OECD Advises Members That Effective Regulation Can Create Economic Growth

The Organization for Economic Cooperation and Development (OECD) recently released its Regulatory Policy Outlook 2015. Part of its findings related to the effect of effective regulation on economic growth. According to the OECD’s study, even small efforts to correct regulatory shortcomings can have positive impact on a nation’s economic growth and health. As a result, the OECD has advised its member governments to focus on improving their lawmaking.

The Organization for Economic Cooperation and Development (OECD) recently released its Regulatory Policy Outlook 2015. Part of its findings related to the effect of effective regulation on economic growth. According to the OECD’s study, even small efforts to correct regulatory shortcomings can have positive impact on a nation’s economic growth and health. As a result, the OECD has advised its member governments to focus on improving their lawmaking.

Secretary General of the OECD, Angel Gurría, speaking about the Regulatory Policy Outlook 2015, noted that “Governments tend to focus their energy on getting their tax and spending policies right and often overlook a third lever that can support economic growth ‒ regulation.”

As reported by Public Finance International, the OECD believes that making regulations based on available evidence that also provide for accountability lead to positive dividends for the enacting nation. In support of its assertion, the OECD cited to Australia, where reducing regulatory costs increased gross domestic product (GDP) by 1.3 percent. Similarly, streamlining economic policies in the UK saved businesses 10 billion pounds sterling over four years, while similar measures in Belgium delivered 1.25 billion euros in savings.

The OECD also used the report as an opportunity to bolster the importance of its own organizational aims. According to its findings, governments and industries that participate in regulatory cooperation, as facilitated by the OECD, have saved over 153 million euros on reduced chemical testing, work sharing, and internationally standardized formats. According to the OECD, such international cooperation in regulation and law making creates universal, globally recognized rules and industry standards, alleviating unnecessary regionalism, trade friction, and environmental risks. It can also help the world to avoid regulatory failures such as the ones that led to the 2008 financial crisis.

In tracking the growth of OECD member nations, it discovered that only about one third of the 34 member nations actually have a clear policy for international regulatory cooperation. Another third have no policy at all, while two thirds have no system for evaluating their own laws after implementation. The OECD argues that these poor regulatory enactment and follow-up policies hamper business and trade.

As Gurría said, “Governments trying to shake off anemic growth must address shortcomings in regulation and ensure laws work as well in practice as they do on paper. Laws need to be not just well designed, but well implemented, properly evaluated and consistently applied across sectors, jurisdictions and borders.”