Deregulation

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Deregulation is the process of removing or reducing state regulations, typically in the
economic sphere. It is the repeal of governmental regulation of the economy. It became
common in advanced industrial economies in the 1970s and 1980s, as a result of new
trends in economic thinking about the inefficiencies of government regulation, and the
risk that regulatory agencies would be controlled by the regulated industry to its benefit,
and thereby hurt consumers and the wider economy.
Economic regulations were promoted during the Gilded Age, in
which progressive reforms were touted as necessary to limit externalities like corporate
abuse, unsafe child labor, monopolization, pollution, and to mitigate boom and bust
cycles. Around the late 1970s, such reforms were deemed burdensome on economic
growth and many politicians espousing neoliberalism started promoting deregulation.

As a result of deregulation, Orange operates “France Telecom”-branded phone booths in Wellington, New

Zealand.

The stated rationale for deregulation is often that fewer and simpler regulations will lead
to raised levels of competitiveness, therefore higher productivity, more efficiency and
lower prices overall. Opposition to deregulation may usually involve apprehension
regarding environmental pollution[1] and environmental quality standards (such as the
removal of regulations on hazardous materials), financial uncertainty, and constraining
monopolies.
Regulatory reform is a parallel development alongside deregulation. Regulatory reform
refers to organized and ongoing programs to review regulations with a view to
minimizing, simplifying, and making them more cost effective. Such efforts, given
impetus by the Regulatory Flexibility Act of 1980, are embodied in the United States
Office of Management and Budget's Office of Information and Regulatory Affairs, and
the United Kingdom's Better Regulation Commission. Cost–benefit analysis is
frequently used in such reviews. In addition, there have been regulatory innovations,
usually suggested by economists, such as emissions trading.
Deregulation can be distinguished from privatization, where privatization can be seen as
taking state-owned service providers into the private sector.

Contents
 1By country
o 1.1Argentina
o 1.2Australia
o 1.3Canada
o 1.4European Union
 1.4.1Ireland
 1.4.2United Kingdom
o 1.5New Zealand
o 1.6Russia
o 1.7United States
 1.7.1History of regulation
 1.7.2Deregulation 1970–2000
 1.7.3Transportation
 1.7.3.1Nixon administration
 1.7.3.2Ford administration
 1.7.3.3Carter administration
 1.7.3.41970s deregulation effects
 1.7.3.5Reagan administration
 1.7.4Energy
 1.7.5Communications
 1.7.6Finance
 1.7.7Related legislation
 2Controversy
o 2.1For deregulation
o 2.2Against deregulation
 3See also
 4References
o 4.1Notes
 5Further reading
 6External links

By country[edit]
Argentina[edit]
Argentina underwent heavy economic deregulation, privatization, and had a fixed
exchange rate during the Menem administration (1989–1999). In December 2001, Paul
Krugman compared Enron with Argentina, claiming that both were experiencing
economic collapse due to excessive deregulation. [2] Two months later, Herbert Inhaber
claimed that Krugman confused correlation with causation, and neither collapse was
due to excessive deregulation.[3]
Australia[edit]
Having announced a wide range of deregulatory policies, Labor Prime Minister Bob
Hawke announced the policy of "Minimum Effective Regulation" in 1986. This
introduced now familiar requirements for "regulatory impact statements", but compliance
by governmental agencies took many years. The labour market under the
Hawke/Keating Labor governments operated under an accord. John Howard's Liberal
Party of Australia in 1996 began deregulation of the labor market, subsequently taken
much further in 2005 through their WorkChoices policy. However, it was reversed under
the following Rudd Labor government.
Canada[edit]
See also: Ontario electricity policy
Natural gas is deregulated in most of the country, with the exception of some Atlantic
provinces and some pockets like Vancouver Island and Medicine Hat. Most of this
deregulation happened in the mid-1980s.[4] There is price comparison service operating
in some of these jurisdictions, particularly Ontario, Alberta and BC. The other provinces
are small markets and have not attracted suppliers. Customers have the choice of
purchasing from a local distribution company (LDC) or a deregulated supplier. In most
provinces the LDC is not allowed to offer a term contract, just a variable price based on
the spot market. LDC prices are changed either monthly or quarterly.
The province of Ontario began deregulation of electricity supply in 2002, but pulled back
temporarily due to voter and consumer backlash at the resulting price volatility. [4] The
government is still searching for a stable working regulatory framework.
The current status is a partially regulated structure in which consumers have received a
capped price for a portion of the publicly owned generation. The remainder of the price
has been market price based and there are numerous competitive energy contract
providers. However, Ontario is installing Smart Meters in all homes and small
businesses and is changing the pricing structure to Time of Use pricing. All small
volume consumers are to be shifted to the new rate structure by the end of 2012. There
is price comparison service operating in these jurisdictions.
The province of Alberta has deregulated their electricity provision. Customers are free to
choose which company they sign up with, but there are few companies to choose from
and the price of electricity has increased substantially for consumers because the
market is too small to support competition. If they choose they may remain with the
utility at the Regulated Rate Option.
Former Premier Ralph Klein based the entire deregulation scheme on the Enron model,
and continued with it even after the highly publicized and disastrous California electricity
crisis (and the collapse of Enron because of illegal accounting practices.)
European Union[edit]

