Deregulation - What Prospects? G. Hagedorn

The question to examine here is whether such an effort has any real prospect of success. Some commen~ tators, even those who are inclined to agree that in many instances the Mr. Hagedorn is Vice-President and Chief Economist of the National Association of Man ufacturers. This column appeared in NAM Re ports, June 30, 1975. adverse effects of regulation out weight its benefits, have suggested that it does not. Deregulation, they say, flies in the face of a long established trend toward increas ing government involvement in the detailed workings of the economy. "You can't turn the clock back," I am continually told when the sub ject is discussed. As rational men, we can protest against any such attitude. Why shouldn't the country take an ob jective look at government regula tion of the economy, in all its myriad forms, toassess its benefits and its costs, and to weigh one against the other? Why should one possible conclusion-the desirability of deregulation-be ruled out in advance? The cliche, "You can't 597 598 THE FREEMAN turn the clock back," seems to mean that once you have made a mistake you must go on making it forever, and reasonable men cannot accept that.

Those to whom such arguments are addressed often nod sympathe tically, but they are not convinced. We are dealing, they say, not with a process directed by a rational analysis of advantages and dis advantages, but by apolitical pro cess that moves by its own momen tum. A mood has developed which leads people to insist that, when' they are dissatisfied with anything, government will step in to set it straight. A Hopeful Sign Disheartening though such a viewpoint may be, we have to admit that it has some weight. But there are other considerations which lead to the opposite conclusion-this may be an ideal time for a move toward deregulation, and its political pros pects may be very good indeed. Paradoxically, the fact that so many things are clearly wrong with the economy at this moment is a hopeful sign. We must have been doing a lot of things wrong, and one of these is overregulation. The public is losing faith in govern ment as the' universal' problem solver.

One example of the falsity of the proposition that when regulation is introduced it can never he removed is the recent fate of wage and price controls. We recall that, shortly after controls were introduced, there was much talk that this action \vould not be reversed in the life time of most of us~ In September 1971 (Phase I was in effect and the shape of Phase II was being dis cussed), the Wall Street Journal ran a story that suggested "Phase II may be forever." But wage and price controls were abandoned in April 1974. The clock was turned back. The reason for the abandonment of controls was not an ideological change of heart, on the part of either the population or their political leaders. The rea son was that controls were a con spicuous and disastrous failure. A second consideration that leads us to believe that deregula tion can be a politically realistic option is the fact that many of the most questionable' forms of regula tion are of fairly recent origin.

True, we have had regulation of railroads since the 1880s, and regu lation of financial markets since the 1930s. But the really big wave of government direct intervention in the economy has occurred during roughly the past 10 years. We now have large areas of government regulation in: product safety, oc cupational health and safety, water and, air pollution, equal employ ment opportunity, etc.

1975 DEREGULATION-WHAT PROSPECTS? 599 The objection to most of these recently-introduced forms of regu lation is not that their intentions are wrong. No one will defend pol lution, or discrimination, or hazard ous conditions of employment. The objection is rather that regulation is not always the most effective, or least costly, way of achieving ad mittedly desirable ends. The main point, however, is that much of our regulatory apparatus is rather recent. In suggesting a new look at the possibilities of de regulation one is not proposing the unwinding of a historical process that has been going on since our great-grandfathers' time. It is more in the nature of taking a look at the results of a lO-year experi ment. The mounting tide of govern ment regulation is one aspect of the increasing tendency toward government activism during the past decade. The results are now in: we have an economy plagued by inflation, unemployment, slow pro ductivity growth" declining real wages, energy shortages, a break down in the transportation system, etc., etc. Surely governmental acti vism-in all its aspects, including regulation-has been a conspicuous and disastrous failure. It is those who refuse to see the clear evidence of this that seem quaintly to be living in the past-the past of 10 years ago when the present huge volume of evidence against govern ment intervention was not yet available. I IDEAS ON $ LiBERTY Keynes Was Wrong THERE IS NO doubt that the American public is moving away from the Keynesian notions and slogans. Their prestige is dwindling.

Only a few years ago politicians were naively discussing the ex tent of national income in dollars without taking into account the changes which government-made inflation had brought about in the dollar's purchasing power. Demagogues specified the level to which they wanted to bring the national (dollar) income. Today this form of reascming is no longer popular. At last the "common man" has learnei(that increasing the quantity of dollars does not make America richer. LUDWIG VON MISES. Planning for Freedom The NobilitV of the Bourgeoisie :j; IF THE MAN FROM MARS were to ask any one of us to point out the business sector of our· society we'd direct him first of all to our factories, offices, banks and stores. Then we'd . add the trans portation industry - rails, trucks, planes and ships. An important segment of agriculture is operated like a business, so we'd add that. The extractive industries would have to be included, and so would lumbering. We would expressly ex clude important parts of life, such as government,education and reli gion, even though business methods are indeed employed by people working in these sectors.