While most governments of the world drift towards collectivism, a curious trend is at work in the opposite direction. Some governments—driven by economic necessity or far-sighted leaders—are establishing centers for relatively free trade.
Perhaps the most avid observer of this trend is Professor Alvin Rabushka, a senior fellow of the Hoover Institution on War, Revolution and Peace at Stanford University. The move toward freeports in Korea, Indonesia, Mauritius, Liberia, and a number of Mid-Eastern states does not surprise him. "Freeports work to the benefit of ordinary people as well as entrepreneurs," he says. "When even the Egyptians are thinking of turning Alexandria into a freeport, you know that something's going on."
Although only 36 years old, Rabushka has published several books describing the benefits of freeports and other areas that allow freedom from tariffs, regulations, and taxation. His startling thesis: not only do people prosper in such places, but racial conflicts subside as freedom takes hold.
The evidence to bolster his case is impressive. In the past 10 years, Rabushka has travelled to more than 25 countries to investigate freeports and plural societies. "To the extent that multiracial societies have a maximum of economic freedom for individuals, they tend to have racial harmony," Rabushka says. "The greater the amount of political controls, the greater the conflict between groups, especially with democracy…You end up with Northern Irelands and Lebanons."
At the other end of the spectrum from strife-torn socialist societies are such freeports as Hong Kong and Singapore, where Chinese and Europeans mingle economically in a relaxed fashion. Rabushka has devoted particular attention to Hong Kong. "My research in Hong Kong shows that there is a real live industrial free society on earth, and it behaves the way economic theory says it should," Rabushka explains.
The St. Louis-born political scientist is not one to draw his conclusions from a distance. He first travelled to Hong Kong in 1963, marrying there and learning Chinese. After becoming an associate professor at the University of Rochester, Rabushka returned to the British colony in 1972 and again in the fall of 1973. He was amazed to find himself virtually the first scholar to thoroughly research the economic policymakers and their activities. "Both the expatriate and resident academic community of the colony promote a wide belief that the Hong Kong government discourages scholarly investigation into its activities," Rabushka noted in his subsequent book, Value for Money (Hoover Institution, 1976, $9.95). He paid no heed to the assumption that his subjects would be impossible to interview—and was rewarded with a rich lode of insights from administrators as to why Hong Kong has become such a success.
The prosperity of Hong Kong, Rabushka found, owes much to its avoidance of easy money, deficit financing, and controls over business and currencies. Administrators of the colony have been imbued with a sense of fiscal accountability that dates from the mid 1800s. The precarious position of Hong Kong at the doorstep of a communist superpower, moreover, has meant that it must go out of its way to attract capital. The result of a low and steady rate of taxation, and a hands-off policy toward entrepreneurs, has been astonishing growth.
As might be expected, Rabushka's explanation for the prosperity and tranquility of Hong Kong has drawn scowls from some quarters. One American reviewer has dismissed him as a tool of business interests, while expatriate British socialists in Hong Kong have sniffed at the book's critique of Keynesian policies. Yet his analysis has also won strong praise, from both American academic journals and foreign observers. "There has been a very favorable reaction to the book from Hong Kong," he says. "The leading English language newspaper ran a front page feature story on it, and people in government are quite surprised that someone has explained things more objectively than before."
Rabushka once deplored the laissez-faire policies of which he is now an ardent and articulate advocate. As an undergraduate at Washington University at St. Louis, his views were markedly leftist. Postgraduate studies at Washington University, the University of Hawaii, and the University of Hong Kong moderated his radical tendencies somewhat, but Rabushka still considered himself to be left of center when he arrived as an assistant professor at the University of Rochester in 1968.
Two events in that year profoundly changed his outlook. The first was meeting a libertarian law professor, Henry Manne, whose office was next door at the university. The second was a long car ride on May 4 of that year, in which a colleague convinced him to invest in the stock market. Rabushka did—and lost heavily. "Losing money made me appreciate economic freedom," he says.
In the years that have followed, Rabushka has moved with equal enthusiasm to apply free-market analysis to foreign and domestic affairs. As a consultant to the Model Cities program in Rochester from 1971 to 1973, he and a colleague conducted surveys which showed, contrary to the hopes of bureaucrats, that elderly citizens did not want to help make policy for the program. Instead, these citizens wanted more protection from criminals. A later survey for the housing authority of Wilmington, Delaware led to the same conclusion. "Black mothers on welfare didn't want a large number of white middle class social workers running their lives." Rabushka says. As a result of the findings, the manager of the program fired 31 social workers, and hired patrolmen to take their place.
Today, Rabushka has a number of promising projects underway. He has helped oversee extensive interviews of elderly homeowners for the Department of Housing and Urban Development, to assess how they view their dwellings. The tentative finding: in almost four out of five cases, dwellers do not perceive the independently-rated "defects" in their housing to be important. In view of the apparent contentment of the occupants, Rabushka questions those who insist upon spending billions of tax dollars to improve the homes.
His abiding interest, however, remains freeports—why they flourish, and why they perish. In addition to his studies of domestic policy for the Hoover Institution, Rabushka is assembling material for what he hopes will be a definitive study of freeports as they have arisen throughout history.
Despite a growing interest in freeports around the world, Rabushka doubts that Third World countries will heed the larger lessons they offer for economic development. Most leaders are short-sighted, he says, and those of longer vision often succumb to the temptation of squeezing freeports dry once they begin to succeed. Nonetheless, Rabushka has hope for the future. His books clearly offer a way for countries around the world to learn from—and profit by—the progress of freeports in overcoming economic and racial problems.