 2003 Corrections to EU directive about software patents

 Deregulation of the air industry in Europe in 1992 gave carriers from one EU
country the right to operate scheduled services between other EU states.
Ireland[edit]
The taxi industry was deregulated in Ireland leading to an influx of new taxis. This was
due to the price of a licence dropping overnight. The number of taxis increased
dramatically.[5]
United Kingdom[edit]
The Conservative government led by Margaret Thatcher started a programme of
deregulation and privatisation after their victory at the 1979 general election. The
1984 Building Act 1984 reduced building regulations from 306 pages to 24,
while compulsory competitive tendering required local government to compete with the
private sector in delivering services.[6]:39–48 Other steps included express coach (Transport
Act 1980), British Telecom (completed in 1984), privatisation of London bus
services (1984), local bus services (Transport Act 1985) and the railways (1993). The
feature of all those privatisations was that their shares were offered to the general
public.
From 1997–2010, the Labour governments of Tony Blair and Gordon Brown developed
a programme of what they called "better regulation". This included 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 1997, Chancellor
Brown announced the "freeing" of the Bank of England to set monetary policy. They
freed the Bank of England from direct government control. In 2006, new primary
legislation (the Legislative and Regulatory Reform Act 2006) was introduced to establish
statutory principles and a code of practice and it permits ministers to make Regulatory
Reform Orders (RROs) to deal with older laws which they deem to be out of date,
obscure or irrelevant. This act has often been criticised and called "The abolition of
Parliament Act".[citation needed]
New Labour did not privatise many publicly owned services because most had already
been privatised by the previous Conservative government. However, some government-
owned businesses such as Qinetiq were privatised. But a great deal of infrastructure
and maintenance work previously carried out by government departments was
contracted out (out-sourced) to private enterprise under the public–private partnership,
with competitive bidding for contracts within a regulatory framework. This included large
projects such as building new hospitals for the NHS, building new state schools, and
maintaining the London Underground. These privatisations were never offered to the
general public to buy shares, instead being offered to commercial companies only. [citation
needed]

New Zealand[edit]

Since the deregulation of the postal sector, different postal operators can install mail collection boxes in New
Zealand's streets.

