Deregulation is the process by which governments remove selected regulations on business in order to (in theory) encourage the efficient operation of markets. The theory is that fewer regulations will lead to a raised level of competitiveness, therefore higher productivity, more efficiency and lower prices overall. Deregulation is different from liberalization because a liberalized market, allowing any number of players, can be regulated to protect the consumer's rights, especially to prevent de facto or even legal oligopolies.

Perceived failures of deregulation (such as the failure of the Savings & Loan sector of the U.S. during the 1980s) have encouraged re-regulation, and more balanced approaches to regulation that emphasize the quality of regulation over the quantity. That is, instead of simply removing (or adding) regulations on business, the point is to regulate business intelligently, using as sophisticated an economic theory as possible.

One problem that encouraged deregulation was the way in which the regulated industries often controlled the government regulatory agencies, using them to serve the industries' interests. Unfortunately, the deregulation process itself was often controlled by the regulated industries.


European Union


Since the economic bubble in 1990s collapsed, the Japanese government has seen deregulation as an effective way to lift its economy because it has a huge deficit and cannot make a large tax cut.

New Zealand

New Zealand has had extensive deregulation since 1984. It was instigated by the Labour Party.

See also: Economy of New Zealand

United States

Deregulation was a major trend in the United States in the last quarter of the twentieth century. A number of major deregulation initiatives were passed. Some of these were withdrawn quickly (but not quickly enough to avoid major problems), including the deregulation of savings and loans. American savings banks, which were permitted to lend unfettered, had their depositors funds insured by the federal government, creating a moral hazard. Other legislation has been considered more widely successful, including deregulation of transport, the gas market, and the electricity market. In 1996, the media market was significantly deregulated.

Related Legislation



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