Paternalism had governed Hong Kong for more than a hundred years and little had changed in the years immediately after the war, which witnessed remarkable economic expansion in the colony, accompanied by considerable immigration. When Hong Kong surrendered to the Japanese on Christmas Day 1941, its population was estimated at 1.6 million. In less than three years under Japanese rule that population had sunk below 600,000; the future of the colony seemed bleak, and yet, by a process of growth in which the government had little direct involvement, it would develop in the 1950s and 1960s to become one of the great commercial centres of the world. The communist takeover of mainland China in 1949, by ensuring that Hong Kong’s great rival, Shanghai, was no longer open to foreign capital, gave the colony an unexpected boost. Yet, even during the struggle which raged within China from 1945 until 1949, financiers, merchants and industrialists had started the flight to Hong Kong from the chaos and uncertainty of Shanghai.20 Immigration was such that by 1960 the population of the colony had reached nearly 3 million people. The industrial sector grew at impressive rates; Hong Kong now became famous for its textiles, for its banking and for the uncanny ability of its manufacturers to mimic luxury goods from outwardly more sophisticated cities like Milan, Paris or London. It was during the 1950s and 1960s that the image of Hong Kong in Europe and Japan became indelibly associated with the manufacture of ‘cheap shirts and plastic flowers’.21
The dynamic days of Hong Kong’s economic expansion have been attributed by many to the activity, or rather the non-activity, of one civil servant, the Financial Secretary of the colony from 1961 to 1971, John Cowperthwaite, who died in 2006 at the age of ninety. He became unwittingly a minor cult figure among the new conservative right in America for the uncompromising nature of his laissez-faire views. He was a rather rigid disciple of his fellow Scot Adam Smith, and developed a doctrine of ‘positive non-intervention’ in which the state’s role would be minimal, consisting only of keeping taxes low, maintaining open markets and abolishing restrictions on the movement of capital. Cowperthwaite had never taken a degree in Economics, but was yet another Oxbridge Classics graduate, so common in the administration of Hong Kong. He had graduated from Christ’s College, Cambridge with a double first in 1939, before going to Edinburgh University to learn some Economics. A statement of his doctrines came in his maiden budget speech in 1961, which, in itself, was one of the clearest expositions of the gospel of the free market in practical affairs: ‘In the long run, the aggregate of decisions of individual businessmen, exercising individual judgement in a free economy, even if often mistaken, is less likely to do harm than the centralized decisions of a government, and certainly the harm is likely to be counteracted faster.’22
Cowperthwaite was passionate about Hong Kong, and declared himself to be a ‘Hong Kong chauvinist’. He has been described by the American right-wing commentator P. J. O’Rourke as a ‘master of simplicities’ and was clear and direct in his manner, although there always lurked a hint of mischief in his style, which has been characterized as ‘polished and amusing’.23 Personal taxes he kept at a maximum of 15 per cent. His rigid determination always to balance the budget and never to borrow money would have impressed Gladstone. Red tape and bureaucracy were reduced, it was said, to such an extent that a new company could be registered with a one-page form. Cowperthwaite, by background and inclination, was the ultimate conservative bureaucrat, giving–with a slight air of superiority –a controlled display of measured efficiency. He was naturally sceptical about all human ability to improve society as a whole and, during his administration, Adam Smith’s invisible hand was a far better guide to policy than the more direct approaches favoured by most states in the twentieth century.
