In class on Tuesday we discussed Economic Crises and Regulations i.e. what causes crises and what regulations are/have been implemented in attempts to quell future crises. I would like to focus on Regulations, and more so how ineffective they are. Unfortunately, the sad truth is that regulations continue to prove meaningless, whether it be financial or any other type of regulation. It seems as if every other day some report is issued on illegal activities by some financial firm. Recently, an Ex-Goldman Trader Pleaded Guilty to Fraud by hiding an $8.3 Billion futures position. Acts of this kind are not unheard of, and that's because the punishments rarely, if ever, fit the crime. Additionally, the major international bank, Barclays, was recently found to have only paid 82 million pounds in corporate tax for the year of 2012. This may seem like a significant number, but after close examination it was found that Barclays was able to change their "top line profits of £7bn to £246m, as a result of an accounting standard relating to how it values its own debt." There have been numerous regulations put in place year after year to prevent such actions, but financial firms always seem to find a loop hole. Barclays even has a division titled their "Tax Avoidance Division". How can a regulation be effective if firms respond with a counter-attack. Regulations are reactive to the crims being conducted, and a system of such will never succeed.
Beyond the financial realm, regulations continue to fail. Recently the U.N. Adopted a Treaty to regulate arms trade. In theory this appears to be fantastic step in the right direction. But again, unfortunately, the illegal arms dealers across the world will continue to operate with the incentive of profit in mind. Incentives always trump deterrents, and this is an example will that trend will continue. While countries within the U.N. may fight against illegal arms trade together, thousands of individual actors will operate under their own laws and guidelines, and that is because of the incentive to make money.
Sadly I have no alternative method to offer as a solution to the losing war regulations are experiencing, but I think implementing a Regulation should not be viewed as putting a successful end to an issue, but rather the beginning.
I just attended a Model United Nations conference in which our main focus was the ATT (Arms Trade Treaty) and how the decrease in illicit trade can be an big step in empowering women as well as reducing the illicit traffic. In the Democratic Republic of the Congo for example, 48 women are raped every hour by rebel groups and they typically use small arms and light weapons to actually perform the abusive acts. The ATT actually has many good measures that ensures better transparency on arms trade, including buy back programs that provides incentives for people, and most importantly great tracking measures. I think that the ATT does have some flaws, however, it is a great step towards progress in the illicit trade of SALW (Small Arms and Light Weapons).
ReplyDeleteI understand the frustration you feel towards powerful actors circumventing regulation to pursue their own self-interests, but that doesn't necessarily mean that regulations should be labeled as useless or thrown out altogether in general. An actor that exploits a legal loophole to avoid regulation shouldn't condemn the entire notion of regulating, but should instead shed light on weaknesses that need to be amended/strengthened. I still believe that the government can create incentive structures that promotes the public good while maintaining individual autonomy, but if you are looking at a more hands off approach you should read this article by Jonathan Adler...
ReplyDeletehttp://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/21/what-conservative-environmentalism-might-look-like/?wprss=rss_ezra-klein