See also: Economy of New Zealand

New Zealand Governments adopted policies of extensive deregulation from 1984 to
1995. Originally initiated by the Fourth Labour Government of New Zealand,[7] the
policies of deregulation were later continued by the Fourth National Government of New
Zealand. The policies had the goal of liberalising the economy and were notable for
their very comprehensive coverage and innovations. Specific policies included: floating
the exchange rate; establishing an independent reserve bank; performance contracts
for senior civil servants; public sector finance reform based on accrual accounting; tax
neutrality; subsidy-free agriculture; and industry-neutral competition regulation.
Economic growth was resumed in 1991. New Zealand was changed from a somewhat
closed and centrally controlled economy to one of the most open economies in the
OECD.[8] As a result, New Zealand, went from having a reputation as an almost socialist
country to being considered one of the most business-friendly countries of the world,
next to Singapore. However, critics charge that the deregulation has brought little
benefit to some sections of society, and has caused much of New Zealand's economy
(including almost all of the banks) to become foreign-owned. [citation needed]
Russia[edit]
Russia went through wide-ranging deregulation (and concomitant privatization) efforts in
the late 1990s under Boris Yeltsin, now partially reversed under Vladimir Putin. The
main thrust of deregulation has been the electricity sector (see RAO UES), with
railroads and communal utilities tied in second place. [citation needed] Deregulation of the natural
gas sector (Gazprom) is one of the more frequent demands placed upon Russia by the
United States and European Union.
United States[edit]
History of regulation[edit]
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 saw industry interests
come to dominate those of the consumer. A similar pattern has been observed with the
deregulation process itself, often effectively controlled by the regulated industries
through lobbying the legislative process. Such political forces, however, exist in many
other forms for other special interest groups. Some of the examples of deregulation in
the United States in the setting of industries are banking, telecommunications, airlines,
and natural resources.[9]
During the Progressive Era (1890s–1920), Presidents Theodore Roosevelt, William
Howard Taft, and Woodrow Wilson instituted regulation on parts of the American
economy, most notably in regulating big business and industry. Some of their most
prominent reforms are trust-busting (the destruction and banning of monopolies), the
creation of laws protecting the American consumer, the creation of a federal income tax
(by the Sixteenth Amendment; the income tax used a progressive tax structure with
especially high taxes on the wealthy), the establishment of the Federal Reserve, and
the institution of shorter working hours, higher wages, better living conditions, better
rights and privileges to trade unions, protection of rights of strikers, banning of unfair
labor practices, and the delivery of more social services to the working classes
and social safety nets to many unemployed workers, thus helping to facilitate the
creation of a welfare state in the United States and eventually in most developed
countries.
During the Presidencies of Warren Harding (1921–23) and Calvin Coolidge (1923–29),
the federal government generally pursued laissez-faire economic policies. After the
onset of the Great Depression, President Franklin D. Roosevelt implemented many
economic regulations, including the National Industrial Recovery Act (which was struck
down by the Supreme Court), regulation of trucking, airlines and the communications
industry, the institution of the Securities Exchange Act of 1934, and the Glass–Steagall
Act, which was passed in 1933. These 1930s regulations stayed largely in place
until Richard Nixon's Administration.[10] In supporting his competition-limiting regulatory
initiatives President Roosevelt blamed the excesses of big business for causing
an economic bubble. However, historians lack consensus in describing the causal
relationship between various events and the role of government economic policy in
causing or ameliorating the Depression.
Deregulation 1970–2000[edit]
Deregulation gained momentum in the 1970s, influenced by research by the Chicago
school of economics and the theories of George Stigler, Alfred Kahn,[11] and others.
[12]
 The new ideas were widely embraced by both liberals and conservatives. Two leading
'think tanks' in Washington, the Brookings Institution and the American Enterprise
Institute, were active in holding seminars and publishing studies advocating
