Regulatory Capture: Is this what’s wrong with Vancouver City Hall?

Regulatory Capture wordsRegulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure; it creates an opening for firms to behave in ways injurious to the public (e.g., producing negative externalities). The agencies are called “captured agencies. (Definition by Wikipedia)

Perhaps “regulatory capture” is a useful concept for explaining some of the phenomena we can observe in Vancouver, in British Columbia, in Canada and in the world.

For example, one of the most important functions of any municipal government is as a “regulator” of land use, and in that context the “regulated” include property owners, developers, and the construction industry. Where you have a situation like in Vancouver where the regulate industry is the largest source of election campaign funding, is it possible that a mayor and city council can be “captured”? And among the city staff, careers appear to revolve in and out of city hall. Some academics (who advise media and government) in the region get considerable funding from corporations. Despite their best intentions, are mayor and city council incapable of acting in the public interest (in this case, providing affordable housing)? Are we witnessing “government failure” unfolding before our eyes? And if so, what are the solutions?

“Captured agencies” are probably incapable of reforming themselves, so change may only happen through significant, persistent, long-term pressure from society as a whole. In this project, perhaps it is citizens and independent media (if they too have not been “captured” by their advertisers and funders) that have the largest role to play.

Try some thought experiments. Look at corporate and union donations to municipal and provincial governments. The yoga wear, pharmaceutical, mining, LNG, and fossil fuel industries in British Columbia at the provincial level. Development industry at the municipal level. And so on. Below is a table inspired by observation. At the bottom is a list of some possible solutions at the civic level.

Issue Regulator Regulated Examples of failure
Climate change Governments (local, provincial/state, national) Fossil fuel industry Decades of delay in taking action, resulting in catastrophic climate change
Nuclear power Government Nuclear power industry Fukushima nuclear disaster in 2011, resulting worst industrial nuclear accident in history, hundreds of thousands evacuated permanently, and radioactive contamination of the Pacific Ocean
Land use Municipal government Development, construction, real estate industries Vancouver City Hall’s failure to recognize threats to affordable housing, failure to find solutions to the housing crisis, creating a housing market “contorted and distorted … beyond redemption” and the very character of Vancouver changed “for generations to come”
Internet pricing in Canada Canadian Radio-television and Telecommunications Commission Telecom industry Excessively high prices paid by Canadian consumers for Internet and mobile phone use
Hydraulic fracturing (fracking) in the United States Environmental Protection Agency Fracking industry Fracking earthquakes, groundwater pollution, environmental degradation, health damage
Regulation of Wall Street Federal Reserve Bank of New York Banking and financial industry Global financial meltdown in 2008
Consumer safety U.S. Food and Drug Administration Agricultural, food and pharmaceutical industries Damage to consumer health

SOLUTIONS

Solutions recommended by experts include high standards of transparency and accountability.

CityHallWatch has listed some solutions that might help too. It would be great for Vancouver City Council to adopt all of these immediately.

Nine actions to reform our municipal government – No reason to delay (27-May-2015)
https://cityhallwatch.wordpress.com/2015/05/27/nine-actions-reform-muni-government/

Copied below.

We need to see at least the following, and there is no reason for delay:

  1. Provincial government decision to ban corporate and union donationsand put meaningful caps on dollar amounts of donations.
  2. Municipal lobbyist registry – perhaps at the Metro Vancouver level
  3. Powerful, independent whistleblower system at municipal level – perhaps at Metro Vancouver level
  4. Ombudsperson for handling complaints at the municipal level
  5. Better standards for handling of freedom of information requests
  6. A bid committee for municipal government procurement, with full minutes posted online within 24 hours
  7. Continuous mandatory reporting of political donations to municipal politicians and parties
  8. Live and archive web video of all meetings of the Metro Vancouver Board of Directors and its committees. (Most municipalities already have this, and Vancouver Park Board started at last in 2015)
  9. Less use of in camera meetings (closed to the public, i.e., secret)

SELECTED READING

It’s Normal for Regulators to Get Captured (1-Oct-2014, by Megan McArdle)
http://www.bloombergview.com/articles/2014-09-30/it-s-normal-for-regulators-to-get-captured

Preventing Regulatory Capture: Special Interest Influence and How to Limit It
Edited by Daniel Carpenter (Harvard University) and David A. Moss (Harvard University). Focusing on the goal of prevention, the volume advances a more rigorous and empirical standard for diagnosing and measuring capture, paving the way for new lines of academic inquiry and more precise and nuanced reform.
http://www.tobinproject.org/sites/tobinproject.org/files/assets/Kwak%20-%20Cultural%20Capture%20and%20the%20Financial%20Crisis.pdf

Regulatory Capture: What the Experts Have Found (by Adam Thierer, 19-Dec-2010). A good compilation of quotes and anecdotes.
http://techliberation.com/2010/12/19/regulatory-capture-what-the-experts-have-found/

Regulatory Capture: A Review (Oxford Review of Economic Policy)
http://oxrep.oxfordjournals.org/content/22/2/203.abstract

Direct link: http://faculty.haas.berkeley.edu/dalbo/Regulatory_Capture_Published.pdf

Regulatory Capture 101: Impressionable journalists finally meet George Stigler. (Wall Street Journal, Oct. 6, 2014)
http://www.wsj.com/articles/regulatory-capture-101-1412544509

by ADAM THIERER on DECEMBER 19, 2010

One thought on “Regulatory Capture: Is this what’s wrong with Vancouver City Hall?

  1. For well over a quarter of a century, Vancouver has been founded (literally and figuratively) on a glaring conflict-of-interest contradiction. How can the entity that determines land use AT THE SAME TIME be a major player in land speculation through the Property Endowment Fund? Have a go at finding information about the PEF – there is almost no public reporting on the public’s holdings of billions of dollars. One of the preconditions for the current stripmining of the public coffers and the public realm.

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