It's been more than a week now and I’m beginning to suspect she’s not going to call, so here I will offer Janet Yellen the advice I’ve been hoping to give her privately since the Senate confirmed her as the new chairman of the Federal Reserve. My advice is: Think about John Cowperthwaite. By this I mean: Really think about
The name is familiar to economic historians, academics in postcolonial studies, specialists in the tax policy of the Far East, and avid libertarians, but less well known to normal people. Cowperthwaite was a lifelong government bureaucrat who should be lionized by anyone who loathes and fears bureaucracies. In 1945, as a member of His Majesty’s colonial administrative service, he was sent to Hong Kong, which was then (and remained until 1997) a British protectorate. Hong Kong was in bad shape at the end of the war. Things only got worse when hundreds of thousands of refugees streamed in as the Chinese Revolution raged next door.
Cowperthwaite rose through the ranks and became financial secretary of the colony in 1961. For the next 10 years he had near-total control over the economic laws and regulations governing Hong Kong. By the time he left office, in 1971, the number of Hong Kongers in poverty had dropped by two-thirds, average wages had risen 50 percent, and Hong Kong had gone from one of the poorest places on earth to one of the richest.
Hong Kong’s rise seems almost miraculous today, and surely the envy of any maker of economic policy. Chairman Yellen, unlike Cowperthwaite, is a determined advocate of the redistribution of wealth and other governmental manipulations that are guaranteed to make us happier, healthier, and more wonderful generally. I know this from the many beat-sweeteners that have already been published by the reporters who will be covering her. (A beat-sweetener, in the technical jargon of journalism, is a glowing article written with the purpose of winning favor from a potential source.) In National Journal, for example, a writer named Michael Hirsh wrestled with the question of whether Yellen is a genius or a saint—I’m paraphrasing—and was forced to admit she is probably both.
“Yellen is considered a nonideologue who will relentlessly follow the facts, whether they lead her toward solutions on the left or the right,” Hirsh wrote. More technical jargon: In the mainstream press a “nonideologue” is a liberal. (An “ideologue” is a conservative.) Oddly, Hirsh waited only four sentences before explicitly contradicting himself. “Disciplined, determined, and brilliant”—you bet she is!—“Yellen is also the product of an old progressive tradition of activist, pro-government economics . . . [and] represents a strain of interventionist thinking that has not found expression at such a high level in Washington in decades.”
If Yellen is truly as ideological as financial reporters are not saying she is, then she might admire a few of the actions Cowperthwaite took as financial secretary. He truly was a nonideologue. He disliked automobiles, as all good progressives do nowadays, and he discouraged their private ownership—not because he disliked them but because Hong Kong was congested enough as it was. And he was a great believer in government housing, or rather, he oversaw a vast construction program to house the endless river of refugees from Mao’s China. The other actions for which he was best known—keeping a flat income tax rate of 15 percent, deregulating nearly every enterprise that caught his attention, nullifying labor laws, and dismantling barriers to imports and exports—are things that Yellen, as Fed chairman, couldn’t do even if she wanted to, which she wouldn’t.
Instead, Chairman Yellen should contemplate another of Cowperthwaite’s initiatives. Asked once what the greatest and farthest-reaching policy of his tenure was, he replied: “I abolished the collection of statistics.” If only in this regard, Chairman Yellen, who will sit atop a vast apparatus built primarily for the gathering of statistics, could do us all a favor by following the Cowperthwaite Way. It’s true that there will suddenly be many unemployed economists wandering around Washington, D.C. But this is only one of the potential benefits.