Thursday, 24 February 2011

Bonfire of the Regulations?

Leading on from Tuesday's post - the same principles apply to regulation. It is a frequent complaint of business that regulation is strangling them. It is a popular election pledge - and government action - to have a "bonfire of regulations" [any review of political history in the last 70 years will show how often this idea is resurrected!]

Regulations do impose costs - the original purpose may be quickly forgotten and rules added ['gold plating'] - turning a regulation into a mighty bureaucratic obstacle. But it is worth reflecting upon why regulations were imposed.

There are people who cheat and lie; who put lives at risk in order to increase their own profit. "Power tends to corrupt" is not a rule that is confined to Government or the public sector. Once again the study of history comes in useful - there is a cycle of

Scandal   -   demands for 'something to be done'   -   imposition of regulation   -  
growing feeling that regulations are costing too much and are stifling innovation, leading to calls for deregulation   -  
deregulation   until next scandal (repeat for ever!!!)

The history of banking and finance amply illustrates this recurring cycle.