A pro‑regulation culture explains why almost everyone agrees red tape is a problem, but so little is practically done to reduce these burdens.
Can you guess who made the following statement?
Individual enterprise must drive us forward. That does not mean that we are to return to the old and selfish notions of laissez‑faire. The functions of the state will be much more than merely keeping the ring within which the competitors will fight. Our social and industrial obligations will be increased. There will be more law, not less; more control, not less. [emphasis added]
It was none other than the founder of the Liberal Party of Australia, former Prime Minister Robert Menzies.
The quote was drawn from this iconic speech, ʻThe Forgotten People,ʼ no less, in which he rousingly called for the political acknowledgement of small business owners, professional salary earners, women, and others whose concerns were persistently ignored by the wielders of political power.
When even self‑avowed vigorous opponents of socialism in Australiaʼs past called for more regulation, it is clear to see how political initiatives to deregulate the economy and other elements of civil society, always and everywhere, seems an uphill battle for even the most astute reformer.
The regulatory rules codified in legislation and similar products of political deliberation obviously exude powerful controls over the activity of law‑abiding peoples, and influencing regulation‑making to effect certain standards of control has proven enticing, even intoxicating, for many associated with the political process.
In a democratic setting, where those affected by government intervention have the right to some say in which they are being intervened, members of the general public, businesses, intellectuals and special interest groups inundate ministers and bureaucrats with calls for new, or amended, legislation and regulatory procedures to rectify all the cares and troubles of the world.
The achievement of regulatory ambitions, through successfully lobbying activities, are intensely important to these groups, euphemistically referred to as ʻstakeholdersʼ in the politically correct jargon.
The political‑class consent to demands for regulatory action is used by stakeholders to publicly signal their success in the dark arts of political persuasion, which subsequently boosts their support levels amongst, and private funding from, the individuals and groups with whom they associate.
More importantly, and worryingly so, regulation could serve as a ʻkiller apʼ for stakeholders to have a say about how the rights of others ought to be interfered with by coercive government.
Going even further, regulations can practically force others within the community, including rival businesses, groups or, in the case of speech restrictions, even talkers and thinkers, to abide by the stakeholderʼs preferred modes of conduct.
Watching how the party in government responds to regulatory demands are rival political parties, who take advantage of the fact that beneficiaries of potential regulations are often highly concentrated, easily identifiable groups, who could be marshalled to campaign against a government, should it fail to do the stakeholdersʼ regulatory bidding.
That all said, it should be noted it does not require a strong flow of political demands from community groups and the general public for the regulatory process to unfold with some vigour.
Political parties are continuously in competition against each other to demarcate the incumbent voting population into new political constituencies (e.g., ʻyou are female, you are gay, you travel on a bus, your niece is of schooling age, you like old‑growth forests, you believe in climate change, etc., … and you happen to voteʼ), as part of efforts to assemble a majority voting bloc at the next election.
Candidates for office casting the line of regulatory ideas out into the voting‑population waters, so to speak, in hopes to reel in favourable reactions, is another way in which open‑ended regulatory aspirations become the reality.
Ultimately, the intensity with which a government is accosted, by political friend and foe, to ʻdo somethingʼ about even the most trifling of issues, through regulatory change, invariably encourages the political class to regulate quickly, and to regulate often.
And the more that government regulation becomes accepted, with fervour or with resignation, as a fact of life, the easier it becomes for people to seek regulatory favours from government, again usually typecast as the silver‑bullet solution for any problem.
The increasing tendency to ʻregulate first, ask questions laterʼ is arguably the defining element of the Australian regulatory culture, or that underlying environment determining the propensity of the political process to regulate economic and social processes.
If the Menzies quote is anything to go by, a pro‑regulatory culture has been a piece among the Australian political furniture for decades on end.
The most visible consequence of the regulatory culture is the exponential growth in primary legislation passed through the unedifying regulatory ʻsausage machineʼ that is parliament, from 358 pages enacted during the first year of federal parliament rising gradually to over 5,000 pages last year.
