Paradoxes of privatization and deregulation

The article draws three main lessons from recent regulatory developments on both sides of the Atlantic. First, deregulation and privatization have not meant an end to all regulation. On the contrary, newly deregulated or privatized industries lose their pre‐existing statutory immunity from competition law and other regulatory requirements. Thus, privatization leads to the creation of new regulatory bodies and to a considerable widening of the scope of agencies to promote competition. Second, experience has revealed the fallacy of assuming that public ownership guarantees public control. The crisis of the nationalized industries is more a failure of regulation than a problem of productive efficiency. Public ownership not only reduced government's ability to regulate the economy, but also interrupted a policy learning process which could have produced, half a century ago, the kind of regulatory institutions which Europe is struggling to develop now. Finally, American deregulation has proved to be considerably more forceful than European privatizations in introducing competition and restructuring key economic sectors such as telecommunications. Differences in styles and methods of regulation explain these different outcomes. A style emphasizing professional independence and public accountability is needed not only to achieve all the benefits of privatization, but also to push through deregulation when economic and technological changes make public oversight no longer necessary.