Deregulation was the idea that societal shared resources could be distributed by market forces without the need for government intervention. A shared resource might be
* transportation system
* energy system
* debt within a country
* debt to other countries
* military
* public education
* public research
* water
* farm land
* housing
* air
* parks
* communications system
* government
Let's take airlines as an example. The airline industry uses many shared resources but chief among them are airports. Republicans believe that Reagan's "deregulation" reduced government involvement with the airline industry. Of course ending direct price controls did change the regulation environment but I argue that the cheaper tickets passengers use now are no less a result of central planning than if they had lowered controlled prices directly. First there is all the investment into airports - money that could have, for instance, been spent on trains:
There is every expectation that the ARRA program will have an unprecedented level of oversight by FAA, Department of Transportation, Office of the Inspector General, General Accounting Office, Office of Management and Budget, and the public. Accordingly, to assure the Administration's commitment to transparency, FAA and the airport sponsor must be fastidious in its grant documentation and overall record keeping.
Next throw in a whole lot of union busting in the airline industry that famously started with Reagan and continued Bush Airline Union Busting Goals Achieve.
Now add in all the intervention that occurs with airline bankruptcy: US Airways 2002, United Airlines 2002, Air Canada 2003, Flash Airlines 2004, US Airways 2004, Aloha Airlines 2004, Northwest Airlines 2005, Delta Air Lines 2005 (putting 4 of the top 7 carriers in the United States under bankruptcy protection), Maxjet Airways 2007, Aloha Airlines 2008, ATA Airlines 2008, Skybus Airlines 2008, Frontier Airlines 2008, Eos Airlines 2008, Sun Country Airlines 2008, Primaris Airlines 2008, Japan Airlines 2010, Arrow Air 2010, Mexicana 2010.
So comes a familiar pattern with these differently regulated industries - consumption of the shared resource increases dramatically but it requires continued government investment and intervention and usually results in some heavy cost absorbed at a later date. That is the regulation turns from cautious and proactive to optimistic and reactive.
Its not that optimistic and reactive is not a reasonable strategy. Its imagining that somehow that strategy results in less regulation and government intervention that is absurd. Optimistic and reactive will not result in less government involvement for the above areas any more than it did for New Orleans. Only people who have personalized all regulations to be the same issue as seat belt laws and condom promotion can imagine that our individual liberty has increased by supposedly leaving the decisions to "market forces".
The choice for a shared resource is heavy regulation before problems or heavy regulation during and after problems. Competition for a shared resource, assuming even that any real competition occurs, always results in expensive investments in the shared resource and issues or bankruptcies followed by even more investment. The strategy of optimistic and reactive governance being followed is the so called "third way" between price controls and razing pure capitalism. But as we shall see for most of the above industries the third way is really just a shell game where small government was never a possibility.
Instead of starting with the financial industry where we have all been reading about the results of the new regulation style for years (the shared resource is debt, an implosion of it affects everyone); or the transportation sector where over reliance on oil driven cars (the shared resource is roads) already cause war and mayhem; let's take an example that hasn't fully happened yet - regulation of mercenaries. The first way would say let's for the most part avoid American use of mercenaries because from a cautious and proactive standpoint they are a disaster waiting to happen. The second way would say let's replace our military with private military companies as did Carthage. The third way attempts something in between.
Straight off we first see the genius marketing of the third way. Our immediate connotation is that of Goldilocks where the in between solution seems just right. Though the use private military companies, PMCs, is out of character with most of American history and culture, selling it as a solution in between two extremes fantastically hides the fact that it is itself an extreme and radical step. The fallacy here is as obvious as saying that taking a little poison is the correct approach between none and a fatal dosage.
Here is the expected third way pattern for PMCs. First consumption of the shared resource, military, that they use will increase dramatically (which it already has). And so their industry will grow also The Unholy Emergence of Blackwater in the Emirates, The Threat of Private Military Companies. This growth will happen with heavy investment from an increasing large and involved government bureaucracy but also with a mostly wait and see attitude towards putting controls in place. Then at some point something associated with PMCs will politically blow up (who could have seen that coming?) and the government will invest even more in a now too big to fail industry in the aftermath.
But if that's all there was to the third way it would not be taking over the world's governance. The real trick to the power of the third way is that third way over consumption in one area leads to third way over consumption in other areas. So over consumption of oil leads to over consumption of foreign debt (which includes more imports and outsourcing of all sorts) leads to over consumption of national debt leads to over consumption of housing leads to a weakened dollar and increased military action for oil. And every third way industry also increases the size of third way government which then turns around and creates more third way industries. The third way industries pop in and out of bankruptcy and so conveniently throw off attempts at unionization. They are typically led by all powerful CEOs and upper management making huge salaries and large political donations. So we cycle around telling everyone that market forces will make government smaller when of course the result can only be that third way government gets larger and larger.
But that's not to say that the third way is all bad. Americans are certainly enjoying cheap foreign imports, a multitude of huge houses, cheap air travel and cars as far as they eye can see. So third way politicians are not popular solely as a result of funding from private sector elites. Third way certainly has its place in a collection of governance tools that includes many other methods. Unfortunately the nature of its viral ideology makes moderation of its usage unlikely.