In an important speech to The Sydney Institute in December last year, the Parliamentary Secretary to the Prime Minister, Josh Frydenberg, raised renewed attention to the ʻscandalous culture of piling on new regulations without assessing the consequences for productivity, and the costs involved … [which] … must now come to an end.ʼ
True to their word, the Abbott government recently engaged in the first of two annual regulatory ʻrepeal daysʼ late last month, in their efforts to achieve reductions in red tape compliances worth $1 billion per annum.
But it was clear from the last parliamentary session that not all parties were on board with the idea of starting to cut away at the thicket of the regulatory state, even the idea of repealing legislative commands which have been effectively rendered inoperative by the passage of time.
This should be of no great surprise, given the portrayal of the regulatory state as a virtue of the previous government, with its supporters such as The Guardian declaring former Prime Minister Julia Gillard ʻthe most productiveʼ in Australian history, in what is unquestionably a gross perversion of the term.
As a broad statement of political reality, if future repeal day rounds are to have sharper teeth, the government must play its part in confronting the regulatory culture head on, at the potential expense of a leeching away of its political capital through acts of denigration by those defensive of the contemporary pro‑regulatory sentiment.
Obviously, changing the prevailing regulatory culture to one consistently weighted in favour of deregulation, and a smaller role for government in economic and social affairs, seems an insurmountable task, given all we know about the regulatory process as mentioned previously.
However, with the alternative of ever‑increasing burdens under non‑stop growth of the regulatory edifice utterly intolerable in a nation‑side grounded in liberal principles, it is necessary to at least consider the conditions under which the regulatory culture could be reformed for the better.
There is certainly merit in implementing a range of options which already have been frequently discussed within the Australian context, such as sunsetting clauses for all legislation, the institutionalisation of rigorous economic cost analysis of all proposed regulations, and other improvements to the quality of the regulatory policymaking environment.
These ideas are designed, in some way, to throw sand in the wheels of the high‑velocity regulatory machine, but there is the risk they may not quell the widespread appetite to regulate quickly, and often, in the face of perceived problems.
A systematic, and even more frequent, repeal day process holds possibly stronger appeal from the standpoint of reforming the regulatory culture.
This is because more repeal days provides a more open invitation for regulatory‑sycophant stakeholders, and the downtrodden and harried regulated, to conceive, perhaps for the very first time, that making bad government regulations history is much more than just a theoretical prospect.
To be sure, the liberal ideal would unquestionable entail the idea that just about every day ought to be repeal day, with the political class working away at whittling the legislative stock down to a bare minimum, but before that glorious day arrives let us also acknowledge that, in a thoroughly statist world, instituting a meaningful deregulatory trend is also admissible under the liberal framework.
An important aspect of turning the orientation of statecraft towards that of a deregulatory character, with prospectively some dividends for shifting the climate of regulatory opinion towards less, not more, regulation, should also incorporate an explicit objective by government to reduce, and not increase, the flow of regulation over time.
The general operating principle announced by Liberal Democratic Senator‑elect David Lleyonjhelm, that his party would not support legislative initiatives that would be expected to diminish liberties, is a fine one.
Indeed, it ought to be adopted by the government to help reduce the flow of its own, internally‑devised regulatory proposals, and to become more impervious to unconscionable rent‑seeking demands by stakeholders to harm others through regulatory interventionism.
Underpinning this pro‑liberty, pro‑deregulatory operating principle should be a series of tests which should assist in sorting the regulatory wheat from the chaff. Almost 15 years ago the economist Wolfgang Kasper outlined, in his book Building Prosperity, three quite practical rules of thumb applicable to each legislative item:
- ʻFish shop test:ʼ How does the proposed legislation affect small business, for example a local fish shop owner? Can the shop owner understand the legislation? Can the owner manage the compliance costs?
- ʻBattler test:ʼ How does the proposed legislation affect the life opportunities of the poorest of Australian citizens? Are there side‑effects hampering the capacity to help themselves, or that make it harder for them to be self‑responsible?
- ʻGrandchildren test:ʼ How does the proposed legislation affect the young who are not yet established in the workplace? Will an aspect of the bill disillusion some of them and turn them against the community? Is there some long term consequence of the proposal that would harm them later in life?
To this, I would add something of a ʻcivil society exhaustibilityʼ test, which would serve as honest and sober appraisals of the exhaustion of the opportunities by individuals, interacting within markets or communities, to create their own solutions to the proposed regulatory problem.
