What can we learn from the American model?

Thursday 12 January Swedish Entrepreneurship Forum and the Board of Swedish Industry and Commerce for Better Regulation, NNR, invited to a seminar with the theme Better regulations – how is it possible?  Keynote speaker was Cass Sunstein, Harvard professor, who spoke about how the American administrations since Reagan – regardless of political view – have worked actively with regulatory impact analysis, RIAs, and improvements of regulation.

Much of the work with effective regulations in USA is made by the Office of Information and Regulatory Affairs (OIRA), which Sunstein managed between 2009 and 2012 under president Obamas first administration. OIRA was instituted in 1981 by president at the time, Ronald Reagan, and have since the start saved American companies and citizens an estimated 250 billion dollars. Many regulations have lessen their extent or stopped all together thanks to the OIRA’s influence.

The work have been guided by a cost-benefit-analysis. Regulations that costs more than they generate are simply not implemented. It is not enough for the value to be greater than the cost, they also check extensively for adjustment to proposed regulations to see if the positive effects can be enhanced and the costs lowered further.

Right from the start RIAs was made mandatory for new regulations, no new regulations was to be implemented, by orders from President Reagan, if the potential financial costs exceeded the social benefits. The regulations should also maximize the net benefit, and if there’s alternative ways to frame the regulation, the alternative with the lowest cost for society should be picked. These are the ground principles that guides OIRA.

Even under Clinton, George W Bush and Obama this continued.  Interestingly, the regulatory improvements are prioritized no matter which party rules the White House, Sunstein remarked. Sunstein believed this will continue in a similar fashion under Donald Trump.Cass Sunstein

Sunstein doesn’t believe in principles such as “one in, one (or two) out” or a “budget” for how much regulations can be enacted. This runs the risk of becoming a gimmick, he said. It is more important to focus on what regulations to enact – or abolish – and the consequences connected with those decisions.

There is however a need for more aggressive policy to reduce regulations, and to involve the private sector. Likewise, more aggressive politics is needed to stop the flow of new regulations and to lower the amount of paperwork.

– In the context of legislation there is a need for the people affected by regulation to be able to express themselves. If people can see regulation before they’re legislated, perhaps they can inform their legislators why it’s not a good idea, before they turn in to reality, Sunstein said.

Therefore the former president just launched an app, The Reginfo mobile app, who immediately gives access to the regulations that are being examined by the legislators.

The seminars first commentator, Johan Eklund, Managing Director Swedish Entrepreneurship Forum, wished those who work with regulatory improvement had a stronger mandate in the political system of Sweden.

– There are many possible administrative solutions, but most important is to have an independent unit with a strong mandate responsible for this question, Eklund said.

This is not always a political problem, but more of an educational problem, he believed, as stressed the importance of clearing up where the problem lies.Johan Eklund

Contrary to many others, Niklas Johansson, state secretary at the minister of enterprise, thought that Sweden was not heavily regulated.

– Sweden is a country with a good innovation climate. But even if we’re good, better than the most, there’s room for improvements. And there are things to learn from others.Niklas Johansson

Sunsteins presentation is good example of what Sweden can learn from other countries, said Mats Persson, economic-policy spokesman of the Liberals. USA, the Netherlands and Australia are all good examples of countries who have taken a holistic approach to the regulatory hassle, at the highest political level. Cost-benefit analysis should affect the political work to a far greater extent.

– We have the experts, we have calculations, but we don’t listen to them. We love to talk about healthcare, school and how much money we want to give them – but what we should focus on is output – not input. How much healthcare is received and how good are the grades, said Persson.Mats Persson

Furthermore, he claimed consequences for small and medium sized corporations needs to be emphasized more. What consequence small sized companies will experience is often ignored and can often differ from the larger companies’ experience of the same regulation.

Chief economist of Swedbank, Anna Breman, pointed out that Sweden is technologically well developed – but small productivity development. She thought one reason for this, is the regulator’s inability to keep up with development.

-Today we do our tax returns on mobile phones – if you are a employed in a firm. If you for an example have your own business it is far more difficult. It is clear that Sweden have not kept up with the possibilities that new technology gives. The regulations and the tax system for self-employment are too difficult and complicated.

Anna Breman

In the following panel discussion Johansson said he does not believe in any type of law demands for effective in the regulatory work, like the USA has. Sunstein noted that the cost/benefit ideas of Reagan were controversial at the time, but now even the democrats have accepted them since they have proved themselves effective.

Eklund pointed out that it is not all about stopping regulations at all cost, but that impact assessments means transparency and makes it clear what effects the regulations have – and what consequences we actually want to create.

Persson believed that you have to be aware that there’s a built in desire in the government to expand the regulations. Some rules are good, some are not, but they always keep expanding. Therefore the system needs the regulators to stop for a second. Impact assessment is the tool.

As a roundup of the seminar Andrea Femrell, Managind director NNR, showed that 30 percent of their members thought that the regulatory burden had worsen over time. At the same time, only a few percent believed that regulation is becoming simpler.

– These numbers show a need for Sweden to take the regulatory burden seriously. In addition, our research shows that regulatory improvements has lessened. All the while regulatory improvements are an effective way to improve the business climate, and thereby strengthen both labor market and welfare state.

 

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