deregulatory initiatives throughout the 1970s and 1980s. Cornell economist Alfred E.
Kahn played a central role in both theorizing and participating in the Carter
Administration's efforts to deregulate transportation.[11][13]
Transportation[edit]
Nixon administration[edit]
The first comprehensive proposal to deregulate a major industry in the United States,
transportation, originated in the Richard Nixon Administration and was forwarded to
Congress in late 1971.[14] This proposal was initiated and developed by an interagency
group that included the Council of Economic Advisors (represented by Hendrik
Houthakker and Thomas Gale Moore[15]), White House Office of Consumer Affairs
(represented by Jack Pearce), Department of Justice, Department of Transportation,
Department of Labor, and other agencies.[16]
The proposal addressed both rail and truck transportation, but not air carriage. (92d
Congress, Senate Bill 2842) The developers of this legislation in this Administration
sought to cultivate support from commercial buyers of transportation services,
consumer organizations, economists, and environmental organization leaders. [17] This
'civil society' coalition became a template for coalitions influential in efforts to deregulate
trucking and air transport later in the decade.
Ford administration[edit]
After Nixon left office, the Gerald Ford presidency, with the allied interests, secured
passage of the first significant change in regulatory policy in a pro-competitive direction,
in the Railroad Revitalization and Regulatory Reform Act of 1976.
Carter administration[edit]
President Jimmy Carter -- aided by economic adviser Alfred E. Kahn[11] -- devoted
substantial effort to transportation deregulation, and worked with Congressional and civil
society leaders to pass the Airline Deregulation Act* (October 24, 1978) -- the first
federal government regulatory regime, since the 1930s, to be completely dismantled. [18][19]
Carter also worked with Congress to produce the Staggers Rail Act (signed October 14,
1980), and the Motor Carrier Act of 1980 (signed July 1, 1980).
1970s deregulation effects[edit]
These were the major deregulation acts in transportation that set the general conceptual
and legislative framework, which replaced the regulatory systems put in place between
the 1880s and the 1930s. The dominant common theme of these Acts was to
lessen barriers to entry in transport markets and promote more independent,
competitive pricing among transport service providers, substituting the freed-up
competitive market forces for detailed regulatory control of entry, exit, and price making
in transport markets. Thus deregulation arose, though regulations to promote
competition were put in place.[citation needed]
Reagan administration[edit]
U.S. President Ronald Reagan campaigned on the promise of rolling back
environmental regulations. His devotion to the economic beliefs of Milton Friedman led
him to promote the deregulation of finance, agriculture, and transportation. [20] A series of
substantial enactments were needed to work out the process of encouraging
competition in transportation. Interstate buses were addressed in 1982, in the Bus
Regulatory Reform Act of 1982. Freight forwarders (freight aggregators) got more
freedoms in the Surface Freight Forwarder Deregulation Act of 1986. As many states
continued to regulate the operations of motor carriers within their own state, the
intrastate aspect of the trucking and bus industries was addressed in the Federal
Aviation Administration Authorization Act of 1994, which provided that "a State, political
subdivision of a State, or political authority of two or more States may not enact or
enforce a law, regulation, or other provision having the force and effect of law related to
a price, route, or service of any motor carrier." 49 U.S.C. § 14501(c)(1) (Supp. V 1999).
Ocean transportation was the last to be addressed. This was done in two acts,
the Ocean Shipping Act of 1984 and the Ocean Shipping Reform Act of 1998. These
acts were less thoroughgoing than the legislation dealing with U.S. domestic
transportation, in that they left in place the "conference" system in international ocean
liner shipping, which historically embodied cartel mechanisms. However, these acts
permitted independent rate-making by conference participants, and the 1998 Act
permitted secret contract rates, which tend to undercut collective carrier pricing.
According to the United States Federal Maritime Commission, in an assessment in
2001, this appears to have opened up substantial competitive activity in ocean shipping,
with beneficial economic results.
Energy[edit]
The Emergency Petroleum Allocation Act was a regulating law, consisting of a mix of
regulations and deregulation, which passed in response to OPEC price hikes and
