial secretary literally sent them back on the next plane.

Cowperthwaite's frugality with taxpayers' money extended to himself. He was offered funds by the Hong Kong executive to do a much-needed upgrade on his official residence, but refused, pointing out that since others did not get a housing benefit, he did not see why he should.

His hands-off approach meant an almost daily battle with Whitehall. The British government insisted on higher income tax in Singapore; when they told Hong Kong to do the same, Cowperthwaite refused. He opposed giving special benefits to business; when a group of businessmen asked him to fund a tunnel across Hong Kong harbour, he argued that if it made economic sense, the private sector would pay for it (as indeed it did). His instincts were revealed in his first speech as financial secretary: "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 centralised decisions of a government, and certainly the harm is likely to be counteracted faster."

He was helped by having two supportive Hong Kong governors, Sir Robert Black and Sir David Trench, both men with free market sympathies. He was also formidable at arguing his case: as Denis Healey recalled, "I always retired hurt from my encounters with the redoubtable financial secretary."

Cowperthwaite was educated at Merchiston Castle school, Edinburgh, and read classics at St Andrews University and Christ's College, Cambridge. While waiting to be called up by the Cameronians (Scottish Rifles), he went back to St Andrews to study economics. This Scottish education imbibed him with the ideas of the enlightenment, especially those of Adam Smith, who had been born in nearby Kirkcaldy. He was a liberal in the 19th-century sense, believing that countries should open up to trade unilaterally.

He joined the colonial administrative service in Hong Kong in 1941. When the colony fell to the Japanese, he was seconded to Sierra Leone as a district officer, before returning in 1946 to work his way up the ranks. He became financial secretary in 1961, holding the post until 1971. His example inspired the governments of Margaret Thatcher and Ronald Reagan, and was a key influence in China's economic liberalisation after the demise of Mao Zedong.

From 1972 to 1981, he was an adviser to Jardine Fleming & Co in Hong Kong. He retired to St Andrews with his wife Sheila, and was an active member of the Royal & Ancient. For many years he and Sheila spent six months of the year travelling the world visiting friends and relatives. He was an old-school civil servant and always resisted requests to write an autobiography, believing that his duty was to serve, not to reveal the minutiae of government business.