Denseman on the Rattis

Formerly known as the Widmann Blog


Will excessive regulations make it hard to restart growth?

When I spent a summer holiday in Russia in the early '90s, and especially when I lived in Tbilisi in Georgia for a year (1996-97), private initiative was everywhere. People might have been dirt poor after the collapse of the Soviet Union, but the upheaval also meant there were very few regulations, so ordinary people set up language schools in their living rooms, bakeries in their cellars, they sold fuel in their backyards or apples in the open-air market.

However, because it’s only the economy that has collapsed here, not the state, we still live under boom-time regulations.

Until recently, it was reasonable to assume that I could get a big loan from a bank to start my own business, either by presenting them with a business plan or by releasing equity in my house. Now most people would be turned down if they tried that.

But how do you start a business without money?

If I started selling home-baked treats to the high-school kids passing our house during their lunch break, I’m sure I’d get a nasty visit from some government official. The same would happen if I started brewing beer and selling it online, or if Phyllis set up a photo studio in our garage.

Of course some regulations need to stay in place, but I’m sure many more businesses would appear from nowhere if 90 percent of regulations were suspended for the next five years.

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