And you did not even mention finance which is perhaps the most extreme and damaging of all. The failure of regulation that led to the massively damaging crash of 2008. For which no-one in the financial world has been held accountable and for which we are all still paying the prices. Another sector where there is a cosy club of the industry, Treasury, Bank of England and regulators.
Finance illustrates some other factors. The power and wealth of the sector that enables them to employ armies of expensive lawyers who can run rings around the regulators. One American bank alone has apocryphally more lawyers than the SEC. Along with the abuse of that power to influence politicians to pressurise regulators in their favour.
Having worked a lot in the world of the City (as well as with other sectors including NGOs) Id add another factor and that is ethics. As ethics tends to zero, regulation tends to infinity. The City has mountains of regulation but it is of little use if they merely game the system. Add in extraordinary rewards that corrodes any ethical principles. With no effective accountability for rule breakers - no City leaders were held accountable in any way for the crash or for other City scandals. Fines, and there have been massive fines, were paid for by their shareholders and regarded just as the cost of doing business. There is a case for far simpler regulation but brutal accountability for directors. Personal fines, disqualification and jail terms would change behaviour.
It is not an inevitable result of capitalism. Ive worked in other sectors where by and large they did not want to poison or rip off their customers, the rewards were nowhere near as extreme and you did not hear complaints about regulation. Aircraft and aircraft engines where the consequences of failure are an example, with Boeing the exception that proves the rule. They specifically engaged in regulatory capture. Ive worked with food and drink industry that has both ends of the spectrum and similarly supermarkets. Fossil fuels, property and construction examples of bad behaviour. Any industry that complains endlessly about regulation needs to be subject to suspicion.
All that said, there are examples of excessive regulation that helps nobody and increases costs for everyone. So simpler regulation yes, but with real accountability. And recognise the problems of ethics, power and extreme rewards.
Thought provoking as always. Seems like we’re rediscovering what we already knew before neo-liberalism swept all before it. I continue to think that a modern centre left project ought to be constructed around the concept of community. FWIW the internet has facilitated the bulk buying of heating oil in our village as well as supporting locally produced food.
At risk of a degree of ridicule from people who know way more about this stuff than I do, from a consumer's point of view it feels like the most obvious example and exponent of countervailing power in the UK is Moneysavingexpert. The elements of campaigning and collective buying are certainly present, and while the site is funded by referrals, it's at least open about who's paying and who isn't, and seems to retain editorial and campaigning independence and a sense of being firmly in the consumer's camp.
I think it was in another of your articles, Chris, that I advocated for privatising regulation.
Specifically, outside bodies would bid for state funds to investigate and prosecute regulatory breaches. It would be harder to capture Greenpeace and Friends of the Earth, as they'd investigate each other.
The rise of open source investigators like Byline and OSint indicates that information asymmetry, whilst very real, can be actively resisted rather than passively accepted. And these private regulatory bodies would be an excellent refuge for whistleblowers.
A diversity of staff beyond the usual Oxbridge humanities might also be an incidental benefit.
Thank you for this characteristically perceptive and insightful post. (I'm considering a pledge of support, but must assess the opportunity cost.)
Your point about the need for consumers, collectively, to exercise Galbraithian "counter-vailing power" is fundamental. But I doubt that funding consumers to buy this as a "service " would work.
In the US there is a long tradition of statutorily empowered Consumer or Public Advocates at the state-level representing the collective interests of final consumers (generally traditional utility - electricity, gas, water - service consumers) in regulatory and competition policy and enforcement proceedings. (Check out nasuca.org.) State-level utility regulators in the US operate in a quasi-judicial mode. They hear the evidence from the regulated firms and from the consumer advocates and other interests parties. There are opportunities for rebuttal and counter-rebuttal. The regulator then assesses the evidence and arguments presented and makes a determination. The contrast with the regulatory process in the UK (or Europe) could not be more pronounced.
Most people seem to think that gas and electricity prices in the US are low relative to those in the UK and Europe because of the huge increase in unconventional gas supplies over the last two decades. But that is only part of the story. Another part is the development of genuinely competitive markets in gas and in gas transmission capacity - in marked contrast to the oligopoly power exercised by internal and external suppliers in Europe. And the final part is the role of Public or Consumer Advocates.
We've had nothing like this consumer representation in the UK or Europe, because in the early decades of the post war era utility services were generally provided by national (or sub-national) public or municipal entities. Privatisation eliminated the possibility that any sense of pursuing the public good, sometimes exhibited previously by the public entities, would continue. And if not actually established as captured entities, the newly established regulators were eminently capturable.
So, what we need is the statutory representation of the collective interests of final consumers - and not only in the areas of the traditional utility services, but in all areas where essential services (telecomms, internet, media, personal finance, insurance, etc.) are provided to the public.
I've made this case in a submission to DESNZ's Review of Ofgem (which is expected to generate a report some time this spring.)
The same applies to the world of schooling. Results are carefully concealed and brief summaries are located on the government website, which is hard to access by parents. Schools are not learning organisations in terms of using their results forensically. The outcome? Sink schools.
There’s a good example of countervailing power in English higher education which has a main regulator (the Office for Students, modelled on OFGEM, OFCOM etc) but where there are student unions, affiliated to the National Union of Students
And you did not even mention finance which is perhaps the most extreme and damaging of all. The failure of regulation that led to the massively damaging crash of 2008. For which no-one in the financial world has been held accountable and for which we are all still paying the prices. Another sector where there is a cosy club of the industry, Treasury, Bank of England and regulators.