With the onset of technologies rapidly reducing the costs of communication, and the partial opening of markets enabling greater access to capital and sophistication in product and service solutions, there is no time greater than the present for Australians to ignore the state when seeking their own solutions to problems as adaptable and responsible individuals.
Appreciating that market and societal interactions are necessarily discovery processes that strictly unfold with the passage of time, this rule, again if honestly and soberly applied, would combine with the others to seriously halt the propensity of the Australian regulatory culture to produce ever‑increasing legislation and regulatory restrictions.
These are rather fine principles which should become the standard of political decision‑making but, when all is said and done, the cause of reforming the toxic regulatory culture requires far more than actions on the part of principled members of the political class.
In the case of the last mile feeling like the longest travelled, many Australians will ultimately need to inspect themselves in a mirror, and ask themselves why do they seem, almost instinctively, to call upon government as the first‑responder anytime there seems a hint of trouble that seems costly and time‑consuming to resolve?
Accentuating the gravity of this very point, the Australian attitude, which now largely seems openly supportive of ʻregulate first, ask questions later,ʼ did not necessarily prevail in the past, at least in every dimension with which it is felt today.
Those living generations ago would have surely regarded the extended web of modern regulation, hanging over just about every conceivable nook and cranny of economic and social existence, as a flight of fancy by an isolated crank.
Perhaps the most immediate, if not the best, way of thinking about how the regulatory culture has gradually, but profoundly, changed us is to consider how it has taken the fun out of Australian life.
Mandatory nightclub opening hours, because a few idiots take to violence and the police would rather counsel the violent rather than round them up? Schools dismantling playgrounds, due to the paranoid concern that little Johnny or Jane might scrape their knees? Bans on home‑made cake stalls at school fetes, out of a fear than Gran doesnʼt know how to properly bake deliciousness? Really?
Multiply all these niggling, soft‑despotic intrusions on everyday life by many times over, and you get a rough idea of the degree of regulatory restrictiveness encompassing the very ability to do just about anything.
Part of the tragedy of the escalating regulatory burden is that many people are either none the wiser, or worse still, apathetic, about their lives being restricted by the government in the ways they are, putting the costs and inconveniences down to ʻjust the way it is.ʼ
Some are aware of the pulling and tearing of the regulatory state upon the capability of one going about their business and their daily lives, but do not exercise their right of ʻvoiceʼ to complain but choose, instead, to physically ʻexitʼ for the hills (or, in the Australian lingo, to ʻseachangeʼ or ʻtreechange areas) (I thank Grace Collier for making this point to me a few months ago.)
But, then again, woe betide us, there are those politically‑connected stakeholders once again, and their supporters, who loudly proclaim the benefits of the regulatory snake oil they aim to sell to the politicians, bureaucrats, and general public, and who deceivingly claim that the very inability of regulated people to arrive at their own solutions to problems calls for even more governmental intervention.
In addition, there is the modern oddity of belief that regulations, no matter how prescriptive, are worth the inhibitions they impose, because one person might benefit from the edicts, which very much confirms that much discourse is informed by a hyperbolic, and often very much unfounded, sense of risk aversion.
Reformist governments can only do so much in a broader cultural environment in which government regulation is often seen as an admixture of salvation and virtue invariably well worth the financial costs and lost opportunities it generates.
Ultimately, individuals and groups comprising civil society must appreciate that one personʼs, or one groupʼs, petitioning for more government regulation might seem democratic and all, but if the petitioning is successful the regulation becomes another personʼs or groupʼs economic or financial hardship, and that is simply wrong.
The Abbott government would do very well to make hay while the sun shines on its deregulatory moment, but changing the regulatory culture means changing the culture as a whole, since reforming the regulatory culture entails raising the relative cost of using coercive government as the organisational apparatus to solve problems.
So, over the next few years, the challenge will be not so much what the government will do for you to change parts of the regulatory system, here and there, as important as that might be.
It will be what you as an individual is prepared to do, including in cooperation with others, to find your own paths to improvement, and make the highly economic and socially damaging pro‑regulatory culture, erected in your name but often without your consent, a relic of the past.