Balneus

Australian Lefty on Politics, Governance, Science and Info Management

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.

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7 Responses to “Deregulated == unregulated == uncontrolled”

  1. craig said

    How true, you only have to look at the banking sector, left to its own devices they have created a huge market for bad debts dressed up like a secure debt and described as an asset.
    Completly unregulated they can charge illegl Penalty fees, see http://www.bankchecker.com.au and even though for atleast 4 years the federal government knew these fees were probably illegal they did nothing to force the banks to operate within the law. I guess thats deregulation!

  2. Dave Bath said

    Craig
    Yep. Yep. Yep. As you say “even though… the fed gov knew these fees were probably illegal they did nothing to force the banks to operate within the law”.

    That’s why I said “Regulations that are enforced can be labelled controls, and these controls keep the bastards honest”. (I use the term “controls” in the sense I do for information security issues – policies without enforcement and auditing aren’t controls).

    I quote The Economist‘s most damning criticism (2007-04-21) in my post Rise of the Dark Board (2007-04-27):

    “But it is in the nature of capitalism to test new ideas to destruction and to use new instruments as the basis of speculative excess.”

  3. zombinol said

    Perhaps the system that creates and governs the control is out-of-control. The shrinking of intention to control by our governments would seem to equate at a certain point with a shift from a Democracy to an Acracy – where the governments are unwilling to coerce powerful economic players to be compliant. Conversely our Governments have disproportionately heaped compliance on the citizen, where is the corporate terrorist or organised crime legislation being applied? AWB et al step right up.

    I wonder if such a shift is due to the Governments finding it politically difficult to publicly defend the ever increasing legal expenses in actually inforcing its own legislation to coerce compliance, that balance may have tipped. The significant lobying by, and political donations from the powerful economic players has paid off.

    I believe that the ability for governments to control is the basis of their power and just how much has the power shifted from our governments to the economically powerful?

    If the Singaporean Government can own more of Australia’s infrastructure than the Australian Government does, what ability did Australia have in controlling the terms of the Free Trade Agreement with Singapore? again loss of control.

    I can probably go on ad infinitum, but I will apply a little control. 8-/

  4. Nigel said

    De-regulation is most definitely a form of control, but not by the government..but as zombinol points out by decades of successful lobbying from the big of town. Johnny H was arguably the architect of de-regulation as he started the de-reg chain happening with the Campbell enquiry…which found that it was a jolly good idea…not for Australians but for the long queue of corporations waiting to go nuts here in the 70s. Both parties have supported the chaos approach to government since then, because it was the end of the era of the ‘public servant’ attitude and the beginning of some new era which was geared toward ‘economic growth’…if anyone has any ideas on how to remove that growth please share…

  5. Bruce said

    Do the same people who argue (context-free) for deregulated financial systems also argue for deregulated traffic rules and product safety controls?

    I’m wondering when criminal law will be deregulated so that violent repeat offenders with can compete in a truly free market with merchant bankers and such. I’m sure the free market fundamentalists agree with me!

    Obviously I’m being facetious, but I can’t help but think that the deregulation of the big end of town, with violent consequences for many, with the converse strict regulation of robbery and extortion, has more to do with who is empowered rather than the consequences of their empowerment.

  6. Nigel said

    According to the Bureau of Probable Statistics database: “the regulation of traffic in western countries increases the likelihood of accidents by 50 percent….probably” the total distraction of road signs combined with subliminal suggestion of road horror build boards paid for the sponsor of road carnage TAC actualises the horror events delivered in the messages…great business for the insurer…so the answer is YES.

    If there was such a thing as a ‘measurement of pure intent’ as a tool to filter aspiring political encumbents the makeup of those who are in power would be completely different…as with Johnny H…his intent was originally pitched toward the big end of town and look at the results…probably a system of random selection ala jury service would enable a democracy to work more effectively than the current system which grooms chaps from the ‘old school network’ who are more often than not feathering their own nests.

  7. […]After my “Deregulation == Unregulated == Uncontrolled” (2008-03-10), it’s worth reading a couple of 2008-03-13 articles in The Economist that support the idea that the rule of law and improved governance (a.k.a. good regulations with enforcing oversight) are good for economies:[…]

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