Is Alberta Overregulated?

Ricardo Acuña

The president of the University of Alberta’s Association of Academic Staff says no

While repeating the mantra and rhetoric that our businesses are overregulated helps corporations and their think tanks raise the righteous anger of anti-government voters, the reality is that every single regulation we have exists for a reason. That reason usually involves the protection of workers, children, the environment, public health, the public interest or some combination thereof.

Regulations do not exist in a vacuum. They are a response by government to the fact that the only objective of businesses and corporations is the maximization of profit, and the understanding that the quest for profit can, and often does, do damage to the public interest.

Do regulations place limits on what businesses and corporations can do in their search for profits, and thereby reduce profits? Yes, and that’s good. It took regulations to ban children from working in coal mines, to put an end to workers being locked in sweatshops with no ventilation or fresh air, to end the practice of workers building bridges and high-rises without harnesses or safety equipment, and to prohibit industry from dumping chemical waste into public waterways. Canada’s banking sector would have suffered the same fate as that of the US in 2008 were it not for strict regulations around sub-prime mortgages and bundling of bad debts.

Notably, industry and their think tanks resisted every one of those regulations. They insisted that not being able to use children, or having to pay for ventilation systems or harnesses or safety equipment, would make it impossible for them to earn profits. They insisted that having to properly dispose of chemical waste would place too much of a financial burden on their struggling industry. And they insisted that if too many regulations were placed on their ability to generate profit, the economy would suffer and people would lose their jobs.

Ultimately, in all of those cases, government made the decision that the benefits of the regulation to the public interest far outweighed the damage of the regulations to the corporate bottom line. For that reason, blanket statements about too much regulation—or a promise to arbitrarily eliminate one-third of existing regulations, as was made by Jason Kenney’s UCP government—are dangerous. They shift the focus away from the need to protect the public interest and in favour of the desire to maximize profits at all costs.

Is it likely that we have some regulations in place that are obsolete and no longer necessary? Of course. But we also still have areas, as in the case of the orphan oil and gas wells that dot the province and pose a serious environmental liability, where more regulation is clearly needed. Unless every regulation is studied on its own merit with a clear understanding of the reasons for its implementation and its impact on the public interest, any assertion that we are overregulated is clearly just ideological rather than factual and based on evidence.

 

Laura Jones

The VP and chief strategic officer at the Canadian Federation of Independent Business says yes

Until recently, politicians of all stripes in Alberta have claimed that measuring the amount of regulation is unimportant and unnecessary. Their argument: Everyone knows that Alberta is less regulated than any other province. After all, who hasn’t heard of the “Alberta Advantage”?

This is hard to square with the fact that 90 per cent of Alberta small-business owners we surveyed agree that reducing around one-third of regulations is a good idea, and 88 per cent support having a red tape reduction minister. Furthermore, Alberta has earned a string of failing grades from the CFIB on our annual Red Tape Report Card for its unwillingness to measure.

Red tape comes in many pernicious forms. It includes rules that don’t make sense, regulations designed in a bygone era, websites that are difficult to navigate, forms that are hard to understand, and even long waits to talk to government agents.

Fortunately, the situation in Alberta is changing for the better. The new government has committed to measuring the amount of regulation—a critical first step towards reducing red tape and toward government accountability more broadly.

As we wait for the government to publicly release its own data, other sources indicate Alberta is not the regulatory lightweight previous political leaders believed it to be.

The Mercatus Center at George Mason University in Virginia recently released new Canadian data as part of its RegData project, which uses text-based computer analysis to determine regulatory restrictions found in legislation and regulation (other restrictions such as those found in departments’ and agencies’ guidance documents are not yet included). Alberta’s regulatory restriction count is 66,714. This is far lower than the province with the most restrictions (Quebec has 137,019). But Alberta isn’t even close to having the fewest restrictions in Canada. In fact, it has the fourth-highest number, behind Quebec, Ontario and Nova Scotia. BC, which has been measuring its regulatory burden since 2001, has the second-lowest number of restrictions at 48,264 (the lowest is PEI, at 34,059).

