Daytrading.no-the homepage of Oddmund Grøtte

Short notes on regulation
Copyright Oddmund Grøtte 2004, updated 3rd of January 2005

(This is older notes from my blog which you can find on the frontpage)

14th of September, 2004
No wonder they are poor

How can we help poor countries help themselves? Start with less regulation and red tape, arguably the single most important criteria for setting up a business. The legal framework in lesser developed countris (LDC) is one of the biggest obstacles for growth and development.

In the last edition of The Economist there are two articles about the regulatory framework for doing business in LDCs. Both are based on a new report from the World Bank called Doing Business in 2005. The report examines seven indicators of a countrys business climate, from the cost of starting a new firm and enforcing contracts to the ease of hiring or firing workers and of borrowing money.

Some random points:

• Registering property in Algeria takes 16 steps, 1 in Norway
• Incorporating a business takes two days in Canada, 153 days in Mozambique
• Sacking a worker in Guatemala costs a firm three years worth of wages, almost nothing in New Zealand
• In Haiti it takes 203 days to register a new company, it takes 2 days in Australia
• Recording a property sale involves 21 steps in Nigeria and takes 274 days and costs amounts to 27% of the sale, compared to one day in Norway and 2.5%
• In 12 countries it costs more to recoup a typical debt than was originally owed (guess how easy it is to borrow money in such places....)

Put shortly, the poorer the country, the worse score. A coincidence? Highly unlikely. Of course, not all regulation destroys wealth. The most important regulation is to protect property rights, where LDCs have a long way to go.

Best is New Zealand, second the US and Norway is number 6.

You find the report here.

10th of August, 2004
...and some more about regulation

About half the Norwegian working population is either on welfare or are employed in the public sector. Some of those in the public sector spend their prime years working with interesting stuff like applications (among other things) on additional things to your house, like a garage, terrace etc. They are supposed to judge if an addition is "fit" to your house. Quite bizarre, really, when you think of it.

I am subscribing to my local newspaper this summer, Adresseavisen, and one of the articles today raised my eyebrows (to say the least). A guy in Trondheim is being refused by the bureaucrats to set up a terrace in his own garden! (Sorry, there is no link to the article)

He wants to build a 100 square metre terrace with partial roof in his garden (yes, you need to apply for that). The neighbours agreed with the plans and he went ahead building after sending the application, sure it would be a formality to get the get go from the bureaucrats. After two months he received a letter with refusal: he now has to tear down what he has already build.

According to the council the terrace is not aesthetic! Who are to judge what is aesthetic? This is a personal opinion, no objective criteria. The reply was that the terrace was too big compared to the garden and the roof is not placed correctly. And they added the big roof was unnecessary.... What a contempt to individual taste and private property.

To make it worse: we are even paying for the bureaucrats to sit there. IMO, what should be done is fairly simple. If the neighbours agree with the plans that is all what is needed. What on earth does this matter to other people? Why do we need this? Is there no room for individual tastes?

BTW, this reminds about a similar case in Larvik earlier this summer: A guy had to pay a daily fine every day as long as his house stayed pink. The council did not accept his changing the color from blue to pink.....

For other people, who love individual freedom (without force being exercised on other people and thus limiting other peoples freedom) and dislike bureaucrats, I strongly recommend some short stories by Nikolai Gogol, a russian author, most famous for Dead Souls. He has written some amusing stories about red tape in St. Petersburg some 150 years ago.

9th of August, 2004
Regulation, regulation, regulation....

Left wing politicians in Norway are discussing ways to set a maximum price for services conducted by lawyers. They are sick of hearing outrageous prices from high earning lawyers.

I, for one, paid almost 15.000 NOK for legal advice regarding my tax filing this winter. I received a letter from the local IRS instructing me to explain my income from abroad. The tax law was so complex and I did not have a clue what is the relevant tax law so I contacted a tax lawyer for this. 

Just from my filing I can give two advice to lower the cost for legal advice: First, they can make the tax law simpler (and decrease the number of laws in general). No wonder it gets expensive when dealing with tax laws which not even the IRS understands. Second, they can get rid of the 24% VAT on services which they introduced in 2001. As is too often the case, the culprit is the government officials themselves. Why on earth should the government interfere with the private market? If they start regulating the lawyers, the next step is the plumbers, after the plumbers the carpenters.....

6th of August, 2004
Farming in the EU

A funny anectode about subsidies in the EU: the average income per person in Sub-Saharan countries is less than 1 USD a day. The average cow in the EU earns about 2.2 USD a day in Brussels handout. (The source is here)