Saturday, September 20, 2014

My interest is not your interest or how "defenders of the public" commit suicide

Imagine a university community harassed by cultism. The students’ union (SU) decides to take up the challenge, supported by the Vice-Chancellor (VC) and the Governing Council. The mandate of the SU was to make sure the campus environment is conducive to learning and provide freedom from fear of the unknown. The SU sets up several curfews, school breaks, library and extra-curricula restrictions. Because the cost of knowledge and information on how cultism operates and SU activities is very high for the studentship, these restrictions become a burden, dragging both curricula and extra-curricula activities. The SU gains in political power, in secrecy, and crushes any supposed opposition. Eventually, the SU loses sight of its target and becomes a threat of its own, but because of its privileged status, it does everything possible to ensure the status quo. Cultism is never defeated; it thrives in a benign form. The studentship suffers.

The message of chapter 3 of the book,How to import modern Western Institutions Suppresses Economic Growth?, entitled “MODERN ROBBERS: SPECIAL INTEREST GROUPS AND BRAKING THE ECONOMIC GROWTH”, is clear – an over-regulated and over-protected society makes corruption profitable for both businesses and the government while initiatives for fighting corruption can only make the situation in such a climate worsen.

Advocacy groups or special interest groups are set up for many purposes, but because they have no power of their own, they use the state apparatus to care for the needy, protect the vulnerable, defend the weak, the sick and the “unwise”. On the other hand, how far can a society support these aspirations? Because the average citizen is incapable of defending himself, assuming rational ignorance, these groups have thrived with the support of the government. They could go far. Regulatory and state interference, growth of state apparatus, increase in extra-budgetary spending and state insurance programs along with reasonable protective measures that bar entry into the market and weaken property rights are some of the burdens these groups can impose on emerging markets.

Using Russia as a case study, Konstantin Yanovsky, Cherney D, and Shadrin A, state that as a result of information asymmetry and likelihood of manipulation of the state, far from defending the weak and consumers’ interests, special interest groups have succeeded in dragging the economic growth of underdeveloped countries, and even developed ones.

Due to the “coupling of property and authority”, intensification of entrepreneurs with special relationship with the government have resulted in an exaggeration of the role played by the authorities in decision making concerning investment; over-the-board redistribution of property; a slow-down of economic growth due to parasitism; the rich and privileged class turning out to be the “weak”, especially bankers and state-owned enterprises; failure of the courts and authorities to enforce legislation, entrenching corruption as a result; inordinate accumulation of property by private persons and etcetera.

Some of the solutions proffered by the authors are the following:
  • Transparency
  • Government activities should be made transparent to the citizenry. The model it proposes is that of the Library of Congress (LOC) which website provides access to accurate, timely, and complete legislative information for Members of Congress, legislative agencies, and the public.

  • Involve civil society in discussions and decision making
  • The chapter made reference to the website as an example where citizens can comment on proposed regulations and related documents published by the U.S. Federal government.

  • Just and equitable legal system
  • Crime and its punishment should be made commensurate.

  • License Institutions and self-regulating Institutions
  • Institutions that serve as lobby groups should choose to self-regulate, making it easier and cheaper to combating corruption.

  • Enforce Antitrust
  • Work towards anti-monopoly, therefore reducing monopoly and the loss of society’s welfare that comes with it.

  • Reduce over-protection of rights and privileged sectors of the society
  • General approaches to property protection and, correspondingly, penalties for rights violations should be universal.

Notwithstanding the poor quality of translation from the Russian, you can download that chapter of the book, chapter 3, and spend about some hours acquainting yourself with the perils of over-protection, over-regulation and how special-interest groups, though good intentioned at the start, might eventually commit suicide by losing focus.

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