The Capital of Capitalism

Capitalism, Hong Kong, and China:
A Reprise

Jesse Alan Gordon, 1992

The trademark of the Conservative press is to "toe the line" with our government's policy, however bad that policy is. The trademark of the free press is to question government policy when it is misdirected. The Bush Administration's policy towards the People's Republic of China is to tolerate human rights abuses in order to maintain good relations; the policy towards Hong Kong is to leave all matters of its handover to China to the Chinese. Ben Shoer's article in The Brandeisian of October heartily endorses the Bush Administration's business-as-usual policy, and views Hong Kong's relations with China through the same rose-colored lenses that Bush uses. I consider the Beijing government as the world's worst and largest remaining bastion of totalitarianism; it is an cruel regime that has no respect for the rights of its people and stops at nothing to maintain its power. The takeover of Hong Kong by China, scheduled for 1997, represents an impending doom for the people of Hong Kong. I consider the Bush Administration lax in its duty to pressure Beijing to guarantee civil rights in Hong Kong, to respect human rights in the rest of China, and to end its dictatorial reign of terror.

From Britain to China

In July 1997, Great Britain will cede control of Hong Kong to China, and it will be renamed Xianggang Province. The six million citizens of Hong Kong will then be subject to rule from Beijing. Beijing has promised to maintain a semi-autonomous capitalist society for 50 years, under a policy of "one country, two systems." Beijing has an interest in maintaining the capitalist system in Hong Kong, because Beijing will benefit directly from the wealth generated by free enterprise. But Beijing has no interest in maintaining individual freedom, and has made few promises guaranteeing any basic rights.

Hong Kong is not politically free now; it is a Crown Colony of Great Britain, one of the few colonies in the world left to be freed. The citizens of Hong Kong hold British passports, but they are "second class" passports, that allow only restricted rights. All colonies are limited in their political freedom because they are not sovereign over themselves. Except for that, Hong Kong's citizens enjoy individual rights and freedoms comparable to those of Britain's citizens.

The currency of Hong Kong states on every bill, "Dieu et Mon Droit," which means, "By God and My Right Arm," the British imperial philosophy of how they captured Hong Kong from China. Britain no longer holds such colonialist attitudes, but that attitude is what built Hong Kong. Britain agreed after WWII, along with other colonial powers, to free their former colonies. Only because of Britain's guilt over their history of military force against China did they agree to cede the colony to the People's Republic, instead of freeing it, as they did with their other colonies.

Britain's history in Hong Kong is expectedly shameful, since the colony was established at the height of Britain's power and world domination. Hong Kong island itself was founded as a British colony by agreement with China in 1842, which agreement was as fairly negotiated as one could expect with British warships anchored nearby. The colony was established as a "freeport," which meant that free trade was guaranteed by the Royal Navy. The real purpose of establishing a free port was to ensure free trade of opium by the British via Hong Kong into China; the war preceding the 1842 agreement is known as the "Opium War." Many Chinese emigrated to Hong Kong in search of wealth, and China had few objections, until Britain expanded their opium exports to the entire mainland. China objected to its population's enforced addiction for the purpose of enriching Britain, and the result was another Opium War, ending in 1860. China lost again, and Britain annexed, by "perpetual lease," the piece of mainland China now known as the Kowloon Peninsula. China continued to object to its ports being forcibly opened to foreign trade, which kept the Royal Navy busy patrolling the Chinese coast. The skirmishes concluded by Britain annexing all of the islands surrounding Hong Kong, and some more of the mainland peninsula as well; that area is known as the "New Territories" today. That annexation, in 1898, was as a 99-year lease; it is that lease's expiration which prompted the return of all of Hong Kong to China, even though, legally speaking, only the New Territories need be returned.

Sure, Britain feels bad about its militaristic history in Hong Kong and wanted to do the right thing by China. China has a legitimate claim to Hong Kong territory (even the non-leased components can be legitimately claimed by the principle of "unequal treaties"). But China is not interested in the welfare of the people of Hong Kong. At best, China is interested in maintaining Hong Kong as a source of income. More realistically, China wants to "gain face" by finally reclaiming its territory from the British usurper. Great Britain was the colonial master of Hong Kong for nearly two centuries, but during that time, they respected the human rights of Hong Kong's people as much as any other contemporary government. China has no such history of any respect at all for human rights.

