Arguments for deregulation & against deregulation

Written by mark fitzpatrick
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Arguments for deregulation & against deregulation
The American airline industry saw deregulaiton reforms in the early 1980s. ( Images)

A 2006 New York Times article by William Pfaff outlined a debate seen within many countries: deregulation. Simply speaking, deregulation is the removal of economic regulations that are seen as a hindrance to economic growth. In the New York Times article, Tom Allison, a counsellor to the United States Senate in the 1980s, regretted that the United States deregulated the U.S. airline industry. However, the economic argument continues over whether deregulation is a positive economic force.

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The Debate

For economic scholars and businesses, regulation might be seen as a burden on free enterprise. Regulation, however, is a broad topic. Regulation may be everything from work safety policies to taxes or tariffs. Hence, the degree of which an economic scholar or business would want regulation reduced will always vary. Some might want lower taxes, but not the removal of safety laws. Others, theoretically, might feel all regulation is a drag on growth. There is also a misconception to apply regulation or deregulation across the board. Paul Joskow, a professor at the Massachusetts Institute of Technology, published an article in 2004 addressing the fact that industries toy with the idea of regulation and deregulation on and off again.

Price Benefit or Spike

The private utility company Direct Energy makes the point that deregulation is beneficial for private business. It is the belief of Direct Energy that with little regulation, aspects such as prices are controlled more efficiently by the market, not by government regulation. With the market in place to dictate prices, consumer purchasing helps drive prices down, leading toward cheaper goods and services for all. However, a 2007 New York Times article by David Kay Johnson argues that electricity prices seen in states with little regulation have higher prices than those set by regulations. Although this is an industry-specific case, it shows that deregulation might not work for every industry.

Financial Crises

Since the global recession of the late 2000s, the debate over deregulation has been at the forefront. A 2009 article in the magazine Roll Call outlines how government officials for decades had centred their ideological beliefs in the free market. This is because, ideologically speaking, government hinders innovation with its regulations. However, as the Roll Call article states, many scholars believe that financial crises come from the lack of regulation over business. However, a 2009 report by the conservative Heritage Foundation counters such a notion, stating that financial crises come from government regulations that force companies and firms to enact financial policies that are against their best interests. By not focusing on their best interests, financial firms inadvertently or against their own benefits, chose financial outcomes that aid in stagnant economic growth.

Partisan and Ideological Undercurrents

A blog post by New York Times writer David Leonhardt in 2011 summarised many economic talking points by conservative and progressive economic thinkers. In the end, according to the article, deregulation divides economic thinking. Deregulation may help businesses, allow for economic growth, reduce government spending and help with the overall greater good. Conversely, deregulation may also not be good for every industry. It might raise prices on goods and services; reduce the quality of goods and services; minimise consumer protections; and lead to national financial issues. Economic research tends to show that deregulation has benefits and downsides, leading supporters or detractors make their case for or against deregulation. In the end, deregulation will always have its benefits some of the time and risks some of the time as well.

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