If Detroit were given the tools it needs to re-build it could be the next Hong Kong. Here Senior Cato Fellow lays it out for you.
Detroit is beautiful—though you probably have to be a child of the industrial Midwest, like me, to see it. As you may have heard, the city is in trouble. At the end of the 2013 fiscal year, Detroit had a balance sheet with liabilities of $9.05 billion. The city’s emergency manager, Kevyn Orr, estimates long-term debt at $18 billion.
But I know how to fix Detroit, because it reminds me of another favorite place, Hong Kong—two things so opposite that they evoke each other the way any Kardashian is a reminder that you love home and mother.
Hong Kong’s per capita GDP is among the highest in the world. But it was once a worse mess than Detroit. Devastated by Japanese occupation, the British colony’s population had declined from 1.6 million in 1941 to 600,000 by 1945. Then, after the 1949 communist victory on the mainland, a million refugees arrived. Most of them were penniless. Britain’s Labor government was penniless, too. Maybe Hong Kong could have gone into Chapter 9. But who would have been the bankruptcy judge? Chairman Mao?
Instead Hong Kong had the good fortune to get John (later Sir John) Cowperthwaite, a young official sent out to push the colony’s economy toward recovery. “I did very little,” he once said. “All I did was to try to prevent some of the things that might undo it.”
Such as taxes. Even now, Hong Kong has no sales tax; no VAT; no taxes on capital gains, interest income or earnings outside Hong Kong; no import or export duties; and a top personal income-tax rate of 15%.