The freedom to fail -- and succeed
The collapse of Braniff International is a saddening event. But the case serves to remind the public how far the United States has come in its efforts to deregulate many of its basic industries -- and how beneficial such deregulation has been.Skip to next paragraph
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Braniff, after all, is the first major airline ever to file for bankruptcy. It is not that other airlines have not faced similar situations. Several have. But the point is that in the past the federal government -- acting through the powerful Civil Aeronautics Board -- would have stepped in to save a failing airline through a forced merger, granting of a new route structure, approval of a hike in fares, etc.
Thus, former CAB Chairman Alfred Kahn, perhaps the driving force for governmental deregulation in the Carter years, is correct when he argues that the Braniff situation is ''an economically healthy process -- painful, but healthy.'' Companies pay the consequences of their ill-considered decisions. Mr. Kahn notes the rise of new carriers since deregulation, such as Air Florida, New York Air, People Express. Other aviation experts point to the enlarged route structures by the major national carriers, plus intense fare competition in many parts of the US.
Deregulation was a worthy objective back in the Carter administration, when the railroad, airline, and trucking industries were first ''unleashed'' from excessive and costly federal restrictions. And it remains a legitimate goal in the Reagan administration, which has made the reduction of unnecessary regulation one of its major economic objectives.
Consider some additional effects of deregulation to date:
* Trucking. Rates and wages within the industry have fallen somewhat, while existing firms, according to a government report, have been forced ''to increase productivity.''
* FCC. Under partial deregulation of the Federal Communications Commission, radio and television bands are being opened to scores of new broadcasting stations.
* Oil. Despite the removal of crude oil and gasoline price ceilings, prices have not soared as critics of decontrol had insisted would happen. Many energy firms have stepped up domestic drilling operations.
* Securities industry. Investment firms now offer more services and new types of savings instruments.
One aspect of the whole deregulatory framework warrants special examination. That is the matter of deregulating the regulatory agencies, such as the Federal Trade Commission.
In the last year of the Carter administration (1980), 446 regulatory rules were proposed, taking up 7,251 pages in the Federal Register.
In 198l, Mr. Reagan's first year in office, only 276 new rules were proposed, taking up 4,856 pages in the Federal Register. In short: a drop of roughly 38 percent from 1980 in proposed federal rules, and a drop of roughly 33 percent in the number of pages devoted to them.
The trend is healthy. A strong case can be made for regulatory changes that reduce bureaucratic paperwork and lift unneccessary costs from the business community. At the same time, the American people surely want Congress to see to it that basic health, safety, and consumer protection standards are not dangerously diluted or lost in the deregulatory climate. The long-range goal should remain deregulation designed to ensure marketplace competition and lower costs, not deregulation stripping federal agencies of authority to protect society as a whole.