I'll keep this short.
Deregulation sounds great, especially when it's supposed to give competition to monopolies. Doesn't necessarily work that way, though. Here are three examples:
The AT&T divestiture was supposed to break up Ma Bell and open competition. Subsequently, phone rates were expected to drop. Well, what happened was a bit different. The only area where competition opened up was in long distance service. With several long distance providers, prices have dropped. Local service on the other hand... The "Baby Bells" were left as regional monopolies - no competition, they set their rates to whatever public utilities commissions allowed. The upshot? Allowing for inflation, I'm paying more for local phone service today than I was before divestiture. Of course, if I used a lot of long distance (I use very little) it would even out or I might even be paying less overall than previously.
That's a bugaboo of mine, though, not shared by most. Here are two other examples that are significant to far more people:
Airline travel. Once upon a time, in the bad old days of airline regulation, airlines were required to provide service to just about every location that had an airport large enough to accommodate their planes. Airlines were also required to provide more-or-less direct service between destinations. Changes in how airlines provided service came with deregulation. Just about every location that previously had airline service still does, but probably not by as many airlines. And direct service? Once they were no longer required to provide more-or-less direct flights, airlines realized they could operate more cheaply and make larger profits by using "hubs." The planes pick up passengers hither and yon, fly to their hubs, and make the passengers change planes. Except on the most popular routes, of course. In order to make an airport a hub, an airline has to book as many as possible of its gates (in Philadelphia, where I live, that's US Air) effectively closing out major competition. Which means, basically, that one airline controls airfares from one location.
Now, what do hubs do to the traveler? The last time I flew to Florida I checked the schedules and rates of every domestic airline flying out of Philadelphia International. To get from here to Florida I had a choice of flights that had me change planes in Detroit, Chicago, St. Louis, Memphis, Newark, NJ, (that's north of here, Florida's south) and Minneapolis (Philadelphia to Florida via Minneapolis? What are they thinking?). Fortunately, a couple of airlines offered flights that changed planes in Atlanta. Unfortunately, those airlines gave me a choice of a squeaker connection (the connecting plane might either leave before my first flight arrived in Atlanta, or it would delay its takeoff until my flight arrived) or a layover. I'm not saying anything against Atlanta, but really, who wants to hang around an airport for six hours?
As I write this (January 15, 2001) millions of people and who knows how many thousands of businesses in California are in immediate jeopardy of losing electricity service as result of deregulation of the utility industry there. What's going to happen to people when they don't have lights and their refrigerators won't work? What will happen to them when they can't go to work because their workplaces can't open? How many small and mid-sized companies will go out of business because they don't have power? This could be a major catastrophe. Face it, nearly everything we have or use relies on electricity to operate or be made. Even your car, pal. Take out the battery, and it won't run.
Some things need regulation. Utilities and public transportation rank high among them. Without regulation that requires them to provide service, we face loss of power, inconvenient travel, and sometimes higher prices.
I was dismayed when just about the first thing George W. Bush said after the Florida election was certified was he was going to push hard for increased deregulation. Isn't he aware of to what's happening in California?
JUST IN TIME INVENTORY Business and industry are working with "just-in-time" inventory. This means they don't maintain supplies of whatever, instead they order what they need when they need it. That way they save money on warehousing and storage, which in turn increases profits. I didn't like that idea the first time I heard of it.
You see, every piece of inventory that arrives at a business or industry goes through a number of steps from raw materials to finished product (or part) before it reaches its buyer. A breakdown anywhere along the line can mean the product/part won't be available in the pipeline when it's needed. For a supplier, if they don't have the inventory on hand when the order comes in, they risk not being able to fill the order and consequently losing the business. If a store doesn't have what you want because they didn't bother to stock enough, you'll give your business to someone else. This is worth the savings on warehousing and storage?
We've got a fine example right now that's putting a crimp on just about everybody. The past couple of winters were mild, which meant people used less heating oil and electric utilities didn't burn as much petroleum to make electricity for heating as usual. So the big oil companies cut back on both stock and refining. Because the big oil companies weren't buying as much petroleum, the Arabs cut back on pumping.
Guess what happened? Any ten-year-old could have asked the question, "What if..."
This year we've got a more severe winter and the demand for oil is up. The stocks aren't there. Everybody's suffering. Not only from being colder than usual during winter, but from higher prices. Even people who don't pay for their own heat are paying; I was just told that the rent on my apartment is going up to cover the higher price of heating oil.
"Just-in-time" inventory? Give me "just-in-case " any day.
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