Trade-Offs in Freeing Markets
October 17, 2002
During the past quarter century, deregulation has reduced federal regulations and created more competitive markets. There is little question that consumers have been the net gainers in the deregulatory process. But some economists contend the process has carried a price.
No less a champion of free enterprise than Federal Reserve Chairman Alan Greenspan recently noted a choice "between economic growth with associated potential instability, and a more civil... way of life with a lower standard of living."
- Some observers blame actions by the Fed during the 1980s and 1990s, as well as the 1999 repeal of the Glass-Steagall Act of 1933 -- which was designed to wall off business from banking -- as setting the stage for some of today's scandals.
- Others cite the Telecommunications Act of 1996 as clearing the way for shenanigans at such companies as WorldCom Inc. -- which imploded after the biggest accounting fraud ever.
- They charge that the airline industry never really learned to cope with deregulation -- and slid into a series of slumps including a particularly devastating one now.
Yet deregulation and low interest rates spurred a burst of technological investment that accelerated the growth of the economy and slashed the unemployment rate. Without deregulation, the U.S. economy would look very different from what it does today -- in more ways than one.
Source: Jacob M. Schlesinger, "Did Washington Help Set the Stage for Economic Woe?" Wall Street Journal, October 17, 2002.
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