Religion vs

The Hong Kong — Puerto Rico Connection

The Case for Puerto Rico

a Thomas Paine Institute essay

A Thomas Paine Institute essay

Freedom advocates, if they truly champion freedom, embrace the vision of pure unfettered capitalism. The Thomas Paine Institute (TPI) is no exception. Part of its mission, unique among Objectivist organizations, is to take on two of today’s great challenges to that vision: where to get the land on which to realize it and the defense system by which to preserve it.

Land and defense are great challenges, first, because of the stark reality that, except for the polar regions, there is no real estate on planet Earth, not even an island, which is not already under a nation’s sovereign control. Second, all nations exhibit hostility to Capitalism, and this is in a world filled with weapon systems of great reach and firepower.

In this essay we focus on the challenges of land and defense as they apply to two regions on opposite sides of our planet, Hong Kong in the South China Sea and Puerto Rico in the Caribbean Sea. Intriguingly, Hong Kong, the closest realization of pure capitalism in today’s world, flourishes immensely, while a non-capitalist Puerto Rico, with the same geographical features of land and sea, languishes in poverty. Yet economists often regard Puerto Rico as a potential Hong Kong of the Caribbean.

There is a great deal we can learn from a close look at the forces that shaped Hong Kong and Puerto Rico into what they are today. And this knowledge is highly relevant to realizing the Thomas Paine Institute’s distinct vision: pure capitalism, from scratch in a new place, inaugurated as an independent sovereign nation.

HONG KONG

At the beginning of the 19^th century, the name “Hong Kong” referred to a 30 square mile rocky island in the South China Sea. Then over time, that small island became the site of the capital city of one of the richest regions on planet Earth, encompassing 470 square miles. This transformation has been so astonishing that today we hear “Hong Kong” and “miracle” in the same breath.

The Perennial Search for Land. Government planners, private entrepreneurs, and venture capitalists are ever looking for territory on which to pursue their visions. Creative initiatives seek to mitigate the difficulty of finding land: Seasteading, Free Private Cities, Zones for Economic Development and Employment (ZEDEs), Special Economic Zones (SEZs), Special Administrative Regions (SARs). All such initiatives seek to create and grow business climates friendly to investors.

The dynamic is straightforward. A host nation reduces regulatory control and grants a certain amount of autonomy to the new venture. In return, the host benefits from increased employment, a higher living standard, and increased trade. Win-win. Dramatic instances of this dynamic exist around the world, but the most striking is the Hong Kong region where it has played out on a truly grand scale.

Hong Kong’s Evolution: From Small Rocky Island to a 470 Square Mile Region. The story begins with Great Britain's defeat of China in the first Opium War of the 19^th century. The resulting Treaty of Nanking in 1842 required—virtually forced—China to cede Hong Kong Island to Britain in perpetuity. This rocky island, a mere 30 square miles, was almost uninhabited and without resources or tillable land or adequate water supply. It did have one asset, however, a sheltered deepwater harbor. Still, it would be difficult to find a more modest beginning, especially considering what it grew into.

The British defeated China again in the second Opium War, after which the 1858 Treaty of Tianjin and the 1860 Beijing Convention forced China to cede the Kowloon Peninsula to the UK in perpetuity. Then forty years later, in 1898, the British solidified sovereign control of the Hong Kong region by leasing from China its “New Territories” for 99 years.

As a result of these three events—the two opium war treaties and the signing of a 99-year lease—the name “Hong Kong” now refers not only to the 30 square mile Hong Kong Island on which the capital city stands, but to the much larger Hong Kong region. Which region includes, in addition to Hong Kong Island, the 18 square mile Kowloon Island (or peninsula), the 57 square mile Lantau Island, and 368 square miles of “New Territories” on China’s south coast, including more than 200 small offshore islands.[1]

Hong Kong as a Free Trade Mecca. What immediately commands attention, however, is the fact that the region of Hong Kong has evolved into a political-economic dynamo, a mecca for free trade with the following extraordinary features:

· An exceptionally light regulatory touch

· Little corruption

· An efficient and independent judiciary

· Respect for the rule of law and property rights

· An uncomplicated tax system with low rates for both individuals and business

· An overall tax burden that is a mere 14 percent of GDP (half the U.S. rate)

· No taxes on capital gains or interest income or even on earnings from outside Hong Kong

· No sales tax or Value Added Tax

· No government budget deficit

· Almost nonexistent public debt

· Average tariff rate of near zero

· A region ranked freest on the World Index of Economic Freedom

· A region ranked by the World Bank as the best for the “ease of doing business”

· One of the world’s richest economies, with a per capita income at 264 percent of the world’s average.[2]

A large body of literature has grown over the years documenting the evolution of the Hong Kong “miracle.” The underlying reality of it all, however, is that a miracle had nothing to do with it but what did was the fact that Great Britain held sovereign control of the region for a century and a half. During that time, a succession of Crown appointed governors consistently imprinted the region with the stability, security, and predictability of British governance and law. And most importantly, the governors possessed the authority, will, and knowledge to advance free enterprise principles in the region. The result: the impressive list of bullet features you see above. Hong Kong truly became a powerhouse.