Milton Friedman, the Nobel Prize-winning champion of free-market capitalism, remembered with affection a visit which he and his wife made to Hong Kong in 1963. While enjoying his stay in Hong Kong’s finest hotel, the Peninsula, and while his wife Rose indulged her tastes in what she described as ‘a shopper’s paradise’, Friedman got a chance to meet Cowperthwaite. During this memorable encounter between the most famous theoretical advocate of laissez-faire in the twentieth century and the doctrine’s most successful practical exponent, Cowperthwaite explained that he had resisted requests from civil servants to provide economic statistics because ‘he was convinced that once the data was published there would be pressure to use them for government intervention in the economy’.24 Famously, in what seems to be an apocryphal story, Cowperthwaite greeted and then immediately sent back on the next plane a delegation of civil servants who had arrived in Hong Kong from London to find out why employment statistics had not been collected in the colony.25
The partisans of free-market economics were not slow to point out the contrast between the entrepreneurial, business-friendly Hong Kong and the socialist state that many of them believed Britain had become in the decades after 1945. Milton Friedman observed that ‘by following a policy opposite to that of its mother country’ Hong Kong had thrived, ‘while the mother country did not’.26 Cowperthwaite’s obituarist in the Hong Kong Standard pointed out that while ‘Britain was moving to a socialist and welfare state’, the colony ‘had the fortune to have Cowperthwaite’.27 It is true that Hong Kong’s growth during Cowperthwaite’s tenure was spectacular, and that he often decried the influence of governments on society and the economy, yet the irony was that, for all his distrust of bureaucracy, he was the archetypal bureaucrat of the British Empire: he was Scottish by birth–the high number of Scots in the imperial administration was well known–he was educated at a public school, in his case Merchiston Castle in Edinburgh, and he had studied Classics–the imperial subject par excellence –with considerable success at Cambridge.
Hong Kong, as Cowperthwaite’s supporters never fail to observe, grew at an average of 13.8 per cent in every year of his tenure as the colony’s financial secretary, and its foreign currency reserves quadrupled. When he died in 2006, his successor (and the last to hold the post of financial secretary), Donald Tsang, later the Special Administrative Region’s second chief executive after Hong Kong’s return to Chinese rule, paid a fulsome tribute to Cowperthwaite: ‘We shall always remember Sir John for the pioneering and dominant role he played in the birth of the legend of Hong Kong as the freest market economy.’28 The picture, however, was not one of unalloyed sunlight and harmony. Milton Friedman described Cowperthwaite as a ‘benevolent dictator’, yet, owing to the lack of infrastructure, new immigrants to Hong Kong were housed in shacks and squatter huts, built on hillsides and in cemeteries.29 Even more alarmingly, Cowperthwaite’s period of office saw a banking crisis in 1965 and the most destabilizing political riots in the colony’s history in 1967, both of which undermined international confidence in Hong Kong.30
The British possession of Hong Kong had always been an embarrassment to the Chinese. Indeed, many people had believed that the Chinese, first under Chiang Kai-shek, in the years immediately after the Second World War, and then under Mao Zedong, after 1949, were poised simply to overrun the colony and take it over by force. That this never happened was surprising and, all through the first two decades after 1945, British officials in Hong Kong and in London remained aware of this potential threat. It is likely that the pressure of internal politics prevented China from expanding its borders, as it underwent a period of intensive industrialization in 1953–7, accompanied by a shift to more widely practised socialism, as well as the introduction of its first Five-Year Plan.31 In addition to the Chinese military threat, there was also the growing realization that the lease of the New Territories, which comprised the vast majority of the land area of the colony, was due to expire; Hong Kong Island and Kowloon would remain legally British, but in practical terms their continued retention would be impossible. Contrary to a commonly held view in the UK in the 1980s, even ordinary Hong Kong residents grew increasingly aware during the 1960s of the significance of 1997 and the need to prepare for it. Robert Black, Grantham’s successor as
governor, observed in 1964 in a letter to the Colonial Office that ‘people, of course, are by no means unaware of the significance of the date 1997’, and referred to an article in the Sunday Times colour supplement about ‘the future of Hong Kong in relation to the end of the New Territories’ lease’.32
