James d. Gwartney

progress.

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of the power of simple understanding of economic common sense, attention to these delays,
perhaps motivated by the wide attention given to Professor de Soto’s work, has resulted in a
massive easing of the bureaucracy required to open a business in recent years. The World Bank
reports that the global average time to open a business has fallen from 51 days in 2005 to 20
days in 2018. Time required improved dramatically among countries at every income level and
in every region of the world except North America, where it remained constant at an already
low 3.5 days. Last place in the league table is held, not surprisingly, by Venezuela, where
legally opening a business would take 230 days. Top ranked were New Zealand and Georgia,
where the process could be completed in half a day.
(25)
 Among post-communist countries the
longest time to open a business was in Bosnia and Herzegovina, where 80 days were required.
Post-communist countries have actually made great strides in ease of opening businesses,
which takes 14 days on average across the region as compared to 23 days in East Asia and 28
days in Latin America.
Second, regulations that substitute political authority for the rule of law and freedom of
contract will tend to undermine gains from trade. Several countries make a habit of adopting
laws that grant political administrators substantial discretionary authority. For example, in
the mid-1980s customs officials in Guatemala were permitted to waive tariffs if they thought
that doing so was in the “national interest.” Such legislation is an open invitation for
government officials to solicit bribes. It creates regulatory uncertainty and makes business
activity costlier and less attractive, particularly for honest people. Popular support for
regulation often stems from the desire to promote a cleaner environment or provide consumers
with protection against unscrupulous business operators. Regulations can play a positive role
in these areas. Even here, however, the law needs to be precise, unambiguous, and
nondiscriminatory. If it is not, it will be a roadblock to gains from trade.
Regulations often help some businesses by restricting competitors. Because such
regulations are lucrative to the few who benefit, they impose an additional cost: Businesses,
labor organizations, and other special interest groups will seek advantage for their constituents
by trying to influence the political process. Some will lobby politicians and regulators to
establish or increase these roadblocks, while others (those most severely harmed) will lobby to
diminish their effects. Lobbying for all sides of any issue consumes the time and effort of

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highly skilled individuals who could be producing wealth instead of seeking political
advantages from policies that reduce the productivity of others. Efforts that waste valuable
resources in ways that may be productive for an individual or firm but not for society as a
whole are referred to as rent-seeking
(?)
behavior and are frequently the result of regulations.