Finance illustrates some other factors. The power and wealth of the sector that enables them to employ armies of expensive lawyers who can run rings around the regulators. One American bank alone has apocryphally more lawyers than the SEC. Along with the abuse of that power to influence politicians to pressurise regulators in their favour.
Having worked a lot in the world of the City (as well as with other sectors including NGOs) Id add another factor and that is ethics. As ethics tends to zero, regulation tends to infinity. The City has mountains of regulation but it is of little use if they merely game the system. Add in extraordinary rewards that corrodes any ethical principles. With no effective accountability for rule breakers - no City leaders were held accountable in any way for the crash or for other City scandals. Fines, and there have been massive fines, were paid for by their shareholders and regarded just as the cost of doing business. There is a case for far simpler regulation but brutal accountability for directors. Personal fines, disqualification and jail terms would change behaviour.
It is not an inevitable result of capitalism. Ive worked in other sectors where by and large they did not want to poison or rip off their customers, the rewards were nowhere near as extreme and you did not hear complaints about regulation. Aircraft and aircraft engines where the consequences of failure are an example, with Boeing the exception that proves the rule. They specifically engaged in regulatory capture. Ive worked with food and drink industry that has both ends of the spectrum and similarly supermarkets. Fossil fuels, property and construction examples of bad behaviour. Any industry that complains endlessly about regulation needs to be subject to suspicion.
All that said, there are examples of excessive regulation that helps nobody and increases costs for everyone. So simpler regulation yes, but with real accountability. And recognise the problems of ethics, power and extreme rewards.
Thought provoking as always. Seems like we’re rediscovering what we already knew before neo-liberalism swept all before it. I continue to think that a modern centre left project ought to be constructed around the concept of community. FWIW the internet has facilitated the bulk buying of heating oil in our village as well as supporting locally produced food.
At risk of a degree of ridicule from people who know way more about this stuff than I do, from a consumer's point of view it feels like the most obvious example and exponent of countervailing power in the UK is Moneysavingexpert. The elements of campaigning and collective buying are certainly present, and while the site is funded by referrals, it's at least open about who's paying and who isn't, and seems to retain editorial and campaigning independence and a sense of being firmly in the consumer's camp.
I think it was in another of your articles, Chris, that I advocated for privatising regulation.
Specifically, outside bodies would bid for state funds to investigate and prosecute regulatory breaches. It would be harder to capture Greenpeace and Friends of the Earth, as they'd investigate each other.
The rise of open source investigators like Byline and OSint indicates that information asymmetry, whilst very real, can be actively resisted rather than passively accepted. And these private regulatory bodies would be an excellent refuge for whistleblowers.
A diversity of staff beyond the usual Oxbridge humanities might also be an incidental benefit.
Why can't regulatory capture be treated much like police corruption?
Pleased to say that in the Channel Islands we are shortly to be getting a co-operative telecoms network: https://coopmobile.coop/
Thank you for this characteristically perceptive and insightful post. (I'm considering a pledge of support, but must assess the opportunity cost.)
Your point about the need for consumers, collectively, to exercise Galbraithian "counter-vailing power" is fundamental. But I doubt that funding consumers to buy this as a "service " would work.
In the US there is a long tradition of statutorily empowered Consumer or Public Advocates at the state-level representing the collective interests of final consumers (generally traditional utility - electricity, gas, water - service consumers) in regulatory and competition policy and enforcement proceedings. (Check out nasuca.org.) State-level utility regulators in the US operate in a quasi-judicial mode. They hear the evidence from the regulated firms and from the consumer advocates and other interests parties. There are opportunities for rebuttal and counter-rebuttal. The regulator then assesses the evidence and arguments presented and makes a determination. The contrast with the regulatory process in the UK (or Europe) could not be more pronounced.
Most people seem to think that gas and electricity prices in the US are low relative to those in the UK and Europe because of the huge increase in unconventional gas supplies over the last two decades. But that is only part of the story. Another part is the development of genuinely competitive markets in gas and in gas transmission capacity - in marked contrast to the oligopoly power exercised by internal and external suppliers in Europe. And the final part is the role of Public or Consumer Advocates.
We've had nothing like this consumer representation in the UK or Europe, because in the early decades of the post war era utility services were generally provided by national (or sub-national) public or municipal entities. Privatisation eliminated the possibility that any sense of pursuing the public good, sometimes exhibited previously by the public entities, would continue. And if not actually established as captured entities, the newly established regulators were eminently capturable.
So, what we need is the statutory representation of the collective interests of final consumers - and not only in the areas of the traditional utility services, but in all areas where essential services (telecomms, internet, media, personal finance, insurance, etc.) are provided to the public.
I've made this case in a submission to DESNZ's Review of Ofgem (which is expected to generate a report some time this spring.)
“ they must spend on such organizations. Just £100 per household - £2 a week - would raise £2bn “
So who’s going to get the £250 left after the rest goes to Palestine Justice and anti-immigrant groups?
Another terrific insightful piece.
The same applies to the world of schooling. Results are carefully concealed and brief summaries are located on the government website, which is hard to access by parents. Schools are not learning organisations in terms of using their results forensically. The outcome? Sink schools.
There’s a good example of countervailing power in English higher education which has a main regulator (the Office for Students, modelled on OFGEM, OFCOM etc) but where there are student unions, affiliated to the National Union of Students