What is financial deregulation


Deregulation is an important regulatory instrument. This is understood to mean the abolition or simplification of state regulations in order to give private sector initiative more space and thus contribute to an increase in the intensity of competition. In 1991 the deregulation commission commissioned by the federal government had submitted a multitude of proposals for the abolition of special provisions, which were very often justified by the dangers of market failure. From 1994, recommendations to accelerate planning and approval procedures were implemented. In spring 2003 a new initiative started, which was continued in mid-2003 with a strategy concept to reduce bureaucracy in order to strengthen the competitiveness of Germany as a location and to help relieve the burden on companies. In the spring of 2005, the federal government presented a catalog of around 300 outdated laws and ordinances that are out of date and out of date and can therefore be repealed without any problems. Example: "Ordinance on the payment of honorary wages for bearers of the highest war decorations of the First World War".

In the health industry:

Contrast of regulation. The term describes the controlled dismantling or withdrawal of state intervention, mostly in economic activity.

In the health market, the term “bureaucracy reduction” is often used instead of deregulation. In this context, however, deregulation means the state's waiver of a statutory or ordinance-based provision that replaces the free development of market forces with a state market organization, or at least the significant restriction of such state-set market regulations. Reducing bureaucracy, on the other hand, regularly remains below this threshold and almost always means simply dispensing with detailed regulations within the framework of a state-imposed market organization.

State regulations, especially in health and social services, are almost always justified by the state with the security of supply, which is to be achieved or maintained or improved through state regulation. State intervention is justified with reference to market failure in the health and social sectors. In the health care system, however, state regulatory interventions since the 1980s have mostly served other political goals, primarily to contain costs or to ensure the stability of contribution rates, which has also been incorporated into the relevant social laws as an express goal.

The principle of stable contribution rates is legally standardized for statutory health insurance in Section 71 of Book V of the Social Code. There it says:

The contractual partners on the part of the health insurance companies and the service providers must structure the agreements on the remuneration according to this book in such a way that premium rate increases are excluded, unless the necessary medical care cannot be guaranteed even after the economic reserves have been exhausted without premium increases (principle of premium stability ).

An example of approaches to deregulation, which should nevertheless serve the goal of stable contribution rates, is the freedom to choose between statutory health insurance funds in statutory health insurance, which was introduced on January 1, 1996 with the Health Structure Act (GSG). The law to amend the law on contract doctors (VÄndG), which was initiated together with the 2006 health reform, also serves to deregulate the largely state-regulated activities of contract doctors within the framework of statutory health insurance.

Another example of deregulation is the approval of the mail order trade in pharmaceuticals as well as the restriction of the prohibition of multiple ownership for pharmacies through the GKV Modernization Act (GMG), which came into force at the beginning of 2004.

In socialist economics: Economic policy program to abolish the regulating and economic controlling role of the state (economic policy) in order to give individual companies more scope for decision-making so that the economy regains its "dynamism". Deregulation goes hand in hand with social cuts (“more personal responsibility”) and the privatization of many state tasks (streamlining the state). > Capital, economic theories of,

> Liberal ism / Neoliberal ism

In the environmental economy:

1 Introduction

Deregulation is understood to be the relaxation, reorganization or repeal of regulation. Accordingly, in order to develop the problem, it is necessary to deal briefly with the nature of regulation.

State regulation of the economy is a complex term, as it is used to describe various issues. In the broadest sense, it is understood to mean all measures aimed at defining the regulatory framework for economic activity. So it's about the “rules of the game” in an economy. In this respect, there are no areas of the economy that are not regulated in some way. However, there are some industries in which this has traditionally been or is done with great intensity. These include B. the transport sector, telecommunications, power supply, the credit and insurance industry, the craft and the labor and health market.

When it comes to deregulation, it is generally understood to mean the dismantling of unnecessary regulation. A reasonable definition of what is necessary and unnecessary can hardly be given. Here, the individual basic political attitudes play a decisive role, which in turn are shaped by the socio-political worldview of everyone. However, there is consensus that regulation should be an instrument to ensure effective competition. Where competition does not lead to satisfactory results, it should be replaced by alternative coordination mechanisms. But even this formulation is not really sustainable. What are satisfactory competition outcomes and when is competition effective? (see reasons for regulation)

In the practice of the deregulation discussion, it is less about such fundamental questions. Rather, existing regulations are questioned and checked for appropriateness. The focus is primarily on those regulations that exclusively impair the scope of action of certain groups or were justified by facts that are no longer relevant today.

Regulation can start with:

the profit;

the merger and cooperation opportunities;

the conditions;

the contract terms;

the cost;

the prices;

the quality.