domestic price controls which affected the 1973 oil crisis in the United States. After
adoption of this federal legislation, numerous state legislation known as Natural Gas
Choice programs have sprung up in several states, as well as the District of Columbia.
Natural Gas Choice programs allow residential and small volume natural gas users to
compare purchases from natural gas suppliers with traditional utility companies. There
are currently hundreds of federally unregulated natural gas suppliers operating in the
US. Regulation characteristics of Natural Gas Choice programs vary between the laws
of the currently adoptive 21 states (as of 2008).
Deregulation of the electricity sector in the U.S. began in 1992. The Energy Policy Act of
1992 eliminated obstacles for wholesale electricity competition, but deregulation has yet
to be introduced in all states.[21] As of April 2014, 16 U.S. states
(Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Montana, 
New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island,
and Texas) and the District of Columbia have introduced deregulated electricity markets
to consumers in some capacity. Additionally, seven states
(Arizona, Arkansas, California, Nevada, New Mexico, Virginia, and Wyoming) began the
process of electricity deregulation in some capacity but have since suspended
deregulation efforts.[22]
Communications[edit]
See also: Telecommunications Act of 1996 and Concentration of media ownership
Deregulation was put into effect in the communications industry by the government at
the start of the Multi-Channel Transition era.[23] This deregulation put into place a division
of labor between the studios and the networks.[24] Communications in the United States
(and internationally) are areas in which both technology and regulatory policy have been
in flux. The rapid development of computer and communications technology –
particularly the Internet – have increased the size and variety of communications
offerings. Wireless, traditional landline telephone, and cable companies increasingly
invade each other's traditional markets and compete across a broad spectrum of
activities. The Federal Communications Commission and Congress appear to be
attempting to facilitate this evolution. In mainstream economic thinking, development of
this competition would militate against detailed regulatory control of prices and service
offerings, and hence favor deregulation of prices and entry into markets. [25] On the other
hand, there exists substantial concern about concentration of media ownership resulting
from relaxation of historic controls on media ownership designed to safeguard diversity
of viewpoint and open discussion in the society, and about what some perceive as high
prices in cable company offerings at this point.
Finance[edit]
The financial sector in the U.S. has seen considerable deregulation in recent decades,
which has allowed for greater risk taking. The financial sector used its considerable
political sway in Congress and in the U.S. political establishment and influenced the
ideology of political institutions to press for more and more deregulation. [26] Among the
most important of the regulatory changes was the Depository Institutions Deregulation
and Monetary Control Act in 1980, which repealed the parts of the Glass–Steagall
Act regarding interest rate regulation via retail banking. The Financial Services
Modernization Act of 1999[27] repealed part of the Glass–Steagall Act of 1933, removing
barriers in the market among banking companies, securities companies and insurance
companies that prohibited any one institution from acting as any combination of an
investment bank, a commercial bank, and an insurance company.
Such deregulation of the financial sector in the United States fostered greater risk taking
by finance sector firms through the creation of innovative financial instruments and
practices, such as the creation of new financial products, including securitization of loan
obligations of various sorts and credit default swaps.[28] The greater risk taking caused a
series of financial crises, including the savings and loan crisis, the Long-Term Capital
Management (LTCM) crisis, each of which necessitated major bailouts, and the
derivatives scandals of 1994.[29][30] These warning signs were ignored as financial
deregulating continued, even in view of the inadequacy of industry self-regulation as
shown by the financial collapses and bailout. The 1998 bailout of LTCM sent the signal
to large "too-big-to-fail" financial firms that they would not have to suffer
the consequences of the great risks they take. Thus, the greater risk taking allowed by
deregulation and encouraged by the bailout paved the way for the Financial crisis of
2007–08.[31][30]
Related legislation[edit]

