Deregulation
Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental
The stated rationale for deregulation is often that fewer and simpler regulations will lead to raised levels of competitiveness, therefore higher
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, which transfers state-owned businesses to the private sector.
By country
Argentina
Australia
Having announced a wide range of deregulatory policies,
Brazil
After Dilma's impeachment, Michel Temer introduced a labor reform, besides allowing up to 100% of foreign capital on Brazilian air companies[4] and giving more protection to state-owned enterprises from political pressure.[5] Bolsonaro administration also promoted deregulations (even the expression "Bolsonomics" was created),[6] such as Economic Freedom Law,[7] Natural Gas Law,[8] Business Environment Law,[9] Basic Sanitation Legal Framework,[10] besides allowing the direct sale of ethanol by fuel stations[11] and opening rail transport industry to private investment.[12] and deregulating the use of foreign currency.[13]
Canada
This section needs to be updated.(August 2021) |
This section needs additional citations for verification. (August 2021) |
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.[14] Comparison shopping websites operate in some of these jurisdictions, particularly Ontario, Alberta and British Columbia. 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.
Ontario began deregulation of electricity supply in 2002, but pulled back temporarily due to voter and consumer backlash at the resulting price volatility.[14] 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 has been at market price and there are numerous competing 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 were scheduled to shift to the new rate structure by the end of 2012.
Alberta has deregulated its electricity provision. Customers are free to choose which company they sign up with, but there are few companies to choose from and the consumer price of electricity has increased substantially as it has in all other Canadian provinces.. Consumers may choose to remain with the public utility at the Regulated Rate Option.
European Union
In 2003, there were amendments to EU directive on software patents.[15]
Since 2006, the
Ireland
The taxi industry was deregulated in Ireland in 2000,[17] and the price of a license dropped overnight to €5,000. The number of taxis increased dramatically.
However, some existing taxi drivers were unhappy with the change, as they had invested up to €100,000 to purchase licenses from existing holders, and regarded them as assets. In October 2013 they brought a test case in the High Court for damages.[17] Their claim was dismissed two years later.[18]
New Zealand
New Zealand Governments adopted policies of extensive deregulation from 1984 to 1995. Originally initiated by the Fourth Labour Government of New Zealand,[19] the policies of deregulation were later continued by the Fourth National Government of New Zealand. The policies had the goal of liberalizing 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.[20] 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
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.[citation needed]
United Kingdom
The
From 1997 to 2010, the
New Labour privatized only a few services, such as Qinetiq. But a great deal of infrastructure and maintenance work previously carried out by government departments was contracted out (outsourced) 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 were never privatized by public offer, but instead by tendering commercial interests.[citation needed]
United States
History of regulation
One problem that encouraged deregulation was the way in which regulated industries often come to control the government
Examples of deregulated industries in the United States are banking, telecommunications, airlines, and natural resources.[23]
During the
During the Presidencies of
1970–2000
Deregulation gained momentum in the 1970s, influenced by research by the
Transportation
Nixon administration
The first comprehensive proposal to deregulate a major industry, transportation, originated in the Richard Nixon Administration and was forwarded to Congress in late 1971.[28] 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[29]), White House Office of Consumer Affairs (represented by Jack Pearce), Department of Justice, Department of Transportation, Department of Labor, and other agencies.[30]
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.[31] This 'civil society' coalition became a template for coalitions influential in efforts to deregulate trucking and air transport later in the decade.
Ford administration
After Nixon left office, the
Carter administration
President Jimmy Carter – aided by economic adviser Alfred E. Kahn[25] – devoted substantial effort to transportation deregulation, and worked with Congressional and civil society leaders to pass the Airline Deregulation Act on October 24, 1978 – the first federal government regulatory regime, since the 1930s, to be completely dismantled.[32][33]
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
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
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.[34] 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
Energy
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
Communications
Deregulation was put into effect in the communications industry by the government at the start of the
Finance
The
Such deregulation of the financial sector in the United States fostered greater risktaking by finance sector firms through the creation of
Related legislation
- 1976 – Hart-Scott-Rodino Antitrust Improvements ActPL 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 ActPL 106-102
Controversy
This article may lend undue weight to certain ideas, incidents, or controversies. (November 2023) |
The deregulation movement of the late 20th century had substantial economic effects and engendered substantial controversy. 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.[citation needed]
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]
For deregulation
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."[45] 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.[46]
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.[47][48]
Against deregulation
Critics of
Critics of deregulation often cite the need of regulation in order to:[49]
- 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.
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."[50]
William K. Black says 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.[51] 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.[52]
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.[53]
See also
- Corporatocracy
- Deregulated capitalism
- Ease of Doing Business Index
- Electricity provider switching
- Night-watchman state
- Political economy
- Public service company
- Regulatory reform
- Stranded costs
References
- ISBN 978-0-292-72139-5.
