Archive for Wednesday, June 20, 2001

Regulations not all bad

June 20, 2001


I am old enough to remember what life was like before Americans began to worship the free market. I try to tell my students that there was once a period in American history when the federal government did not take as gospel that all regulation and all social programs were evil, a time when tax reform meant actually reforming and attempting to simplify the tax structures rather than simply reducing taxes and governmental services.

Most of them find such a world impossible to visualize because we have for so long worshipped at the alter of deregulation. But I must confess that on occasion these days, I find myself overcome with nostalgia for the time in our history when some things were regulated in order to protect the average consumer.

In fact, I find it increasingly difficult not to feel just a trifle nostalgic. Every time I go over my heating bills from last winter and as I look at the estimates for propane for next year I wonder whether deregulation has been such a good thing. And, of course, every time I stop at a gas station to fill up my truck I reflect upon those halcyon days when gasoline was 30 cents a gallon.

And, let me tell you, every time I have to take an airplane someplace I actually become misty-eyed with a longing for yesteryear. Have you tried to fly cross-country to a non-hub city recently? More and more often I seem to fly five hundred miles east to go west and three hundred miles south to go north. I fly from one hub to another, in cramped seats in overcrowded airplanes where a bag of peanuts is now considered a "light lunch" by the airline. And, as far as I can tell, airfares haven't gotten cheaper to these non-hub destinations. In fact, it seems often that the fares have actually increased substantially.

I think that there can be no question that between the beginning of the New Deal of the 1930s and the end of the 1970s the federal government grew at a frightening pace and that with this growth came what seemed to be an endless production of new regulations. I'm sure that many of these regulations were both expensive and unnecessary. But not all.

During the presidency of Ronald Reagan, the federal government indulged in an orgy of deregulation in the firm belief that a free market solution is always the best one. The problem, of course, is that ours is a complex society and what may be the best solution for one segment of the economy or one group of individuals may not be a best solution for others. How many of us can honestly say that deregulation of the air travel industry has made our travel easier or better?

Right now the federal government is being faced with a major test of its deregulatory zeal. There can be little doubt that we are in the beginnings of a new, and perhaps, permanent national energy crisis. California finds itself ahead of the curve and California's citizens are finding that they must endure huge increases in the cost of energy combined with increasing energy shortages.

Is it at all surprising that the governor of California has called, therefore, for a reversal of federal deregulatory policy and asked the Federal Energy Regulatory Commission (FERC) to institute price caps on energy suppliers? Reluctantly, the FERC has made some concessions to California's plight, but what is at stake is a far more fundamental issue, i.e. the extent to which the federal government reasserts its regulatory powers and decides to abandon the goal of letting market forces control the American economy to the greatest extent possible.

The realization that free market, deregulatory policies may not always work is not an American phenomenon alone. Last December I spent a week in England. I was based in Cambridge and planned to visit Oxford and London by train. But these plans were disrupted by a series of slowdowns in train service, slowdowns caused by a series of unfortunate decisions made by the private owners of the formerly government-owned and regulated train companies.

That the trains were privately owned and not regulated was a legacy of the deregulatory policies of former Prime Minister Margaret Thatcher. As I was preparing to return home to the U.S. I found it interesting that the British media was filled with calls from throughout the nation to have the government take back control of the trains so that they would run on time and as scheduled, as they had before privatization. Conservatives were just as vocal in favor of re-regulation as Laborites and Liberals.

In the coming months and years I believe that we will continue to discover that deregulation has not been an unalloyed blessing just as tax reduction is not always an optimal governmental policy. There are times when we need government intervention and government regulated services, even though they may come at a price.

We may hope that the current Congress working in conjunction with President Bush will not close their minds to reversing some of the deregulatory policies that have been held so dear by Congress and the executive branch for two decades or more and take a fresh look at government regulations, not simply to abolish them, but, perhaps, in some cases to preserve or even strengthen them when by doing so they can better serve the American public.

Mike Hoeflich is a professor in the Kansas University School of Law.

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