, Professor of International Economic History at the University of Glasgow, told the story of Hong Kong
’s transformation into an international financial centre and challenged some of the common perceptions around Hong Kong
as a paradigm of Laissez-Faire Capitalism at work.
- Interview: The Role of Cities in the History of Capitalism [Watch]
- Full lecture [Watch]
- Slides [PDF]
- Photos [View]
- Lecture Transcript [PDF]
Throughout the lecture, Schenk asked the audience to look again at received perceptions of Hong Kong and its economy. She showed that people in Hong Kong are not, despite popular opinion, uninterested in politics. She discussed the Umbrella Movement and linked rises in income inequality with increasing political unrest.
She also highlighted the fact that the state controls all land in Hong Kong and how to lease it. It subsidises housing too; 30% of people in Hong Kong live in public housing and pay, on average, rents that are 14% lower than those demanded by the private sector, effectively using rents to subsidise the cost of living.
She went on to explore the claim that Hong Kong and China did not interact, giving evidence of ‘integration’ with China before 1978 that cheapened the costs of food and labour.
Schenk challenged the myths concerning the banking sector. Most shockingly, artificial barriers had been erected to prevent ‘parasitic’ foreign banks from succeeding in Hong Kong. Incumbent banks were protected from competition by, for instance, a moratorium on new bank licences from 1965 to 1981 and limits on the setting up of new branches until 2001. Interest rates were set by a cartel until 2001. There had been repeated banking crises and in each case, depositors had been bailed out and banks taken over by the government. The market in Hong Kong was not free. Rather, a small group of banks were free to control it by interacting cannily with the state.
Schenk considered the term ‘positive non-interventionism’ used to describe the particular attitude to regulation and government intervention that is supposed to have made Hong Kong particular, and particularly successful. It refers to the approach of Philip Haddon-Cave, the Financial Secretary of Hong Kong from 1971 to 1981. In the words of Haddon-Cave, it is to take ‘the view that it is normally futile and damaging to the growth rate of an economy, particularly an open economy, for the Government to attempt to plan the allocation of resources available to the private sector and to frustrate the operation of market forces’. As opposed to a laissez-faire approach, a positive interventionist approach involves considering economic situations on a case-by-case basis but usually deciding to not intervene.
Schenk is an archival historian and her lecture was brought to life by the inclusion of slides showing letters between the government and the banking sector during Hong Kong’s dramatic ascent. This type of research reveals how important it is to avoid helicopter views of policy environments, especially where day-to-day interactions show a very different picture. One example she presented, showed Haddon-Cave writing affectionately to Mr Li Ka-shing, business magnate, investor, and philanthropist, whose rags-to-riches success is emblematic of perceptions of this period. He is thanking Ka-shing for dinner in the same letter as expressing determination to keep ‘the economy and all the markets within it free from influences that inhibit competitive forces’. Schenk noted the innovatively messy way the state and the private sector coexisted in the political and economic spheres.
The evening was moderated by Hywel Williams, Senior Adviser at the Legatum Institute.
About the Speaker
Catherine Schenk FRHS, AcSS is Professor of International Economic History at the University of Glasgow. She gained her PhD at the London School of Economics and has held academic posts at Royal Holloway, University of London, Victoria University of Wellington and visiting positions at the International Monetary Fund and the Hong Kong Monetary Authority as well as the University of Hong Kong and Nottingham Business School campus in Seminyeh Malaysia. She is Associate Fellow in the international economics department at Chatham House in London. Her research focuses on international monetary and financial relations after 1945 with a particular emphasis on East Asia and the United Kingdom. She is the author of several books including International Economic Relations since 1945 (2011) and The Decline of Sterling: Managing the Retreat of an International Currency (2010). Her current research interests include the development of international banking regulation since the 1960s and the causes of the sovereign debt crisis of the 1980s.
About the History of Capitalism Series
This series of lectures, which forms part of the Legatum Institute's 'The Culture of Prosperity' programme, investigates the origins and development of a movement of thought and endeavour which has transformed the human condition. Capitalism's characteristic emphasis on freedom of trade and market expansion has encouraged social mobility, global exploration and intellectual curiosity. Wherever and whenever it has appeared across the world's continents capitalism has undermined monopolies, economic protectionism and restrictive practices. The series' lecturers therefore assess case studies in business history and the individual biographies of thinkers, writers and inventors as well as describing particular periods in the histories of cities, states and nations. Further information available here.