One Country, Two Systems

The government of the People's Republic of China is evil. It is run by a small group of old men who are interested only in maintaining power at whatever cost. They interact with the Western world only to get wealth and technology. They play along with our demands for human rights only as long as it is convenient and not too costly in terms of loss of power. When there is a choice between maintaining power and looking good to the rest of the world, such as there was at Tiananmen Square, they choose to maintain their power even though it requires brutally killing their own people.

Former President Jimmy Carter visited China in April of this year, and presented his usual complaints about human rights violations. The head of the Communist Party said, "the Communist Party and the Government are very concerned about human rights," according to the South China Morning Post. But he defined "human rights" as feeding and clothing China's people, and nothing more than that. There are no easy answers to respond to China's human rights violations, but appeasing China is not an answer at all. Extremist dissidents in Hong Kong compare the handover to appeasement of Nazi Germany in the 1930's. The chairman of the Hong Kong Bar Association called the failure to allow self-determination or independence for Hong Kong "one of the biggest denials of human rights by Britain in this century."

The rosy view of China espoused by the Bush Administration and The Brandeisian assumes that totalitarianism will stop at the border of Hong Kong. Indeed, Britain has been negotiating with China since 1984 on Hong Kong's "Basic Law," which will serve as the Constitution for Hong Kong. It is a strong Bill of Rights, and China has promised to uphold it for a minimum of fifty years after the takeover. The concept of a separate capitalist constitution for Hong Kong, which supersedes the communist Constitution in force in the rest of China, is encapsulated by the phrase, "one country, two systems." Before Tiananmen, there was justifiable hope that, even if China continued with its atrocious human rights record in the rest of the country, that they would uphold the Basic Law in Hong Kong. After Tiananmen, Chinese pledges to guarantee freedom have become increasingly discounted as propaganda. China's Constitution has guarantees of freedom for every Chinese citizen, protecting the right of property, safeguarding the environment, and guaranteeing freedom of speech, the press, demonstration, and religion. Those guarantees are routinely ignored; there is no reason to presume that the Basic Law of Hong Kong will not ultimately be ignored as well. A Boston Globe article reports on a government statement that said that Beijing "reserves the right to examine at an appropriate time after 1997 all the laws currently in force in Hong Kong, including this bill of rights."

Mr. Shoer's rose-colored lenses view the Hong Kong "brain drain" in a positive light as well. He says that the flight of the middle class from Hong Kong creates opportunities for rapid employment advancement and high demand and high pay for those who remain. This is the equivalent of claiming that the Bubonic Plague in Medieval Europe had a positive side, since the high death rate freed up lots of apartments in a tight housing market. About 90% of Hong Kong's doctors are preparing to leave by 1997; other professionals are emigrating at comparable rates: the current estimates of emigration are 62,000 per year, compared to an historical average of 20,000 annually. The "brain drain" reflects the middle class' distrust of Beijing and their rejection of the the reality of "one country, two systems." In January of this year, the Hongkong and Shanghai Banking Corp., Hong Kong's largest financial institution, moved its headquarters to London. The corporate equivalent of the brain drain reflects the same distrust of Beijing by conservative organizations.

The encroachments on freedom have already begun, even though Britain still runs the colony. The Hongkong Standard reported earlier this year that "China's increasing insistence on involvement in Hongkong's affairs... looks alarmingly like the start of an attack on free speech." In 1990, I participated in a pro-democracy bike ride, a public demonstration against the Tiananmen crackdown. Most of my Chinese associates declined to participate because they feared that agents from Beijing would photograph the participants and would later use the photographs as evidence against them.

Hong Kong has a large square in the heart of the Central District, alongside the government buildings. This square is the scene of a nightly ritual of protest against the government's policies, ranging from distribution of literature to organized demonstrations. In six years the Red Guard will march into Hong Kong Central. Will the protests be allowed to continue?

