Monday, 22 November 2010


Every time my eyebrows are raised at the state of our nation’s, or anyone else’s, financial affairs, I can’t help remembering James Carville’s quote (he being Clinton’s campaign manager) which he stuck on the wall of the presidential campaign HQ in 1992...

’it’s the economy, stupid’.

This seems like an answer to most questions, and one to which I, as matriarch in this house, resort with some frequency. But boy oh boy, am I glad I don’t have to take monumental decisions on the economy of a nation.

As I write, the financial markets are jittery following last weekend’s decision that Ireland should be bailed-out. As Ireland formally applies for 90 billion (or so) euros of European-led loans, we learn that despite the austerity currently hovering over us here in the UK, around 7 billion of that 90 is expected to come from Britain. The Chancellor hastily explained that ‘Ireland is a friend in need, and we need to help.’

I realize that a blog post about the economy is verging on the turgid...but really, no matter how dull you think economics might be, it seems to me more or less impossible to ignore this subject for the time being. I know I’m a snore, but I can’t get economics out of my head, (particularly since reading Robert Peston’s explanation of how global financial collapse came about in his brilliant book ‘Who Runs Britain?’)

So far, nobody has guessed the name of the economist (and St Andrews graduate) I mentioned last time. And perhaps there is a reason for that. The man of which I speak was one of those old-fashioned civil servants, not the sort to rush off and create a ‘celebie’ ghost-written-spin of an autobiography with which to supplement his perfectly respectable pension. No, no, this man was very pleased to spend a happy retirement in relative obscurity in St Andrews where he enjoyed many contented days within the hallowed walls of the Royal and Ancient. I have always been rather keen on modest, bespectacled old gents, and this guy ranks as one of my faves.

Rejoicing in the name Sir John Cowperthwaite, here was a man whose Scottish education had left him with a strong streak of common sense, a razor sharp intellect, a talent for thrift and a head filled with the notions of the Enlightenment. Born in Edinburgh in 1915, he read Classics at St Andrews, went on to Cambridge, and then returned to St Andrews to study economics. He joined the Colonial Administrative Service in 1941. From 1961 to 1971 he held the post of Financial Secretary for Hong Kong, and by simply doing his job, brought about an immense and lasting change for the colony.

In 1961 the average Hong Kong resident earned a quarter of someone living in Britain. By the early 1990s, average incomes there were higher than in the UK. Whereas we in the North East of Scotland cannot imagine life without the oil industry, and the same is true for Norway, Hong Kong’s lack of natural resources (other than a harbour) made its success particularly intriguing. As a result of Cowperthwaite’s policies, Hong Kong saw a 50 per cent rise in real wages, a two-thirds fall in the number of households in acute poverty, and exports rose by 14 per cent a year.

Cowperthwaite had arrived in Hong Kong with the ideas of Adam Smith very firmly established in his head. His administration was termed as a shining example of the ‘potency of laissez-faire’, a policy which created conditions for rapid growth. Personal taxes were kept at a maximum of 15 per cent, government borrowing was seen as unacceptable, there were no tariffs or subsidies, and red tape was reduced to the point that a new company could be registered with swift ease.

Cowperthwaite believed government should only intervene on behalf of the most needy, and that it should be actively discouraged from interfering in business. This meant continual battles with Whitehall. He also argued that for poor countries to thrive, they should abolish the office of national statistics, believing that statistics led the state to fiddle unnecessarily, thus hindering the natural working of the market.

However, despite low taxes, figures for mortality and disease showed steady improvement. Cowperthwaite had a Gladstonian sense of obligation towards the least fortunate, but did not believe that luxury should be the necessary reward for those who benefited from a free market economy. Indeed, his frugality with taxpayer’s cash extended to himself....he refused a much-needed upgrading of his official residence, saying that since others did not receive housing benefit, he did not see why he should. I know Scots are famous for being ‘mean’ but the line between being mean and being canny is mighty fine.

