Guest Post: Justinian the Great: What About Quality Regulation? The Hard Truth.

Being Justinian the Great I have somewhat of an interest in law and regulation.

An earlier post by TAFKAS (really? Can’t we just go back to calling you Spartacus? Can’t you just admit retirement wasn’t your thing?) caught my attention.

I have no real quarrel with anything Spartacus (am calling a spade a spade here) said per se but I think he misses the point.

To my mind the issue is not about regulation versus deregulation, or “over regulation” versus “under regulation”.

Such an approach reduces the issue of regulation (which is often necessary) to a false zero-sum game and/ or binary choice, i.e. deregulation is good, regulation is bad.

Surely the real issue is about quality of regulation. That means looking at regulation in terms of both political / economic / social principles, cost-benefit, and regulatory approach.

All of the above is sadly lacking in Australia. The most pernicious of the above is approach, by which I mean the shift away from hard regulation towards soft regulation.

Don’t get me wrong, I think Australia is massively over regulated (on soft regulation) and hence like Spartacus I find it incredible that Gitten’s could possibly think the opposite.

That said, the substance (being generous) of Gitten’s article (possibly by accident) seems to be about lack of enforcement by regulators. On this he has a point.

This moves the entire debate to another direction that is not about “over” or “under” regulation but the absence of any consequences for failing to comply with regulations in the first place.

Let’s be honest, it doesn’t mean a brass razoo if we are over regulated in a legal / technical sense if nothing is enforced on the ground.

That is why Josh Frydenberg’s stint as Junior Minister / Parliamentary Secretary for Deregulation was always a joke and his boast of eliminating thousands of regulations totally bogus.

Like “Small Government Agenda” we no longer here about the “Deregulation Agenda” from the Abbott-Turnbull-Morrison Government!

Sure Frydenberg reduced regulation. But only eliminating from the statute books thousands of regulations that were already obsolete, redundant, and hence not enforced in any event.

His deregulatory efforts saved the Commonwealth a very modest sum in terms of printing costs but that is about it. Certainly not the billions in productivity gains as promised.

The real issue / problem is that regulators prefer to build empires out of soft regulation. It is easy, opaque, unaccountable, intrusive, virtue signalling, safe, empowering and profitable.

It is also prone to industry capture, corruption, and rent seeking all of which is more profitable than providing value added products and services customers actually want at a price they are willing to pay.

Soft regulation is all about industry-wide, voluntary codes of conduct (i.e. meaningless and subjective) that typically reward insiders and act as barriers of entry for would be competitors.

Soft regulation activity is focused on “culture” (whatever that means), “education” (i.e. virtual signalling globalism), self-regulation (i.e. hear no evil, see no evil, promises, promises) and so forth.

In other words intangible, unenforceable, unaccountable, make work bullshit.

Even better is the fact that soft regulation costs are passed onto business (and ultimately to consumers) creating perverse, self-funding incentives to further expand empire building indefinitely.

It is great for regulators. Devoid of accountability and outcomes soft regulation pays high salaries and fills out a travel calendar of luxury international conferences, seminars and other self-promoting activities.

Better still it enables regulators a wide degree of latitude in which to embed themselves into any given company’s internal operations.

This enables lucrative networking opportunities and post-regulatory job opportunities. That is, so long as though regulators don’t rock the boat or dare one say bite the hand that feeds them.

Companies know this of course and naturally seduce regulators into the private sector.

Regulators know this too. Soft regulation enables regulators and companies to fraternise for mutual gain in a soft regulatory game played out in the shadows of corporate boardrooms.

Today, most regulators work for the benefit of the regulated, and in doing so improve their own careers and material prospects.

This is how the term “industry capture” came into existence. It is a function of the lucrative transfer of personnel between the regulated and regulators. It is conflict bordering on corruption.

The softer the regulation the better the environment is. Soft regulation is cooperative, opaque, unaccountable and mutually beneficial.

Hard regulation on the other hand (i.e. investigation, enforcement, prosecution) is adversarial and the very opposite of soft regulation.

It is about investigating corporate malfeasance, it does involve sensitive investigations, does lead to enforcement orders and / or the prospect of criminal prosecutions.

Hard regulation involves being unpopular, in highly transparent / public circumstances, and directly accountability for ones actions and outcomes.

It doesn’t involve mission creep. It avoids conflicts of interest involving corporate-regulatory fraternisation and worse still a blurring of roles and responsibilities as soft regulation entails.

In short hard regulation is about being the tough cop on the beat and not a social worker. It is unpopular work and doesn’t pay. It is not a job one builds a fiefdom or network out of.

Any wonder why our regulators prefer to go soft.

The number one glaring omission for the Hayne Royal Commission was anything of substance about the role played by our fat corporate regulators (something Spartacus remains almost alone in covering).

