Increased economic regulation in Europe over the past few decades?

March 10, 2013 2:52 PM

Europe has seen a gradual but definite expansion in economic regulation. While in recent years it has had a lot to do with the financial crisis, there has been an increasing trend in economic regulation for the last few decades. Why has this been occurring exactly especially since so many speak of an era of deregulation prior to the financial crisis?
posted by espada0 to law & government (8 answers total)

Regulations increase because regulators need something to do. In particular, a lot of bureaucrats working for the EU need to justify their existence, and need something to keep them busy. Their job is writing regulations, and so regulations get written. If regulations were not being written, God forbid, someone might ask whether all those people are really needed, and budgets and jobs might get cut.

The job of a bureaucrat is to regulate. Left to themselves they'll eventually try to regulate everything.
posted by Chocolate Pickle at 3:15 PM on March 10

"Deregulation" has become code for "privatization". So you can see chunks of industry formerly controlled by the government being sold off to private owners while new regulations are being created elsewhere or even governing the newly-privatized industry.
posted by b1tr0t at 3:17 PM on March 10 [1 favorite]

Another point: Have you ever read "Parkinson's Law"? It's a collection of essays, very funny, but funny because it's simultaneously tragic and true. (You have to laugh or you'd start crying.)

In one of them Parkinson makes the point that bureaucrats make work for each other, and as a result any government bureaucracy grows about 3% per year unrelated to the job it's supposed to do. And as it grows, that means more bureaucrats turning out more regulation.
posted by Chocolate Pickle at 3:21 PM on March 10

Every time a business gets larger, it gets more powerful -- it has more money, more influence, and more knowledge of the market. It will, by its very nature, try to use this power to its own advantage.

People do not "get larger" in this sense. Any more money or influence or knowledge that a single person can acquire vanishes in comparison to how much more of those things that Walmart or Monsanto or BP or Microsoft have.

Regulations are an attempt to balance this out -- for instance, food safety regulations attempt to balance out the fact that a consumer cannot go to a slaughterhouse and inspect every cut of meat he or she buys. Antitrust regulations attempt to balance this most directly, by flat-out saying to companies, "You cannot accrue all of a market."

Also, the last few decades have seen a huge expansion in entirely new industries -- there were virtually no computer regulations in 1983, but now there are tons, simply because there are computers in millions more places than there were then. More people, more things, more processes, more industries... all of these things are regulated, because otherwise, chaos tends to ensue.
posted by Etrigan at 3:50 PM on March 10 [1 favorite]

Broadly, the countries in the EU are far less economically regulated than they once were, say, in the 1970s. The EU has followed a path of growing "liberalization" of member states' economies.

Further, the growth of regulations from the EU have had the effect of lessening, not growing, overall regulation. The separate regulations of 27 (and Croatia and EFTA states) have been replaced with a single set.
posted by Jehan at 3:57 PM on March 10

I would be interested to see some stats as to the comparative level of economic regulation over time across Europe (I have a feeling I have seen something on this but can't find it). If there has been an expansion I would suspect the following would be the key drivers.

1: The formation of a customs union which takes in 27 different countries plus an attendant economic area taking in additional countries requires regulation which covers all of them as well as setting out how regulation between them interacts.

2: The move to drive an increasing number of industries into private ownership requires regulation to protect investors and customers (I am sure there are plenty of people who can argue as to who gets what protection here, so I won't). The depth of regulation is not really the same for state owned industry. This brings us to the misleading term 'deregulation', which usually would be more accurately represented as 'reregulation', ie, the formation of a set of regulations specific to the oversight and protection of rights within a privately owned industry. (As b1tr0t, says privatisation.)

3: The EU experiment has helped to drive the more rapid expansion of regulation in areas where it was not previously applicable. The environment is one obvious area, and while this is not economic directly, it certainly has implications for economic regulation, for example, State Aid laws, abuse of exemptions from economic regulation for protectionist purposes, etc.

4: EU efforts to create single markets have meant continuous change in some market sectors.

Anyway, its late on Sunday and I've been drinking so am likely missing something, but this is a start.
posted by biffa at 4:05 PM on March 10 [2 favorites]

I'll assume you're asking about economic regulation on the level of the European Union, not within individual member states. To put it simply, there's more regulation because since the inception of the European Coal and Steel Community in the late fifties there's a been an intent and drive towards greater economic unity, partly to counter the United States' economic superiority. Things like the European Economic Area and the European Monetary Union have required regulation (or legislation) to be shifted from national to supranational levels. In addition, creating a common market and allowing free trade, capital and to some extent labor between various economies have created new issues requiring regulation, harmonisation of various standards regarding food safety or financial oversight being two examples.

Basically, what Jehan and biffa said, but differently.
posted by ar0n at 5:39 PM on March 10

I'm a regulator, but not in economics. One of the biggest challenges facing regulators is managing the 'regulatory pendulum', where forces act for both increased and decreased regulation over time, leading to a constant swing between high levels of regulation and more freedom. Ideally, regulation should be established and maintained at a level that is sustainable in terms of not restricting trade or competition unnecessarily while still ensuring the long-term stability of the sector being regulated by ensuring that the standard of those offering goods or services remains high.

When this balance isn't correct, regulators must move either to higher levels of regulation to stamp out poor practices or lower levels of regulation to increase the ability of organisations to operate in the sector in a viable manner. All too often, this 'regulatory pendulum' swings wildly from side to side as regulators make huge changes in the regulatory framework in response to particular events.

I'm not an economic expert by any stretch, but my perception is that this (along with many other factors, no doubt) may be a regulatory response to the GFC - a major event that made it clear that regulation had failed to, well, regulate the market sufficiently. Given that regulation on an international level must be slow-moving and changes made cautiously, it's possible the increasing economic regulation now is also in part a response to the massive 'de-regulation' that occurred during the '80s and '90s, which brought with it some of the shady practices that contributed to the GFC (while also stimulating activity by increasing the freedom to operate).

As jehan says, the perceived increase in regulation in the EU could be related to an actual decrease by replacing a whole swath of individual regulations with a single set that encompasses a much larger regulated population within a single set of rules. If you operate across two or more of the previous regulations, you would likely see a significant decrease in the regulation you have to deal with, although those operating in an area where regulation was previously lower may see an increase. Over the last few years, I've been involved in amalgamating eight separate regulatory frameworks into a single one. The majority of people see this as a reduction in regulation, as they no longer have to navigate different (and often conflicting) frameworks, but there are a minority who previously operated in an environment where regulation was largely ineffective that are none too pleased about being under the microscope for the first time, so perceive that there has been an increase in regulation.

I wish I could deny that regulation increases because bureaucrats needs something to do. Sadly, there is some truth there, as there is in the theory of bureaucrats making work for each other. Some days it seems that, for every bureaucrat working to minimise regulation and remove unnecessary barriers to businesses doing what they do and people accessing the things they need, there is another following along behind creating new regulations to fill the perceived gaps left by the process of reducing red tape. Come the revolution etc ...
posted by dg at 7:05 PM on March 10