Yes, regulation costs us money, but what is the cost of deregulation?

August 6, 2021

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Yes, regulation costs us money, but what is the cost of deregulation?

In response to tragic events – including two recent incidents in both Canada and the U.S. that caused terrible loss of life, loss of homes, and destruction of infrastructure – we always tend to ask as a society or community: how did this happen? Why did it happen?

The events referred to are the terrible collapse of the condo building in Miami, Fla., which caused the deaths of 98 people and the loss of homes for countless more, and the crane collapse at a construction site in Kelowna, B.C., which killed five men.

Regarding the Kelowna crane collapse, the exact cause is still being investigated. In the case of the Miami condo, however, we know the cause was deteriorating concrete and structural integrity. A report by a structural engineer in 2018 flagged the building as having major structural damage.

Both these incidents will likely come to be seen as highly preventable and, at the heart of it, failures of regulation. Whatever the immediate cause turns out to be for the crane accident or the Miami condo collapse, we must look beyond that immediate cause to the underlying factors that allowed these tragedies to occur. In the Miami condo collapse, if it was known the building needed repairs, why didn’t they happen? To this question, it might be answered, the condo board did not have the money to fix it. Does the probe end there? Hopefully not.

Regulation vs. deregulation – an ideological divide

There is often a political tug of war, and even an ideological divide, that underlies trends toward more regulation and, on the other hand, less regulation. Regulation is often viewed in bare economic terms by deregulation advocates as costly and inhibitive to economic growth and investment. In short, too much red tape means businesses and professionals will not set up shop, ultimately leading to a loss of jobs and opportunity in the regulating jurisdiction. Those who argue for regulation say it’s necessary for public protection and that economies fare better when there is a stable and secure environment. Regulation, they say, is an investment and a safeguard that ultimately is a cost saver by avoiding the expense of addressing accidents or disasters. In short, an ounce of prevention.

Most reasonable people would agree that an ounce of prevention is a good philosophy, but as the cost of regulation increases, the deregulation argument gains momentum. Another question that arises, however fallacious, is: why are we spending more on regulation when there isn’t a problem? Buildings aren’t falling down everywhere; construction sites are generally very safe. Regulation has set the standards of safety so now we don’t need them anymore, right? Wrong. Standards can’t just be set and then not enforced.

Common sense will tell us this simplistic analysis is flawed. Yet, there is a pervasive predisposition to accept this argument, especially when individuals see the possibility of money going back into their pocket. People can see money in their pocket and tangibly experience the things they can buy with it. What regulation buys is not as obvious. Regulation, when it works, prevents risks from happening – it’s an absence of tragic events. You can’t see and know what does not happen.

Gaps in regulation lead to gaps in accountability

In the case of the Miami condo collapse, the existing regulations only required a process called “recertification” to happen every 40 years, a process that puts the onus on volunteer condo boards, who are often under pressure from residents to keep costs down and avoid disruptive projects, to take action. And even though the condo association had started the recertification process early, at the time of the collapse, almost three years after receiving the engineer’s report, no action had been taken. Where there are gaps in regulation, there are gaps in accountability, making it easier to shift blame around.

However, in these situations, blame is usually shared because there are several precipitating factors. For instance, there are no laws in Florida requiring condo boards to have reserve funds and, moreover, no clear laws requiring condos to repair structural problems upon discovery. Whatever the final findings are from the investigation, it is clear there were gaps in the regulatory framework and without a strong mandate, there does not appear to have been a body that was clearly responsible for fixing the building.

Regarding the crane accident in Kelowna, there are already calls for increased regulation for crane operators, which would include a provincial registry and mandatory training.

And these are just two recent examples of tragic incidents that could have been prevented if stronger regulations were in place. Sadly, there are countless others, including the 2017 fire that claimed the lives of 72 residents of Grenfell Tower in London, England, and the Lac-Mégantic rail disaster in Quebec that killed 47 people in 2013.

Solid, clear regulation provides the foundation

Wherever there are calls for increased regulation, there will be associated costs that must be borne by someone, whether that be taxpayers (if it’s government-run regulation), licensees in the case of professional regulation (which could be passed on to the consumer), or even individual citizens, such as condo owners. So, the question is, in the face of devastating losses of human life, is that cost not worth it? We often get caught up in the expectation of the “freedom to” – freedom to travel; freedom to buy things; freedom to do what we want. But we cannot forget the value of “freedom from” – freedom from worry, freedom from risk.

Solid, clear regulation could be seen as part of Maslow’s hierarchy of needs – it’s a foundation upon which we can enjoy the finer things in life, but we need that foundation first. We need to be able to go to work without fear of injury or death. We must be able to live in our houses without the danger of collapse. These are the essentials; everything else is gravy.

Cara Moroney is a lawyer with extensive experience in professional regulation in Canada. She combined her legal education and conviction for public protection to investigate cases of serious misconduct at the College of Nurses. She went on to lead the professional conduct department at the College of Kinesiologists of Ontario, and later brought her skills to the Law Society of Ontario as Compensation Fund Counsel. She currently leads the Enterprise Solutions Group at Thentia.