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« Making War On Red Tape | Main | The Enforcement Rap Sheet »
Tuesday
Sep142010

In Search Of Good Red Tape

The negative side of excessive regulation is well known. It weighs people down and creates obstacles to commerce and everyday life. When businesses, non-profits, households, and individuals spend time hassling with red tape, resources are diverted from productive work. And because red tape breeds corruption, everyone pays more for everything, stunting economic growth, development, and innovation.

But does red tape bring any benefits? The one most commonly cited is that governments need information, and the way to collect it is through regulations.

Assuming the amount of red tape that's actually needed can be determined, the problem is that bureaucracies tend naturally to propagate more and more regulations, increasing contact with users and opportunities to extract bribes. But not everyone would agree that all red tape, or even all bribery, is always bad.

Some have argued that red tape keeps bureaucracies from showing favoritism. By reducing the discretion of individual bureaucrats and groups of them, red tape forces more equal treatment of everyone. One scholar, James Wilson, argued in 1989 that red tape can even be a sign of compassion in a society. Excessive regulation, he said, is more fair to poor and powerless people than, say, auctions, because with complicated red tape, everyone is equally advantaged (or disadvantaged, depending on your point of view), creating more opportunities for more people.

And the benefits of graft? Economists Art Carden and Lisa Verdon, among others, said it can sometimes create positive change. In a healthy economy, they argued, corruption is bad -- it's like sand in the gears of society. But in poor and undemocratic countries, corruption oils the gears. It helps bring change and economic progress. It can be a substitute for freedom by allowing entrepreneurs to beat red tape and get things done.

But coming back to the planet earth, let's ask a question: How do the world's most efficient and cleanest governments gather information without creating red tape?

In Singapore, for example -- which ranks first on the World Bank's index for ease of doing business, and third on the corruption perception index -- regulators don't collect most of the information the government needs about businesses and individuals. Another unit  -- the Singapore Department of Statistics -- does that. It doesn't regulate anything. Its only job is to collect and handle information. And as the designated national statistics coordinator, it has a near statutory monopoly on the gathering and crunching of business and personal information.

"Statistics Singapore," as it likes to be called, isn't loved, but businesses and individuals fill out its mandatory questionnaires without much grumbling. That's the trade off for an efficient, clean, and red-tape free government.

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