The Worst Policies in the Developed World

No one give Starmer any ideas...

As we have been treated to Rachel Reeves’ political masterclass over the past week, for some reason, the topic of terrible policies has been on my mind.

Britain hardly has a monopoly on bad ideas: once you start looking, you realise the developed world is littered with policies that raise prices, block growth, and entrench cartels with impressive confidence. Today is a quick run through 10 of the worst of them.

1. Canada’s Internal Trade Barriers

During the Canadian PM debates last year, plenty of viewers blinked when Pierre Poilievre promised “to end the internal tariffs in Canada”. Internal tariffs? The what??? Unsurprisingly, google searches for it soon spiked.

Say you own a craft-beer shop in Ottawa and want to stock a popular Montreal brewery. You can’t simply order a few cases. Alcohol is controlled by provincial monopolies, so the shipment has to move through the Ontario system, be priced under Ontario rules, and comply with Ontario labelling requirements. If you drive it back yourself without permission, you’re technically committing an offence.

Swap the product and the story repeats. A small construction firm in British Columbia can’t simply take on a job in Alberta: different certification rules, different insurance requirements, and often a need to reapply for provincial permits. A trucking company might have to switch regulations mid-route.

This affects normal, day-to-day commerce constantly, and the macro impact is huge. The best estimates suggest these internal barriers reduce Canadian GDP by roughly 3–7%. Canada trades more freely with the United States than with itself.

Other countries used to behave like this, but they dropped it centuries ago. The United States abolished internal tariffs in 1787, Britain did it with the 1707 Union, and Germany cleared its internal borders with the Zollverein in the 1830s. Canada is the only G7 country still running a fragmented market that would have looked normal in the 1700s.

2. The Jones Act

The Jones Act dates back to 1920, when the United States decided that any cargo shipped between two American ports must be carried on a vessel that is US-built, US-owned, US-flagged, and largely US-crewed. It was framed as a national-security measure after the First World War, but it created a protected domestic shipping sector almost entirely insulated from competition.

Shipping from Houston to Boston can cost several times more than shipping from Houston to Rotterdam, and fewer than 100 compliant ships now operate nationwide. A Jones Act tanker can cost 3–5x as much as one built in Japan or South Korea, which prices many domestic routes out of existence. Coastal freight is pushed onto lorries and rail, raising costs and congestion far from the coastline.

Puerto Rico absorbs roughly $1.1–1.5bn a year in extra costs linked directly to the Act. Cars, building materials, food, and fuel all arrive via a needlessly expensive route, even though cheaper foreign vessels pass the island daily. After Hurricane Maria, basic emergency supplies required a federal waiver simply to enter on non-US ships, which delayed support at exactly the wrong moment.

3. The Town and Country Planning Act

The TCPA came in during 1947 and replaced Britain’s old rule-based system with a fully discretionary one. Development rights were nationalised, and nothing could go ahead unless a council granted specific permission. That single shift created a world where predictability vanished and the default expectation became “wait, negotiate, appeal, hope”.

The rules meant everything from a back extension to a housing estate fell under the same discretionary structure, and there was a presumption that you can’t build, unless the council says so. They had no requirement to set any rules, and could deny permission for any arbitrary reason they fancied.

Britain now builds roughly half as many homes per capita as France and about a third as many as the Netherlands. New homes average 76 m², compared with 95–100 m² in much of northern Europe. Planning approvals routinely take a year or more, and large projects can sit in the system for three to five, while Japanese cities approve major schemes in months. Since the mid-1990s, house prices have risen by over 300% while real wages barely moved.

If you want to read my overly-long description of why this policy is terrible, click here.

4. Protectionism run amok

Protectionism survives because it promises simple wins: protect local jobs, stabilise prices, keep foreign competition at bay. In practice it raises costs, shrinks supply, and hardens lobbies that then fight to keep the rules in place. It is one of the few policies where the long-run outcome is the same in every country, yet governments keep it alive because the losses are spread thinly and the gains are concentrated.

Canada’s supply-management system covers dairy, eggs, and poultry through quotas and tariffs that often exceed 200%. Milk in Canada costs 20–40% more than in nearby US states, and quota rights can be worth millions on a single farm.

