Is compliance becoming impossible? The overproduction of law scares companies, and the costs run into billions

Luc Williams

Overproduction of law in Poland The audit and consulting company Grant Thornton (GT) has been measuring for 10 years. One of the juxtapositions of her works is jaw-dropping. During the major political changes carried out in 1989-94, 8,600 pages of acts, regulations and international agreements were published in the Journal of Laws. The same legal acts adopted in 2014-23 amounted to almost 250,000 pages. Proportionally, the increase in legislative activity in the last quarter of a century was 15-fold.

GT experts note that if someone wanted to keep up to date with all changes in the law, they would have to spend 2.5 hours reading legal acts every working day in 2023, at a speed of one page every two minutes. So without understanding and assimilating legal abracadabra. There is a need to “read” the uniform texts. On the other hand, not all regulations concern the economy, but it is also unclear which “non-business” regulations will one day become important for an entrepreneur.

Production of law for companies in Poland

In 2023, 553 new regulations for companies entered into force, 1,051 more regulations changed their wording, and only 41 lost their force. According to the PARP report for 2023, there were 1,964,000 companies operating in Poland. micro companies and 84 thousand small companies. Let's assume at the Krakow market that the owners of “companies” only deal with official issues, including legal and tax ones, for half an hour a day, and an hour of their work costs a measly PLN 40, calculated on the basis of the average salary in Poland. There are nominally 260 working days in a year. In this sense the total costs of just observing changes in the law borne by micro and small companies would amount to PLN 10-11 billion per yearon average approx. PLN 5,400 per year per company.

This is probably the lowest possible value. At the same time, micro companies allocated on average less than PLN 19,000 for “tangible fixed assets” in 2021. PLN per year. Compliance costs (this is how corporations refer to compliance with regulations) must be immeasurably higher, certainly by at least an order of magnitude, but they are also usually resource-rich, so they can afford their own and external experts. It would be good to see an expert estimate of the financial effort required to cope with the flood of new and resolve previous regulations in Poland.

In the United States, the law is worse than in our country. Compared to America, we are like a young adept facing a sumo grandmaster. This includes: Therefore, the American legal elite are multi-millionaires. In the work entitled “Regulatory costs and market power” by Shikhar Singla (currently a postdoctoral fellow at Stanford) published estimates according to which in the period 1970-2018 the costs related to keeping up with the effects of legislation in the USA increased by as much as USD 1 trillion (1,000 billion). The inevitable effects of this are reduced sales, employment and overheads in small companies and a relative increase in sales and higher overheads in large companies where compliance costs are diluted. As a result of the increasing abundance of regulations, small companies become smaller or disappear, and large ones become even larger, which we do not like.

Regardless of the accuracy of the absolute values ​​presented, Dr. Singles confirm the feeling that legislative expansion began to increase in the West about half a century ago. Although this is only unsubstantiated speculation, the thought comes to mind that the intensification of the Cold War struggles between the USA and the USSR was the trigger.

Cumulative regulatory costs in 2018 purchasing power dollars/Other

Bureaucracy in Germany

The situation is very bad and even worse in Germany. In the March issue of “IMF Country Focus”, International Monetary Fund experts focused on the German economy, with the review titled “Aging, underinvestment and too much bureaucracy are serious challenges for Germany.” The state maintains 375 official databases there, and German companies spend 65 million man-hours each year filling out forms or files with information to supply them. In April 2022, the cost of an hour of work in Germany was 39.50 euros. The forms alone added as much as EUR 2.6 billion to local companies' costs annually. If we take into account the much more serious obligations and necessities related to compliance with the law that blooms like golden algae on the Oder, the annual compliance bill in Germany must amount to many hundreds of billions.

Even digitalization can be an example of legal and bureaucratic hassle. The New York Times quotes Michael Wirkner from Göppingen – the owner of an advertising agency founded 20 years ago, who was launching an online registration system for 20 education districts, but had to first obtain the consent of 5 regional data protection officers. Each of them interpreted the regulations differently, so the entire process required contacts with hundreds of different people. Andreas Schweikardt, head of the Gebauer supermarket chain operating in Baden-Württemberg, gave an example of a new regulation regarding packaged cold meats. Until now, when the expiry date approached, employees took them from the shelves and made sandwiches from them for immediate sale. Now the law requires an exhaustive list of ingredients contained in each product, so it has become too labor- and therefore cost-intensive for stores to produce sandwiches themselves. The sandwich offer is more modest, but above all, more meat ends up in the trash.

Germany has the impression that the situation has long gone out of control. This was admitted by Chancellor Olaf Scholz himself, who was co-responsible for the “orgiastic nature” of the law, saying that: “We have reached the point where in many places no one is able to implement all the regulations we have created.”

Only in the past was it knotty. The first set of laws announced in our culture was created 2,500 years ago in Rome. It took the form of first 10 and finally 12 bronze tablets placed (supposedly) in the Roman Forum. Successive authorities passed new laws over the centuries, and the empire became a deadly mess, not only in legal terms. The Byzantine emperor Justinian dealt with it, ordering a review after a thousand years, sifting out a lot of chaff and collecting the rest of the rights “together”. Justinian's jurists had to go through some 2,000 books, containing as many as 3 million verses written down, starting from the “time of Romulus”. The law, which was not included in Justinian's Codex Constitutionum and three additional books, became null and void.

Therefore, the advice for today is to take a good rake in your hands and comb through the laws, regulations and ordinances in order to introduce basic law and order. Nowadays, rakes can be in the form of AI, it would be easier.

Unfortunately, this will not happen. Man is imperfect, egoistic and distrustful, most often hostile towards strangers. Therefore, the most important core value for us is multi-faceted security, the protection of which we have entrusted to the state. The state is like a room for hours – every few years a new government is appointed by the new parliament. Almost no continuity, everything that the predecessors did was wrong, “statesmen” is an entry from old encyclopedias that no one looks at anymore. In such circumstances, it is easiest to “increase” security by introducing new laws and tightening penalties. Why move your head when you can write a paragraph and three paragraphs in it?


Luc's expertise lies in assisting students from a myriad of disciplines to refine and enhance their thesis work with clarity and impact. His methodical approach and the knack for simplifying complex information make him an invaluable ally for any thesis writer.