The Myth of Deregulation

I’ve heard it many times, and once again we are about to enter something completely misunderstood. Some fear it, it some cheer it. Strangely it seems no one gets it: the myth of deregulation.

The idea of deregulation is simple. Rules choke business. Rules are expensive to business. If you get rid of the rules, business can make things more profitably. They make more money and everyone is happy.

It makes some assumptions though. One is the rules are meaningless. The other is that rules only come from one source. The problem is that both of those don’t hold up to the light of day.

Let’s look at rules are meaningless, only restricting business. Let’s ask a simpler question first: what does regulation do? Ideally, it protects citizens from harm or provides guidance to a best practice. If a battery can explode, should it be on a plane? The FAA prohibits some types of batteries on planes because they could catch on fire. One could argue that restricts passengers unfairly from carrying what they want on an airplane. Maybe we should get rid of rule allowing Guns and knives on planes? I think many would agree preventing weapons on planes discourage hijacking of planes and prohibiting exploding smartphones prevents mid-air fires and plane crashes.

But here we see the other side of the coin. There is more than one rule maker. The airlines themselves restricted the use of the exploding phones before the FAA stepped in and restricted use. Just because you get rid of a rule, does not mean the rule disappears. Instead, you lose control over the rule.

Let’s take a hypothetical example. Suppose you have a EPA rule that says a factory must only emit a certain amount of soot from smokestacks. That might be expensive for the company to carry out, but it is the law, so they do. There’s a change in US administration, and the very pro-industry administration decides that this pollution rule restricts business, so they get rid of it. While the soot may make the production cost less for the factory it pollutes the town where everyone in the factory lives. Every brightly colored McMansion in town is now soot black. The town might propose their own clean air ordinance that restricts the factory. In the case of a small town that might not happen, because it is the only source of income for the town. In a city, they might just say good riddance to bad trash.
But suppose that factory sells products across the United States and even the world. Environmentally conscious California might write a rule that products sold in the state must be made in factories with certain emission standards. So too could China and the European Union. If this company wants to sell in a lot of markets, it has to meet those laws or not see the product sold there. The US government loses control of the rule and others pick up an environmental rule, possibly making it even more restrictive than the original.

For China, which has its own problems with pollution, that might seem a bit hypocritical, but really its something else all tougher: Protectionist. Tariffs and taxes aren’t the only way to prevent a product from importation. Very often regulation works far more effectively. California may be promoting its own low emission businesses by preventing a Kansas firm from selling in California. Many countries do it, including the U.S. There’s big offices for the FDA in China for protecting US health, but the Chinese will tell you a different story of protectionism. One way to prevent this kind of restraint of trade is harmonize the rules. If you make sure everyone is playing on the same field, then no one can play that game. But if that country then decides to pull out of harmonization, the other countries can enforce the rule and block trade with the offending country.

If there are rules in place, you do not make the world free of a rule when you lose it. You just give someone else power over you. The idea the removing the rules only works in a small closed system. The bigger the system the weaker the idea becomes and the more others can dictate what you do.

Trainer, App developer. Author. Artist. Proprietor of and Host of Slice of App Pie Show

Posted in Uncategorized

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