No open and shut case on wishing away government

Business needs regulation but we can do without pen pushers who master art of resisting change

PUBLISHED : Wednesday, 02 October, 2013, 12:00am
UPDATED : Wednesday, 02 October, 2013, 4:30am

It is tempting, perhaps irresistibly so, to celebrate the government shutdown in the United States as a result of the budget impasse. Business people are supposed to be in the forefront of those welcoming a shutdown on the clichéd grounds of "it's time to get government off the back of business"; but it's not that simple.

Indeed in their heart of hearts, even the most fervent free market advocates understand that money needs to be spent on government and that regulation of business is necessary to provide an overall framework for conducting economic activity.

The problem is that down at ground level this sensible macrovision is greatly obscured by the way that government officials go about their work.

Here in Hong Kong, often held up as a poster boy by free market idealists, there is a massive bureaucracy with extensive powers over even the minutest aspects of business.

As I operate companies in what is probably the most extensively regulated sector of enterprise - the food business - I am acutely aware of this level of bureaucratic control and let me tell you, it ain't pretty.

First, I am always struck by the sheer numbers of bureaucrats allocated to any given task. If you go to meetings with officials you will generally find that for every one person attending from the business side of things there are at least two bureaucrats.

Second, unless you are someone like Li Ka-shing, who does not have to deal with the lower echelons of the bureaucracy, you will almost always find that you are treated as a supplicant. Bureaucrats set times for meetings then keep you waiting, just to make the point of who is in charge.

When you get in the room they act as though you are really fortunate that they have deigned to spend time with you.

Third, the bureaucracy is famous for sending out demands requiring responses by specific dates but if you write or attempt to call them, they take their time responding and then add some more time to the time taken.

Fourth - bear with me, I've tried to truncate the list but it is long - there is a rigid determination to interpret the rules through the narrowest spectrum of flexibility, in other words where scope exists for a degree of sensible discretion the opportunity to be flexible is vigorously eschewed.

In food land the level of regulation is notably high because of understandable concerns over food safety, but the enormous web of rules often serves to distract attention from this central objective.

There is, for example, a special licence to be obtained for selling ice cream, a rule that dates back to the time when refrigeration was less widely available. That time passed some decades ago, but the rule lingers.

Once you move from producing food and drink to selling it in a café or restaurant, you encounter no fewer than four government departments with a regulatory role.

They rarely talk to each other and the lack of co-ordination can often mean that if one department has signed off on a licence it can be delayed and delayed while the other department takes its time.

We recently lost a restaurant licence for some weeks because one of the bureaucrats was away on holiday and, apparently, although this office was teeming with other pen pushers, no one else could be found to do the job.

Moreover because licensing is required before you even open the doors of the premises, you will find bureaucrats using their power to bestow differing conditions on licences in the same area by, for example, specifying shorter closing time provisions for liquor licences on some premises, effectively giving others a competitive advantage.

The bureaucrats will, of course, strenuously deny distorting the market, but they are not really bothered by who makes or loses money as a result of their decrees.

All this produces an enormous temptation to simply say that business would not be affected one jot if the government bureaucracy were to be deprived of funds and shut down.

Yet there is, of course, a point to regulation and even in the poor old food business we recognise that someone must keep an eye on food safety but, my oh my, surely there are better ways of doing these things?

The problem is that any kind of reform is subject to enormous institutional resistance by civil servants who have entirely mastered the art of preventing change.

Stephen Vines runs companies in the food sector and moonlights as a journalist and broadcaster