The finest economic leader the 20th century ever produced is why Hong Kong is so prosperous. His greatest quality: He didn't intervene. He called his approach "positive nonintervention."

It's the story of a man whose legacy legitimized the laissez-faire economic policies of Milton Friedman and the boys at the University of Chicago. According to the Chicago approach, intervention almost always does more good than harm.

Our hero set the bar as Hong Kong's financial secretary throughout the 1960s.

The Cowperthwaite Approach

Sir John James Cowperthwaite was born on April 25, 1915. Before joining the Colonial Administrative Service in Hong Kong in 1941, Cowperthwaite studied economics at St. Andrews University and Christ's College, Cambridge.

Cowperthwaite arrived in Hong Kong immediately following the war. That was
a good thing. Roughly four years of Japanese occupation had taken its toll.

Manufacturing ceased. Inflation soared. Tens of thousands were cast in the streets. Many more were deported to the mainland.

By war's end, only 600,000 of the original 1.6 million citizens remained.

Unlike most British colonies at the time, Hong Kong didn't receive its freedom immediately following the war. The reason was simple. Hong Kong sat right next door to Mao's communist China. Dominos couldn't fall…Or so they said.

So while the Brits sat at home channeling their energy around their newly enlightened welfare state, Cowperthwaite stepped back. He removed his hands. He released the Hong Kong economy. He let man determine his fate.

Personal taxes were kept at a maximum 15%; government borrowing became an oxymoron; there were no tariffs or subsidies. Cowperthwaite reduced the red tape required to launch a new company to a single one-page form.

Cowperthwaite's intrinsic distrust for government enabled him from preventing even the highest bureaucrats from keeping figures on the rate of economic growth or the size of GDP. His reason…"If I let them compute those statistics, they'll want to use them for planning."

In his very first budget speech, he said, "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do more harm than the centralized decisions of a government; and certainly, the harm is likely to be counteracted faster."

During his "do nothing" tenure, the island only six times the size of Washington, D.C., witnessed a 50% rise in real wages and a two-thirds fall in the number of households in acute poverty. Exports grew by an average of 13.8% a year.

All this from a country forced to import all its raw materials, water and oil. All this from a country excluded from the do-gooder benevolence of the World Bank or IMF.

From 1960-1996, Hong Kong's per capita income rose from about one-quarter of Britain's to more than one-third larger.

As Friedman himself pointed out, "Compare Britain - the birthplace of the Industrial Revolution, the 19th-century economic superpower on whose empire the sun never set - with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbor. Yet within four decades, the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country."

This is why Pesident Reagan wanted free trade because it gives you a free market without government intervention. This is why Hong Kong to this day is very prosperous and even though China now owns Hong Kong since 2000 they haven't messed with success yet.

All of this background is leading up to a recommendation.