What is Deregulation
Deregulation refers to the removal of government intervention or participation in an industry. When a government fully controls an industry that is run privately through laws, this is known as regulation. When these laws are removed, and the company is given an opportunity to operate freely then it is known as “deregulation”. Some of the restrictions that govern the industries include; taxes, quotas, laws to protect the environment, the workers and the people’s interest. All these restrictions are a set back to the development of the industry.
The main disadvantage of regulation is that it encourages monopoly since the favored industries will have a sizeable share of the market. Deregulation ensures fair competition among industries since the companies or industries are able to use all the available resources without any limitations to achieve their goals. Many companies or industries are opposing to regulations or being governed by external laws since this creates extra work and cost which reduces the profit capabilities of the industry. Many companies argue their facts on the basis that government involvement affects both the consumer and the companies due to costs; therefore, the business argue that the government has no right to be involved in the industries affairs.
Deregulation should not be assumed to be a new concept since some companies, especially in the capitalist countries have fought for the freedom of government involvement in controlling their businesses. Removing the regulations does not necessarily mean getting rid of the government regulations that govern business but simply making the laws lighter and easier to understand. A straightforward explanation is reducing the government levy on taxes for business. This means the government will be partly in control on the business and the costs will be lowered making it easy for the franchise to operate effectively.
Reducing the regulations by the government that governs business will mean that, the business will operate in a more neutral state giving room for them to maximize on their opportunities. Some of the business that should be subjected to deregulation include banks and trading industries, power companies and the wide range of transportation agencies. Deregulation is often associated with political views in that those who are in support of deregulation argue that; deregulation gives the company an opportunity to make more choices meaning the company will have less profit and loss. On the other hand, the consumer will incur lower prices for goods or services.
As much as deregulation may seem to make economic sense it has it’s withdraw backs. Deregulation can prove to be extremely costly for business and can result to abuse of power. Deregulation can lead to substantial financial loss and termination of prominent business. Nevertheless, some believe that the market has a potential to deregulate itself but; this are just mere assumptions.