The Constitution of Economic Liberty in Hong Kong

Abstract

The constitutional foundations of economic liberty in Hong Kong, the freest economy in the world according to many, are little understood. So as the perceived spread of collusion, cronyism, and corruption in the territory ever since the 1997 transfer of sovereignty despite China’s promises that little change will be made to the pre-existing way of life. Relying on the analytical tools of constitutional economics, this article argues that the Beijing-ratified Hong Kong Basic Law preserved only the form of the territory’s original, British-descended, constitution, not the substance; as witness the insertion of contradictory interventionist mandates, and the consequent reversal of principal-agent relationship of government to the business elite. The erosion of economic freedom over the past 17 years is explicable, at least partly, by the entry into force of the Basic Law, which has transformed the Hong Kong state from the impartial and passive umpire it once was into a partisan social engineer and economic gamesman, thereby unleashing skyrocketing rent-seeking opportunities.

Keywords: Economic liberty Rent-seeking Constitutional design Hong Kong

JEL Classification: D02, D72, H11, K10, K23