Nearly five decades of OECD data reveals a powerful truth: smart regulation—not blanket deregulation—drives economic performance. While removing counterproductive upstream barriers unleashes growth, intelligent regulatory frameworks that shape better labor and environmental practices in the private sector foster lasting productivity gains.
Eliminating Growth-Killing Barriers
The OECD’s analysis spanning 1980-2023 shows that removing upstream trade barriers in network sectors—energy, transport, and telecommunications—boosted economy-wide labor productivity by 5% cumulatively. Manufacturing sectors saw 14% gains by accessing better, more competitive inputs. The key insight: regulatory reform contributed 0.25 percentage points annually to productivity growth during 1995-2005, while stalled progress accounts for one-sixth of subsequent productivity decline.
Smart Regulation as Sustainable Growth Engine
The most impactful reforms targeted barriers to entry rather than eliminating all oversight. Countries with restrictive upstream barriers could still achieve nearly 2% productivity gains through intelligent regulatory design. Smart regulation that promotes competition while maintaining standards for labor practices and environmental stewardship creates sustainable competitive advantages—not just short-term efficiency gains.
Strategic Value Creation
Today’s regulatory landscape demands nuanced thinking. Businesses thrive when regulations eliminate trade-distorting barriers while establishing clear frameworks for sustainable practices. Organizations must identify which regulatory changes create material value—whether through improved supply chain access, enhanced labor productivity, or environmental innovation that drives long-term competitiveness.
Building Sustainable Advantage
The OECD findings confirm that regulatory quality, not quantity, determines economic outcomes. Smart regulation removes obstacles to growth while channeling private sector innovation toward sustainable practices. Companies that understand this dynamic—and invest in transformation programs aligned with intelligent regulatory frameworks—position themselves to capture both immediate productivity gains and long-term sustainable value creation.
Ksapa has long standing expertise, networks and methodologies to drive strategic thinking and grasp material sustainability issues, design and deploy across global operations and value chains the transformative programs ensuring to adapt business no matter what when regulation is not clear. Call us and adapt to uncertainties working with Ksapa.
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Author of several books and resources on business, sustainability and responsibility. Working with top decision makers pursuing transformational changes for their organizations, leaders and industries. Working with executives improving resilience and competitiveness of their company and products given their climate and human right business agendas. Connect with Farid Baddache on Twitter at @Fbaddache.
