Goals of Government Expenditure in a Laissez-Faire Political Economy: Hong Kong in the 1970s

Abstract

HONG KONG is one of the few developing areas in the world whose people are rapidly growing richer. The fast growth of its economy and the steadily improving quality and variety of its exports have impressed an increasing number of consumers and manufacturers in industrial countries. In the past three decades, Hong Kong has been successfully transformed from a colonial entrepot into a modern industrial colony. This development is possible, first of all, because the government of the People's Republic of China (PRC), in the past three decades and in the foreseeable future, has made and will make it a policy to keep Hong Kong economically viable. The status quo is oW viously economically beneficial to the PRC, more so now because of its four modernizations program; and not surprisingly the PRC government has been tolerant of the classical laissez-faire philosophy that has been guiding the colonial government of Hong Kong in the past century or more. In the early 1970s, however, international and domestic factors began to pose a serious challenge to this laissez-faire philosophy. For one thing, the Governor, Sir David Trench, retired in 1971 after seven and a half years of office and was replaced by Sir Murray MacLehose; the new governor, unlike his postwar predecessors, was a professional diplomat with no previous experience in colonial administration. Sir John Cowperthwaite, the ultra-conservative Financial Secretary, whose long tenure had left his personal stamp on almost every aspect of government policy in the 1960s, also retired and was replaced by his deputy, Philip Haddon-Cave. This change of guard was by no means the only factor that prompted the Hong Kong government to make a thorough reappraisal of its