(This essay was published in Hong Kong Economic Journal on 25 May 2016.)


When the Cultural Revolution erupted fifty years ago, political ideology was veering to the left around the world. Two years later in 1968, student unrest swept across Europe and America. I was a fifth-form student at that time. Very quickly I became aware that students in China and across the world thought capitalism caused inequality and injustice. But to me, capitalism was just an economic term.


In the summer of 1968 I read The Communist Manifesto to find out more about capitalism. I must have been quite influenced by the teachings of Marx and Engels because I decided to study economics afterwards. By sheer chance, I ended up at the University of Chicago, whose economics department was the intellectual nemesis of Marxist reasoning.


At Chicago, I learned more than an understanding of capitalism as an economic system, but also how capitalist and socialist ideals of freedom and democracy are different. Three propositions stand out in my mind.


First, capitalism provides better protection for individual freedom than socialism, while the latter threatens individual freedom and befriends collective freedom.


Second, the political ideals of liberal democracy befriend capitalism, while the political ideals of populist democracy befriend socialism.


Third, the political ideals of populist democracies lead to tyrannies.


Consider the first proposition. Under capitalism, a citizen can own private property and his rights over his property are recognized. If the state threatens to violate his rights, then he may choose to leave the state with his private property before the threat materializes. Capitalism assures citizens a higher degree of individual freedom because of private property rights.


Under socialism, a citizen does not own private property, so when a person’s rights are threatened he is free to leave but has no property to bring with him. As a result his choices are materially reduced. Private property rights are at the heart of why capitalism protects individual freedom more than socialism, and why the latter is a greater threat to individual freedom. The roots of individual freedom are embedded in private property rights.


Besides private property rights there are other individual rights like freedom of speech, freedom of worship, and other important freedoms. While these are not the same as private property rights, all rights tend to be related to each other. For example, foreign exchange control limits the freedom of an individual to purchase foreign goods and own foreign assets. But the restriction also limits your freedom to purchase religious books from abroad for the purpose of worship, which is an indirect constraint on the freedom of worship. So although foreign exchange control appears as a restriction on economic freedom, it is also a restriction on the freedom of worship.


Next consider the second proposition. Historically, Thomas Hobbes (1588-1679) and John Locke (1632-1704) provided the philosophical tools in defense of liberal democracy. Hobbes conceived of the state as a social contract chosen voluntarily by the people to escape from the conditions of anarchy and violence that characterize the state of nature(自然狀態). The contractual state represents the successful establishment of political order that makes human civilization possible.


Locke went beyond Hobbes to argue that civilization is not merely an escape from anarchy and violence, but a means of nurturing individual freedom. Unlike Hobbes, Locke saw the state as not merely the result of a social contract to prevent human civilization from relapsing into anarchy and violence, but an enlightened political arrangement to enable humans to flourish in a free environment for their individual benefit and the benefit of all.


Locke saw human nature as characterized by reason and tolerance. He drew the inference that all individuals could together agree on the proper scope and content of mutually recognized rights to be defined in law. In his conception, the empowered person has rights, including private property rights that are recognized, protected and defended by the state operating under the rule of law.


This also requires imposing limits on the power of the state to interfere with individual freedom.The social contract only justifies a state with limited powers, normally achieved by setting constitutional limits on the exercise of state power and buttressing that with the separation of powers. Locke draws a sharp line between the public and private spheres of life for an individual. The state has no business in interfering with the private sphere. The resulting system of government is a liberal democracy, whose purpose protects the private spheres of individual freedom and the capitalist economy.


By contrast, Jean-Jacques Rousseau (1712-1778) conceives of freedom and democracy in a fundamentally contrary collectivist rather than individualist manner. In his Discourse on Inequality (1754) and Social Contract (1762), he argues that human civilization has corrupted man’s morals.


Rousseau sees man as a ”noble savage” (高貴的野人)in the state of nature. Man is a self-sufficient loner untouched by civilization, who kills only for his own self-preservation. In the state of nature, all men are equal and undifferentiated from each other. But once man established property as his own, it was the beginning of evil.


