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Business Investment, The Recovery, And Goals-Based Regulation

  • The economies that will recover fastest will be those that are best able to re-establish and sustain strong demand and to unleash the dynamism of entrepreneurs, large and small.
  • Business investment is the key to a recovery, both to boost demand and to enable businesses to adapt to the structural changes that are now inevitable, and governments must start thinking about how they can support business investment.
  • Supporting business investment means reducing regulatory frictions, including by making permanent some of the temporary easing of regulations that we have seen during the early stages of the pandemic.
  • Too much regulation is heavy on process, with the purpose of the regulation sometimes lost as a result, and rigid rules-based regulation too often stifles innovation or fails to keep up with industry changes, meaning it no longer serves its purpose.
  • When whole sectors must adapt, regulation needs be flexible to encourage businesses to innovate and invest while also allowing regulatory objectives to be achieved, and that means shifting from rules-based to goals-based regulation.
  • Goals-based regulation is inherently more responsive to market changes as it allows businesses to innovate and adapt their approach while still meeting regulatory objectives and without requiring regulators to overhaul their rules.
  • The benefits from better regulation for productivity growth and in encouraging investment are likely to be particularly significant in relatively highly regulated economies.

Further Insights

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