Complete deregulation under free trade allows large corporations to benefit but at the expense of people in that nation or region - Coursework Example

Complete deregulation under free trade allows large corporations to benefit but at the expense of people in that nation or region Date Regulations are introduced mainly to prevent the appearance of monopolies and to protect people from overpriced products and services. Another reason for that is a desire to insulate businesses and protect them against the risks of the free market. Nevertheless, nowadays more and more industries and companies successfully escape governmental regulations due to deregulation acts.

Deregulation is the act of removing government control power and regulations on certain industries. Its primary objective is always to create more competition within the industry. Some of the industries that have faced deregulation are the telephone industry and airline industry among others. In most cases, it is always done with the aim of stimulating free market competition, which theoretically would mean price reduction. Removing state controls from business brings it enormous profits. However, the results of this process are not always positive for people who are the consumers.

Despite the deregulation allowing free trade, increased competition always favours the large corporations with high capacity to exploit the markets and the available resources better than their competitors. There are often unforeseen negative outcomes of deregulation. For instance, without regulations, sectors like the environment, natural resources, and energy among others, sometimes suffer from over-exploitation resulting in significant adverse impacts on the people living in the regions of exploitation.

These effects include health hazards, environmental degradation, and price fluctuations affecting the economy, thus, leading to poor livelihoods of people living in such regions. To begin with, the first important consequence of deregulation is the price increase. All industries’ first and the most major aim is increasing their income. But they do not always have an opportunity to reach top scores as they are required to establish a certain price on goods or services, determined by government.

As long as a business is actively regulated customers feel safe and may not expect abrupt changes of prices. However, with the advent of deregulation prices rocket up immediately. The evident example of this is the case of AT&T landline Phone Company in California, USA. Since deregulation, which took place back in 2008 the company’s service, prices have soared more than 260%. That was done despite official assertion that free market competition would reduce monthly payments. “It has substantively been a failure.

All we have seen since deregulation is a constant increase in prices” (Lazarus, 2013). Due to free trade, deregulated companies are in a position to exploit the global market and reach various destinations. With the increased level of competition enabled by complete deregulation as a result of the free trade, some local companies have suffered and got outcompeted in the market. As a result, some sense of monopoly has prevailed since the dominant companies dictate the market prices of various commodities and services.

Without government regulations, deregulation will always remain as protectionism for the large corporations with the power to protect themselves and dominate the market. The government should, therefore, have some sense of regulation to ensure fairness and protectionism for all, thus, protecting the survival of the small domestic companies and prevent the large corporations from monopolizing the market. They should also ensure that the corporations honour the trade agreements as required by the World Trade Organization.

Another evidence that complete deregulation brings benefits only to corporations but not to people is that rural areas become left out. Some regions are not so densely populated; they are less developed and, therefore, less profitable for business. People there are provided with necessary services, such as railway commuting or cellular telephone systems, only due to governmental regulations. However, if companies are not controlled by the government, their policy changes dramatically. It is clear that no business will work at a loss.

As soon as they get complete freedom of action they will stop their activity in most unprofitable areas. That is what has happened in America after official deregulation of railroads in 1980. After realizing “passenger service wasn’t a money-maker,” (Brinson, 2011) a lot of regional routes were left out of use. Moreover, after a spread of cell phones landlines were abandoned, and areas with poor cell phone coverage were again left out. For the companies, the outcomes of deregulation were more than positive as they stopped working with financial drains.

Meanwhile, rural people were left without service. The larger corporations’ aim is always profit not the publics’ interest at heart, therefore, without regulation fair distribution always lacks making other parts suffer and remain marginalized. The last but not least negative factor of deregulation that affects people is connected with health. It is hard to believe but the absence of governmental control over certain industries may cause not only financial troubles for consumers, but also health problems.

Except for the price increase and changing districts of business activity, completely deregulated companies are not constrained in advertisement. In order to get a higher income, they promote goods actively. But when it comes to food the results of such promotion are not beneficial for people. The recent study, which was conducted by WHO (World Health Organisation), shows that more strict governmental control over food selling industries is needed to prevent global obesity epidemic. (Kelland, Liffey, 2014).

