Time to cut Frankenstein over-regulation on Spanish businesses

Fernando del Pino Calvo-Sotelo, in Madrid | Through the years, central, regional and local politicians have created, out of the blue, hundreds of thousands of laws, rules and regulations with which we all are obliged to comply. As far as I know, the Official State Gazette publishes 250.000 pages a year; the regional ones, 800.000 a year. You read it right: no typo there. One million pages a year. Maybe in Spain we don’t read as much as we should, but we most certainly seem to write a lot.

However, in spite of this nonsense, the principle which states that “ignorance of the law is no excuse” still applies. In my view, this principle made much more sense in the good old days, when there were far fewer rules and also when those rules followed the paths of common sense. In any case, the principle still applies, and it leads us, citizens and businesses alike, to a number of most uncomfortable situations. Today it is hard to be certain that we are complying with each and every dictum invented by our politicians.

To the delight of lawyers and consultants, we have to assign an increasing amount of resources to that very compliance.  Since resources are finite, those assigned to this purpose are diverted from improving our productivity, enhancing the quality of our products, expanding our capacity, increasing employees’ and shareholders’ compensation or strengthening our liquidity so we don’t need to hang on that fragile credit line, for instance. The whims and vagaries of our politicians divert us from productive actions and towards totally unproductive matters. Soon, if we were to add up the politicians who pass the rules, the individuals who oversee us to make sure we comply with those rules, and the individuals actually hired by us to ensure the overseers do not complain, precious few of us will be left to pay the wages of them all. Then, what? We will be and are even now approaching the world described by Ayn Rand in Atlas Shrugged.

A foreign businessman, a subtle observer of Spains’ affairs, amazed with both the tangle of regulations and the laxity with which Law is obeyed, put it this way: “Spain is a regulatory dictatorship, smoothed out only by the mild observance of the Law.” He was talking about a problem which is the cause of the relative poverty and loss of competitiveness of Spain’s economy. The actual problem is really more of a national disaster. It strikes at the root of our country. This national disaster is called excessive regulation and legal uncertainty.

That true cancer has four main facets. First, as mentioned above, politicians pick too many rules out of the hat. These rules oppressively regulate the slightest details of our personal and business lives. They besiege our freedom in order to increase their power. Moreover, in Spain we have 18 different administrations, each with its own with the gigantic regional bureaucracy, as well as Brussels’ mammoth stomping all around.

Secondly, these rules are too cumbersome and too entangled in their nature. Simplicity seemingly terrifies the legislator. Complexity sells better; laws are apparently to be valued by weight. How typically Spanish these lengthy laws are, full of heavy wording and a swarm of articles and sub-articles which try to chain up reality, which it is factually too wide and too complex to be tied up in a few pages. Unsurprisingly, reality rebels in defense of its threatened liberty.

Thirdly, hopelessly, really relevant laws are changed each time the color of the government changes. That is definitely not my definition of stability. For instance, how many education reforms have we had? How many tax system changes? The major parties do not agree on anything and have the habit of passing laws to correct the “mistakes” made by the previous administration. This way it is impossible to plan for the long term. You won’t see much investment without long term planning. And if there’s no investment, kindly tell me, how can the seeds of growth be sown?

Fourthly and finally, Spanish laws swing between that precision which tries in vain to trap an ever-bigger reality and a calculated ambiguity to allow arbitrariness by the power holders who enact the law. In the latter case, the citizen or the business depends on the “goodwill” of the politician sitting there. Like King Richard III in Shakespeare’s eponymous play, politicians always want to keep the door open to be able to say: “I’m not in the giving vein today” (Act 4, Scene 2). Remember that the summit of power is arbitrary power. All politicians dream of it. Remember that.

In Spain, politicians have made a profession out of politics. As a rule, they have been there since they finished their education. Given that many scarcely have any education at all, that means they’ve been around a pretty long time. On the other side we have all those who finished university and some second degree thereafter and, just like those other twenty-something years old, entered politics. These we call “the well-prepared”. Obviously, it’s always better to have more education than less; foreign languages, politicians please take note, also help. Nonetheless, this breed of “well-prepared” politicians has not had any experience in the outside “real” world. All they have known is the party headquarters and, if lucky, some role in the Administration. In all too many cases, they do not have the faintest idea of how a business works. As business is the engine of growth and wealth anywhere you look in a free market economy, lacking this experience is no small drawback. Never mind, we are living in a globalized and brutally competitive world. These politicians, therefore, have always been on the side of those who write the rules and oblige us to comply with them, never on the other side, the side which suffers the consequences of those rules.

Well, sooner or later, both the well-prepared and the uneducated get into power after spending half their lives craving for it. They want to leave their particular footprint: they want to write a law. They develop some sort of compulsory law-writing fever and measure their success by the number of rules passed. In Spain, having no distinction in practice between the executive and legislative branches, politicians feel ruling is writing laws. What our country desperately needs is quite the opposite. It needs fewer rules, not more; deregulation, not further regulation. It needs to stop suffocating individual liberty so as to allow this individual liberty to create prosperity.

If the current government really wants to reform Spain in order to get out of this damned crisis, it should set itself the goal of drastically reducing the number of rules and regulations. In particular, it should aim at pruning those manufactured by that Frankenstein called “the autonomous regions”, an invention truly turned into a monster.

It should also plan to simplify the most important laws. Both measures would return some power to Society, power which was taken from it by coercion. Lastly, it should try to establish some effective and serious communication channels to reach agreements with the opposition party, even if the latter is currently in a guerrilla warfare stance– politically speaking, of course. If some true consensuses were reached on important laws, only the less important fields would be left to the frivolity and triviality of political confrontation.

Business activity in Spain has barely survived burdened and squashed as it is under the weight of the nonsensical and whimsical rules of all our 18 different administrations, and under the legal uncertainty caused by their continuing modification and the arbitrariness of their application. We must get rid of this yoke. Now.

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