John James Cowperthwaite

"The fact that previous generations have handed down to us a substantial public heritage by way of roads, port, etc. almost completely free of debt, seems to me to impose some limitation on the validity of the theory that by borrowing we should, or could, pass on the burden of development to the next generation."

"If one accepts that in general social services should be made available to all on the basis of ability to pay, one has the choice of two opposite principles of action, although they need not be mutually exclusive—either progressive taxation and free services or fees covering costs with remission for those who cannot afford them. The former method is appropriate, in my view, in rich developed countries where the principle of progressive taxation can be applied without unduly adverse economic or social results, and the wastes inherent in full and free services can be afforded. In less advanced or poorer countries, where neither economy nor society is geared to progressive taxation and waste cannot be tolerated, fees remittable in case of need seem to me clearly more appropriate."

"I will not be proposing a course which has been under some public discussion recently — deficit financing. It is wholly inappropriate to our economic situation. In its least extreme form it is based on the theory that additional money generated by a Government deficit (and given currency, as necessary, by use of the printing press) will stimulate consumption and thereby production, in time to match the excess money with goods before real inflationary harm is done. Unfortunately we dont, and cant, produce more than a small fraction of what we consume, and increased consumption would merely mean increased imports without matching exports; and a severe balance of payment crisis, which would destroy Hong Kongs credit and confidence in the Hong Kong dollar; and which we could not cure without coming close to ruining ourselves. Keynes was not writing with our situation in mind. In this hard world we have to earn before we spend."

"Economists of the modern school will no doubt protest that I have said nothing of the use of budget deficits or surpluses for the control of the economy in general. I doubt if such techniques would ever be appropriate in Hong Kongs exposed economic position; and I think they are certainly not appropriate at present, when in strict orthodoxy they would suggest the need to plan for a very substantial surplus "to take the heat out of the economy". Although we have in fact run substantial surpluses in recent years we have not done so with deflationary effect because we have not removed them from the economy but have left them inside the Colonys banking system to continue to work for the economy. $500 million or 55% of reserves are so held at present."

"It seems to me that we have three choices; first, public services of high standard and cost but of limited scope, leaving unfilled a substantial part of the present gap, not necessarily benefiting those in real need and benefiting many who are not in need at all (this has been our historical approach); second, public services to meet the requirements of all, with the beneficiaries making a contribution by way of fee according to their means, and with adequate provision for complete remission in suitable cases; or third, universal public services provided for rich and poor alike on terms the poorest can afford; that is, the welfare state where all benefit and the whole cost is met by the taxpayer in general. I think it is well-known that I am an advocate of the second approach."

"One of these is an increasing awareness of the benefits to our economy, particularly in terms of investment and enterprise, both local and from overseas, of not having the inquisitorial type of tax system inevitably associated with a full income tax. Another is that even I, who have always believed in the vigour of our economy under our present tax regime, have been surprised by the growth of revenue generated at our present tax rates."

"What gives me concern in so much of the comment is the implication that the people of Hong Kong have to be given a reward, like children, for being good last year, and bribed, like children, into being good next year. I myself repudiate this paternalistic, indeed colonialist, attitude as a gross insult to our people"

"Deficit financing proper is rather the process whereby a Government spends more money that it withdraws from the economy by taxation, borrowing, running down reserves, etc.; thereby causing in most circumstances, and very acutely in ours, monetary inflation and severe pressure on the balance of payments."

"What mystifies me is how he or any one else can determine what is a desirable type of industry such as should qualify for special assistance of this kind. In my own simple way I should have thought that a desirable industry was, almost by definition, one which could establish itself and thrive without special assistance in ordinary market conditions. Anything else suggests a degree of omniscience which I, at least, am not prepared to credit even the most expert with. I trust the commercial judgment only of those who are themselves taking the risks."

"One of the things that most surprises me about my honourable Friend’s remarks is that he characterizes his proposal for state intervention in, and control of, industry as “innovation and a spirit of adventure” and condemns free private enterprise as “prosaic precedent”. This is a strange paradox. I would put it precisely the other way round. What he advocates is based on the “prosaic precedent” of many of our rivals who have to resort to wooing industry with artificial aids and have had remarkably little success at it. Recent events have shown that enterprising spirits still prefer our economic freedom to the restrictive swaddling clothes offered elsewhere. Possibly I am a romantic in this but I, for one, do not believe that our spirit of adventure is in need of artificial stimulation — nor do I believe that we can afford the wasteful application of our scarce resources which they would entail—we are neither desperate enough, nor rich enough, for such expedients to make economic sense. It is, of course, all the fashion today to cry in any commercial difficulty, “why doesn’t the Government do something about it”. But I would rather go back to the old days when even the most modest attempt by Government to intervene in commerce and industry was rudely rebuffed."

"If people want consultative government, the price is increased complexity and delay in arriving at decisions. If they want speed of government, then they must accept a greater degree of authoritarianism. I suspect that the real answer is that most people prefer the latter so long, that is, as government’s decisions conform with their own views."

"We enjoy a considerable net inflow of capital and I am sure that a condition of its coming, and staying, is that it is free to flow out again. It is also important for Hong Kongs status as a financial centre that there should be a maximum freedom of capital movement both in and out."