Deregulated == unregulated == uncontrolled
Posted by Dave Bath on 2008-03-10
Citing with approval OECD figures about how deregulated Australia is might seem a logical thing to do. Unfortunately, nobody thinks about what the word "deregulated" means.
Who would say an "uncontrolled" economy is a priori a good thing? What is the difference in real meaning (once you strip emotive overtones) between deregulated, unregulated and uncontrolled?
In fact, deregulated simply means moving from controlled to uncontrolled.
Do the same people who argue (context-free) for deregulated financial systems also argue for deregulated traffic rules and product safety controls?
Even The Economist, which started as an advocate for free trade, and continues to do so, always argues from a consideration of outcomes. It has been arguing for moving the "off-track SP betting" on esoteric derivatives onto regulated exchanges, better controls (like Basel II) on financial institutions, long jail terms for the likes of Enron accountants and executives, greater transparency and governance, tighter controls on environmental impact of economic activity… the list goes on.
Why? Because using the term "deregulation" as a mantra, as an article of faith, is plain stupid. Tighter governance, including real Corporate Social Responsibility (not just promotional hype) leads to long-term performance improvements, and provides a means for governments to steer the economy.
Governments around the world have been irresponsibly deregulating, because it allows them to wash their hands politically and point the finger at others. Regulations that are enforced can be labelled controls, and these controls keep the bastards honest, protect the public, and provide levers governments can use to steer economies.
Of course, regulations that are poorly linked to outcomes, and do little to improve probity, can be counterproductive. However, regulations in nations with public servants with living wages (who don’t have a need to ask for "expedition fees") are usually associated with better balances of payments in the longer term. Consider the damage down to US car manufacturers because they have been coddled by a lack of regulations on safety and environmental matters: the long term market demands we know will arise are usually met only by regulatory pressure by governments a decade or two earlier.