Monday, December 04, 2006

Yesterday's battles

The so-called think-tank Open Europe offers an interesting example of the Euro-scare dynamic today, presenting the results of a study which finds that the EU's financial services action plan "will cost UK up to £23.5 billion".

I have forgotten how many times I have run stories of similar ilk, predicting the demise of this, that or the other industry as a result of one or other EU directives or regulations. The most memorable was the Electromagnetic Compatibility directive which was set to wipe out Britain's uniquely structured electronics industry.

Actually, the effect it had was marginal, mostly because it was never implemented and most people just ignored it – or restructured their product ranges to circumvent the most damaging effects.

That is the difficulty in making these dire predictions. We are not dealing with static scenarios. Businesses adapt to their environment and, for many, there is an upside as well as the much publicised downside.

Most often, regulation disproportionately increases cost of compliance for smaller firms, so it favours larger companies. These have seen regulation as a welcome means of driving their smaller, innovative competitors out of business - and a far cheaper way of increasing market share than advertising.

Regulation also tends to make new entry into a given sector more difficult, as the initial investment and early operating costs are much higher. This again helps established players avoid competition.

Then, regulation often creates jobs – even if they are “useless mouths”. Think how many inspectors and enforcement officers there are. Think how many "compliance officers" there are in the City. Think how many "consultants" there are whose businesses rely solely on regulation. And, of course the unions have been bought and paid for – they make a small fortune out of training and compliance monitoring, particularly in the field of health and safety.

This is why the big boys never really get worked up about regulation and why I never take the likes of the CBI very seriously when they go through their ritual complaints. Usually, if they do complain, they are trying to wrest a particular advantage out of a set of regulations. You will never see them objecting in principle.

Funnily enough, the people who usually do not benefit are the consumers, with costs being driven up and choice being driven out by the lack of competition. But there is often compensation in the form of foreign producers, who either ignore the legislation, or who go through the motions so as to appear to be complying. But the people who will never complain are the "consumers" – or at least their representatives. There is a major industry in consumer representation, working hand-in-glove with an idle media – and the call will always be for more regulation, and always to "protect the consumer".

So the merry-go-round goes on. There is actually money in them thar regulations, which means that no-one is going to take the Open Europe "sky is falling in" message very seriously. They are fighting yesterday’s battles with the thinking of the day before that.

The way to fight the anti-EU battle is on "relevance". On all the important issues of today - the really important issues - the EU is either an irrelevance or a handicap. The idea that membership of the EU is the way forward, the future, has long gone. Soon enough it will dawn on people that the are paying a huge amount for something that doesn't actually matter - that they don't actually need. And that is what will kill the "project".

As an aside, but one I could not resist, it is odd though how the "bright young things" are so often committed to fighting battles long gone, while us old fuddy duddies are looking to the future and innovating. There you have the young Mr Cameron, all modern and bright, reinventing the Conservatives as the "nice" party, just as "nice" is going out of fashion. It does take the young and "fashionable", it seems, to be really old-fashioned.

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