For Rousseau, the state of nature was not Hobbesian at all, but a romantic Garden of Eden. Civilization and private property were the curse. He sees the establishment of private property as the original source and basis of all inequality and injustice. The socialist (and anarchist) rejection and hatred of private property is Rousseau’s intellectual legacy.


Rousseau wanted to transform human civilization through a social contract where everyone could participate equally to constitute the “general will” – the will of the people, their collective will, the sovereign will. But the “general will” is premised on the socialist ideals of rejecting private property, not the capitalist ideals of protecting private property as conceived by Locke.


Rousseau’s message is truly revolutionary. It rejects the present as morally decadent and corrupt and seeks to overthrow it to create a new future. The French Revolution is the true heir of Rousseau’s ideas. One part of the Chinese Cultural Revolution, as manifested in the mass movement, has similarities.


Finally, consider the third proposition. Rousseau’s “general will” substituted the freedom of individuals with the freedom of the collective. If everyone must “will” the same thing, then there is no room for individual free choice. The “general will” is transformed into a coercive instrument that takes politics a step towards tyranny.


If political choices are manifestations of the “general will” then every political decision represents the will of the sovereign people. This makes political choices very precious. It also means that if constitutional limits or the separation of powers emerges as obstacles to the precious choices of the sovereign people, then these obstacles should be removed. This then becomes the tyranny of state power in action.


A populist democracy leads naturally to tyranny. The terror unleashed by the French Revolution has its intellectual roots in Rousseau’s conception of the “general will.” On the night of 4 August 1789 and until eight o’clock the next morning, the French National Assembly passed thirty decrees that abolished all feudal rights and dues and divided up the land of the nobles to give it to the peasants and completely change the whole fabric of French law and society. As time went on, extremism and violence grew. Finally, the people happily accepted Napoleon as their new dictator. Again, there are similarities in the extremism and violence that was unleashed in one part of the Chinese Cultural Revolution.


In a liberal democracy, elected representatives are chosen by the people to serve for time-limited terms. The people can sometimes make bad or poor political choices, and elected representatives may fail in their tasks. There is nothing inherently precious about voting. Politics is a way of ruling societies where different individuals have different interests without undue violence. Politics seeks to listen to and respect those differences and not to interfere too much and too often. It therefore recognizes, protects and defends individual and private property rights. To ensure freedom, it is necessary to limit the powers of government by limiting the tenures and the powers of office.


In practice, both Rousseau’s populist democracy and Locke’s liberal democracy have to operate according to majoritarian democratic rules. But how does Locke’s majoritarian democracy differ from Rousseau’s? Majoritarian democracy without the protection of individual and private property rights will lean towards becoming more coercive and socialist. Any individual not in the majority coalition will be oppressed harder and more frequently. Without the protection of private property rights, an individual’s sphere of private life will get smaller. In a liberal democracy, life will be less coercive and capitalism will feel more at ease.


In most of the past century, the fear of populist majoritarian democracy centered on whether minority and individual interests would be violated and sacrificed in the name of a democratic majority. In more recent decades, majority coalitions have become composed of increasingly large numbers of highly diverse minority interests that do not share any common interests, but are merely opportunistic partners of convenience.


The traditional fear of the tyranny of the majority has increasingly been replaced by the fear of paralysis under the tyranny of (often shifting) minorities. This has led to the increasing fragmentation of politics. Minorities often wield veto power that can prevent and delay political decisions. Political gridlock has spread to so many societies that one author has openly called this “the end of power.”


In the past generation we see the rise of groups who are against politics. These groups no longer trust their politicians. They prefer to bet on those people who have no political experience. In wanting to have outsiders, they delegitimize political compromise – an essential element for protecting the freedom of individuals by limiting the scope and scale of coercive measures.


In the short-term we have dysfunctional governments and political gridlock. But this will only feed the demand for tyranny. Liberal democracy will give way to populist democracy. And this is the curse of the present generation. Hong Kong some argue does not have democracy, but we do have populism and elections that do not lead to any political solution.


Political reform in Hong Kong is a necessary condition for addressing our political problems. But even more urgently, we must first answer whether we want a liberal or a populist democracy. Time may not be on the side of a liberal democratic solution.

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