Thursday, April 13, 2006

In Praise of Regulation

Reading about the French protesting their government's attempt to lighten the employment regulations for workers under 26, I started thinking... why don't we in North America have more regulations that protect citizens from corporate interests? I like regulations. I think regulations and public education are the two things that make society work.

There are areas of our society that are heavily regulated. The investment industry makes very very sure that there is a ton of regulation and enforcement so that everyone can keep raking in the bucks. Industries like real estate and banking also make sure there's a lot of government regulation when it helps them do business.

There are, of course, all kinds of good regulations that we never think about, like city planning, food and drug regulations, consumer safety laws, rules of the road, etc.

But there could be a lot more regulations to help individuals interact with two related groups: entities that have a disproportionate amount of power and money-making interests. It seems that we need some catalyst to create the public will to push that kind of regulation through (otherwise, government defaults to protecting corporate interests). In Canada, we seem to have the will to address some issues (maternity leave was an easy sell, gun control was not) and in the US there seems to be will to create regulations that keep business running smoothly.

In the US, the stock market crash of 1929 created a public will to regulate corporations, and a similar will arose in 2002 after some corporate scandals led to the Sarbanes-Oxley Act. Canada's anti-corruption regulations are 75 years behind the US. Arguably the most important difference in US and Canadian corporate regulation is that in the US a publicly traded company that owns another publicly traded company has to pay income tax on the dividends it gets from the company it owns. This discourages corporate structures like the one Conrad Black set up in Canada, where he owned a company that owned 10% of a company that owned 10% of a company and so on for about 10 companies deep, and he could tunnel finances from a low-down company up to himself. It's a scandal that Canada allows so much corporate corruption (Conrad Black would never have been prosecuted under Canadian law, but is facing massive fines and serious jail time in the US) and yet there is zippo public discourse about it. In fact, thousands of people invest in those low-down companies without having any idea how horrible an investment they are. (That's where the need for public education comes in.)

In terms of regulations protecting citizens from money-making interests, we have consumer regulations convering fairness in advertising, but sometimes it seems that the rules are designed to con the public into thinking that ads are true while being completely insufficient to ensure that they are. In that sense (which isn't wholly fair), the regulations are designed to benefit the money-making interests more than the consumers.

There are a lot of conusmer protection regulations I remember from 20 years ago that quietly slipped away. There used to be a law (perhaps municipal) that magazine racks couldn't display pornographic magazines except in the top rack with the photographs hidden. The pop bottling industry used to have to offer a certain percentage of bottles that were refillable. Planes weren't allowed to land or take off between 11 PM and 7 AM. Magazines couldn't run liquor ads. Billboards were almost completely outlawed in Ontario.

Sweden is known as a highly regulated country. Their agricultural sector didn't collapse when they created stringent regulations governing treatment of animals. Europe in general has been much more progressive in forcing money-making interests to adhere to community standards.

France isn't doing so well economically so their employment regulations are a bit of a tough sell, and anyway I think they probably go too far, but the French show that a country can give some teeth to employee protection. In France, federal employee laws surpass the protection of the strongest unions in North America. It's very difficult to fire a French worker, workers can take their employer to court over all sorts of issues, they get lots of holidays and so on. I think it is also France that has extremely strong regulations in favor of renters. You see the pattern here: citizens are forcing their government to give citizens more power in their relationships with employers and landlords. Hmmm... we could do that.


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