- Kleinknecht, William (2010). The Man Who Sold the World: Ronald Reagan and the Betrayal of Main Street America. PublicAffairs. ISBN 978-0-7867-4433-6.
- Lotz, Amanda (2007). The Television Will Be Revolutionized. New York, New York: New York University Press. ISBN 978-0-8147-5219-7.
- Rose, Mark H.; Seely, Bruce E.; Barrett, Paul F. (2006). The Best Transportation System in the World. University of Ohio State Press. Archived from the original on 2009-01-15. Retrieved 2008-01-12.
{{cite book}}
:|work=
ignored (help) - Johnson, Simon; Kwak, James (2010). 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. New York: Pantheon Books.
Notes
- .
- ^ Krugman, Paul (December 11, 2001). "Laissez Not Fair". The New York Times. Retrieved June 10, 2011.
- ^ Inhaber, Herbert (February 12, 2002). "Deregulation and Its Discontents". Ideas in Action. Archived from the original on November 5, 2011. Retrieved June 10, 2012.
- ^ Netto, João Cláudio; Barbiéri, Luiz Felipe (December 13, 2018). "Temer assina MP que libera até 100% de capital estrangeiro em companhias aéreas brasileiras". G1. Retrieved January 8, 2023.
- ^ "Lei das Estatais e sua aplicação prática". Insper. August 16, 2018. Retrieved January 8, 2023.
- ^ "Bolsonomics: versão cabocla do Reagonomics?". Propmark. November 6, 2018. Archived from the original on January 7, 2023. Retrieved January 7, 2023.
- ^ Deffenti, Fabiano (November 1, 2019). "Brazil's Economic Freedom Law". LawsofBrazil. Retrieved January 7, 2023.
- ^ "Nova Lei do Gás Natural: entenda quais os seus benefícios". Portal da Indústria. Retrieved January 7, 2023.
- ^ Marangoni, Afonso (August 26, 2021). "Bolsonaro sanciona lei do ambiente de negócios". Revista Oeste. Retrieved January 7, 2023.
- ^ "New legislation facilitates private investments in basic sanitation in Brazil". gov.br. June 13, 2022. Retrieved January 7, 2023.
- ^ "Sancionada lei que permite compra e venda direta de álcool". gov.br. January 5, 2022. Retrieved January 7, 2023.
- ^ Yano, Célio (February 7, 2022). "Em 6 meses, marco legal das ferrovias atrai R$ 240 bilhões em investimentos privados". Gazeta do Povo. Retrieved January 7, 2023.
- ^ Caselato, Matheus (January 5, 2023). "Novo limite para dinheiro em viagens e transferências para e do exterior; entenda o novo marco cambial". Money Times. Retrieved January 8, 2023.
- ^ a b "A Funny Thing happened On the Way to Utopia", Ontario Electricity Restructuring, Public Interest Advocacy Centre, 11 November 2002, archived from the original on 7 June 2008, retrieved 2009-04-26
- ^ Amendment 23 to the proposed Directive on the patentability of computer-implemented inventions (PDF), European Parliament, September 2003, archived from the original (PDF) on February 10, 2006
- ^ "Multilateral Agreement on the Establishment of a European Common Aviation Area (ECAA)". European Council. December 1, 2017. Retrieved August 3, 2021.
- ^ a b Healy, Tim (October 30, 2013). "Deregulation 'ruined taxi drivers overnight'". Irish Independent. Retrieved August 3, 2021.
- ^ Hosford, Paul (October 16, 2016). "The government just avoided a €360 million payout over taxis". TheJournal.ie. Retrieved August 3, 2021.
- ^ Dalziel, Paul (5 March 2010). "Spending in the economy – Economic reform from 1984". Te Ara – the Encyclopedia of New Zealand. Retrieved 4 October 2012.
- ProQuest 213226506.
- ISBN 978-1-5261-4186-6.
- ^ Patrick Jenkin (July 3, 2006). "Legislative and Regulatory Reform Bill". Parliamentary Debates (Hansard). Vol. 684. HL. Retrieved August 1, 2021.
- OCLC 52554419.[page needed]
- ^ http://www.encyclopedia.com/doc/1G1-16514254.html[dead link]
- ^ a b c Hershy Jr., Robert D. (December 28, 2010). "Alfred E. Kahn Dies at 93; Prime Mover of Airline Deregulation". New York Times.
- ProQuest 217121225.
- .
- ^ Rose, Seely & Barrett 2006, p. 154.
- ^ "Thomas Gale Moore". The Hoover Institution, Stanford University. Retrieved 2012-06-11.[self-published source?]
