Deregulation

From Wikipedia, the free encyclopedia

Deregulation is the process by which governments remove, reduce, or simplify restrictions on business and individuals in order to (in theory) encourage the efficient operation of markets. The stated rationale for deregulation is often that fewer and simpler regulations will lead to a raised level of competitiveness, therefore higher productivity, more efficiency and lower prices overall. Deregulation is different from liberalization because a liberalized market, while often having less and simpler regulations, can also have regulations (sometimes quite far ranging and complex) in order to increase efficiency and protect consumer's rights, one example being anti-trust legislation. However, the terms are often used interchangeably within deregulated/liberalized industries.

Deregulation gained momentum in the 1970s, influenced not only by research at the University of Chicago and the theories of Ludwig von Mises, Friedrich von Hayek, and Milton Friedman, among others, but more importantly by that of Alfred E. Kahn. Deregulation in the US was led by President Jimmy Carter, with Kahn's input. Key legislation that was passed included: Airline Deregulation Act (24 October, 1978), Staggers Rail Act (signed 14 October, 1980), and the Motor Carrier Act of 1980 (signed 1 July 1980). The Emergency Natural Gas Act (signed 2/2/77) was a mix of regulation in response to OPEC price hikes and deregulation. The Airline Deregulation Act is a notable example. It sought to reintroduce market forces to the heavily regulated commercial airline industry. Subsequent deregulation has had mixed results.

One problem that encouraged deregulation was the way in which the regulated industries often controlled the government regulatory agencies, using them to serve the industries' interests. Even where regulatory bodies started out functioning independently, a process known as regulatory capture often sees industry interests come to dominate those of the consumer. A similar pattern has been observed with the deregulation process, itself often controlled by the regulated industries.

Perceived failures of deregulation (such as the failure of the Savings & Loan sector of the U.S. during the 1980s) have led to limited re-regulation, and more balanced approaches to regulation that emphasize the quality of regulation over the quantity. That is, instead of simply removing (or adding) regulations on business, the point is to regulate business intelligently, using as sophisticated an economic theory as possible. Many processes labelled deregulation where anyway examples of re-regulation alongside a market liberalization process taking state-owned service providers into the private sector.

One influential measure of worldwide business regulations that has inspired mostly deregulation but also in some instances increased regulations is the Ease of Doing Business Index.

1 Argentina
2 Australia
3 European Union
4 Japan
5 New Zealand
6 Russia
7 United Kingdom
8 United States
- 8.1 Related Legislation
9 See also
10 External links

[edit] Argentina

Argentina underwent heavy economic deregulation^{[citation needed]}, privatization, and had a fixed exchange rate during the Menem administration (1989–1999). Critics argue that these policies, implemented under advice of international organizations like the IMF and the WTO, eventually produced massive de-industralization and unemployment, and became unpopular after the politico-economic collapse of 2001. Others argue that high corruption flawed these policies in practice and that continued overspending by the government, while causing a temporary 'economic miracle', inevitable in the end caused a collapse.

[edit] Australia

Australia has had extensive deregulation of their labour market since 2005. This process was made under John Howard's Liberal Party of Australia. The Australian banking industry also saw significant deregulation from 1986.

[edit] European Union

2003 Corrections to EU directive about software patents

[edit] Japan

Since the economic bubble in 1990s collapsed, the Japanese government has seen deregulation as an effective way to lift its economy because it has a huge deficit and cannot make a large tax cut.

[edit] New Zealand

New Zealand has had extensive deregulation since 1984. It was instigated by the Labour Party.

See also: Economy of New Zealand

[edit] Russia

Russia has been going through wide-ranging deregulation (and concomitant privatization) efforts since late 1990s. The main thrust of deregulation has been the electricity sector (see Unified Energy System), with railroads and communal utilities tied in the second place. Deregulation of natural gas sector is one of the more frequent demands placed upon Russia by the United States and European Union.

[edit] United Kingdom

The United Kingdom has developed a programme of better regulation since 1997. This has developed to include a general programme for government departments to review, simplify or abolish their existing regulations, and a "one in, one out" approach to new regulations. In 2006, new primary legislation is proposed (a Legislative and Regulatory Reform Bill) which is intended to establish statutory principles and a code of practice.

[edit] United States

Deregulation was a major trend in the United States in the last quarter of the twentieth century. A number of major deregulation initiatives were passed. Some of these were withdrawn quickly (but not quickly enough to avoid major problems), including the deregulation of savings and loans. American savings banks, which were permitted to lend unfettered, had their depositors funds insured by the federal government, creating a moral hazard. The California electricity crisis was precipitated by price manipulations by companies such as Enron after energy industry deregulation in 1996. Other legislation has been considered more widely successful, including deregulation of transport, telecommunications, and the gas market. In 1996, the media market was significantly deregulated.