Uncontrolled nutrition sector is promoting unhealthy food that leads not only to excess weight but also to diabetes, heart diseases, and even cancer. WHO is worried about the situation and gives convincing figures? They have found out that body mass index and the number of times people bought fast food has increased after deregulation. Companies are getting higher and higher incomes while people are suffering from consuming their products not even realizing the threat. WHO suggests introducing certain governmental regulations over food and nutrition industries in order to make them sell fresh and healthy products, ultra-processed foods and drinks, and reduce the usage of chemicals and pesticides.

To get more profits, the companies have also resorted to over-exploitation of resources such as raw materials and energy. Lack of government regulations and weak environmental laws has facilitated this act of overutilization. As the resources get scarce, the environment gets more degrade, the prices of various goods also goes up since the companies must make profits, in turn affecting the local consumers who incur the additional costs. Deregulation under free market results to competition. Many companies usually flood the market.

As a result, some of them might lack the capital and capacity to compete well leading to the production of substandard and inferior quality products. That is always facilitated by the lack of government inspection and standard regulation. These products are sold to the consumers without their knowledge that at times could lead to health complications in their lives. For instance, lack of proper regulation led to the continuous use of silicon breast implants that were later on found to leak causing health problems to women.

These implants were supplied by the manufacturers who knew about their effects but did not care as long as they obtained their profits. Another case was that of 650 S & L that committed abuse and fraud then went under causing a lot of losses due to savings and loans industry deregulation. The freedom of choice as a result of the availability of various types of companies providing the same services also affects the consumers when their companies’ of choice collapse due to competition. That in turn forces the consumers to incur new extra costs to fix the service that were provided by their prior collapsed company, like new cable installation for the case of network services.

In such cases, the larger corporations benefit from the new clients by increasing their income and profits while the consumers suffer extra costs on what they had paid for initially. In conclusion, complete deregulation indeed allows large corporations to benefit and get much higher incomes. However, its usually done at the expense of people, their customers, and consumers. Theoretically deregulation seems to be a good idea because it increases competition between companies, and seemingly they should improve service and reduce prices.

But in practice it turns out contrariwise. Having got rid of governmental control industries establish higher prices on their goods and services, abandon unprofitable areas and even promote unhealthy way of life. To avoid these and all other undesirable results of complete deregulation some rules should be introduced. In such a way, companies would get a certain degree of freedom, but it would not harm people. Therefore, creating a balance between deregulation and protectionism is required. We may speak about rules and regulations in the national, regional (RTAs - Regional Trade Agreements) and global (WTO - World Trade Organization) contexts.

WTO is an organization the primary aim of which is supervision and liberalization of the international trade. It implies different regulations of economic relations between its members. RTAs are trade treaties that just like WTO also regulate firms’ economic activity. These establishments were designed to ease the trade market somehow by reducing tax rates, tariffs, and other trade restrictions. Their activity is directed at trade facilitation and reducing costly formalities of international trade.

Introducing regulations at the national level means designing, adapting, and applying different procedures which would meet requirements of “most demanding commitments” (UNCTAD, 2011). What concerns RTAs, regulations on this level may guarantee its trading partners privileged conditions to simplify their activity. As for the WTO, introducing new rules and outlines of work may not only strengthen its existing resolutions, but also broaden its borders of cooperation with less developed countries.

This would “benefit all trading nations without discrimination” (UNCTAD, 2011) as well as facilitate the activity of exporting and importing firms. References Brinson, L. C. (2011). “10 Unforeseen Effects of Deregulation.” How Stuff Works? Available from: . [14 March 2011]. Kelland K. and Liffey K. (2014). “Study finds deregulation fuelling obesity epidemic.” Chicago Tribune. Available from: . [02 February 2014]. Lazarus, D. (2013). “Since deregulation, landline costs skyrocket.

” Los Angeles Times.Available from: . [05 December 2013]. “Trade Facilitation in Regional Trade Agreements” in United Nations Conference on Trade and Development (2011). Available from: .