by GK Strategy 29th October, 2013

Regulation: the good, the bad and the ugly

It is commonly held that regulation is bad for business, and this is not just amongst the business community.

Since the Premiership of Margaret Thatcher, Prime Ministers have repeatedly sought to roll back regulation with bodies such as Tony Blair’s ‘Better Regulation Executive’, to David Cameron’s ‘one in one out rule’.

The reality however is that the tide of regulation continues its march forward, with the national press, the Internet and money lenders merely the latest in the sights of the state regulator.

Regulation in theory exists to protect the market society from the worst excesses of the market. And whilst regulation is often far from perfect, the other options of state control of the means of production, or raw capitalism have not had a good record in recent history.

However regulation can, in many instances, be positive for business.

For emerging new sectors of the economy, or those suffering bad press, regulation can help establish legitimacy and raise standards. This benefits those at the higher quality end of any market.

Further regulation acts as a barrier to entry. The costs, complexity and risks of a regulated market puts up an immediate wall between those regulated and those not.

This explains why some of the strongest calls for increasing regulation come from the larger operators in regulated markets, they protect their dominance not through innovation nor efficiency, but through regulatory burdens.

So regulation is here to stay. And there will be one sector who will not be complaining about that… the lobbyists!

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