The Problems of Regulation - and of Deregulation
A recurring debate in European politics, and one that spans many different policy areas, concerns the merits and failings of regulation.
What kind, what volume of regulation is both efficient and effective? Does regulation achieve less good than harm it does, in adding unnecessarily to the costs of the companies that must comply (and prove that they comply) as well as to the public sector that must verify? Do elaborate regulations only succeed in stimulating the vivid imaginations of those who seek to evade them? Does compliance to an external code inculcate a mature moral life, or does it infantilise us, by inviting us to substitute this ‘letter’ for a ‘spirit’, a living moral sense?
In the Letter to the Galatians, St Paul argues that ‘all who rely on the works of the law are under a curse’. At best, he writes, law is a ‘disciplinarian’ (in other translations, a ‘nursemaid’!) checking our worst impulses ‘till Christ came so that we might be justified by faith’. Paul’s theological argument still persists in political and economic form.
John Ruggie, as the UN Secretary-General's Special Representative for Business and Human Rights, argued persuasively that any international legal framework which could be agreed by China, Russia and the United States, would always express the lowest common denominator. The level of legal obligation would be set so low that, in practice, injustice would scarcely be prevented. Better, he thought, to enrich the voluntary codes of practice that (at least in the ‘court of public opinion’) restrain corporate malpractice.
Yet Mr Ruggie did not deny that only legal frameworks can truly hold companies accountable, can allow abuses to be punished, can insist on the provision of information that fits poorly into the company’s preferred public image.
The idea that deregulation stimulates the keen moral sense of transnational corporations is largely a fantasy. Those who break free of St Paul’s ‘disciplinarian’ do not necessarily ‘live by faith’. The recent bid, by about one hundred company chiefs, to get the European Council to ‘cut red tape’ in the service of generating ‘the growth that will benefit us all’ is both question-begging and special pleading. Growth rarely ‘benefits us all’: ask the people of Congo or Paraguay.
In the finance sector, the sweeping deregulation of banking and finance by no means facilitated healthy growth. It unleashed the lust for maximum growth, and provoked the uncontrolled irresponsibility that led to the crash of 2009.
Despite this recent experience, the present writer was recently told on good authority that 2000 persons are employed in the finance sector in Brussels to lobby against regulation. Their employment is not prompted by some moral quest, it is a business expense in the service of increased profit.
In the late 18th century in his Dissertation on the Poor Laws, Joseph Townsend argued as follows. So long as property is safe’ (yes. he did demand regulation to protect the rich from the poor!), hunger is a more effective goad to labour than mere laws can be. Yet once the hungry are left to the mercy of the affluent, who can doubt that `the only difficulty’ is to restrain the impetuosity of the latter's benevolence, and who can doubt that such charity is far nobler than anything that flows from legal obligation?’. Possibly, Mr Townsend, possibly.
In terms of morality itself the first ethical duty is not to do needless harm. The protection of the vulnerable from the abuses of powerful insiders is the first and absolute requirement of appropriate regulation. Where that objective is accomplished, voluntary efforts to go further deserve encouragement and esteem.
Frank Turner SJ