Protests in the streets of Santiago, Chile have been going on for several months. Thousands have been injured and at least 29 people have died in clashes with authorities. In Hong Kong, it’s been nearly a year. While the two bursts of demonstration overlap in time, they reveal very different psychologies.Modern Hong Kong is a product of colonialism. Modern Chile is the product of dictatorship. The two countries have distinct stories that have shaped their respective cultures.Benign NeglectHong Kong was won by the British in the nineteenth century as a consequence of the First Opium War. Institutional gene-splicing meant the island got British Common Law, but not much more was imposed. Policies of benign neglect in the fifty years prior to the 1997 handover resulted in stellar economic
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Protests in the streets of Santiago, Chile have been going on for several months. Thousands have been injured and at least 29 people have died in clashes with authorities. In Hong Kong, it’s been nearly a year. While the two bursts of demonstration overlap in time, they reveal very different psychologies.
Modern Hong Kong is a product of colonialism. Modern Chile is the product of dictatorship. The two countries have distinct stories that have shaped their respective cultures.
Hong Kong was won by the British in the nineteenth century as a consequence of the First Opium War. Institutional gene-splicing meant the island got British Common Law, but not much more was imposed. Policies of benign neglect in the fifty years prior to the 1997 handover resulted in stellar economic growth and relative autonomy.
The results have been nothing short of miraculous: Hong Kong remains the crown jewel of Asia, with a per capita GDP of about $46,000.
Hong Kongers thus see themselves as of a special kind, or at least they want to define themselves as something other than Chinese nationals. It’s no wonder: compared to the rest of the world, Hong Kong is a shining example of free and open markets. They have a strong commercial culture. And they view the People’s Republic and its Communist Party as authoritarian. Their protests are motivated by desperation to keep freedom, prosperity, and identity—despite a colonial past.
Hong Kongers want self-government, but Chileans on the other hand...
Shame and Bus Fare
While Chile has a rich history prior to the rule of Salvador Allende, his rise was an important catalyzing event. Allende, a socialist, came to power in 1970 and doubled down on land seizures that amounted to the state appropriating 59% of agricultural land. In response, general Augusto Pinochet led a 1973 military coup that brought down Allende. Pinochet was brutal in victory. He instituted a purge that meant death for thousands of political enemies.
This has become Chile’s national shame. And yet Pinochet’s economic reforms were friendlier to private property and free markets—so much so that Chile has become the economic success story of South America, topping the list of countries in GDP per capita. So what are Chileans protesting?
A bus fare hike.
Of course, the protesters see such transit cost increases as indicative of great wealth disparity in Chile, despite a slightly lower inequality score (Gini) than that of Hong Kong. Many Chileans view their comparative economic success as far too lopsided and linked to dictatorship.
"[A]ll the measures the governments take are patches that do not end up helping anyone,” says 24-year-old medical student Natalia Torres, quoted at Business Insider. “They end up enriching the rich and impoverishing the poor.”
According to Foreign Policy, the association between today’s ruling elite and Pinochet is undeniable.
Many of the [conservative party’s] initial founders were in their late 20s and early 30s at the time of the transition and therefore still comprise an important component of the Chilean right. The country’s recently sacked interior minister, who initially tried to quell the protests with government repression, was one of the UDI’s founding leaders and earliest national deputies. Another early UDI leader, Hernán Larraín, still heads the Justice Ministry.
As long as Chileans see their problems as linked to the legacy of dictatorship, they are likely to overlook whatever economic progress Chile has made relative to the rest of South America.
Despite cashing Pinochet’s check, they know it had been signed in blood. Many Chileans then—especially the youth—have come to believe that to erase that historical stain, they must not only rid themselves of the dictator’s legacy, but return to socialism.
It’s ironic, then, that Transantiago fare increases sparked the protests. The once-solvent private transit system had, ironically, been socialized more than a decade prior.
So what can we make of these two stories? The most troubling thing is that neither is likely to end well.
In Hong Kong, the protestors are battling hard and keeping at it because they know the mainland government plays a long game. One protester, quoted in the The Atlantic, reflects a rather nihilistic sentiment among Hong Kongers: “We might as well go down fighting.”
In a sense, Hong Kong is a city-state full of Tiananmen Square “tank men.” They want self-government. They want free markets without interference from Beijing. Indeed, pro-democracy candidates won landslides in recent district-council elections. But the mainland regime is likely to put its thumb on them and keep it there. It’s difficult to see any scenario in which the Communist Party ever lets go.
By contrast, socialism in South America is a persistent mind virus, especially as a response to pervasive corruption and cronyism. One can’t help but wonder whether Chile, in its efforts to wash away Pinochet’s legacy, will discard that degree of economic liberalism that has made it South America’s success story. Chile is by no means perfect, but it stands in stark contrast to experiments like that in Venezuela, or the irresponsible neighbor Argentina with its outsized debt and money printing.
Consent of the Governed
As one who is working in the area of international development, creating autonomous “prosperity zones,” I see much to admire in both Hong Kong and Chile. But beyond relatively free markets, the two protest movements seem to share only one thing in common; their unrest parallels the degree to which they view their operating rules and rulers as being imposed on them.
Rule by democratic majority is not always enough to quell unrest, especially when half the country imposes its rules on the other half.
“It turns out there’s only one thing that guarantees production of good laws,” writes hedge fund manager Michael P. Gibson. “The people bound by the laws have to agree to be bound by them. … Consent must be real, transparent, and continuous.”
Most of the world fails to appreciate this insight.
But there’s no getting around it: you need the consent of the government. Not hypothetical. Not tacitly. Real consent. A system of law that provides for regulation or expropriation on behalf of cronies, will create neither peace nor stability in the long run. State power destroys the foundations of voluntary cooperation. And in so doing it destroys what makes a society attractive, leading to eternal battles by constituency groups over favorable regulations and transfer payments.
Although neither Chile nor Hong Kong is a Utopia, each is a beacon. But if China’s socialist oppression and Chile’s socialist populism persists, they are likely to lose their edge as commercial centers. My hope is that the creation of new, special jurisdictions will allow for islands of economic freedom in the world.
I have dedicated my life to creating these niches, because freedom and free enterprise remain humanity’s best hope. Maybe Chileans and Hong Kongers will find some measure of peace beyond this chaos. Chile is a big country, they would have enough space to start a prosperity zone as an experiment in freedom. And if Hong Kong falls, then a New Hong Kong might be created in the region – but of course, outside of China.
At the very least we can hope future generations learn something from their trials. Just maybe there will be somewhere on earth to go when socialism returns to each.
Titus Gebel is a German entrepreneur with a doctorate in law. He founded, among others, mining company Deutsche Rohstoff AG, and is the current CEO of Free Private Cities Inc., a company working on the creation of contract-based prosperity zones and private cities. Gebel is also the author of Free Private Cities: Making Governments Compete for You.
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