The Effects of Deregulation on Global Economy

Introduction

Thesis: Deregulation has more negative effects on global economy than positive.

Deregulation, this word is heard on the news, economists use this word quite often, and government officials are somewhat terrified of this word. What does deregulation mean?

Deregulation is the process in which a government may remove or reduce certain restrictions in matters of business to have a more efficient operation of markets. By observing the effects that deregulation can cause on an economy, can help later generations not commit the same mistakes that the past or the current generations have done.

In today’s global economy being regulated by the government is in the norm. Businesses that deal with a very competitive field are limited as to how much they can grow and how low they can make their prices. For example back in the 1800s Andrew Carnegie created a monopoly that was not regulated. By lowering his prices he caused others unable to compete with him. By doing this Andrew Carnegie drove others out of the steel-producing business. When one person not only has control over a specific area but is the only supplier of this item, this is called a monopoly. These days the government regulates actions such as the ones mentioned above.

What can happen if the government’s let go of some of these regulation? Will businesses flourish while hurting the common people? Will deregulation help to push another depression? Will the environment be harmed while people benefit from their selfish desires? These questions will be discussed later in the paper.

Throughout the world governments are giving large corporations a lot of leeway or deregulation. In Russia for example, the government have deregulated their laws concerning in the electricity sector. Railroads and communal utilities are also something that was recently deregulated by the government. Both of these called for the development of better technologies, better and more efficient ways of using energy. Better ways of transporting people. At the same time this may have caused disturbances in the business sector. Control by one major company may cause somewhat of a monopoly. The cost and prices of transportation and electricity may be controlled by one major company. Can this be positive or negative? Deregulation in the Natural Gas Sector is being imposed from the EU (European Union) and the United States. Indeed this is a global economy in which one action may affect the whole world.

Consider the United States in the trends of S&Ls (Savings and Loans). The United States has had many forms of deregulation during the past Century but was often late on pulling them out at the right time. The article, “The Bubble Economy” will discuss more about this subject.

Since 1938 the CAB (Civil Aeronautics Board) regulated all the fares and schedules in the domestic airlines. This was considered a public utility. It was not appreciated by most economists and obviously the airline companies. Later in 1978 the ADA (Airline Deregulation Act) was passed and signed by President Jimmy Carter. This caused the airline prices and fares be controlled by the market forces. (Supply and Demand Forces) This caused people to pay more and thus caused some friction between the airlines and the government. In time it was regulated to a certain degree.

In Asia, deregulation puts banks into a tight competition. With this global economy not only do Asian banks compete with each other but, they must compete with the rest of the world. More details are discussed in the article, “Bank Fund Management Challenges and Opportunities”.

In Europe the Gas Market deregulation causes the development of better technologies and equipment to transfer Gas. The company that took advantage of this, “Gaz de France” is now replacing the pipelines in order to be more efficient in its use of resources to produce gas. More of this will be discussed in the article, “European Gas Market Deregulation Demands Financial Muscle”.

Summary of Article #1

The Bubble Economy by Robert Kuttner written in “The American Prospect” on September 24, 2007 describes what has caused the “ Big Bubble” after the turn of the century. “The Federal Reserve is struggling to contain what is already the most severe credit contraction since the Great Depression”. This is the consequence of a series of financial deregulations. This caused the American economy to depend on asset bubbles. Asset bubbles are overvalued stock, overvalued real estate, and dubious financial instruments.

What have caused this bubble to grow even larger? Speculative borrowing have caused this bubble to pump itself up. Just like in the 1920s the borrowing feeds on itself. This causes inflation of assets and these