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Edited by Philip Arestis and Malcolm Sawyer
Chapter 22: Deregulation
22 Deregulation Dorene Isenberg1 Deregulation is a concept that is imbued with theoretical, ideological, political, historical and policy implications. As a concept it implies that regulation in the ﬁnancial sector had already occurred and it now needs to be reversed. So to understand deregulation, it is ﬁrst important to understand regulation. Eﬀectively, for some predetermined reason ﬁnancial markets were viewed as being unable to produce the optimal allocation, stability, eﬃciency and equity results that neoclassical economics proposes, so behavioral and operational rules were imposed by the government on the ﬁnancial markets and institutions. These regulations did not supplant markets, but altered them so that when they operated, their outcomes would be as close to optimal as possible. The process of deregulation then implies the lifting of the governmentally determined rules and allowing markets to operate freely. It also implies that deregulation creates markets that produce optimal outcomes automatically. These implications produce a view of a market as a process of pricemaking and quantity-determining that is a-politically, a-culturally, a-geographically and a-historically constructed, which markets are not (Hodgson, 1988). If markets are imbued with political, cultural, geographical and historical attributes, then the processes of regulation and deregulation need to be seen as less diametrically opposed. This chapter will begin by introducing the theoretical foundations of the debates over deregulation; then it will use the case of the USA to explain the process of deregulation. The historical nature of this chapter should not be taken to mean that this process has...
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