Government Regulation vs. Self-Regulation in Handling Private Sector Operations: A Critical Analysis

Often, government regulation of private sector operations is viewed as an intrusion, amidst the alternative argument that self regulation will suffice.

This contention is frequently asserted by “big business” who claim that they have acquired the necessary skills, experience and expertise in the particular sector and, therefore, can assure the public that they are best placed to set standards and police their own.

In some cases, this assertion is true, as the group seeks to vigorously protect its image and, as such, work aggressively to kick out bad actors.

Here at home, the Institute of Chartered Accountants of Barbados (ICAB), for example, has taken steps to inform citizens of its self regulation processes and encourages members of the public who have complaints about any ICAB member to alert the body to have them investigated and action taken.

The public has not been informed of any complaints or disciplinary action taken and so, we cannot offer an opinion on the efficacy of this group’s self regulation.

When it comes to attorneys-at-law and the process of self-regulation by the Bar Association, some may argue that the jury is still out.

Admittedly, in recent times, the number of disbarments from the profession has increased and sadly, there is a growing number of lawyers who have faced incarceration.

There are some sectors however, that require governmental regulation as the impact of a failure or bad action could have a devastating effect not only on those directly involved but a ripple effect across the society.

Multinational corporations are usually the most highly regulated because of their cross-border activities and so, a disaster in one geographical location would likely result in contagion.

The global financial crisis of 2007/2008, which started with the foibles of the United States housing bubble, quickly swept across the globe, engulfing economies such as Barbados’.

Failed regulation of the subprime market saw individual borrowers provided with loans so large that they were unlikely to be able to repay them. In addition, there was overstating of borrowers’ income and over-promising investors on the safety of mortgage-backed securities products they were being sold.

An even more stark and tragic case of laxed regulation which has had a direct impact on thousands of Barbadians was the collapse of the CL Financial Group in Trinidad and Tobago.