- ^ Rose, Seely & Barrett 2006, pp. 152–60.
- ^ Rose, Seely & Barrett 2006, pp. 154–56.
- ProQuest 1541534529.
- ^ Lang, Susan S. "Economist Alfred Kahn, 'father of airline deregulation' and former presidential adviser, dies at 93," December 27, 2010, Cornell Chronicle, retrieved April 9, 2020
- ^ Kleinknecht 2010.
- ^ "The Bumpy Road to Energy Deregulation". EnPowered. 2016-03-28. Archived from the original on 2017-04-07. Retrieved 2017-05-01.
- ^ "Electricity Deregulation Map of the United States". Electricity Local. Retrieved 2014-04-23.
- ^ Lotz 2007, p. 47.
- ^ Lotz 2007, p. 82.
- ]
- ^ Johnson & Kwak 2010, pp. 20, 133, 150.
- ^ Johnson & Kwak 2010, pp. 88–90.
- ^ "Markets: The Ghosts of '94 Veteran bond traders fear the omens point to a repeat of the catastrophic collapse of the mid-nineties". Financial Times. London. March 19, 2013. Archived from the original on 2022-12-10.
- ^ Frontline (U.S. TV program). PBS. October 20, 2009.
- ^ Johnson & Kwak 2010, pp. 147–148.
- ^ Thierer, Adam D. (13 April 1998), A Five-Point Checklist For Successful Electricity Deregulation Legislation, The Heritage Foundation, archived from the original on 4 April 2009, retrieved 2009-04-26
- ^ Smith, Adam (1801). The Wealth of Nations. Paris: James Decker. p. 96.
- ProQuest 1282085602.
- S2CID 145059055.
- ^ ISBN 978-0-85003-892-7.[page needed]
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- ^ Black 2005.
- ^ Black, Bill (December 28, 2010). "2011 Will Bring More De facto Decriminalization of Elite Financial Fraud". Next New Deal: Blog of the Roosevelt Institute. Archived from the original on July 15, 2014. Retrieved September 7, 2012.
- ^ Jayati Gosh (January 2013). "Too much of the same". D+C Development and Cooperation/ dandc.eu.
Further reading
- Barnum, John W (September 1998). What Prompted Airline Deregulation 20 Years Ago?. Annual Meeting of the International Bar Association. Vancouver, BC. Retrieved 2009-08-17.
- Baskin, J. and P. Miranti. A History of Corporate Finance (Cambridge UP, 1997), worldwide.
- ISBN 978-0-19-512886-4.
- Derthick, Martha; Quirk, Paul J. (1985), The Politics of Deregulation, ISBN 978-0-8157-1817-8, in United States
- Kahn, Alfred E. "Deregulation: looking backward and looking forward." Yale Journal on Regulation 7 (1990): pp. 325+ online
- Kahn, Alfred E., "Airline deregulation", Concise Encyclopedia of Economics
- Moore, Thomas Gale (November–December 1988), "Rail and Truck Reform: The Record So Far", Regulation
- Robyn, Dorothy (1987), Braking the Special Interests, ISBN 978-0-226-72328-0
- Schenk, Catherine R. (December 2020). "Regulatory foundations of financialisation: May Day, Big Bang and international banking, 1975–1990". Financial History Review. 27 (3): 397–417. ProQuest 2473344023.
External links
- Crews, Clyde Wayne (28 February 2000), Jump, Jive an' Reform Regulation: How Washington Can Take a Swing at Regulatory Reform, Competitive Enterprise Institute, archived from the original on 1 December 2008, retrieved 2009-04-26
- Powering a Generation of Change, Smithsonian Institution, retrieved 2009-04-26
- Zhuravskaya, Ekaterina; Yakovlev, Evgeny (14 March 2008), Deregulation of Business, SSRN 965838
- Nachshon Draiman CEO (2000), The deregulation of the natural gas industry and other utilities, Multiut, archived from the original on 2009-01-07, retrieved 2009-04-26
- Jay Draiman, Dir. of Utilities & Sustainability (1999), Age of Deregulation, US GAS ELECTRIC, archived from the original on 2010-11-03, retrieved 2010-12-19
- Nachshon Draiman CEO, Fraud, archived from the original on January 6, 2011, retrieved 2009-04-26
- Doing Business project, World Bank, retrieved 2009-04-26
- Regulation: From Economic Deregulation to Safety Regulation, Federal Highway Administration, 8 November 2006, archived from the original on October 18, 2007, retrieved 2009-04-26. This comprehensive study indicating, among other things, that transport deregulation reduced distribution costs in the United States from about 14% of gross domestic product to under 11% (If this measure is selected, current dollar savings can be calculated by multiplying current GDP by @3%).[Misplaced in article]