The French are credited with saying that the more things change, the more they stay the same. The phrase is less elegant when expressed in English.  Perhaps the most frequently quoted line of Guiseppe di Lampedusa’s novel ‘The Leopard’ is the Prince’s acceptance that ‘If we want things to stay as they are, things will have to change.’ George Orwell wrote, in his essay ‘The Lion and the Unicorn’, of England having ‘the power to change out of recognition and yet remain the same.’ Friedrich Hayek wrote of ‘the fatal conceit’ of those people who believe that central control and planning of a country’s economic output is possible, and even desirable. These are only a handful of examples of a history of observation and understanding of the challenges in achieving meaningful change in a society. Change is endless, although superficial unless the emotions of the people change.

Financial services in Australia today bear little resemblance to what they were 50 years ago. Consider the changes. What was once a commerce-enabling function of the real economy has become an industry in itself. Financial services are now an export. Banking, wealth management and insurance products are prolific. Technology allows immediate and continuous access to financial institutions even beyond the back of Bourke. The agents, middlemen, staffers and IT departments, the sales forces and rent-seekers have grown to massive numbers. So too has the volume of regulation, the staffing at the regulators and the micro-management of the operations of all financial institutions, right down to mundane matters of management.

However, consider what has not changed. Financial scams and frauds are still with us. Herd-mentality among investors and the inevitable sorry tales of loss are still here.  Housing affordability is worse now than at the end of World War II, according to at least one Australian economist. Australians remain chronically underinsured for life, disablement and general insurance, according to various studies. Progress towards self-reliance in retirement is glacially slow, despite a compulsory superannuation savings requirement that has been in existence for over 20 years.

Faced with obvious challenges and the apparent lack of substantial change to outcomes, despite the vast array of new regulations, the politicians, law-makers and public servants decide that clearly there has not been enough regulation and so more regulation is required. Increasingly, layer upon layer of dense and almost impenetrable regulation is the result. Are the law-makers destined to never learn that no matter what superficial change is imposed, fundamental change is never driven by act of Parliament? Fundamental change in society comes from the bottom up, it comes from human emotion. It comes from human action, unpredictable and spontaneous. That action, that spontaneity, is frustrated and hindered by suffocating regulation.

There are only a handful of laws required in any particular industry, including financial services: they are laws that protect private property rights, protect freedom of exchange and trade and impose a judicial system of penalty on aberrant behaviour. All other regulation is pointless, ineffective, a waste of resources and probably counterproductive. Only in an environment that is as free as possible will innovation, experimentation and occasionally genuinely valuable ideas take hold of human emotion and make viable, sustained economic improvements.