Deregulation: Definition, Effects, Merits & Demerits

DEREGULATION | Meaning | Advantages | Disadvantages

Deregulation is the process of removing state regulations. It is therefore opposite of regulation which refers to the process of the government regulating certain activities. It is also seen as the reduction or elemination of government power in a particular industry, usually eceated to creat more competition with the industry.

Advantages of Deregulation

• Competitiveness: The stated reationale for deregulation is often that fewer and simplier regulations will leaad to a raised level of competitiveness, therefore, higher productivity, more efficiency and lower prices overall.
• Access to Credit Markets: Deregulation can enable consumers to gain easier access to credit markets. It boosts spending on consumer durables such as cars, etc.
• Generated savings: The biggest gain will be in savings generated from divesting in the sector. This will free up government funds for other activities.
• Efficiency: As long as government regulation is removed, it will enhance efficiency in running most of the industries.
• Wider choice for consumers: In the provision of goods and services, consumers will have hinder and sufficient choice to make.
• New Ideas: New ideas will be injected into the economy as a result of competition. high quality products and services will definitely be the out come .

Disadvantages of Deregulation

• Opossition: Opossition deregulation may usually involve apprehension regarding environmental pollution and environmental quality standards such as the removal of regulations on hazardous materials, financial uncertainty and constraining monopolies.
• Maximization of Profits: Removal of regulation may lead to high cost of production of goods and services and return consumers may likely pay more for the products. Most of these industries would want ot maximise their profits.
• Poor quality products: This may result because laws governing quality standards have been removed.
• Refreshment: Deregulation may equally result to retrenchment of the workforce.
• Poor Living Standard: This may also come up because people are now paying more for godods and services.

Effects of Deregulation and Privatization

• Potential savings in the down stream sector: are define as the difference between the actual cost of supplying petroleum products to consumers either through imports or by refining crude.
• Capital Market Development: The key issues in the impact or effect of privatisation when sold are those of profitability, efficiency, unemployment and capital market development.
• Profitability: This is likely to occur once the refineries are cold but may be due to debt write off by government, in order to give the company a fresh start.
• Efficiency: Normally, after deregulation and privatisation, state owned enterprises return to being efficient as costs are reduced and redundant employees are retrenched.
• Unemployment: This cannot be avoided, but government can create effect sfety ntes so as to handle welfare matters arising.
• Cost of living: It has increased cost of living, made the cost of transportation high and even created job opportunities.