Better regulation, in Justinian the Greats view would be a sharp focus on hard regulation, informed by economic / social / political principles, understood by all, rigorously enforced.

Rigorously enforced that is by lean, competent and fully accountable regulators.

Regulators restricted from entering the private sector in their area of expertise for a period of say 3 years from resigning and vice versa.

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9 Responses to Guest Post: Justinian the Great: What About Quality Regulation? The Hard Truth.

  1. Tel

    There’s a fundamental practical problem with the whole idea of regulation.

    If you take a guy who has worked for government his whole life and say, “Congratulations! You are not regulator over this industry,” then you end up with a clueless gimp who makes appalling decisions … because he knows nothing.

    On the other hand, if you take a guy who has worked in industry his whole like and say, “Congratulations! Now you work for government and your new job is to regulate all your old buddies,” then you get a guy who knows enough to be dangerous … but also has a lot of entanglements and conflicts of interest.

    If you sit and write compliance instructions for every single activity, then firstly no one has time to read that crap (so everyone will be breaking some regulation somewhere), but secondly brute force codification of even simple tasks fails miserably when you try it (if droids could think, none of us would be here).

    Soft regulation works well, when there is some consequences for failure. E.g. doctors in Australia are mostly able to decide for themselves who should be a doctor but if there’s a big screw-up like Dr Patel then a lot more people get interested and start asking who exactly screwed up? Maybe that’s not the best example.

  2. Nob

    Biggest threat is activists inserting themselves into industries they wish to destroy while enriching themselves, under the guise of “social licence”, “inclusivity”, “diversity”, “fairness” and a host of other weaselly abstract nouns.

    Regulation is just a way of institutionalising this corruption.

  3. RobK

    Thanks, good post and comments.
    In the environment department of the states some “noble cause” appears, at times to creep in on the compliance side. Planning is another woeful area.
    In many areas of regulation it soon gets overly prescriptive and there by restrictive. In many cases i wonder if things were not nust simply left to common law, that remedies and responsibility would not be much more clear and workable all round.

  4. Bruce of Newcastle

    Justinian should know well that regulations like we are deluged by have their own adjective: byzantine.

    The over-regulation we are subjected to is a symptom of the rise of the parasitic class in the bureaucracy. For their own benefit by use of hard and soft regulation they can gain control of a nation. Which then is strangled.

    That was the case in the Eastern Roman Empire. It also occurred in China, which is why we tend to call guys like Martin Parkinson “mandarins”. Both those entities were overtaken by barbarians as they became unable to defend themselves. In China’s case there were whole waves of invasion, by the Mongols, by the Manchu, the Japanese etc. The mandarins became expert in preserving the bureaucracy and subverting the invaders with discombobulation and soft living.

    The private sector has less of this, even if JTG is so contemptuous of them. Each recession and downturn companies go through restructuring and purges to survive. The internal crap which built up in the good times – procedures and paperwork and middle management drones – get booted and there’s a clean slate. Suddenly the company becomes competitive again.

    That never happens in public bureaucracies. So the crap, drones and paperwork just build up higher and higher until the whole edifice collapses.

    So my suggestion to JTG is this. Stop inflicting APRAs and ACCCs and ASICs and Hayneses on the companies. That is just adding yet more layers of stultifying regulation. Apply your ire to government. Purge the public sector brutally, and apply the alphabet salad regulators to it to keep the remnants in check.

    That’s where the problem is.

  5. MACK

    The call for all these royal commissions is an indictment of the people who write the regulations and those who enforce them. There is quite clearly severe incompetence amongst these people. (And don’t give me that “we need more money” nonsense).

  6. Pyrmonter

    ‘Hard regulation’ also involves recourse to the courts and the taking of risk – something to which most of our regulators (and even more, the Cth DPP) are averse.

  7. Percy Popinjay

    If this country wasn’t such an over regulated shithole, Gittins would be remunerated for his scribblings by the sack of dog droppings as opposed to anything else that might be of actual value.

    BTW, the concept of “Quality Regulation” reminds me a lot of Jonathon Green’s concept of “Quality J’ism”, i.e. utterly nonsensical and contradictory.

  8. Percy Popinjay

    ‘Hard regulation’ also involves recourse to the courts and the taking of risk – something to which most of our regulators (and even more, the Cth DPP) are averse.

    That mighty adversary of the ATO, Kerry Packer, could not be reached for comment.

  9. thefrollickingmole

    But it sets you up beautifully for Anarcho-tyranny, where you erent a criminal…yet… but we can make you one at any time.

    Having a council inspector use 3 different sets of standards to refuse certification on one disabled toilet was an eye opener.
    Along with “no we wont provide you with the standard you need to comply with”…

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