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Why I learned to love regulation

Wed, 17/09/2008 - 15:50 — patrickcallioni

Patrick CallioniIn our time, we cannot wait for hundreds of years while the rules evolve to suit our requirements; we cannot even wait decades, largely because of the speed of technological development and its social, economic and cultural consequences.

Regulation is not merely another form of government red tape. Regulation is pervasive in any western economy and is increasingly a topic of interest in developing economies. Global and national regulation is a powerful influence on business, especially in the financial sector, and is generally perceived by business as a hindrance or, at best, as a necessary evil. As rules change or new rules are made, there is a direct impact on the environment in which a business operates and sometimes on the business itself. As businesses struggle to comply with red tape, many see regulation and compliance as a threat to profitability and as a factor that discourages investment and damages competitiveness. Only crooks and cheats prosper in an unregulated or improperly regulated market and the evidence is that properly regulated industries thrive to the advantage of most, rather than a few. History shows how, if not why, this is so.

Modern society cannot exist without regulation and the international financial markets and associated institutions could not exist without a regulatory framework - we are seeing now how the global financial markets can be placed at risk by the effect of poor regulatory frameworks in one nation alone. 

What governments should do

Tue, 09/09/2008 - 16:41 — patrickcallioni

Patrick CallioniAn independent judiciary, a strong civil society and an effective bureaucracy are far more important to social stability and economic development than the application of Jeffersonian, Hamiltonian or Westminster principles.

In substance, I abide by the traditional formulation of the role of the state, which is to provide peace, order and good government. Governments should do what they do best - in Paul Ormerod's words, "Governments should do much less...detailed short-term intervention...and [spend more time] thinking about the overall framework." They should shun ideology and focus on making the environment right for us to go about our business, while being mindful of the consequences of allowing too much freedom.

Strangely enough, to allow citizens and business the freedom they crave, good government must contain an element of regulation, it must, in some cases, in some ways, restrict freedom. This is because regulation is an essential ingredient of governance and, in turn, governance is fundamental to the success of the modern state and of modern economies. Maslow developed a "hierarchy of needs" for individuals. The higher needs in this hierarchy become relevant as a motivator of behaviour only when the lower needs are satisfied. Once an individual has moved upwards to the next level, needs in the lower level will no longer be a priority. I think this model is applicable at the societal level as well. I think a similar pyramid or hierarchy of needs can be constructed for society as a whole.

If you can't beat them...

Thu, 10/07/2008 - 10:47 — patrickcallioni

Patrick Callioni

Rather than struggling against government regulation, businesses should be looking for opportunities to use it to their advantage.

The relationship between government and business is often fraught, confrontational and difficult to manage. Government regulation, in theory designed to ensure the smooth operation of our economy and society, is often seen as an impediment by businesses keen to progress its interests on its own terms.

But after years working in both the public and private arena I am convinced it doesn't need to be this way.

Rather than struggling against government regulation, businesses should be looking for opportunities to use it to their advantage. Rather than see regulation as something which needs to be avoided, business should be looking to engage with government and move the debate in a direction which would be more beneficial to their own operations.

The problem with simply attacking and fighting against regulation, is that we eventually reach a point where there is no regulation and therefore no checks and balances in place to prevent a market overheating, or adopting deleterious practices.