THE BLOG
10/13/2014 01:42 pm ET Updated Dec 13, 2014

The Future of Hong Kong's Freedom?

After weeks of protests, government officials are meeting with leaders of the ongoing protests in Hong Kong. It's unlikely that the negotiations will solve much as the protesters want the full democratic choice in nominating the next CEO (head government official) of Hong Kong. Beijing is unlikely to back down on this key point. Whether an agreement can be reached or not, the future of freedom in Hong Kong is unclear.

Hong Kong has never had democratic freedom. Under British rule, officials in London chose Hong Kong's leader. Since 1997, when Great Britain transferred sovereignty of Hong Kong to China, a committee of Hong Kong businessmen selected by the Chinese government in Beijing have picked Hong Kong's CEO. The recent protests commenced after the announcement that voters in Hong Kong would be able to choose among a slate of two or three candidates nominated by the committee during the 2017 election. The protesters expect -- and are demanding -- the right to decide for themselves who the candidates are going to be.

Although Hong Kong has always lacked democratic freedom, it has been very free in other ways. It has been economically free for decades. Under British rule, Hong Kong embraced free trade, kept taxes low, limited regulation, and provided reasonable enforcement of contracts. Hong Kong has ranked as the most economically free country in the world in every year since 1970 (the earliest date data is available). The transfer of power from London to Beijing hasn't changed that.

The impact of economic freedom on the lives of Hong Kong's citizens has been dramatic. In the span of a generation, Hong Kong transformed from having a pre-industrial standard of living to becoming one of the wealthiest countries in the world with a truly awe-inspiring urban landscape. Longer life expectancies, better health, greater literacy, and other measures of standards of living have improved as well.

Of course, non-economic freedoms matter, too. The Human Freedom Index includes civil as well as economic freedoms. It measures 34 civil freedoms in the areas of security and safety, movement, expression, and relationships. Things like freedom of speech and assembly, political pressure on the media, and women's freedom of movement are included.

Hong Kong also compares favorably with other nations in non-economic freedoms. Hong Kong ranks 3rd in the Human Freedom Index which includes civil as well as economic freedom. Within civil freedom, homosexual freedoms are Hong Kong's only major weakness.

Economic freedom, civil freedom, and democratic freedoms tend to be highly correlated. Nobel Prize winning economists Milton Friedman and Frederick Hayek argued that political freedom was not possible without a large degree of economic freedom more than 50 years ago. Empirical evidence supports their claims. The few exceptions tend to either gain economic freedom or lose their political freedoms over time.

But Hong Kong is the opposite type of exception. It has maintained a high degree of economic freedom with few democratic freedoms for more than a half century. It's not at all clear that this could not continue.

Although most people value the freedom to choose their own rulers as a good in and of itself, it's important to keep in mind that democracy is just a means of choosing leaders or policies. Whether democratic procedures choose 'good' policies is a separate question.

In Hong Kong's case, it's difficult to imagine that a democratic Hong Kong would choose greater economic or civil freedom than what they achieved under British rule and have so far maintained under Chinese control.

The real question is how much civil and economic freedom will Chinese officials allow residents of Hong Kong to exercise in the future compared to what democratically elected officials in Hong Kong would allow. While Hong Kong ranks first in economic freedom, mainland China ranks a dismal 115th. However, China has made some of largest improvements in economic freedom anywhere on the globe since 1980.

Will China continue to improve its economic freedom until it looks more like Hong Kong? If so, democratic freedoms in Hong Kong are likely to detract from their economic and civil freedoms.

Or is China going to increasingly interfere with Hong Kong and have Chinese economic freedom and Hong Kong's economic freedom converge to each other somewhere in between their current respective levels? If that's the case, then a democratic self-governing Hong Kong might preserve as much of their economic and civil freedoms as is realistically possible.

Whether Hong Kong's democratic freedom protests are an overall movement for liberty depends crucially on what is expected out of Beijing in the future. I suspect that a democratic Hong Kong would have more economic and civil freedom than China would allow them in the long run. Unfortunately, that's still likely to mean less economic and civil freedom than what made Hong Kong great.