That Alberta has almost 20,000 more regulatory requirements than BC suggests there is room to reduce the burden without harming the health, safety and environmental outcomes we all care about. It seems many Albertans agree, as the government has received over 4,000 comments since it launched a website last June seeking suggestions for cutting red tape.

Why does this matter? Some regulation is a good thing. But too much regulation slows economic growth, frustrates entrepreneurship and simply stresses people out. Studies using the RegData dataset show that higher levels of regulation are even associated with greater poverty and income inequality.

We need more data, but what we have suggests that Alberta has lots of room to grow if it can pare back the regulations it doesn’t truly need. It’s good the new government under Premier Jason Kenney is making this a priority.

 

Ricardo Acuña responds to Laura Jones

Laura Jones tries to make the case that Alberta is overregulated by stating that 90 per cent of business owners surveyed by the Canadian Federation of Independent Business (an anti-government advocacy group) think it is. As arguments go, that’s the equivalent of trying to prove that chicken coops are too secure because 90 per cent of foxes surveyed by the Association of Hungry Foxes think they are.

Ms. Jones also points to the fact that the CFIB has repeatedly given Alberta a failing grade for not even measuring red tape. The question, then, is how she can be so certain that Alberta has too much regulation if nobody is actually counting or keeping track of how much regulation Alberta actually has.

To answer that question she points to a study that she co-authored for the Mercatus Center, a think tank funded by the Koch brothers that includes on its board the executive VP of Koch Industries, the president of the Koch Foundation, and Charles G. Koch himself. The Center, known for its advocacy of health care and education privatization, low taxes and virtually non-existent government, quantifies regulation by using a computer to count the incidence of the words shall, must, may not, required and prohibited on provincial government websites. A less-than-scientific method, to be sure, and one that even the report itself warns may not be ideal for concluding that one province has a heavier regulatory burden than another.

In short, Ms. Jones bases her argument that Alberta is overregulated on an entirely biased survey and the dubious research of an advocacy group with a clear anti-government and anti-regulation ideology.

Corporations and businesses are not in it for the sake of promoting the public interest. Their interest is profit maximization. Every time a business is told that they can’t endanger their workers or dump their chemicals in the back alley, it costs them money. And everything that costs them money cuts into their profit margins. It makes sense, therefore, that they would fight against anything they see as reducing profit for the sake of protecting employees’ lives and safety, public health or the environment.

Government’s job, on the other hand, is the protection and promotion of the public interest, not private profit. As such, government has a fundamental responsibility to regulate businesses in order to safeguard workers, public health, the environment and the public interest in general. Blindly slashing regulations in order to meet some arbitrary ideological target is not only dangerous, it would abrogate government’s duty to Albertans.

Ms. Jones then suggests that Albertans agree we’re overregulated because more than 4,000 submissions have been made to the government’s red tape reduction website. Setting aside that many of those proved to be joke submissions, or submissions showing a complete lack of understanding of what was being asked, it is problematic that Ms. Jones seems to use “red tape” and “regulations” interchangeably.

Most people generally understand red tape as being those unnecessary processes and procedures that slow down or prevent action or decision-making. Think about processes that require you to go to an office and fill out forms in triplicate rather than being able to do so online, or applications you have to snail mail instead of email. That’s red tape. Regulations, on the other hand, deal with things such as safety gear on construction sites, rules for dealing with hazardous materials, and zoning of certain types of industries or businesses. There is a big difference between the annoyance of having to fill out a form by hand in triplicate and the life-saving nature of requiring a high-rise window-washer to wear a harness—and the CFIB’s efforts to blur that line for political purposes is troublesome.

There’s no question every level of government can benefit from streamlining processes and making them more user-friendly. Moving to online forms for government programs, for example, would go a long way to eliminating unnecessary hassles and impediments for Albertans trying to access services.

Moving to reduce the number of regulations, however, requires significantly more care and attention than simply asserting that we need to reduce regulation by “a third.” Every regulation on the books is there for a reason. Therefore, no regulation should be eliminated unless a careful assessment is done to determine why it exists, what protections or limits it offers, whether those protections and limits are still relevant, and whether the regulation has been rendered moot by technological advancement or duplicate regulations. Only once all those questions have been answered can government ever be in a genuine position to determine whether a regulation should be eliminated, kept, amended or strengthened.

