Regulation for the Sake of Regulation Is Just Populism
As long as a company isn't harming anybody or committing a financial crime there should be no regulation
The 21st century can be called the century of regulation. The freedom of the market has become quite rampant thanks to technology, and the governments are trying their best to keep things under control.
However, almost every regulation that is being implemented nowadays is harming the markets rather than supporting them. Most libertarians would say that the government should have zero involvement in how the markets develop, but that’s not necessarily the case.
I agree that some regulations such as the registration with the government, agreement on various laws such as customer compensation, customer data safety and etc. should exist. What I’m trying to say is that making business a larger headache than it already is should not be a state policy.
There shouldn’t be things such as a specific color for a taxi, or the set amount of funds a company can use for promotions. Overall, anything that would directly impact customer experience and the opportunities of a company to prosper should immediately be reconsidered and subsequently removed.
I’ll show you a few examples just so that you’re aware of what types of regulations I’m talking about.
Restrictions on promotions
One of the most common regulations you’ll find in the world are the restrictions on too much promoting of a specific product.
Things such as consumer goods, cars, electronics, and etc. don’t necessarily fall under these type of regulations though.
They mostly target things such as alcohol, tobacco, and wagering. Why? Because the government has deemed them undesirable means of generating profit for the company, even if they are some of the largest taxpayers in the country.
But there’s a serious issue. The regulations are not working. These companies are still able to get customers, and marketers lose some of their highest paying clients all over the world.
One of the most prevalent countries where this regulation can be found is Australia, where any type of online wagering, besides sports betting, is illegal, and therefore does not constitute promotions. But even those who’ve paid millions for licensing hired locals and have relatively user-friendly platforms get to suffer under these regulations.
In fact, Joseph Kim, the regional manager of Playamo online casino Australia, which is one of the most successful platforms in the country, had this to say about the regulations:
“We understand how important it is for the government to have limited access on wagering opportunities in the country. It’s definitely a risky hobby and could lead to some serious financial damage for the customer if they’re not careful.
That is why we always make sure to provide disclosures on problem gambling, the statistics of people who win and those who don’t and only after the customer has confirmed reading them do we allow them to continue.
Plus, we don’t really see the restriction on promotions harm us too much as there are still ways that remain legal. Things like digital marketing through various blogs and websites, or just sponsored content here and there.
These regulations have been around for so long that even if they were removed, it wouldn’t be too enticing to use them as the customers have gotten used to being marketed to on the internet.
But, in the past, where people were expecting promotional content offline, wagering companies were some of the largest customers that agencies could possibly hope for. Even today, simply approach any country that has legalized wagering and see who’s the biggest employer and spender in the nation, almost 80% of the time it’s a wagering company.
Because of this, I believe that the regulation is harming the government more than they understand. We don’t take too much damage in terms of publicity through the regulation, but the agencies and various other companies we used to hire in the past have been forced to seek alternatives in terms of large customers.
I believe regulations hard the economy more than they support them. But laws about disclosing information, being honest and transparent are understandable. What I don’t understand is the restriction on spending money.”
This comment was made almost 10 years after the IGA 2001 was implemented in Australia, so it’s pretty understandable just how much revenue various service companies lost due to that regulation.
But this is not the only instance of regulation getting in the way of a developing economy. In fact, these are easily justified, as wagering can sometimes be seen as immoral and therefore have backing by the community, who is willing to sacrifice economic gain for “moral” value.
But what about regulations that are implemented purely because of aesthetics? Are they supposed to remain?
Regulation on service equipment
The most common regulation on service equipment are the laws regarding the cars that can be used as taxis.
One such example can be New York, where the cabs you can actually stop on the road are required to be yellow, but that’s fine as every freelance driver can simply install Uber and use whatever car they prefer.
But let’s distance ourselves from a developed market and look at a developing one. A country where the average income is still quite low and people are forced to work as taxi drivers due to the low availability of skilled jobs.
One such example is Georgia, a country that became independent after the collapse of the Soviet Union in 1991. Over the years, the economic development was rather substantial, but it’s been slowing down lately.
The reason I’m mentioning Georgia is that its capital recently introduced a regulation that every taxi that can be stopped directly on the road is forced to be painted white. Nobody said why this regulation was being introduced, what it would change for the environment, and what kind of benefits it would give both the drivers and the passengers.
It was all just an attempt to change the aesthetics of the city as much as possible. But here’s the difference. Taxi drivers that were registered with a local carpooling aggregator that had an app were allowed to drive whatever they wanted. The only difference was that they couldn’t pick up a customer from the street, nor have an indication that they were a taxi.
So, what did this regulation change? It forced thousands of freelance taxi drivers to either give up the profession completely or register with a company where they’d get paid less and get taxed as well.
Usually, avoiding taxation is unforgivable, but when half of the country lives in poverty, it’s understandable why freelancing is more preferred. Furthermore, those who did switch to a white car are still considered as freelancers and don’t have to pay tax, meaning that this regulation wasn’t about adding tax money to the treasury.
What was it about then? Nothing, really. It was just a populism stunt by the local politicians to promote themselves as champions of development.
And what did it achieve? The color white is now an undesirable color by common citizens as they don’t want to be associated with a taxi. The imports on cars are going to decrease significantly as white cars will be given a priority but people won’t want to buy them. And finally, tens of thousands of freelance taxi drivers will have to face a serious pay cut or spend thousands of dollars painting their cars.
The more one looks into it, the more it seems like an unnecessary headache.
What types of regulation should be encouraged?
As already mentioned at the beginning of the article, not all regulations are useless or damaging to the economy.
Things such as KYC (Know Your Customer) and AML (Anti Money Laundering) rules may tamper with the company’s profitability a little bit, but at least it guarantees transparency and prevention of financial crime.
The licensing regulation for various companies acts as a guarantee that companies have what it takes to refund a customer if they fail to deliver a service or a product that was promised.
Every regulation that guarantees safety, education, and fairness to the end consumer is to be welcomed. But something that doesn’t have real value to it, like the equipment regulation, needs to be thrown out the window as soon as possible.