The Drawbacks Of Regulation

“The regulatory systems in place disincentive innovation. It’s intense to fight the red tape.” — Travis Kalanick, co-founder of Uber

Govt. Regulations
Recently, Dominica’s Director of Trade, Matthan Walter, announced that the Government of Dominica will soon implement consumer protection legislation. To most people this initially sounds like a good idea. After all, no one wants consumers to be defrauded. And Mr Walter referred to the downside of the lack of such legislation. That’s fair enough; it’s his job to explain the rationale for implementing new measures. Still, it’s also important to remember that implementing such legislation carries downsides of its own.

For example, yet another arm of government is being created here, and that doesn’t happen without tax money. Nothing in life is free: either taxes will go up, or else less tax money will be available to do other things. Will roads be repaired more slowly? Will schools have fewer resources than they would have otherwise? Also, regulations mean additional costs for businesses, which is why one of the lessons of economics is that the more regulations you have, the more prices go up.

There’s also an assumption that every aspect of this legislation is really meant to protect consumers. That’s probably true in this case, but Dominicans should beware, as in other countries this has turned out to be less and less so as this sort of legislation gets expanded more and more over time. It’s also a very short step from using regulation to protect consumers from what is clearly harmful, to using regulation to push consumers into buying what you think they should want and away from buying what you think they shouldn’t want. When government is given enough power to help you, it also has enough power to control you.

A final concern is that this legislation is basically being imported wholesale from CARICOM. This is supposedly being implemented as a trade measure when the only ones affected are Dominicans. There’s no need for an international organisation to come up with this sort of legislation for small countries to implement obediently as a treaty obligation. CARICOM should stick to discussing unambiguously international matters like implementing free trade and free movement. They are not an unelected parliament for the Caribbean, and they should be resisted when they presume to act like one. The Europeans tried handing significant political power over to a centralised bureaucracy, the EU, and as one can read in the news these days this has led to Greece teetering on bankruptcy and the UK considering withdrawal altogether. Europeans may be wealthy enough as a whole to afford that sort of commotion, but Caribbean countries are not.

Ultimately, whether it concerns this legislation in particular or CARICOM as a whole, we’d all do well to remember that regardless of who is in power, and regardless of good intentions, there’s no way to make government bigger without consequences. In some cases most people will find those consequences acceptable, and that’s fair enough, but without considering them it’s not possible to make a truly informed policy decision.