Three graphs explain the compliance industry’s growth

Whenever I’ve talked to groups about compliance — particularly younger people from universities, banks, and big companies — someone asks, “Does the compliance profession have a promising future?” My answer is always yes. A few graphs explain why.

First, look at global population growth since 1950.

We added about 5.5 billion people in just over seven decades. That’s a population increase of about 250 percent in a tiny fraction of history’s timeline.

Next, look at the money supply. From 1950 to now, the global money supply has increased by about 2,000 percent. That’s measuring M3, or what’s known as “broad money.” It includes currency, short-term deposits and debt securities, and money market funds.

Why so much more money? It’s needed to meet the needs of all those new people in the world — to feed, clothe, and house them, to keep them warm or cool, to move them around, to provide healthcare, education, public safety, entertainment, and so on.

Some countries’ money supply has far exceeded the global growth rate. For example, U.S. currency in circulation (M3) has increased by about 15,000 percent since 1950.

More money in the world comes with more risks.

How do those risks show up? As more kleptocrats. More cash sloshing around offshore. More financial scandals everywhere.

What’s the response? More regulations.

Globally over the past 70 years, financial concerns have meant about 3,000 percent more regulations (measured by so-called “policy interventions”).

Here’s a graph isolating the U.S. federal regulatory response since 1950.

That’s a 1,750 percent increase and doesn’t include new state and local regulations that happened at the same time.

So, new regulations respond to new risks created by new money in the world that’s needed to care for all the new people.

The future?

There are nearly 8 billion people now, and the UN projects at least 10.4 billion by the end of the century. Even with population growth slowing, the real number of people being added is still huge.

And the global middle class is growing faster than ever — now by 140 million annually and up to 170 million annually within five years. Middle-class growth also powers the cycle of more money supply and therefore more regulation.

We know whose job it is to keep track of new (and old) regulations and help others comply with them.

So yes, the compliance profession has a promising future.