The growing consciousness of the significance of 1997 in the 1960s was coupled with an air of resignation, even of defeatism, which clung around the old Colonial Office, as it lingered on till its ultimate abolition in 1966, and also around the Foreign Office. There was no point making a declaration about 1997 because any announcement would simply cause a panic, in which people might flee the colony, but some sort of plan was needed. In 1962 Black wrote gloomily, in his best official, circumlocutory style, that we ‘would deceive ourselves grossly if we failed to acknowledge that we hold our position in Hong Kong at China’s sufferance’. This, in his view, had been the case since 1950. He added that there ‘can be no doubt whatever that many people here are even now discussing and speculating upon the situation that lies little more than a generation ahead’. Black was a devotee of the principle of ‘masterly inactivity’ which had been a guiding notion in Britain’s handling of foreign and colonial affairs from the time of Lord Salisbury. His ‘single conclusion’ was that there ‘should be no official or authorised pronouncement on Hong Kong’s future until and unless this becomes clearly unavoidable’. He could see very clearly in 1962 something which some British officials never fully grasped, that ‘eventual incorporation with China is the only feasible long-term future for Hong Kong’.33
What Churchill had once called the ‘drawling tides of drift and surrender’ had, by the mid-1960s, nearly submerged the once confident imperial bureaucrats in London and the formerly proud British diplomats overseas. The Queen’s proposed visit to South-east Asia in 1965 was carefully scheduled to avoid Hong Kong on the grounds that if she stopped over here this could ‘provoke’ the Chinese. Lord Palmerston would have been horrified by the British diplomat in Beijing who stated before the Queen’s tour that although ‘we have for the past 18 months had comparatively easy going with the Chinese over Hong Kong, I believe that this period may be drawing to a close’. The diplomat advised against her visiting Hong Kong, concluding that ‘all in all, pusillanimous though [this] may appear, I believe discretion is, in this case, the better part of valour’.34
British diplomats were also afraid that rivalry between the Soviet Union and China might goad the Chinese into rash action. T. W. Garvey, the man in Beijing who had counselled against the Queen’s visit to Hong Kong in 1965, noticed that the Soviet propaganda machine was now using Hong Kong as a stick with which to beat the Chinese. At the end of May 1964, Pravda, the official Russian newspaper, carried a feature entitled ‘The Ill Fame of Hong Kong’ which criticized the British imperialists while taunting the Chinese:In this society the rifts between rich and poor are especially deep. On the sweat of the dockers, the coolies, rickshaw men, fishermen and factory workers live the bourgeois Chinese, the bosses of British firms and foreign businessmen. And all this goes on [at] the doorstep of the PRC [People’s Republic of China] and on soil which has been Chinese from time immemorial.35
Pravda mocked Beijing’s inertia in relation to Hong Kong, claiming that the Chinese press ‘displays extreme indifference to the fate of the unfortunates living in the floating quarters of Hong Kong or in the shanties of Kowloon’. The Chinese, the Russians sneered, were not good communists, since ‘talk of principles dies away when the call of the dollar is heard’.36 Britain was worried, during the 1960s, that the Chinese, merely to prove their anti-imperialistic good faith, would act in an aggressive way over Hong Kong.
The year 1967 is one which people in Hong Kong would rather forget. The background to the disturbances of that time did not lie in anything John Cowperthwaite did or omitted to do, but rather in the precarious nature of the relationship between Britain and the People’s Republic of China. The actual cause of the unrest that shook Hong Kong was a labour dispute at a plastic-flower factory in May of that year. The industrial dispute quickly widened into a series of demonstrations and riots, and to the laying of bombs, both real and dummy. In Beijing, the People’s Daily fulminated against the British, urging the Chinese to ‘tell the British imperialists that not only have Chinese peasants the right to fill the land in the New Territories, but the whole of Hong Kong must return to the motherland’. Sir David Trench, the Governor of Hong Kong since 1964, managed to keep up a front of characteristic British insouciance by playing his weekly game of golf, but the official messages that flew between London and Hong Kong betrayed grave concern on the part of British officialdom. The brokers on the floors of the Hong Kong Stock Exchange experienced real fear as the Hang Seng index, a crude but powerful measure of local sentiment, plunged to a low of 59 points in 1967.37 In between his weekly rounds of golf, Sir David Trench, in a telegram of May 1967 marked ‘Top Secret’, showed his true feelings, admitting ‘that in the face of an all-out confrontation we probably could not last very long’, as the Chinese could always cut off the water supply. The Governor was sufficiently calm, however, to observe that the