Re: [PEN-L:4751] The fruits of de-regulation

[sokol@xxxxxxxxxxxxxxxxxx (Wojtek Sokolowski)]

In reply to the posting on the Value Jet crash under this heading:

I am not a big fan of deregulation, to say the least, but for the sake of
intellectual honesty we must acknowledge that the notion of deregulation
involves two analytically separate issues:

- the removal of entry barriers to doing business, and

- the elimnation of government surveillance to ascertain the compliance with
the existing laws, regulations and safety standards.

The free market crowd who, in the words of John Kenneth Galbraith, are in
the business of providing the needed conclusions to those in the position to
pay for them, have often emphasized the first aspect, while the business
interests who paid for those conclusions had the latter in mind.

IMHO, we should bear this disctinction in mind when criticizing
de-regulation.  Removal of entry barriers usually serves the interests of
the consumers, as any such barriers almost invariably create a monopoly.
For example, most European carriers monopolize flights to and from that
country, especially to/from less frequently traveled destinations -- with
the disastrous or wonderful (depneding whose side you are on) effect on
prices.  Not long ago I flew from NYC to Amsterdam for under $500 round
trip.  Since my flight was 16 hours late (I guess that is the price of
budget flying), in Amsterdam I tried to catch a flight to Budapest, a
distance comparable to that between New York and Chicago, and learned that
only two carriers fly there, the KLM and the Hungarian airlines.  The KLM
quoted me the price of $600 , the Hungarians had a lower fare but (or
perhaps because of that) all their seats were sold out.  Consequently, I
took the train, as I originally planned.  Had there only been a Dutch Value
Jet.... (well, I'd still prefer the train beacuse I profoundly hate flying,
but that's another story).

The fact that the KLM has a better safety record that, say, the Value Jet
has nothing to do with its near monoploy position in certain routes, or even
with the KLM itself.  It has all to do with the fact that, unlike its US
counterpart, the Dutch government is doing its job and seeing into it that
safety regulations are adhered to.

IMHO, the problem with the deregulation American style is not the
introduction of market competition, but the fact that Amercian business
executives, unlike their European and Japanese counterparts, cannot be both
efficient and safe.  Consequently, they must pressure the government for a
free ride on safety issues to stay competitive.

That, as Michael Schwartz convincingly argued, has much to do with the
American business culture.  The American business execs tend to favor an
authoritarian top-down style of management and confrontation with the unions
-- which necessitates the creation of safety valves (e.g. stockpiling) and
seriously compromises the quality of the product.  Of course, much has been
said about that in connection with the TQM, but the truth is that all that
talk is nothing but parole, parole....

To sum it up, the Value Jet crash is not an idictment of deregulation and
market competition.  It is an indictment of the arrogance of the US business
culture and the US government complicty with that culture.



wojtek sokolowski
johns hopkins university
baltimore, md 21218
sokol@xxxxxxxxxxxxxxxxxx