Where nations ease the burden of rules, their industrious people become wealthier

We were negotiating the traffic of Bangalore, the Silicon Valley of India, where lane markers are merely suggestions, and dogs, cars, bikes, pedestrians and errant cows elbow, hoof and jostle their way with equal vigour down the noisy lanes. My host and I got to speaking about India’s business boom.

Despite the relatively poor performance of the BRICS nations, India has been surging ahead, and continues to do so relentlessly. I recounted something I had read about their government repealing restrictive laws in the 1970s and ’80s.

‘Absolutely,’ my host said. ‘The Raj laws. The government of India was so tight and so tough that they strangled business worse than anything we ever had under imperial rule. Nothing was possible. Everything was red tape. The answer was always ‘no.’ Rules, rules, rules – they were very unfriendly to business. Probably the biggest problem was petty bureaucrats who could deny you anything if they didn’t like you. And of course that just breeds corruption, because to get past these little tyrants, you had to … you know … make them like you,’ he said, rubbing his forefingers against his thumb.

Once the government started repealing restrictive laws, the economy began to boom. And it hasn’t stopped since.

‘You know,’ he mused, ‘we probably could have been a lot richer a lot sooner…’

In Why Africa is Poor: And What Africans Can Do About It, author Greg Mills discusses the cost, to entire countries, of petty, protectionist rules. He asserts that there is basically no real point to them. They neither protect nor assist in any cause. In fact, they only serve to bog down and to add cost. Governments just want control. It’s led by ego. But actually, efficiency – in which governments get out of the way and allow business to happen, or better still, build infrastructure that makes it easier for business to happen – is much more lucrative than control. The trouble is, bureaucrats have a disappointing tendency to adore their little bit of control.

In India, my host told me that the central government has actually become notably pro-business and now goes to great lengths to remove red tape and make it easy for businesses to operate.

Could that be a clue to their relentless surge toward prosperity?

Donald Trump is doing the same in the US, and their economy has never been stronger.

By contrast, the Obama administration introduced more new rules than any other administration in their history. The Wall Street Journal published a study asking how much rules cost the US economy under his tenure, and arrived at a number. In 2016 alone, they said, it cost US businesses a collective (and eye-watering) nine trillion US Dollars, just to comply with regulations.

Where India is repealing red tape and getting out of the way of its highly industrious, incredibly intelligent people, it appears to be prospering greatly. Where nations encourage ease of trade, rather than retarding its progress with ever more new rules, money flows.

Some rules work in our favour. Some don’t. Some are little more than an ego problem.

‘You’re robbing me of my taxes!’

In the wonderful medieval novel World Without End by Ken Follett, we meet a controlling, protectionist character in the form of a priest. The priest’s name is Filimon, and Filimon is a bureaucrat to his core; a dyed-in-the-wool petty tyrant. Charged with overseeing King’s Cross Cathedral, Filimon ensures the income of the place through rents and taxes.

As the infrastructure in his town deteriorates, and the next town along makes great improvements to its roads and facilities, his profits begin to decrease. Trade gradually abandons King’s Cross. It moves on.

Through the course of the book, a few of the characters suggest a series of simple innovations to Filimon: ‘Build a better mill, and you will attract more trade. Ours is old and broken.’ ‘Build a bigger bridge over the river for travellers to reach the town. It takes too long for tradesmen to get in. They wait for days to cross the small bridge and they won’t tolerate it any more.’

Filimon can’t see it. Money, he believes, comes from rents and taxes. If his income is down, he must increase the rents, force his subjects to pay more, and use soldiers to extract the payments by force if necessary. Naturally, the more he does this, the more his subjects sneak away in the night, moving to greener pastures.

Every time someone suggests a simple innovation, Filimon responds with: ‘You’re trying to rob me and you’re trying to rob the cathedral!’

This little story is a perfect microcosm of what happens when petty tyrants rule a system. Viewing the world exclusively through numbers and greed, they cannot see sense in growth and investment. The thing that matters most to them is control – rules! - and their control strangles the life out of their own systems.

Petty protectionist rules are almost always ego-led. They get in the way of the increased flow of business. Greater business flow equals greater prosperity, but only for those who can see it. When ‘control’ is the goal, your King’s Cross starts circling the drain. Business goes where everything is easier. Such as India. Or the US.

Douglas Kruger specialises in dismantling needless rules. A business speaker and author of 5 books with Penguin Random House, including ‘They’re Your Rules, Break Them!’, he presents locally and internationally on the topic of disruptive innovation and how to reduce your own rules in order to achieve it. Douglas is also a multiple award-winning speaker, who was inducted into the ‘Speakers Hall of Fame’ in 2016. See him in action at www.douglaskruger.co.za.