Prosperity, or lack thereof, is on a lot of people's minds lately. A few months ago I participated in a panel at Deloitte on the topic, where I discovered just how different my fellow panelist's ideas were about how Canada can become more prosperous. Lately, there's an initiative related to Shopify executives called Build Canada, which is a great attempt to put forward concrete ideas for prosperity. The idea behind their site is that businesspeople know what policies to enact, to enable higher prosperity for everyone. I'm less sure that this is true, because businesspeople generally don't know how laws work or what's wrong with the current model, so they ask for the thing everyone does: more laws. Build Canada's position is in one way a very typical one: there's too many rules getting in the way so we should change them to be the rules we like. Unfortunately, the proposed new rules will end up suffering from the same problem as the old ones. This blog post explains why.
New Regulations Are Everyone's Answer
There's a popular view in Canada among lawyers, businesspeople, policymakers, and politicians: we're just a few more regulations away from utopia. The basic idea is that if enough fine-grained policies and specific, smart, all-encompassing regulations can be passed and an effective bureaucracy and compliance culture, etc., etc., then everything will work better. But after a century of this idea, the results are increasingly poor, as bad regulations stack on top of each other. Rarely are misguided or just obsolete rules removed. And because it continues to be such a popular solution (to just about any problem), people advocate for more.
People Want What They Shouldn't
H.L. Mencken once said that Democracy is the theory that the common people know what they want, and deserve to get it good and hard.
. People want more regulation, but they don't know that it's costing them a fortune already. Even people who don't have to comply with rules pay for them, in the form of higher prices and less competition. For example, Canadian cellphone plans cost about $25/mo more than French and German ones, where they use the same cellphones and the same cell towers. Every year, overregulation and bad regulatory schemes cost likely thousands of dollars. Strange tax credits, special programs, and an endless variety of regulatory devices affect our lives in subtle ways, and not always for the better. Do people really want more expensive cellphones? Does the current regulatory regime justify itself in terms of other benefits that excuse the high price? The answer is likely no. But even if cellphone regulation is justified (which I doubt), there are tens of thousands of other rules that weigh down Canadian society.
Growth Is Slowing Due To Over-Regulation
At a time of near 0 growth in Canada (negative actually, for the last two years), Canadians can't afford this modern idea of making regulations for everything. It's not in the DNA of the country either, having been a fairly recent invention (at a mass scale). The least painful way to improve Canadian prosperity is to stop viewing every problem as a nail to be hammered down with new regulatory schemes.
One estimate of the losses from overregulation is $50 billion a year. A recent Statscan study found the loss was about 0.1 percentage points of growth per year (which is significant, when the last decade has seen 0-1% growth per year). The problem is surely much bigger than either of these reports concludes, because there's no way to quantify what businesses might have been started or new services that might have been offered.
Less Regulation: Using Other Tools
A drastic simplification of the rules would be great (but bad for lawyers). At the very least, people need to start seeing over-regulation as the cause of problems and not the obvious solution it appears to be. The same applies to special tax credits and every other form of special privilege enshrined in law, which have caused the tax code to balloon to more than 10,000 pages of statute and regulations.
Eliminating regulation is the cheapest path to prosperity for Canada. The more people realize that special laws aren't needed (or good), the more they'll look to other solutions (of which there are many, such as relying on common law courts).