The 2012 Index of Economic Freedom, published by Heritage Foundation and Wall Street Journal, has once again ranked Hong Kong the world's "freest economy" - with an overall score of 89.9 compared with a world average of 59.5. The same index shows that the United States only ranked 10th, behind Mauritius and Ireland, due in part to the "reckless government spending."
Created in 1995, the influential Index of Economic Freedom uses 10 economic measurements, including business and labor freedom, government size and spending, property rights and freedom from corruption, to measure the degree of economic freedom in the world's nations. And according to Boston-based Freedom House, "there is a high and statistically significant correlation between the level of political freedom and economic freedom." In other words, the main definition of a free economy is the lack of government intervention: Less state intervention means a freer market.
But is the Index of Economic Freedom accurate? The answer is: not quite that simple.
Hong Kong today has Asia's biggest wealth gap and its Gini Coefficient, which measures income inequality (a number between 0 and 1, where 0 corresponds with perfect equality and 1 corresponds with perfect inequality), has gained from 0.43 in 1971 to 0.537 in 2011 - 0.468 in the United States. "Hong Kong's free-market credentials," writes Katie Hunt of BBC News, "have long masked a more complicated picture than its model economy status suggests. The disparity between rich and poor is wide and has become a political flashpoint."
While Hong Kong's GDP per head is high at $32,000, more than half of its population earns less than $1,400 a month, and the average monthly household income of the poorest 10 percent of Hong Kong's population fell to $280 in 2011, while the richest 10 percent advanced to $17,740 a month. To help people survive on such low incomes, the government has to provide public housing to about 50 percent of the population.
In terms of "business freedom" and "labor freedom," Hong Kong also has very little to do with a free economy encouraging competition on a level playing field. "True," report Eddie Leung and Pepe Escobar of Asia Times, "you can open a business in three days. But depending on the business, you will be squeezed by monopolies and oligopolies in no time. And if you are 'labor,' chances are in most cases you can only aspire to some sort of glorified slavery."
"The dark secret at the heart of Hong Kong," Leung and Escobar believe, "is the unmitigated collusion between the government and a property cartel - controlled by just a few tycoons; the Lis, the Kwoks, the Lees, the Chengs, the Pao and Woo duo, and the Kadoories. These tycoons and their close business associates also happen to dominate seats on the 1,200-member Election Committee that chooses Hong Kong's chief executive."
And Hong Kong's chief executive is another problem. Only a few hours after newly elected Chief Executive Leung Chun-ying was sworn in on July 1, more than 400,000 protesters from all walks of life took to Hong Kong's streets to express their anger at Hong Kong's new pro-Beijing Chief Executive. Leung was elected by only 689 members, most of them billionaires, of the Election Committee and is viewed by most analysts as faithfully obeying Beijing's agenda. Furthermore, the self-made millionaire Leung's own credibility has been questioned. The top scandal in Hong Kong today is how Leung had made many illegal additions to his mansion in Hong Kong's millionaire neighborhood, Victoria Peak.
"The feeling among the marching 400,000 on July 1," writes Pepe Escobar, "boiled down to an immense frustration about having being handed a non-representative government in perpetual collusion with big business. Virtually everyone points to more democratic Taiwan or South Korea as examples of what Hong Kong could be in terms of solving its problems concerning housing, welfare and the environment. In the end, the frustration inevitably has to be channeled towards Beijing. In theory, Hongkongers will be allowed to elect their own leader in 2017 and all, not just a few, legislators by 2020. Yet Beijing remains absolutely mum about the deadlines."
It is 15 years since Britain handed over its Crown Colony and the city became a Chinese Special Administrative Region (SAR). In today's Hong Kong, negative public sentiment toward Beijing is at a record high and discontent with SAR government is growing. To many in Hong Kong, the award of being the world's freest economy does not necessarily ring true.
Xiaoxiong Yi is the director of Marietta College's China Program.