 1976 – Hart-Scott-Rodino Antitrust Improvements Act PL 94-435

 1977 – Emergency Natural Gas Act PL 95-2
 1978 – Airline Deregulation Act PL 95-50
 1978 – National Gas Policy Act PL 95-621
 1980 – Depository Institutions Deregulation and Monetary Control Act PL 96-221
 1980 – Motor Carrier Act PL 96-296
 1980 – Regulatory Flexibility Act PL 96-354
 1980 – Staggers Rail Act PL 96-448
 1982 – Garn–St. Germain Depository Institutions Act PL 97-320
 1982 – Bus Regulatory Reform Act PL 97-261
 1989 – Natural Gas Wellhead Decontrol Act PL 101-60
 1992 – National Energy Policy Act PL 102-486
 1996 – Telecommunications Act PL 104-104
 1999 – Gramm-Leach-Bliley Act PL 106-102

Controversy[edit]
See also: Anti-globalization movement, Globalization, and Neoliberalism
The deregulation movement of the late 20th century had substantial economic effects
and engendered substantial controversy. As preceding sections of this article indicate,
the movement was based on intellectual perspectives which prescribed substantial
scope for market forces, and opposing perspectives have been in play in national and
international discourse.
The movement toward greater reliance on market forces has been closely related to the
growth of economic and institutional globalization between about 1950 and 2010.[citation needed]
Critics of economic liberalisation and deregulation cite the benefits of regulation, and
believe that certain regulations do not distort markets and allows companies to continue
to be competitive, or according to some, grow in competition.[32] Much as the state plays
an important role through issues such as property rights, appropriate regulation is
argued by some to be "crucial to realise the benefits of service liberalisation". [32]
Critics of deregulation often cite the need of regulation in order to: [32]

 create a level playing field and ensure competition (e.g., by ensuring new energy

providers have competitive access to the national grid);
 maintain quality standards for services (e.g., by specifying qualification
requirements for service providers);
 protect consumers (e.g. from fraud);
 ensure sufficient provision of information (e.g., about the features of competing
services);
 prevent environmental degradation (e.g., arising from high levels of tourist
development);
 guarantee wide access to services (e.g., ensuring poorer areas where profit
margins are lower are also provided with electricity and health services); and,
 prevent financial instability and protect consumer savings from excessive risk-
taking by financial institutions.
For deregulation[edit]
Many economists have concluded that a trend towards deregulation will increase
economic welfare long-term and a sustainable free market system. Regarding the
electricity market, contemporary academic Adam Thierer, "The first step toward creating
a free market in electricity is to repeal the federal statutes and regulations that hinder
electricity competition and consumer choice." [33] This viewpoint stretches back centuries.
Classical economist Adam Smith argued the benefits of deregulation in his 1776
work, The Wealth of Nations:
[Without trade restrictions] the obvious and simple system of natural liberty establishes
itself of its own accord. Every man...is left perfectly free to pursue his own interest in his
own way.... The sovereign is completely discharged from a duty [for which] no human
wisdom or knowledge could ever be sufficient; the duty of superintending the industry of
private people, and of directing it towards the employments most suitable to the interest
of the society.[34]
Scholars who theorize that deregulation is beneficial to society often cite what is known
as the Iron Law of Regulation, which states that all regulation eventually leads to a net
loss in social welfare.[35][36]
Against deregulation[edit]
Sharon Beder, a writer with PR Watch, wrote "Electricity deregulation was supposed to
bring cheaper electricity prices and more choice of suppliers to householders. Instead it
has brought wildly volatile wholesale prices and undermined the reliability of the
electricity supply."[37]
William K. Black claims that inappropriate deregulation helped create a criminogenic
environment in the savings and loan industry, which attracted opportunistic control
frauds like Charles Keating, whose massive political campaign contributions were used
successfully to further remove regulatory oversight. The combination substantially
delayed effective governmental action, thereby substantially increasing the losses when
the fraudulent Ponzi schemes finally collapsed and were exposed. After the collapse,
regulators in the Office of the Comptroller of the Currency (OCC) and the Office of Thrift
Supervision (OTS) were finally allowed to file thousands of criminal complaints that led
to over a thousand felony convictions of key Savings and Loan insiders. [38] By contrast,
between 2007 and 2010, the OCC and OTS combined made zero criminal referrals;
Black concluded that elite financial fraud has effectively been decriminalized. [39]
Economist Jayati Ghosh is of the opinion that deregulation is responsible for increasing
price volatility on the commodity market. This particularly affects people and economies
in developing countries. More and more homogenization of financial institution which
may also be a result of deregulation turns out to be a major concern for small-scale
producers in those countries.[40]