On speaking of how Hong Kong became known as the ‘world’s model of free economy’ under his watch, Cowperthwaite modestly remarked, ‘I did very little...all I did was try to prevent some of the things that might undo it’. When he retired in 1971 the Hong Kong economy was growing at a rate of 13.8%. He knew that this success must be attributed to the diligence and intelligence of the people, but it cannot be denied that his lightness of touch allowed it to happen. Nobel Prize Laureate Milton Freidman said ‘it would be hard to overestimate the debt Hong Kong owes to Cowperthwaite’. And with Hong Kong acting as the gateway to China itself, his legacy has now spread into China with massive implications for future growth.

Disciples of Adam Smith are not always popular, but if one man is capable of making a lasting impression on the globe, I have to hope there might be one or two Cowperthwaites around.


  1. Well I had never heard of Cowperthwaite, so that was very interesting indeed. Yes, we do need a few economic geniuses just now... although I am even more concerned about environmental sustainability than I am about economic growth per se. But that's another conversation!

  2. Christine, but it's not another conversation at all. I'm sure our economy is absolutely linked to our environment....we need both to be sustainable. The oil industry is not always seen as a Friend of the Planet, but as I said here once before, I've yet to meet anyone working within the industry who is not very highly-tuned to the environment.There are many 'green'-minded geniuses involved in energy, so let's hope they can see a way thru the murk, both economic and environmental.

  3. Hello again! I just wanted to say, that's cheered me up! Sometimes I feel, when listening to the news for example, that it's "economic growth at any price" (pun intended). I like the fact that we are moving from the oil industry to the energy industry. It's true that there are a lot of good ideas out there. I love the story about the young Scottish woman (Emily Cummins) who's pioneered a solar-powered fridge that's been a huge success in Africa, for example.

  4. I hadn't heard of Cowperthwaite either - which is astounding, given that I was an economics major. But he sounds like the men I would have loved to hear more of during my studies.
    Your post hits the nail on the head. A lot of problems we face today result from too much governmental engagement, and a general 'the state will fix it' attitude as one of the results. At the moment, a lot of people seem to want both, the benefits of socialism without giving up the freedom of capitalism. I am praying for another Cowperthwaite, too!

  5. Jane, I'm having problems posting a comment on your blog from my Blackberry - the post comment button doesn't come with quivering hand over it. So anyway here goes. Yes all very interesting. You have prompted me to reread ( asynopsis) of A...dam Smith's W O N. The problem is that the cabal of business interests that AS warned about has crept up on everyone unawares to subvert the economy. It is not finance as such but black box derivatives that no one understands dressed up in the emperor's nerw clothes of clever clog solutions to making a profit. The reason we still don't have- and will not have in my view - any sensible international regulation is because everyone was involved in the making of the clothes - there were no boundaries between who was wrong or right just shades of grey. .
    If you can repost this to your blog - do! Jenxxx

  6. It is also interesting that AS said no good economically came out of trying to do good. That's a good one to discuss! You could bring that back to the crisis. A recent Prospect article said that greed and skulduggery was expected f...rom the top financial , classes - what's new no one should be shocked. They just took advantage of liberal (small L) desire for enabling equality - everyone shalt have his own house, everyone shalt go to university - regardless of whether they could pay. The media, politicians, lifestyle aspirations all contributed to the idea and derivative finance enabled that dream to become a reality. Discuss!

  7. Christine...I'm a big fan of solar power, and particularly pleased to learn that our delightful Scottish climate, despite appearances, suits 'solar' rather well.
    Met, now I'm scared...I have real proper economists reading this thing...yikes. I am do hope we can still produce the likes of Cowperthwaite somewhere in our system...the current turmoil in Scottish education re our curriculum change is making parents very afraid that the rigourous thinking we used to be capable of may be a thing of the past...I FERVENTLY hope not.
    Jen...I have to go lie down now after reading all that...blimey. I don't think I'll sleep for some time with all those questions going round in my mind...I shall go reread Adam Smith too, but your comment has made me realize that I'm never going to save the world, darn it.