I had a bit of a hard time digesting this week’s readings. I have tried to use this blog post as a way of dissecting my assumptions about regulation and how this relates to the opinions presented in the articles for this week – Vogel, Rodrik, Snyder, and Polanyi.
Vogel’s piece is very theoretical and provides few examples on his way to explaining regulatory reform. He highlights what he sees as the 3 main ideologies regarding regulation – the titles being ‘Deregulation as the Triumph of Markets Over Governments,’ ‘Deregulation as the Triumph of Interests Over Governments,’ and ‘Reregulation as the Reorganization of Government Control.’ As Vogel demonstrates, the first two are ideologies, whereas the third – Reregulation – is more like a next step in order to fix the problems that arise from deregulating markets. Not all states move towards reregulation after deregulating, depending on the government in charge. But as the other authors explain, having more regulation is better than having less.
Breaking down the idea of regulation a bit: regulation is a sign that there is an active government at work behind the market. Polanyi’s point about labor and land being in fact people and natural resources is important here – although the labor/people may no longer be getting free hand outs as they did under the English Speenhamland Law (1795), regulation’s most basic reason for existence is to protect the people and land from being exploited. One can see how it is today’s equivalent of a “right to life” law. In early 1800s England, no regulation and no markets led to extreme poverty. Twenty-first century USA, with regulation and markets, leads to overall high quality of life. As Dani Rodrik explains, regulation is not anathema to markets – they go together.
For some reason I have always thought of Rodrik’s point as a given, but as we all know, many, especially in the ‘development world’ do not agree. There are fears that regulation will cause utter destruction to delicate markets in developing countries. This opinion is exemplified in last week’s reading by Leeson and Hall – “Good for the Goose, Bad for the Gander.”
Being able to regulate demonstrates that there is a strong and probably democratic government in power. Strong, because it has to have the power to enforce the regulation laws. Democratic, because – well that is where I get stuck. Why is it that I have always assumed the government needs to be democratic? Technically a strong dictatorship with a love for its people could install strong regulations to protect them, although the people would not have any participation in said regulations. Perhaps I instinctively feel democracy is needed for strong regulations because I can think of no example of a country with a dictatorship or other type of government that has put the welfare of its people above markets.
Luckily for me, this week’s readings help justify my inalienable feeling that regulation is good, right, and NECESSARY. Rodrik’s article gives statistical evidence that a strong government is complementary to strong regulations – regulations protect rather than weaken markets! Snyder’s analysis of Mexico’s coffee trade shows that even when a government tries to deregulate, the POLITICS inevitably lead the government back to regulation (if you want to stay in power anyway).
That is what it seems to come down to – whether or not your government goes with deregulation or regulation/reregulation – it’s all about the politics.
Regulation is needed and has a good chance of occuring in a democracy, no matter the stance of the politician: regulation is the natural, go-to position in a democracy – if you deregulate, eventually you will wind up reregulating, at least to a certain degree.
But if a country/government is weak and cannot build both strong markets AND demand regulation (again the Goose/Gander piece), it is vital that those that can DO stand up for regulation in other countries. While this has always been my go-to/defacto position on regulation, this week’s articles have helped explain both logically and statistically why this is true.
And even if a country’s government is strong, it doesn’t mean that it will want to do what is best for majority of its citizens (the lower classes). Getting a democratic government to regulate is not necessarily an easy task – As the 4 Mexican coffee states example shows, the small producers of Chiapas had to struggle to get their government to reregulate.
USA politicians constantly argue back and forth about regulating and deregulating – regulation is by far not as universally accepted as it should be. Again it comes down to the politics – regulation is good for the poor, working, and middle classes (and the poor countries) – deregulation is good for the richer class (demonstrated well in Snyder’s article).
How do we make the idea of regulation and reregulation as the more “go-to” position of the international community? Why isn’t the idea of deregulation – especially when it comes to degrading peoples’ health and environment – more shameful? It’s shocking to hear a politician say they want to abolish all social welfare in the USA. But its not so shocking to hear some “development expert” claim that ANY regulation will hurt development.
Regulation and deregulation are really just code words for “help the masses” and “let them fend for themselves” – and reregulate is a code word for “oh, we messed up (they want to kick us politicians out of power!) let’s try to fix it.”
Labor and Environmental Standards 