The US corn-ethanol complex consumes billions of dollars a year in subsidies and mandate support. Around 40% of all American corn now goes into fuel rather than food, with minimal environmental benefit and clear price effects for global grain markets. Farmers in Iowa openly admit that without the mandate they would switch crops, which is why presidential candidates spend every cycle performing loyalty rituals at ethanol plants.

Norway’s dairy tariffs are high enough that the country ran out of butter in 2011 after a small surge in demand. Imports were blocked or priced into oblivion, so shops had empty shelves while foreign suppliers sat a short sail away. The government had to issue emergency quota increases and still struggled to fill the gap.

Japan’s construction state channels public money into rural areas through padded contracts, guaranteed work, and an infrastructure pipeline that keeps going even as populations shrink. Public works spending has hovered around 5–7% of GDP in many years, far above other developed countries. Small towns with a few hundred residents still receive new roads, river embankments, and concrete slopes whose value is far below the price paid.

5. Occupational licensing

Occupational licensing has expanded far beyond anything that improves safety. In the US, about 5% of workers needed a licence in 1970; today it is roughly 25%. Estimates puts the annual cost to American consumers at tens or hundreds of billions in higher prices and lost output. Germany, France, Greece, Australia, and several Canadian provinces show the same pattern: ordinary work pushed into regulated territory for no clear public benefit.

The weakest cases are the low-risk jobs that never needed licensing. More than 1,000 occupations in the US are licensed in at least one state, including hair braiding, interior design, floristry, locksmithing, and massage. Germany’s Meisterpflicht blocks people from opening trades like tiling and plastering without years of formal training. Greece’s old taxi and trucking rules pushed prices up by 30 to 40% and kept new entrants out almost entirely. These systems restrict supply first and foremost.

The sharper failure sits in medicine, where licensing matters but training places are kept artificially scarce. In the UK, the BMA has spent decades resisting expansion and warning that more domestic doctors would “destabilise the profession”. The system now rejects over 20,000 qualified applicants a year for about 9,500 places, then fills the gap with international recruits. In 2022, around 40% of new F1 doctors had trained abroad, and in several recent years international graduates have outnumbered UK graduates entering the NHS. Germany shows the same pattern, with tight caps and steady reliance on Eastern European clinicians. Canada caps residency slots so tightly that hundreds of domestic graduates go unmatched each year while provinces import GPs to fill shortages.

6. Italian notaries

History lovers will know that one of the sparks that lit the American Revolution was the Stamp Act, which forced colonists to pay an official fee for an unnecessary stamp on basic documents. The idea that the state should insert itself into every contract and charge for the privilege looked absurd even in the 1700s.

Modern Italy still does it. Every house sale, company registration, inheritance update, power of attorney, or corporate amendment must go through a notary, and notaries operate as a legally protected cartel. Fees are fixed, numbers are capped, and entry requires a notoriously selective exam with pass rates often below 10%. An Italian notary can earn well over €200k a year, and in some regions more than €400k, largely because the law guarantees their monopoly.

The economic effects show up everywhere. Simple property transfers can cost several thousand euros in mandatory notary fees; corporate registrations proceed more slowly and more expensively than in almost any other EU state; and international investors routinely cite notary costs as a friction point. Italy has built a system where routine paperwork functions as a private tax, collected by a small profession with legally enforced scarcity.

7. The EU’s Common Agricultural Policy

The Common Agricultural Policy began as a way to stabilise post-war food supply and support small farmers, but it became the EU’s largest spending item. It absorbs roughly €55–60bn a year, close to a third of the entire EU budget. Payments are tied mainly to land ownership rather than productivity, environmental impact, or market conditions.

The distribution is heavily skewed, with large landowners capturing most of the money: in many member states, the top 20% of farms receive about 80% of all payments. In the UK’s final years inside the system, some individual estates collected more than €1m a year simply for holding acreage. Several member states still run market-distorting quotas and intervention schemes that keep prices above world levels, long after their original purpose vanished.

Land prices in recipient regions rise because subsidies capitalise straight into the value of acreage. Environmental outcomes stay weak despite the scale of spending, and younger farmers face higher entry costs than they would under a market system. The EU also struggles to open global agricultural trade, since domestic protection must remain in place to justify the subsidies.