Freedom via Capitalism

Mr. Shoer says in his Brandeisian article, "It's as if Milton Friedman were about to take over Hong Kong instead of Li Peng!" Let's look at what Milton Friedman, the Nobel laureate economist, actually says about China, and about the relationship between economic freedom and political freedom. In Capitalism and Freedom, Friedman's book outlining his philosophical bases, he says, "It is widely believed that politics and economics are separate and largely unconnected; that individual freedom is a political problem and material welfare is an economic problem; and that any kind of political arrangements can be combined with any kind of economic arrangements ... Such a view is a delusion ... there is an intimate connection between economics and politics." Friedman warrants that economic freedom is possible without political freedom (but not vice-versa). That has occurred in Tsarist Russia, in Fascist Spain, and that is what is proposed in Hong Kong under China: capitalism without individual rights. The very title of Friedman's primary philosophical text, "Capitalism and Freedom", emphasizes the importance that Friedman places on the inherent connection between the two. Regarding economic reforms in China specifically, Friedman in Free To Choose states, "... letting the genie of private enterprise out of the bottle even to this limited extent will give rise to political problems that, sooner or later, are likely to produce a reaction toward greater authoritarianism."

Milton Friedman recognizes the reality that China's Special Economic Zones will be perpetually fostering political freedom because of their economic freedom. Beijing will not find the resulting demands for freedom acceptable, and will act accordingly, by enforcing authoritarian rule on all political freedom and ultimately on the economic freedom which fosters it as well. There is precedent for this assertion: After Tiananmen, the Shenzen stock exchange was closed, all economic reforms were halted, and border controls into the zone were tightened; these controls lasted for nearly two years, until this April. Beijing clearly values maintaining control over maintaining the economic zones; presumably the same logic and course of action will apply to Hong Kong after 1997.

Special Economic Zones

Now let's address the economic issues that Mr. Shoer cites as evidence that Chinese socialism is waning. He describes Shenzen's poor economic conditions, where workers are paid meager wages in overcrowded working and living conditions, and then concludes that the Shenzen Special Economic Zone is a success because Chinese workers willingly travel there. In fact, this attests to the atrocious working and living conditions elsewhere in China much more than to the success of Shenzen. Yes, Shenzen is better off than the rest of China, but it's much worse off than anywhere in the Western world. If all of China became equal in work opportunities and work conditions to those in Shenzen, I would consider the Special Economic Zones to be a success (but then, no one would travel to work in Shenzen anymore). Without that, Shenzen's success merely reinforces how bad the rest of China is.

Mr. Shoer then cites, as further evidence of reform, that "the official exchange rate for currency has adjusted itself appropriately and realistically...." In fact, China has two currencies, one for Chinese citizens and one for foreigners. Foreigners are required to use "Foreign Exchange Certificates", or "FEC Yuan", for all transactions. The FEC Yuan are not negotiable outside of the Special Economic Zones, and have a message informing the user so on every bill; it's printed in English for the convenience of Americans. Chinese citizens must use Renminbi Yuan, a physically different currency, which has no such English message; it's illegal for foreigners to possess Renminbi at all. I have had trouble having my FEC Yuan notes recognized outside of the city limits of Shenzen, even though they're still legally negotiable, because Chinese citizens need special permits in order to use the FEC's, and those permits are very strictly regulated (I survived by trading Hong Kong Dollars on the black market for Renminbi Yuan). Renminbi Yuan are strictly controlled at the border and are not negotiable outside of China. The government can thereby claim that their currency is freely exchanged, but in practice they disallow their citizens from getting any of the freely exchangeable notes. This is a typical ploy by totalitarian governments who wish to look good to naive outsiders while still maintaining authoritarian monetary controls. It has the side benefit, from the point of view of the authoritarians, that foreigners who leave the Special Economic Zones are automatically committing a crime, because they must illegally possess Renminbi Yuan in order to eat. That's another typical totalitarian ploy: declare that foreigners may travel anywhere, and then arrange other rules that make any such travel illegal, so the government can detain the foreigners whenever they deem necessary. Currency policy such as that is indicative of a government that is firmly in control and has no intention of reforming soon.

