Deregulation

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Deregulation is the process by which governments remove selected regulations on business in order to (in theory) encourage the efficient operation of markets. The theory is that fewer regulations will lead to a raised level of competitivness, therefore higher productivity, more efficiency and lower prices overall. Deregulation is different from liberalization because a liberalized market, allowing any number of players, can be regulated to protect the consumer's rights, especially to prevent de facto or even legal oligopolies.

Perceived failures of deregulation (such as the failure of the Savings & Loan sector of the U.S. during the 1980s) have encouraged 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.

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. Unfortunately, the deregulation process itself was often controlled by the regulated industries.

European Union

• 2003 Corrections to EU directive about software patents

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.

New Zealand

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

See also: Economy of New Zealand

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 Some of these were withdrawn quickly (but not quickly enough to avoid major problems), including the deregulation of savings and loans.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. Other legislation has been considered more widely successful, including deregulation of transportation, the gas market, and the electricity market. In 1996, the media market was significantly deregulated.

Critics of deregulation in the United States have attributed the following problems to deregulation:

• Widespread safety problems and inefficiency in commercial trucking
• Increased accident rate, and a trend toward general bankruptcy in the airlines
• The $43 Billion cost to the state of California, due to extraordinary prices paid for electricity during the California electricity crisis
• Degradation of telephone service
• The insolvency of financial institutions such as Long Term Capital Management (LTCM)

Pope John Paul II's critique

Although criticism of deregulation has come from many quarters, one interesting commentary appeared in in a speech by Pope John Paul II to the Pontifical Academy of Social Sciences in April 1997:

"An economy based only on financial gain deprives itself from its own roots and from its original aim, which should be that of serving the real economy and should be, ultimately, the development of people and human communities. The economic picture becomes all the more dramatic if one considers the asymmetry characterizing the international financial system: innovative processes and the deregulation of financial markets tend in fact to consolidate only in some parts of the globe. This raises serious ethical questions, because the countries which are excluded from such processes, even if they are excluded from any benefit from such financial products, are not safe from the negative consequences of financial instability on their real economic systems, particularly so if they are fragile and late in developing."

• 1976 - Hart-Scott-Rodino Antitrust Improvements Act PL 94-435
• 1978 - Airline Deregulation Act PL 95-504
• 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 - 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