8. New Zealand’s unofficial supermarket duopoly

New Zealand’s grocery duopoly came from policy, not preference. Councils limited commercial land through zoning, and competition law allowed supermarkets to attach long exclusivity covenants to nearby sites. These clauses barred future owners from opening a supermarket or leasing to anyone who might compete, often for decades. With the state treating them as ordinary contracts, incumbents built a legally protected perimeter around their stores.

By 2022, these covenants covered hundreds of parcels of land. Some banned food retail within a set radius; others blocked use even when sites sat empty. The Commerce Commission estimated excess profits of about NZ$430m a year, noted that suppliers faced a two-buyer market, and placed New Zealand among the most expensive food markets in the OECD. New entrants couldn’t secure viable sites because most were contractually tied up.

Costco’s arrival in Auckland showed how frozen the market had become. It took a large foreign chain to find land outside the covenant network and push prices down. The government has since moved against these clauses, but the structure remains a clear example of how policy can seal off a market without ever announcing a ban.

9. Price controls

Price controls survive because they promise simple wins: force prices down and claim a victory. Supply always reacts. Firms delay launches, cut investment, or withdraw stock, and the controlled price turns into queues, shortages, or rationing by other means. A small group benefits, and everyone else pays through slower access or higher prices elsewhere.

In pharmaceuticals, Japan and France show how this works in rich, regulated systems. Japan revises prices down every 2 years, often by 20–50%, which pushes companies to treat Japan as a late-launch market. Over the past decade, only about half of new US-approved drugs reached Japan within 3 years, and oncology drugs often arrived 1–2 years later than in the US or Germany. France relies on long pricing negotiations rather than automatic cuts, but the effect is similar. EMA-approved medicines typically take 6–24 months to reach French patients, and France now has lower availability of new cancer drugs than Germany, Switzerland, and the UK. Both systems keep sticker prices low by slowing access rather than reducing real costs.

Rent control shows the same pattern. In San Francisco, a detailed study of the 1990s expansion found that around 15% of affected units exited the rental market through conversion or demolition, raising citywide rents by about 5% for everyone else. Sweden’s system fixes nominal rents well below market levels but produces extraordinary waits: 10 years or more for a central Stockholm flat, and 5–8 years for many suburbs. Berlin’s 2019–21 rent freeze cut listed rents on regulated units but caused new listings in that segment to fall by roughly 30–40%, with sharp increases in unregulated stock. New York’s long-running controls have produced a split market where controlled units are under-occupied and newcomers face some of the highest asking rents in the OECD.

Across both sectors the mechanism is identical: the controlled price becomes a privilege for insiders, and the real price reappears somewhere else - in time, access, quality, or scarcity.

10. US Certificate-of-Need laws

Certificate-of-need laws were introduced in the 1970s to limit “duplication”, but they gave existing providers a formal right to challenge newcomers. If an outpatient surgery centre wants to open, or if a hospital wants a second CT scanner, they must apply to the state. Incumbent hospitals can then file objections claiming local needs are already met, triggering hearings and delays that smaller providers struggle to absorb.

Incentives drive results: independent surgery centres often charge 30–60% less than hospitals for the same procedures, so hospitals use CON rules to keep them out. Dialysis firms trying to enter a region can be blocked by the dominant operator. In many of the 35 states with CON laws, pharmacies, rehab clinics, and even extra MRI machines require approval that incumbents can contest. The law turns competitors into gatekeepers.

Government reviews show that CON states have higher prices, fewer hospital beds per capita, and far fewer independent surgery centres. Border studies find cardiac units 11–15% less available in CON states and nursing homes with fewer beds despite clear demand. Rural hospitals have used CON to block nearby clinics offering cheaper care. The system was sold as cost control, but it largely freezes market entry for the 60% of Americans living in CON states.

Conclusion

Most of these policies share the same structure. The state steps in to “protect” something, locks in a rule that freezes competition, and then spends decades managing the consequences. Prices rise, supply tightens, and incumbents defend the system because it now serves them perfectly.

The striking part is how durable these systems are. Once a policy creates a protected group, reform becomes an uphill fight, because the winners are few and concentrated while the losers are dispersed. The result is a developed world that often behaves like an old guild economy with better branding. Markets are not perfect, but nearly all of the failures in this list come from governments preventing competition, not from competition failing.