Name: Course: College: Tutor: Date: Introduction Deregulation refers to the simplification or removal of government regulations and rules that constrain free operations of market forces, the term does not primarily mean elimination of the laws that protect property rights no does it mean the reduction of government control in business activities to create a Laissez-Faire or free kind of market…
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A good example of deregulation is the airline and the telecommunications industries in most countries including Europe and United States. Deregulation often arise from economic agents who identify failures and problems in their regulatory framework, add pressure to the norms shaking the existing rules of game through institutionalized and legitimized logics change. As mentioned by Collier and European University Institute (1998, p. 3), two forces that have been key in driving pressure for change in industries that have embraced deregulation are the rising concern about negative impacts of economic regulation particularly on industries’ competitiveness, this has resulted in the drive for deregulation that focuses on the liberalization of the industrial sectors and privatization of some of the state-owned firms. Emphasis has particularly been on breaking monopoly powers and enhancing competition, while this has been critical, it has also been important for governments to identify the environmental implications of deregulation in sectors like energy where free market forces and competition influences technology as well as fuel prices. The other factor that has been key in driving deregulation has been the command-and-control measures of environment and their effectiveness that have been highly scrutinized. Government intervention with policies and standard has been viewed as insufficient and too lax and this has driven the need for deregulation. Deregulation of the airline industry Airline market was one of the heavily regulated public utilities in the past few decades. Regulatory reform has been central in most countries’ economic policy trend since mid-1970s, airline deregulation rose from the failures of countries to arrive at multi-lateral settlement on pricing, traffic rights, and capacity mainly in Geneva in 1947, and in Chicago in 1944 that mirrored the protectionist policies and rules that hindered entrepreneurial and competition activities (Winston 1263). Regulation of the mentioned aspects therefore became central in bilateral negotiations held by governments and airlines, these negotiations have seen dramatic changes whereby traffic rights are settled by states’ bilateral agreements, control of frequencies and capacity became subject to bilateral state agreements or to inter-airline agreements, tariffs setting came to be done by the International Airline Transport Association (the IATA). Airline industry in Europe is one of such cases in the economic policy reforms. Deregulation began as essential economic decisions concerning traffic rights (entry), capacities as well as pricing were ruled by either suppliers (representatives) or the governments. U.K and U.S signed the 1946 Bermuda agreement that opened for future agreements increasing freedom rights and ending the frequency and capacity controls (Collier and European University Institute 13). Bermuda agreement did not explicitly indicate that tariffs setting were to be done by IATA, in 1978, U.S. signed the act on domestic airline deregulation and this put pressure to the international airline regulatory system resulting in various bilateral negotia
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