How the Economy Was Lost by Paul Craig Roberts

Author:Paul Craig Roberts [Roberts, Paul Craig]
Language: eng
Format: mobi
Publisher: AK Press
Published: 2013-07-16T20:00:00+00:00

Chapter 30: Which is Worse: Regulation or Deregulation?

Libertarians preach the morality of the market, and socialists preach the morality of the state. Those convinced of the market’s morality want deregulation; those convinced of the state’s morality want regulation.

In truth, neither seems to work.

Consider for example the rules against collusion. The political left imposed this regulatory rule in order to prevent monopoly behavior by companies. One consequence has been that, unable to collude, firms are slaves to their bottom lines. In order to compete successfully in the competitive new world of globalism, firms have curtailed pensions and health insurance for their employees.

Or consider the regulation of new drugs, which drives up costs and delays remedies without, apparently, doing much to improve safety.

Or the fleet mileage standards that regulation imposes on car makers. These regulations destroyed the family station wagon. Families needing carrying capacity turned to vans and to panel trucks. Car makers saw a new market and invented the SUV, which as a “light truck” was exempt from the fleet mileage regulations. The effort to impose fuel economy resulted in cars being replaced by over weight fuel-guzzling SUVs.

On the other hand consider the current troubles resulting from banking and financial deregulation. The losses from this one crisis greatly exceed any gains from deregulation.

Or consider the plight of the de-regulated airlines and deterioration in the quality of air service. Or the higher costs of telephone service and the loss of a blue chip stock for widows and retirement funds that resulted from breaking up AT&T. Or the scandals and uncertainties from utility deregulation, which permits non-energy producers like Enron to contract to deliver electric power.

Economists claim that deregulation results in lower prices. Cheap advanced fare airline ticket prices are cited as evidence. What these economists mean is that the fares without stopovers are cheap to people who can plan their trips in advance. Other passengers subsidize these advanced fares by paying four times as much. Moreover, deregulation has created bottom-line competition that has lowered service, removed meals, and results in periodic bankruptcy, thus forcing the airlines’ creditors to pay for the low fares. Pilots, flight attendants, and aircraft maintenance crews subsidize the lower fares with reductions in salaries and pension benefits. Are bankruptcies and mergers leading the industry toward one carrier and the re-emergence of regulation?

Consider the fall-out from trucking deregulation. As in the case of the airlines, the claim was that more communities would be served and costs would decline. But which costs? De-regulation made every minute a bottom-line item. Trucks became bigger, heavier, and travel at higher speeds. Highway safety suffers, and highway maintenance costs rise. The courtesy of truck drivers declined. When trucking was regulated, truckers would stop to help people whose cars had broken down. Today that would throw off the schedule and threaten the bottom-line.

Economists dismiss costs that aren’t included in price. For them the cost that matters is the price paid by consumers. The truck that gets there faster delivers cheaper to the consumer. The myriad

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