Regulation and Deregulation

Transportation is a significant element of business logistics and delivery, since it is essential for the production and sale of goods. Transportation affects the price of goods. Manufacturers, carriers, consumers, and the government are always interested in the optimal organization of transportation process. This paper provides a comparison of regulation and deregulation, the impact of these processes on the transport industry, the impact of globalization on the regulation, as well as the benefits of regulation and deregulation for customers.

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Deregulation gained momentum in the 1970s and lasted until the beginning of the second millennium, under the influence of the Chicago School of Economics (U.S. Department of State, 2009). Its main purpose was that the state should have greatly weakened its intervention and influence on the policy of many companies, including transportation. It primarily affected the processes of railway and road transport and, later, a law spread to commercial shipping. Despite the fact that the law abolished the state regulation of the transport companies, it repealed the rules of fair competition. For the air transport success of non-interference of the law, it was highly questionable (Bereskin, 2007). On the one hand, the cost of transportation to customers decreased by almost half, and people received more opportunities to travel. On the other hand, problems, such as disruption of flights or denial of service, emerged.

In turn, the regulation, which took place before the Great Depression, and partly the case now, complicated the process of transportation and logistics. It is because the regulation implied adoption of new laws, which were aimed at optimizing traffic flows (U.S. Department of State, 2009). However, as practice shows, the regulation only complicates all the logistics operations, has a negative impact on the competitiveness of companies, and creates new challenges for logistics. For example, the Interstate Commerce Act of 1887 led to the fact that traffic pools were prohibited, tax rates were increased, and manufacturers were limited in their rights (Bereskin, 2007). It led to the instability of production capacity, and each state suffered from the unexpected consequences of the new law.

As it has already been mentioned, the regulation and deregulation have influenced transportation differently. First, it is worth noting that the deregulation affected the reputation of rail and air transport, since the new tax rates meant that the use of land motor transport was less profitable. In addition, deregulation meant the priority of cost-of-service over the value-of-service (Bereskin, 2007). However, deregulation caused the emergence of new railways and their merging, which, in turn, reduced transportation rates, increased delivery speed and improved its convenience.

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Transport regulation was less useful in increasing the efficiency of logistics supply. Since the new laws governing the carriage were taken before the beginning of the First World War, the United States was not ready for the increased loads in logistics (U.S. Department of State, 2009). Thus, the eastern countries terminals were filled with empty cars, while the western terminals were overloaded and new cars were needed. In addition, the Great Depression proved that the regulation was not the best way to improve the stability and efficiency of transport supply. The Emergency Railroad Transportation Act of 1933 proved to be ineffective for railways (Bereskin, 2007). Therefore, two years later, the government was forced to accept the new laws.

Globalization had a great influence on the regulation of transport supply. Aiming at the trade development, the US Government planned to enact new laws that were originally targeted at optimizing logistics purposes. For example, the Interstate Commerce Act of 1887 was created to simplify the supply using railways (Bereskin, 2007). However, as a result, it had a large number of inaccuracies that caused the litigation between the companies and the state. In addition, Elkins Anti-Rebating Act of 1903 and Hepburn Act of 1906 were aimed at rationalizing rates and new pricing policy in the field of logistics. However, these laws were ineffective, and the US was not prepared for the rapid globalization at the beginning of the 20th century. Attempts by the authorities to improve the quality of transport networks and logistics through the adoption of new laws (i.e. regulation), were of little success and the subsequent events, such as World War I and the Great Depression, proved it.

Despite its limited success, the regulation had some positive impact on customers. First, the regulation in the late 19th and early 20th centuries was aimed at optimizing the railroad supplies (Bereskin, 2007). As it has already been mentioned, new railways were built. It simplified transport processes, and, in spite of the high tax rates, customers had an opportunity to transport the goods faster and more conveniently.

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Deregulation of transportation had a significant influence on the air supply. As it has already been mentioned, many airlines received a competitive advantage that has caused a resonance in the development of aviation industry. Companies were able to reduce the cost of flights, and thus, customers benefitted from this (U.S. Department of State, 2009). However, due to the increased demand for air supply, many companies were not prepared for the sharp increase in load. A logistic system of many low-cost airlines was not ready for the deregulation. Therefore, many terminals were overloaded and in need of new aircrafts.

To summarize, it is important to note that the regulation and deregulation are complex processes, which directly depend on the government decisions. On the one hand, regulation had its negative consequences, such as higher taxes and restrictions on the rights of manufacturers. On the other hand, deregulation had negative impact on the airlines. However, globalization had a great influence on the processes of transport regulation, as the government was forced to comply with the pace of trade development and adopt new laws that regulate trade relations and transport supply.

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