One might optimistically believe that the Special Economic Zones, and especially the enclave around Hong Kong, would cause capitalism to encroach into the rest of China. When I visited Hong Kong in early 1989, before the Tiananmen Square massacre, that attitude was indeed prevalent; people said, "China is not taking over Hong Kong; Hong Kong is taking over China." The implication was that Hong Kong's economic freedom, and eventually their individual freedom, would get incorporated into mainland China once the people were exposed to the system. I visited Hong Kong again in July 1989, one month after Tiananmen, and then nobody quipped anymore about who was taking over whom. They instead were making plans to leave, or were rationalizing how they would live under totalitarianism.

Mr. Shoer says that the "Chinese government has showed some signs of slowly being relegated as a force of ridiculous irrelevance." When the Berlin Wall fell, the Soviet Army stationed in East Berlin did nothing to stop it. When the Romanians revolted, the Soviets stood by and let Ceaucescu fall. When the Lithuanian Parliament building was occupied, the Soviets fired a few perfunctory shots and then withdrew. When Gorbachev makes policy, Yeltsin regularly ignores it. Those are signs of irrelevance. When the Beijing government was faced with peaceful demonstrators, they called in the tanks and shot people. Considering the Chinese government ridiculously irrelevant is a capital offense in China.

China has a long history of xenophobia, and of acting decisively to oppose "capitalist subversion" who would lead China along the road of "peaceful evolution" towards capitalism. The Great Proletarian Cultural Revolution of the mid-1960's, in which millions were imprisoned and killed, was the largest such xenophobic purge. The victims' crimes ranged from being "capitalist-roaders" who would advocate peaceful evolution, to "class enemies," guilty of conspiring with foreign powers, which meant talking to Britons or Americans. After the Tiananmen massacre, the Beijing government used many of the same phrases as were used in the Cultural Revolution. Mr. Shoer sees this as evidence that the hardliners are alarmed and in retreat. I see it as evidence that the hardliners are still firmly in control, and have not changed their basic policies since the Cultural Revolution. Indeed, the Chinese Constitution of 1978 called the events in the 1960's "the first Great Proletarian Cultural Revolution," and many feared that Tiananmen marked the start of the second one. Since the protestors at Tiananmen undoubtedly recognized the phrases of the Cultural Revolution and their implication of immediate harsh punishment, I think that the use of those phrases was the primary signal that caused the leaders of the protest movement to abandon their cause as hopeless against the hardliners.

Omnipotent Gerontocracy

Mr. Shoer also contends that the "concept of an omnipotent socialist government controlling everything big and small inside the PRC is essentially rotting on the rubbish heap." The government of the PRC believes otherwise, as evidenced by one of their long-term responses to the Tiananmen massacre. News and pictures of the events in Tiananmen were much more widely distributed in the West than they were within China. After the massacre, there was a private initiative in Western countries to spread the news within China by faxing news clippings to randomly selected facsimile machines. One such US organization provided a list of fax numbers in China and one-page newsletters printed in Chinese. The initiative worked well enough that the Beijing government became concerned that the people would begin to believe the news from the West (i.e., the truth), instead of believing their internally generated propaganda. Their response? The omnipotent government assigned an official censor to every fax machine in the country, who would screen incoming fax pages for acceptability.

Remember last year's Oscar nominations? There was a movie made in China, called Ju Dou, which China permitted to get nominated. They later tried to withdraw the nomination because, although the movie accurately portrayed Chinese rural life, it didn't "portray proper socialist values." One might conclude, since Ju Douwas produced in China and then made it to the Oscars, that the Chinese government doesn't really try to control everything big and small. True, China cannot control events outside of its borders; within China, all screenings of Ju Douwere banned, and its director's new film this year (Red Lantern, by Zhang Yimou) was banned as well.

