Does red tape strangle an economy or provide a safety harness?
Bureaucratic interference and rule setting is generally categorised as sugar in the petrol tank of commercial and economic progress.
Yet, hold it for a moment. Weren’t these rules prepared and enacted as a consequence of rightly perceived wrongs, inequities and downright dishonesties?
Plain paper packaging rules for tobacco have been rightly introduced as a consequence of the undeniable damage done by an addictive drug. You don’t need to have two family members die of emphysema to wish the tobacco industry had a dose of its own medicine.
Planning laws are enacted so that Sydney doesn’t end up looking like Palermo, Italy. Strict engineering standards have ensured (so far) that Qantas jets don’t fall out of the skies as frequently as those operated by Air Nigeria or Aeroflot. Speed cameras, safety belts and drink-driving laws have driven absolute numbers of road deaths down to levels not seen since the 1950s.
Yes, it is entirely possible that a purely capitalist society as envisaged by Ayn Rand might throw up rewards for the privileged or connected. Think the early stage capitalism as exemplified by late-19th century America or early 21st century Russia. But you wouldn’t want to be poor in either of those societies. We should not forget that around 60% of personal bankruptcies in the present day United States are, in whole or part, as a consequence of an inability to pay medical bills. Or that life expectancy in Russia has declined considerably since the collapse of the Soviet Union.
Perhaps we would be better served by recognising that Melbourne, Sydney, Perth and Adelaide are all in the top ten most liveable cities in the world (Economist Intelligence Unit’s Global Liveability Report 2011). That corruption rankings place Australia at 8th least corrupt out 182 nations; with New Zealand in first place. That Australia is expected to deliver the highest rate of economic growth in the developed world through 2012/13. That government debt is inconsequential. And that Australia consistently ranks in the top category as regards satisfaction with life.
I remain unconvinced that taking an axe to red tape will do any more than wedge open the door to more corruption and commercial opportunism – generally at the expense of the consumer.
Fergus Neilson has a wide range of business and life skills gathered from a career in the armed forces, investment banking, the United Nations, McKinsey & Company and private equity investment.
Alex Dunnin
June 13, 2012 at 12:59 am
Insightful question
This is a really clever and insightful question. Red tape is regulation and that is part of the rule of law which holds us together. So I think you may be right Fergus. Sure we have too much red tape but while we want less of it, we can’t agree which bits to reduce and yet we also and ironically want more controls too. The implication is that not all red tape (law and regulation) is bad. Great question this one.
David Myer
June 13, 2012 at 2:21 am
Healthy debate
Yes, a classic ‘on the one hand… but on the other…’ argument. Six of one and half a dozen of the other. And as long as there is healthy debate, the red tape can move around so that we continue to improve the situation: taking it out in one area where it ios disproportionate and putting it round another area where it’s needed. Love the deliberate mixed metaphors, Fergus, tape being a glue, and taking an axe to the tape. Great stuff.
Sarah Zanon
June 13, 2012 at 2:33 am
Increased administrative overload
Being a lawyer, I have long held that rule of law in Australia is one thing that sets us above and apart from other societies. I agree that there is some truth in the argument that reduction in red tape would lead to greater corruption. However, I query exactly what "red tape"means in this instance. Fergus refers to the US populace’s reluctance to embrace universal health care as an aversion to red tape – I wouldn’t see this as such; more as their extreme devotion to individualistic capitalism.
I see red tape as increased administrative overload in order to comply with or navigate the legislative / regulatory framework. To be perfectly honest, when you’ve dealt with government departments in places like India, China and the Middle East, we have absolutely no problems with red tape (in my definition) here: In general, I find personnel in Aus govt departments approachable and easy to deal with. Unlike other countries, most Aus govt websites are well structured, informative and have the information required to deal with that dept. While it sometimes takes a while to find the answer, it’s not opaque or arbitrary, and we have good and open processes for appeal against administrative decisions.
Geoff Curran
June 18, 2012 at 1:12 am
Depends on the definition of red tape
Firstly, in my opinion it depends on the definition of "red tape" By itself it can have negative connotations. As a democratic society, we deem that its important to have process, procedures, checks and balances. Its about the implementation which by poor judgement can lead to admin demands that people complain about
Charles Powell
June 18, 2012 at 1:33 am
Complexity vs simplicity
I think the dynamic underlying this issue is complexity vs simplicity. Companies are disciplined by their competitors, and the business cycle. Those that become too consumed by ‘doing business with themselves’ do not last. But what corresponding forces are at work in the public sector, and our compendium of laws and regulations? The US tax code consists of 5.6M words-7X that of the Bible! What is required is a dynamic/cycle that periodically prunes back the complexity of our laws and regulations, either through ‘sunset provisions’ or periodic wholesale consolidation.
Campbell Dawson
June 18, 2012 at 1:36 am
You can have rule of law and no red tape
I’m pretty sure you can have rule of law and no red tape. By any standards there is more red tape in Australia/UK than there was 50 years ago but I’m pretty sure that the primacy of the rule of law hasn’t changed. There has to be an optimal level of bureaucracy a la the Laffer curve. Problem is that no one knows where it is but I suspect we have passed it.
I’ve recently been intrigued by the example of health care where private hospitals claim (and they say that the Productivity Commission has validated the claim) that they are 30% more efficient than the public health care system and can build hospitals 25% cheaper. When you push them as to where the 30% comes from, they will tell you it is labour. Lots of people doing not enough or doing non-essential stuff ie red tape.