Without that kind of thorough and meticulous case-by-case assessment from a public interest perspective, not a single regulation should be eliminated in the province, regardless of how many self-serving surveys and “reports” Ms. Jones and the CFIB may publish.

Every regulation exists for a reason. None should be eliminated without careful assessment.

 

Laura Jones responds to Ricardo Acuña

On the topic of whether Alberta is overregulated, my sparring partner and I have one point in common: We both agree that plenty of regulations exist for good reasons, such as the protection of human health, promotion of better safety outcomes and prevention of environmental degradation.

But Mr. Acuña is arguing that every regulation exists for a reason, only conceding that we may have outgrown some as no longer necessary. I disagree. Many rules exist for a good reason, and many others can best be described as red tape, contributing little or nothing to the social goals we care about (sometimes even undermining them) while sucking precious time from citizens and causing unnecessary increases to our collective blood pressure.

A few examples might help illustrate this point. What good reason is there to make it more difficult than necessary for low-income seniors to access financial assistance programs? What good reason is there to restrict the construction of wood buildings to six storeys? What good reason is there to require commercial drivers in Alberta to get permits for standard equipment that is allowed in most other jurisdictions? These are just a few of the issues that the Alberta government has recently fixed as part of its efforts to reduce red tape. Judging by the over 4,000 responses to the government’s call for red tape examples so far, there are plenty more where those came from.

More broadly, what good reason is there for Alberta to have 20,000 more regulatory requirements than British Columbia?

Regulatory accountability in government deserves to be as important as fiscal accountability. But until recently there has been no constraint or “budget” on regulating.  Incentives have been stacked in favour of adding rules without much thought to which ones need to be weeded out. The Alberta government is in the process of changing this. Ideally, this will lead to better regulatory outcomes with less time and stress spent on compliance. This is the win–win that reducing red tape (while keeping important regulations in place) can deliver.

After BC dramatically reduced its forestry regulations as part of its successful red tape reforms, the minister responsible pointed out that fewer forestry deaths occurred in the years after the regulatory reduction than in the years before. This doesn’t mean the reduction caused that better outcome, but it does show that better outcomes are possible with fewer rules. The minister also insisted that those fewer rules should come with stronger penalties for non-compliance, which is reasonable.

Mr. Acuña argues that the quest for profit can, and often does, do damage to the public interest. It is unfortunately true that bad actors exist in every walk of life, from regulators to business owners. Bad actors can damage the public interest, and this most certainly can be a result of wanting to earn money. But most of us are not bad actors, and I take issue with Mr. Acuña’s one-sided view of the profit motive.

Businesses must earn some profit to be successful and continue to operate. By working to make a profit, businesses do a lot of good in society, from employing people, to producing the goods and services that we enjoy, to supporting local soccer teams. The vast majority of small businesses are rightly proud of the contributions they make to their communities, deriving pleasure not just from the money they make but from the satisfaction of their customers and the well-being of their employees. Profit is a reward for the risks that entrepreneurs take—and the often difficult and unprofitable road to success. People who seek to make a profit aren’t inherently evil, needing piles of regulations to keep them in check. They are largely people trying to do good, with excessive rules making that more difficult.

My argument that Alberta is overregulated is an argument against red tape, not an argument against necessary rules. It’s an argument against excessively long delays on everything from basic building permits to bigger infrastructure projects. It’s an argument against forms being longer and more difficult than they need to be. It’s an argument for common sense. It’s an argument for more accountability with respect to what is currently a hidden tax on all of us.

Mr. Acuña and I may disagree about many things but we agree that there are lots of good regulations that support good outcomes. I also agree that in some areas we may need more regulation, even as I argue that an overall reduction is in order. Like the vast majority of Albertans, we both want strong safety, environment and health outcomes. We just disagree on how best to get there. More rules are not always better. Sometimes fewer will do the job just as well.

Jones acknowledges the assistance of James Broughel, Senior Research Fellow at the Mercatus Center.

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