Like Mr. Shoer, I have crossed the border between Hong Kong and Shenzen. He sees the border as a source of investment money for China, and indeed it is. But the border also defines a barrier between freedom and totalitarianism. When I crossed, it was with a woman smuggling Chinese-language Bibles. Such Bibles are, of course, legal in Hong Kong, and are distributed freely. But in the "open door" zone of Shenzen, she was detained for carrying "subversive literature," and her Bibles were confiscated and her passport marked. (She had 12 more Bibles hidden under her skirt, which made it through). The People's Republic of China believes in free economics in Shenzen, but not the other freedoms which we associate with it.

One of the biggest news events of this spring provides a more recent example of the government's attitude. A Chinese poet published a poem in a popular newspaper which, on its surface, sang the praises of the Communist regime. However, if one read the characters diagonally across the poem, it said, "Li Peng Step Down." The poet was denounced by the government and was next heard from in hiding. The newspaper that published the poem had its editorial staff "purged," which means they were all fired and reassigned to jobs on collective farms. I can say, here in print, that I hope George Bush loses the next election; in fact, I could say it directly to him with no fear of repercussions, except maybe that he wouldn't then shake my hand. The equivalent act in the People's Republic is a criminal offense.

The government of the PRC considers things as small as faxed news clippings, fictional movies, Bibles, and acrostic poems to be within their control. That's my definition of "omnipotent."

After 1997

I foresee two possible paths for Hong Kong. The pessimistic path assumes that the Chinese government survives in essentially its current form; in that case, the people of Hong Kong will see their individual rights progressively deteriorate, and eventually their economic rights will be usurped as well. The optimistic path assumes that the existing Chinese government falls; in that case, Hong Kong will lead a reform movement towards democratization and freedom in all of China. The government is subject to fall during the power struggle ensuing after each leader of the government gerontocracy dies; Deng Xiaoping, the semi-retired head of government, is 87 years old now. Most of the hardliners are very old men, and with any luck, they could all die before 1997 or at least before Hong Kong loses too much freedom. However, if the Beijing government is strengthened by political and economic ties with the West, it could survive the upcoming power struggles intact. For that reason, I believe the United States government should limit its contact with Beijing to formal diplomatic ties only. Bush's "Most Favored Nation" trading policy with China should be terminated; economic interaction should be linked to strict human rights observance; the US should lead a UN General Assembly censure of China for its actions in Tiananmen Square; and we should encourage Chinese political reformers, in China and in the US, to speak out freely. Such a policy would actively pursue Hong Kong's optimistic path, fostering the move away from totalitarianism and towards freedom. Bush's policy of tolerating the Beijing regime's excesses pursues the pessimistic path, because it fosters the survival of the regime, and hence condemns Hong Kong in the long run.

I love Hong Kong. The highlight of my every trip to the Far East is my pilgrimage to the Capitol of Capitalism. I've been to Hong Kong a dozen times, but I still have a long list of Things To Do and Places To Go there. I'll never finish my friends' shopping lists for jade and silk and cheap electronics. It's like New York's Canal Street extending for miles in every direction, except that in Hong Kong the Burger Kings get stiff competition from the neighborhood noodle shops. When you take a morning jog there, you're accompanied by young men walking their birds and old women doing their daily shadow boxing. You can ride the ferry from Kowloon to the heart of the city for 7, or splurge for an extra 4 for a first-class seat. You can do anything you want in Hong Kong, for a price, and negotiating the price is half the fun.

The hustle and bustle of the "Shopper's Paradise" is a testament to the success of free enterprise. But the vibrancy of Hong Kong is as much a result of its people's individual freedom as it is of their economic freedom, and their individual freedom is in mortal danger. In six years, Hong Kong will be returned by Britain to the People's Republic of China, and what happens after that will be determined in large part by how we treat the situation now. We must treat the leaders of the PRC in accordance with what they are: totalitarian dictators, who kill to maintain tyrannical power. Get rid of the rose-colored lenses and we can see that China is the enemy.

EJSCK Reprinted from The Watch, Brandeis University, 1992.
All material copyright 1992 by The Watch and Jesse Gordon.
Reprinting by permission only.


Jesse Gordon, 1770 Mass Ave., #630
Cambridge, MA 02140
Voice mail: (617) 354-2805

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