One of my favorite things about Matt Yglesias’s blog is that he’s considerably better-informed than his commenters, and is willing to say things that he knows perfectly well will piss them off. The latest example is a post where Matt opines that “the movement, started under Jimmy Carter then of course continued by Ronald Reagan and Bill Clinton, to deregulate important aspects of the American economy was basically a good thing.” This provokes almost unanimous condemnation from Matt’s readers. But Matt’s right.
I think it’s amazing how many commenters here appear to have absolutely no knowledge of the nature of a lot of regulations in the 1970s and before. I’m not talking about meat inspections or environmental laws here, but the regulation of trucking, airlines, telecommunications, securities, and a number of other industries were thinly veiled attempts to create government-supported monopolies for the benefit of incumbent businesses. The ICC, for example, which regulated surface transportation, carefully controlled which trucking companies could drive which routes. They routinely denied applications to provide new service on the grounds that the route in question already had “enough” competition. The result, not surprisingly, was that prices were significantly higher than they would be in a competitive market. Airlines were the same way. The CAB actively prevented the airlines from cutting prices or expanding service. And until the early 1970s, the FCC actively worked to prevent competition in the long-distance market to keep AT&T’s profits up.
Not only did consumers get screwed from higher prices, but this created a lot of waste too. Trucks would commonly drive from one city to another, and then drive back empty because they couldn’t get permission to carry cargo on the return trip. In the 1960s, airplanes were almost half empty, on average, because they weren’t allowed to cut prices in order to attract more passengers.
Airline, trucking, and long distance deregulation were a win from just about every ideological perspective. It was good for consumers (especially low-income consumers), free markets, and economic efficiency. The major losers were incumbent businesses who no longer enjoyed monopoly profits. It’s a rare example in which elite opinion across the political spectrum converged on a set of changes that benefitted almost everyone in society.
A final thing to note is that these policies were championed by liberal Democrats. The key players were Jimmy Carter, Ted Kennedy, and Stephen Breyer, who worked for Kennedy in the 70s. This was a great triumph of liberal intellectuals over corporate interests. Yet a generation later, the smart lefties who read Matt’s blog seem to be completely oblivious to what was probably Jimmy Carter’s most important domestic policy accomplishment.
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