One of the findings from the Legatum Institute’s Prosperity Index was the inverse relationship between social cohesion and regulation:
It found countries that had low levels of social capital tend to be highly regulated and vice versa:
Social capital is one of the most important components of prosperity. The term ‘social capital’ encompasses factors
such as social cohesion and engagement, as well as community and family networks.1 In every region of the world, social capital correlates negatively with government regulation.
Does excessive regulation decrease social capital or do high levels of social capital lead to low levels of regulation? Research suggests that the causal relationship follows the latter example, with higher levels of social capital leading to fewer but better regulations. Indeed societies that are highly trusting—both in government institutions and in one’s fellow citizens—tend to demand fewer, less complex and less restrictive economic regulations.
It goes on to say that countries with little social cohesion have more regulation which results in result in unwanted barriers to entrepreneurial activity, innovation, and competition.
By contrast, in countries with high levels of social cohesion entrepreneurs are considered to provide societal benefits and, as a result, these countries tend to erect fewer regulatory barriers to entrepreneurial activities.
Social cohesion provides trust which necessitates less regulation which provides social and economic benefits.