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What is Deregulation?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 08 November 2016
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When industries are principally run privately, but controlled to a large degree by a government through laws, this is regulation, but when regulations are removed, allowing the industry a freer hand, this is known as deregulation.

Especially in principally capitalist countries, industries often oppose too much interference from the government. They do not want to have to abide by extra laws created since this might cost money and create extra work. Many businesses argue that government does not have the right to determine how a private industry runs its business, and when it does, it costs money for everyone involved, including consumers. When businesses are allowed to self-govern, it is argued, they are perfectly capable of operating in ethical ways that are protective of the customer, and that don’t lose profits.

Deregulation is not a new concept, especially in places like the United States. It has long been the call of certain sectors of the US population that government interference in business, in the form of regulation and exercise of control over a business, violates some of the basic tenets of the society. To this end, many industries have fought for and won deregulation, gaining far greater control over their industries and the standards they can personally set.

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Removing regulations doesn’t necessarily mean all laws are removed, but they may be simpler and easier to follow. Essentially, enough laws for the company or companies to operate in a much more independent fashion may be changed or discarded. Certain industries in the US that have been subject to a degree or more of deregulation include power companies, banking and trading industries, and many widespread transportation agencies.

It is the case that the issue of deregulation is one representing several distinct political viewpoints. Those in favor of lifting, removing or simplifying some regulations argue that this makes economic sense. They suggest that dealing with stiff laws creates profit loss and this will always be conferred to customers of industries through higher prices. On the other hand, simpler laws allowing a company to make greater choices, means less profit loss and more potential money saved by the consumer.

The flipside of this is that deregulation can prove costly and may result in abuses. The fall of the financial markets in the late 2000s was principally blamed on not having enough laws to prevent abuse, and the financial damage accrued was significant and excessive, affecting those with lots of wealth and those who had very little. Even people usually in favor of deregulation began to demand greater government control of the market to avoid a recurrence of this economic disaster. Yet others continue to oppose changes to present laws, suggesting the market has full capacity to regulate itself.

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