The 99-Year Lease Ends and a SAR is Born. Hong Kong’s status significantly changed just prior to the end of the 20^th century. Hong Kong remained the great mecca of international trade in the South China Sea, but Great Britain’s 99-year lease of the “New Territories” ended in 1997. The UK had to return sovereign control to China of the entire Hong Kong region, including the portions that had been ceded in perpetuity to the UK after the Opium Wars. This officially happened on July 1, 1997. As of that date, Hong Kong become a Special Administrative Region (SAR) of China for 50 years, to end in 2047.

A “Basic Law” governing the SAR is an integral part of China’s constitution. This law guarantees that (a) Hong Kong retains its free enterprise system and high degree of autonomy over its internal affairs during the SAR’s 50-year duration and that (b) China’s central government remains responsible for Hong Kong’s foreign affairs and defense.[3]

The SAR concept was a significant new development in world affairs. It was the brainchild of the Chinese premier, Deng Xiaoping, who captured its essential characteristic by coining and then popularizing the now widely recognized expression, “One Country, Two Systems.” The only other SAR in the world at the time of this writing is China’s Macau. It started life in 1999, two years after the birth of the Hong Kong SAR.[4]

PUERTO RICO

About the Island. Puerto Rico, 3500 square miles, is the fourth largest Island in the Caribbean. Geographically, it is a steppingstone between North and South America. The island’s distance to each continent is virtually the same: 1000 miles to Florida in North America and 1200 to Venezuela in South America. In addition, Puerto Rico has four seaports, the largest of which is in the capital city of San Juan and has a deep-water harbor. Such considerations lead people to entertain the thought of Puerto Rico as a trading mecca in the Caribbean, as Hong Kong is in the South China Sea. But unfortunately, that has not happened.

Today’s Puerto Rico, Up Close. During the same 150 years that Great Britain cultivated Hong Kong to become a mecca of free trade, Puerto Rico pursued the opposite course. That course was ever greater regulatory control of island life.[5]

Due to pervasive regulation, Puerto Rico’s economy is less than vital, and its poverty level is abysmally high. A third of the island’s jobs are in government, and for the entrepreneur, the burden of government regulation is so onerous that it can take years to obtain the necessary licenses to start a business.

As for the island’s political environment, it is a fractious one. Three main political parties stand out, one seeking USA statehood, another seeking full independence, and the third seeking to remain a US territory, the “commonwealth” it has been since the Spanish American War ended in 1898. But dozens of other political factions are at work as well. Then there is the reality that Puerto Rico consists of 78 municipalities, each with its own government. The net effect of all this is to so fragment the island that the pursuit of any island-wide improvement, let alone a great vision, is unfeasible.

Complicating matters further, there is Puerto Rico’s history of socialism: There was a registered communist party from 1934 to 1991 and a registered socialist party from 1959 to 1993. And now in the 21^st century, both parties, although no longer officially registered, are still alive and active on the island.[6] Socialism is less than friendly to free enterprise.

America’s stewardship of its Puerto Rican territory, as well as the island’s self-stewardship, have long been wanting and at times positively destructive. Tragically, there is a very real and legitimate sense on the island that Puerto Rico is dying.[7] Puerto Ricans, already American citizens, are emigrating to mainland USA, and the demographic forecast is that the already steady population decline will continue, precipitously, through the 21^st century.[8]

Puerto Rico as a Potential Hong Kong of the Caribbean. The controlling bureaucracies, as well as the social ills of Puerto Rico, are by nature self-perpetuating. Left unaddressed, they stand as insurmountable challenges to the vision of Puerto Rico as a Caribbean Hong Kong.

But as the “Puerto Rico is Dying” video makes clear, the challenges are not cast in stone but caused by humans. They can be addressed. The island truly is dying, but over time reason, intelligence, and courage could reverse that process and squelch its underlying despair. But patience will be needed. There is a destructive infrastructure in Puerto Rico that needs to be addressed, and despair is only one of its ingredients.

