In case you’d got the wrong idea about how the ’regulatory state‘ is supposed to work
UPDATED 30 December 2024.
I keep having to update this because regulation and regulators continue to make the news, despite being no more than jumped-up accountants whose main role is to shield the regulated industries from actual political scrutiny. This time, in a genuinely headspinning inversion of proper politics, UK Prime Minister Keir Starmer has written to regulators to ask them for ideas.
Seriously, instead of announcing that he will make use of his huge majority and almost universal public support for reform of the regulatory regime to shut them down or increase their powers or… something – anything, really – he’s meekly inviting the regulators into the policy process. It’s such a profound abdication of political responsibility, such a refusal of political opportunity as to be almost incomprehensible. An admission of defeat made before the battle has even begun.
Anyway, by way of a primer, here’s how regulation actually works:
- The present-day regulatory state is not an intrusive government intervention, it’s the invention of the post-war neoliberal economists. It was designed not to protect consumers but to shield capital from democratic control.
- Since the 1970s, politicians have eagerly embraced this new regulatory model. It looks competent and technocratic but mainly it protects them from democratic outcomes. Politicians can’t be criticised because they literally can’t alter the behaviour of regulated industries.
- In Britain now, for instance, the actual government of the sixth largest economy on earth – a nuclear power, a permanent member of the UN security council – has no mechanism to stop executives from pumping shit into rivers while routing profits off-shore.
- When new governments come to power they promise action but this rigid regulatory system doesn’t permit them to do much. Larger fines, tougher sanctions for managers, ‘dashboards’ and so on. Soon, everything returns to normal.
- Businesses claim to hate regulation and campaign more-or-less constantly to have it neutered or removed all together, but they can live with it: it’s predictable, imposes manageable costs and doesn’t threaten their operational models (it has the secondary benefit of imposing costs on new entrants, which limits competition).
- The actual regulators – hapless machine-minders, junior to the executives they regulate – must reconcile the irreconcilable. They must somehow discipline businesses without materially altering the terms of the agreement that protects them.
- When things go wrong it’s the regulators who get it in the neck – asked awkward questions on the TV, called to testify and so on. But this is their job. To absorb and dissipate public anger and frustration. Occasionally they’re monstered in the press or actually fired. Their contracts of employment reflect this risk, though, and there’s always the revolving door.
- The managers of regulated businesses are stuck too. Executives must unwaveringly serve shareholders (foreign states, private equity, your pension fund), according to the principles of company law. They have no choice. The provision of an adequate service must come second.
- When it becomes evident that regulators cannot do more than cosmetically alter even the most egregious behaviour of the regulated companies, citizens and legislators get angry and bluster about giving regulators ‘teeth’.
- But to give regulators teeth would be to reabsorb them into the state, put them under direct democratic control and give them literal, life-or-death control of the regulated function. Impossible.
- Regulation in this system is an aspect of the corosion of civil society that reduces citizens to consumers. In this regime we’re permitted to choose between almost identical management regimes but not to decide for ourselves.
- The whole idea of regulation in the contemporary setting is fake, a derisive pantomime of control that inevitably contributes to the accelerating collapse of trust in institutions and to democratic fragmentation.
The position of the actual neoliberals on regulation was, of course, more complicted than this. They believed in the ‘unfettered market’ but at the same time advocated – and helped to bring into being – a complex web of global institutions – GATT (later the WTO), third-party arbitration courts, the EU and a long list of treaties and untouchable, ‘independent’ regulators whose function was essentially to keep elected governments out of their business. Quinn Slobodian’s Globalists is a really gripping account of how this worldwide system came into being and Adam Tooze’s review of the book a good introduction.