Deregulation

Historical Perspective

Historically, deregulation emerged as a response to the welfare and Keynesian programs of the 1950s and 1960s and the economic instability of the 1970s. Conventionally, deregulation is associated with the rise to power of Margaret Thatcher in the United Kingdom (1979) and Ronald Reagan in the United States (1981). In this received view, deregulation is associated with the economic paradigm of neoliberalism. The international diffusion of deregulation was facilitated by the programs of the International Monetary Fund (IMF; e.g., in Latin America), the ideas cementing the Washington Consensus, and the promotion of approaches to deregulation, such as the ones pursued by labor governments in Australia and New Zealand. When labor governments joined the bandwagon of deregulation, the international spread of the phenomenon seemed to some observers universal and unstoppable. The conventional wisdom, however, ignores that (a) as a matter of fact, the total amount of regulation continued to grow in the 1980s and is still on the rise; (b) the association between deregulation and other so-called neoliberal ideas is dubious, as shown by the spurious correlation between deregulation and privatization; (c) there was strong political opposition to deregulation ideas (“genuine,” “persistent,” and “vicious,” according to Sam Peltzman), hence they were never uncontested and triumphant; with the financial crisis triggered by the credit crunch of 2008–2009, deregulatory ideas lost much of their intellectual appeal, amid several calls for “new” forms of regulatory capitalism; and (d) in continental Europe at least, the deregulation of domestic utilities and other crucial markets was caused by a newly emerging regulatory power, that is, the European Union (EU) as “regulatory state.” National rules were removed and remodeled, but this happened in the context of a transfer of regulatory powers to the supranational European level to facilitate the creation of the EU Internal Market.

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