CONCLUSION

In all human history only two places successfully established a socioeconomic system close to pure laissez-faire capitalism. The first was America, during its first century and a half after winning independence.[9] The second, as recounted in this essay, was the Hong Kong region, during the century and a half of British control. Each had founding fathers who were intellectuals of the Western Enlightenment. In the case of Hong Kong, those founders were a long line of British governors. Each place was driven by vital factors, discussed in the above, without which capitalism would never have happened. We will first summarize the factors that drove Hong Kong’s dazzling success and then conclude by assessing their applicability to Puerto Rico.

Hong Kong’s Blueprint for Success. Hong Kong’s deep-water harbors and their ideal geographic location were important but not sufficient. Four manmade factors, added to them, ensured success.

A Powerful Ally for Defense. Military defense must be on the blueprint for success of any new beginning in today’s world. In the case of Hong Kong, of course, it has always been a non-issue, given China’s great military power.

The Embedding of Free Market Principles in the Culture. As recounted above, Great Britain successfully gained sovereign control of the entire Hong Kong region for a century and a half. During that time, a succession of crown appointed governors propagated free market principles throughout the region. The importance of this cannot be overemphasized. Those British governors truly functioned as Hong Kong’s founding fathers.

Patience. The virtue of patience was clear in Britain’s 99-year lease of China’s “New Territories” in 1898. It reflected the United Kingdom’s realization that much time was needed for free market principles to take root in a nation with a long history of complete government control of the economy.

The Special Administrative Region (SAR). The SAR was a new concept, first born in 1984 by China premier Deng Xiaoping and vitally important as a communist nation’s recognition of the power of free market principles and practices.

Puerto Rico’s Blueprint for Success. Hong Kong’s Blueprint applies to Puerto Rico.

A Powerful Ally for Defense. As an American territory, military defense is a nonissue for Puerto Rico as well.

The Embedding of Free Market Principles in the Culture. Just as Great Britain gained sovereign control of the Hong Kong region by winning both Opium Wars, so did America gain sovereign control of Puerto Rico by winning the Spanish American War. In principle then, America is in the same position with Puerto Rico as Britain was with Hong Kong. We need to note, however, an important difference: Although China was an ancient nation, the Hong Kong region was largely undeveloped. By contrast, Puerto Rico, though not as ancient, has an entrenched bureaucracy and regulatory system developed over several centuries. This reality poses seemingly insurmountable challenges for Puerto Rico, as indicated in the “Puerto Rico, Up Close” section two pages ago. Fortunately, the island has a powerful tool for addressing those challenges: the Declaration of Freedom in the Appendix, below. This Declaration would have two roles; it would embed free market principles in Puerto Rican culture, and it would galvanize the island with the courage, the conviction, and the will to prevail.

Patience. What we just pointed out in the above paragraph regarding the seemingly insurmountable challenge of a Chinese communist dictatorship, that it had required much time and great patience, bears repeating. The seemingly insurmountable challenges of Puerto Rico’s entrenched government regulations and smothering bureaucracies, to say nothing of the enormous resistance that Puerto Rico itself would throw up against rolling them back and eliminating them, are just as demanding, of time and of patience. All of which is where the next factor could come into play.

The Special Administrative Region (SAR). This concept, or some variation of it, so important to Hong Kong’s continued success after the great turnover of the region back to mainland China, could have a vital and indispensable role to play in Puerto Rico. As sovereign owner of Puerto Rico, America could conceivably declare Puerto Rico a USA SAR, with a constitution having the Declaration of Freedom as its Preamble.

Final Thought: Rational Optimism.

Hong Kong and Puerto Rico truly are connected, and we have suggested that Puerto Rico could become a Hong Kong of the Caribbean with determination, intelligence, and hard work.

Challenges exist that seem to border on the insurmountable but that is to be expected for any great vision. Puerto Rico has much in its favor: as a Caribbean Island, it is immensely attractive, as a trading mecca, it is a steppingstone to North and South America, and above all, as a territory of the United States of America, it would have the support of the nation which has always, to this day, held the torch of freedom higher than any other nation in history.

Recent documentaries in the general media counter the despair so evident in the “PR is Dying” video. And everything TPI stands for, and every one of its goals, directly or indirectly targets such despair.

With the current political climate in the US and Puerto Rico, it is unlikely that we can establish a totally free capitalist society in all of Puerto Rico. However, we might be able to establish a Strategic Administrative Region that incorporates our declaration of freedom. With success in this limited area, we might be able to extend this region to all of Puerto Rico.

With that thought in mind, it is fitting that we end with a personal invitation to you from the final paragraph of the Thomas Paine Institute’s essay, “Rational Optimism,” by Jerrold Myer.

