Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries

by Steven Kent Vogel

Over the past fifteen years, the United States, Western Europe, and Japan have transformed the relationship between governments and corporations. The changes are complex and the terms used to describe them often obscure the reality. In Freer Markets, More Rules, Steven K. Vogel dispenses with euphemisms and makes sense of this recent transformation. In defiance of conventional wisdom, Vogel contends that the deregulation revolution of the 1980s and 1990s never happened. The advanced industrial countries moved toward liberalization or freer markets at the same time that they imposed reregulation or more rules. Moreover, the countries involved did not converge in regulatory practice but combined liberalization and reregulation in markedly different ways. The state itself, far more than private interest groups, drove the process of regulatory reform. Thus, the story of deregulation is one rich in a movement aimed at reducing regulation increased it; a movement propelled by global forces reinforced national differences; and a movement that purported to reduce state power was led by the state itself. Vogel's astute and far-reaching analysis compares deregulation in Britain and Japan, with special attention to the telecommunication and financial services industries. He also considers such important sectors as broadcasting, transportation, and utilities in the United States, France, and Germany.

Genres: Economics

Paperback

First published September 1, 1996

About the author

Steven K. Vogel is Professor of Political Science at the University of California, Berkeley. He specializes in the political economy of the advanced industrialized nations, especially Japan.

Reviews

[Frank Stein · Rating 3 out of 5]

Steven Vogel has an original proposition and some good evidence to back it up. He argues that the wave of deregulation that swept the developed world in the 1980s and '90s was no such thing. In fact, most countries engaged in significant "liberalization," allowing more competition and more private companies, but this often required an increase in regulation to encourage the opening of monopolies. By focusing on the UK and Japan, and especially the areas of telecom and finance, he shows that liberalizing governments were forced into a series of new, judicialized regulations to ensure old monopolies did not overwhelm upstarts. For instance, many people today discuss the "Big Bang" of 1986, which ended fixed commissions for City of London stockbrokers, as the liberalizing moment that created the modern financial city. But most forget that deal was part of a six year legal crusade against the London Stock Exchange that also aimed to change "single capacity" traders to traders who could both make markets and act as brokers. In fact, the Big Ban was a legal and regulatory attack against the old ways. Most also forget that 1986 was the year the government, under legal expert L.C.B. Gower, created the "Financial Services Authority" to regulate stockbrokers directly.

In Japan, the National Telephone Company (NTT) was once run by the Ministry of Posts and Telegraphs, but the Japanese Diet controlled its budget. Gradually, the Ministry, in competition with other agencies such as MITI, liberalized competition for value-added networks and switching equipment, and finally, in 1985, privatized the company. Yet this privatization involved more rules on accepting competitors on the lines, approval of spending levels, and so forth. The MPT actually gained power under the new plan.

There are lots of other good examples here, with a smattering from Germany, the U.S., and France, but the book gets bogged down in irrelevant details and segues. It's a good thesis that could have been synthesized better.