You can't have the government and eat it too!

Government is the favorite bashing topic for all ages. Nothing unites us more than our disapproval of their functioning (not talking about any political parties here but government in general). Recently there has been a lot of debate around the amount of regulation they should be responsible for. The fact that we are coming out of a nasty recession and obviously well needed bailout, this is hardly surprising. In the last decade, the popular opinion was to reduce the role of government in functioning of markets, corporations... It is understandable and to a large extent it actually worked. No reason it shouldn't work in future, provided we learn from our mistakes (and not wait to act till its too late). 

But here I ask a different question. I am not getting into the details of the extent of regulation needed but questioning the validity of the argument itself. A lot of us say - Government should stay out of the way. I have a feeling it is not fair to ask them to stay out. Especially when they are ultimately responsible to pay for the mess we create (whenever we do). You can't expect them to be ultimately responsible for the actions of corporations/markets/ sectors... and have no/minimal role to play in regulation. Also, you can't take that responsibility away from the Government. It is embedded in their role. 

Now what is bad (or what haunts us) is regulation interfering with growth. It's like having too many rules for safety and in the process losing the spirit of what you actually meant to do. I don't think increased regulation is a choice really, after what happened in the last few years. But what we really need is increased accountability of the government - like shareholders get to have in public companies. Both sides need to rise to the challenge. A big part of this is reducing the ambiguity of the dimensions on which accountability is measured. Its much more reasonable than asking (and expecting) the big guy to stay out. 


  1. The basic question is " why do we need to have regulations/ acts/ rules". It is to control age old human instinct of greed. For uniformed people, to inculcate discipline.
    To ensure Accountability there will be requirement of another Regulation.In India we are waiting for Lokpal Bill to be enacted so as to bring in lawmakers i.e. Parliamentarians/ Ministers accountable.
    Saint ofcourse is above all,but do we have a real one.

  2. Regulation is needed when markets cannot deliver...example is natural monopolies like water and power distribution in regulators step in and fix prices for these services else the companies could charge very high prices and consumers would be helpless as they would have no alternative...

    The problem in India is different....the government itself is a monopolist...and therefore it is the government that needs to be independent regulators...

    For example, driving licenses can only be issued by government monopolist called the RTO...therefore the service standards need to be monitored by an independent regulator like Team Anna...

    The government also creates franchisee monopolists who are also colloquially called crony capitalists...these are like real estate colonizers who have paid huge bribes to the government to get their projects approved and in that process have created monopolies in their respective markets...Greater NOIDA is a good example...

    The general public batters the government based on its gut feel that government is not doing things right...that gut feel is largely correct...

  3. Agreed. The point I was making is against trying to keep Govt out of the way entirely. That is not possible. Not taking any moral ground - but it is just not possible because the source of money is ultimately controlled by the Govt. They decide how much to print, interest rates etc... So the argument really should be (as you also mentioned) - make the Govt accountable and find ways to regulate them.

    1. The source of money is the government and that is part of the problem...look at any municipality or city government as an example...they are supposed to provide services like water, roads, parks, street lighting and garbage collection. Their source of revenue is property tax....because it is called "Tax" the city government feels it has got a right to collect it...without any accountability for giving proper quality service in return for the money it collects.

      One good practical way is to break up the city government into small blocks or colonies...each colony can have an elected RWA which can collect the property tax and provide the services within its jurisdiction that the municipality finds it so difficult to give...and being localized, the RWA will find it impossible to shirk its responsibilities..

      The point is that accountability is easy to talk about but very difficult to ensure...the larger the organization, the more difficult it is not unnatural that governments are inefficient the world is partly due to their large size and partly due to lack of intent...