The Thomas Paine Institute (TPI) was established in the optimistic belief that a new society based on the principles of individual freedom and a purely capitalistic socioeconomic system can be formed from scratch somewhere in the world. Like the Founding Fathers, our optimism is rationally grounded in a deep understanding of the challenges we face but tempered with the certainty that these challenges can be overcome through hard work and the brilliant minds of those who share our values of freedom and individual rights. We invite you to join us on this exciting journey to create a new society that will truly be a beacon of light to the whole world.[10]

APPENDIX: Declaration of Freedom for Puerto Rico

DECLARATION of FREEDOM

Preamble for the Constitution of the

Independent Nation of Puerto Rico

Adapted from the Declaration of Freedom in

When in the course of human events, the nation that was once the freest the world has ever seen, whose government—a Constitutional Republic—was the first and only one in history explicitly founded on the moral principle of individual rights—when that nation, for centuries the sole beacon for the world’s oppressed—when that nation itself loses sight of what it means to be free and, instead, makes initiated physical coercion and the violation of individual rights a way of life both on its own shores and the shores of the Caribbean island of Puerto Rico—it is then necessary to declare our freedom from such tyranny and declare our right, as a fully sovereign state in our own right, to henceforth set our own destiny.

We the men and women of the island nation of Puerto Rico hereby advance this declaration of freedom—freedom from initiated physical coercion—as our seminal founding document and the Preamble of our Constitution.

We hold certain fundamental truths to be observable and inducible facts of reality:

· that all individuals are born equal in their possession of reason, the distinguishing faculty

elevating them above all other creatures,

· that individual human life—the ultimate value and standard of the good—to survive and to

flourish requires the free exercise of our faculty of reason for, unlike all other creatures,

humans have no automatic knowledge of how to survive but must use reason,

· that the initiation of physical coercion, because it abrogates the free exercise of reason and

thereby human life, must be abolished from all human affairs,

· that standing in opposition to this evil are individual rights, which all men and women possess,

the most fundamental of which rights are life, liberty, property, and the pursuit of happiness,

· that the absolute, objective basis of rights is not an alleged supreme being or social group or

government but the immutable requirements for an individual human life to survive and flourish

in a social context,

· that a constitutionally controlled government is nonetheless an absolute necessity, strictly limited

to the sole sacred purpose of securing and protecting individual rights against initiated physical

coercion,

· that such a government equally protects all men and women against initiated physical coercion

and itself uses coercion only in retaliation against those who have already initiated or threatened

it.

But when government itself makes it a practice to initiate physical coercion, or to legalize its initiation by others, it renders itself illegitimate. It has defaulted on its sole sacred function which is to protect its citizens from initiated force. We declare that throughout the world, governments exhibit this evil. That includes governments, past and present, that have held Puerto Rico under their sovereign control. It is also evident in the many small municipal governments on the island of Puerto Rico.

We, the founders of a free Puerto Rico proudly proclaim this Declaration of Freedom and renounce initiated physical coercion. Puerto Rico’s socioeconomic system, Capitalism, outlaws it. Capitalism enables all human interactions to take place through voluntary persuasion and trade by the free exercise of reason. Our legal system uses force only in retaliation against those who have already initiated or threatened that evil. This is the legal system of a free society, of a free nation.

We proclaim that Capitalism is, and always shall be, the socioeconomic system of Puerto Rico. Under Puerto Rico’s system of pure Capitalism, the Constitution, for which this declaration is the preamble, prohibits the government, at any level, from intervention into finance, economy, education, medicine, science, religion, or any other activity or enterprise, including those yet to be developed.

We recognize that so long as human nature is volitional, certain forces from within and without will choose to initiate and threaten physical coercion. But government properly exists to execute a sole sacred function. Puerto Rico’s government addresses physical force initiated from within by a legal system of police and courts. It addresses physical force initiated from without by a virtually impregnable system of defense, that of our great ally, the United States of America. And Puerto Rico will not want for impassioned citizens and allies to defend freedom, with enlightened professionals leading the way on the intellectual and military ramparts.

As we set out on this grand endeavor, we the leaders of Puerto Rico, proudly adopt an exalted oath uttered long ago by the founders of the nation to which we referred at the opening of this declaration. It is fitting that we adopt their oath as our own, for the inspiration of their original founding is timeless.

We mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

With these words ringing down through the ages, we know that all men and women of good will on Earth—East and West—will join us in our quest—our quest for a new Age of Reason—the birth of a new Enlightenment— on our great island of Puerto Rico.

SIGNATURES:

Endnotes