communists in China would probably want merely to humiliate the British and not ‘force us out of Hong Kong’.38 The extent to which Beijing was involved in the disturbances was unclear, although the Governor was cautious about blaming the Chinese directly.39 The incidents that May led to a long summer in which relations between China and Britain sank to their lowest ebb in decades. In August, the People’s Daily denounced the British in inflammatory language, promising that the ‘debt of blood which British imperialism has accumulated will certainly be paid off’. Much of the denunciation of the British was openly racist: in October, the same newspaper denounced British hypocrisy in lurid terms, claiming that the ‘barbarous bald-pates of British imperialism on the one hand carry out fascist barbarities . . . and on the other hand assume the airs of gentlemen with talk of British democracy and freedom’. The ‘bald-pates’ of Europeans were the equivalent of the Western view of the Chinese as ‘slit-eyed’.40
The crisis of 1967 was taken sufficiently seriously in London for the Treasury to draw up secret plans for evacuation. In a paper written in August on the ‘Possible Economic Effect on the UK of the Disturbances in Hong Kong’, Treasury officials pointed out that the Chinese, if they occupied Hong Kong, would probably seize the assets of the residents of Hong Kong and the assets of the banks. They recommended that, in that event, the British government should immediately block all the Hong Kong sterling balances, which included the money held by Hong Kong institutions on deposit in London; this would be a ‘grave step’, but it would essentially freeze all the deposits of Hong Kong banks in London and keep their money out of Chinese hands. In the context of a ‘forced evacuation’, it was decided that the sterling balances would be frozen by the government, although there would be ‘no possibility of protecting British property’ in the form of ‘fixed physical assets’, such as buildings, in the colony itself.41
These plans were top secret and it was vital that ‘absolutely no hint should be given to Mr Cowperthwaite that we have been considering contingency plans’ for evacuation. In the event, Cowperthwaite displayed his usual calm confidence and seemed, in the words of the official who met him in London in September 1967, ‘entirely unworried’.42 To Treasury officials in London, the most likely scenario in the face of continued disturbances would be a ‘loss of confidence and flight of capital’. The contingency plan had been carefully considered, but the pragmatic view was that there would probably be ‘no alternative but to sweat it out in the hope that in time a Chinese regime will emerge with which at a suitable moment we could negotiate an orderly and mutually satisfactory withdrawal from Hong Kong’.43 At this time Whitehall still believed that the withdrawal should occur ‘in advance of the expiry of the lease on the New Territories in 1997’, since the common opinion at the time was that capital flight and panic, once people knew the British were leaving, wou
ld be such that Hong Kong would be of little value when the year 1997 itself finally arrived.44
Throughout 1967, Hong Kong remained Britain’s ‘main problem in relation to China’.45 The situation was tense and difficult, as rioters were confronted by an equally determined police force. By December, there was a ‘steady decrease in the use of genuine bombs’, but the police remained the ‘main target for bomb attacks and other acts of violence’, and the communist press still continued to produce large quantities of ‘anti-British propaganda’.46 At this time, China was experiencing the worst days of the Cultural Revolution, and to the colony’s government the likelihood of Maoist revolutionaries taking over Hong Kong seemed high. A Special Branch report of the Hong Kong Police, dating from January 1968, surveyed the scene with alarm. The ‘local Communists here have no intention of abandoning their long term aim of obtaining a victory over the Hong Kong Government’, the police believed. Of nine communist newspapers three had been suppressed, but the communists still had ‘a forceful propaganda machine’. Radio broadcasts from Macau, from the radio station Villa Verde, attacked the Hong Kong government every day, though it was noted that the nature of these attacks had softened since December 1967. The police were also worried about widespread interest in the thought of Mao; the police report painted a lurid picture of study groups, large-scale meetings and exhibitions at ‘Communist premises’, which aimed to make the whole Hong Kong community ‘red’. ‘It should not be forgotten’, the report observed, ‘that the continual study of the “little red book”–a handbook of Mao’s political philosophy–breeds fanatics with no respect for law and order.’47 Even though, by the beginning of 1968, the situation had quietened down, the police were concerned that the communists had now adopted a policy of the ‘friendly hand and the smiling face’ in order to ingratiate themselves with a sceptical local community.
Ghosts of Empire Page 43