Deregulation: An Unfinished Story

Deciding how much government should interfere in individual markets continues to be debated vigorously. In 1996. the United States partially deregulated its communications industry, allowing long-distance and local telephone companies to compete with one another. In 1999, Congress removed tight controls on the financial industry by repealing the Glass- Steagall Act. For the first time since the Great Depression, banks, insurance companies. and ‘investment houses are now allowed to compete with one another and to offer “one-stop financial’ shopping.”

As deregulation sweeps through the economy. it is wise to recall that government still has an important role to play in monitoring the economy and setting the rules of the road. much regulation historically may have been designed. market failures may continue to call for regulation in special instances. In the banking industry, economists worry that inadequate regulation will lead to bank failures and potential not economic disturbances; particularly because deposits are guaranteed by the government. the people are concerned that intense competition is leading airlines to cut corners on maintenance. A similar concern has arisen as increased ‘competition in the electricity industry . induced some nuclear-power plants to curtail their safety investments. These fears were a sober reminder that regulation is not an either or situation-that government oversight includes much more than telling. firms what to produce and at what price .

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