Hong Kong and Venezuela
Essay title: Hong Kong and Venezuela
Hong Kong and Venezuela
Hong Kong has built economic strength from an impoverished economic infrastructure, since the 1950’s, at the same time as Venezuelas economic health has declined despite its relatively strong economic structure. Figure 1 shows that in 1950, Hong Kongs income per person was approximately half of Venezuela. During that period, Hong Kong came under tremendous economic and social pressure due to an arrival of immigrants from China and a lack of natural resources to support growth. In the interim, Venezuela was resource-rich and had a relatively stable population. Comparisons in the 1990s showed Venezuelas income per person was much lower than 1950 in real terms while Hong Kongs was noticeably greater
While Venezuelas economic decline may be attributed to its high population growth negatively impacting economic growth, it can be proved that Hong Kong also experienced tremendous population growth over the past few decades (Figure 2). In addition, Hong Kong lacked the natural resources to support its population growth and resorted to importing all its basic needs to support the economy.
The variation in economic performance can be attributed to the differential economic freedom between the two countries. Figure 3 shows that during the 1970s and through the 1990s, Hong Kong continued to achieve higher levels of economic freedom than Venezuela. More importantly, economic freedom in Venezuela deteriorated during the same period. By 1997, Hong Kong had over 50% more economic freedom than Venezuela (Figure 4). However, such comparisons are not rare when viewing global economies as stories of economic asymmetries abound around the globe.
Although some economists believe economic freedom cannot be measured, physicist Enrico Fermi pointed various comparisons. What Fermi emphasizes is that when we make a comparison, we make measurements. While the concept of economic freedom remains difficult to measure, continued efforts are made to accurately gauge comparisons by refining measurement methodology.
Measuring economic freedom consists of three main elements:
The right to engage in voluntary acts of trade and exchange, without interference by government or others via force or fraud;
The ability to access an impartial judiciary or the enforcement of property rights;
The right of citizens to retain a majority of the income they earn.
An Economic Freedom Index has been designed to identify various factors that make a country economically free, by using a compendium of 23 freedom factors based on objective data or independent surveys. It is a ranking of 123 countries according to the extent to which they are free.
The Economic Freedom Indexs components consist of:
Government size.
Economic structure – extent of government ownership over the means of production
Monetary and price stability
Freedom to use alternative currencies – the right to use foreign currencies to engage in foreign trade.
Legal structure and property rights – enforceability of contracts and security of property rights.
International exchange – the extent to which citizens can trade with foreigners.
Freedom of exchange in capital markets – the right to engage in capital transactions with foreigners, the right to have access to credit facilities.
Taking into consideration all aspects of the Economic Freedom Index, Hong Kong and Singapore emerge as the “Most Free Countries” while New Zealand is ranked the third most open economy amongst the 123 countries in 1999. Hong Kong has enjoyed high levels of economic freedom since the 1970s. During the past few decades, Hong Kong has continued to be the top ranked jurisdiction in the world. Although Hong Kongs overall economic freedom rating in 1999 was up since 1990, it was still down from a peak score of 9.8 (out of a possible score of 10) in 1995. This slip can be attributed to a decline in the Legal Structure and Property Rights Index section2. However, in other areas of the index, Hong Kong consistently maintained or improved its scores since 1995. Since 1997, its rating has been tied with Singapore,