This makes it clear that with a high level of regulation, even within a competitive economic system, the economic scope can be restricted to a minimum.

Reasons for regulation

The reasons for regulation can be found in two different ways. One can approach the topic in the tradition of normative theory or look at the problem from a positive point of view. A combination of both approaches makes sense. The result comes close to a target / actual comparison and does justice to the complexity of the topic.

Normative view

If you are concerned with the economic context of a competitive economic system, you cannot ignore an important principle: the journey is the goal. Not only the market results but also how they come about is the subject of interest. In fact, it is the crucial element in the efficiency of an economy. Regulation should form the framework that guarantees the optimal allocation of resources.

The market brings supply and demand together. The price takes on the task of coordination. The factors of production are thus put to the most efficient and useful use. The pressure to adapt permanently ensures progress and development. Competition ensures consumer sovereignty by controlling the offer according to consumer preferences. It prevents dependencies.

The effectiveness of these mechanisms can be impaired by a wide range of influences. In principle, these are the deviations from the model of the perfect market that can be observed in reality. The essential characteristics of an ideal market are:

high transparency;

no dependencies on suppliers and buyers;

no external effects that are not internalized;

quick adaptation to changed market conditions;

negligible transaction costs.

In reality, however, the following influencing factors counteract the model world:

external effects,

Information deficits,

Market power,

natural monopoly,

public goods,

opportunistic behavior, transaction costs.

Regarding any difference between model and reality as a general reason for regulation is certainly going too far. Nevertheless, they form a useful basis for state intervention. If one is systematized according to motivation, regulation fulfills exactly the opposite purpose: On the one hand, the regulatory framework should ensure the functionality of competition or even enable it in the first place. On the other hand, some market results are socially undesirable. Here regulation should give direction to competition or restrict it.

4. Regulation to secure competition

The existence of competition is a necessary but not a sufficient condition for satisfactory market results. It makes sense to intervene in the design in order to maintain the efficiency of the competition. This includes measures that increase market transparency and thus reduce information deficits and also transaction costs. (e.g. provision of information by chambers of industry and commerce). Another crucial area of ​​regulation is dealing with market power. State supervision must ensure that this power has been legitimately obtained on the one hand (i.e. through the performance of the company) and, on the other hand, is not abused. The focus is therefore on mergers and cartels that promote the formation of market power.

Abuse control is a very complex task. It requires knowledge of the healthy level of competition, market share, or size of the participants - and that's hard to do. A number of questions have to be answered in order to come to an assessment of the competition:

What is effective competition? Competition is a dynamic process of action and reaction with an open outcome. Market imperfections are part of this process. The difficulty is to distinguish the necessary from the undesirable market imperfections.

What is the market structure? Above all, the number of players and their market share are decisive. Who owns the companies and who controls them? In addition, one must consider the barriers to entry and market transparency and assess the market phase.

What does the typical market behavior of companies look like and what is the result from the consumer's point of view?

Here the strategies of the companies with regard to prices, conditions and services are to be analyzed and the quantity and quality of the products to be compared. What is your risk appetite and willingness to innovate? How high is the market supply, the advertising expenditure, etc.? Many of these criteria are very soft and therefore cannot be assessed objectively.

Which is the relevant market anyway?

To answer this question, one has to distinguish between a temporal, spatial and objective dimension. It should be checked to what extent the products are homogeneous and thus easily substitutable. The spatial definition of the relevant market is becoming more and more difficult with increasing globalization. With regard to the time aspect, it should be noted whether it is primarily short-term exchange trading or long-term contracts.

What is the appropriate size for a company?

As far as this question can be answered at all, technical and economic factors must be taken into account. They are determined by the economically sensible minimum size of the production capacities. On the other hand, through the breadth of product diversification and the financial strength of the company. This is followed by the question:

What motivates companies to merge? First and foremost are the “economies of scale” (advantages from size) “economies of scope” (advantages from the combination of services), which can also be improved through external growth. In addition to opening up (geographically) new markets, the expansion of the product range can also trigger considerations for growth through merger. Of course, securing existing market shares can also be a motivation. The direction of the mergers is possible horizontally, vertically or diagonally.

It is in the nature of competition that market participants will try to eliminate it. The monitoring of the competition is an ongoing task.

5. Regulation to restrict competition

As already mentioned, the market mechanism is restricted mainly for two reasons: One is not satisfied with the result or it is not functional “due to the system”.

The restriction of competition in order to achieve political goals has a long tradition. Interventions of this kind are both temporary and permanent. They can be designed almost as desired in terms of their intensity of intervention. Examples are all forms of:

Establishment of market entry barriers (e.g. craft regulations);

Compulsory contract (feed-in law);

Price supervision (e.g. tariff regulations for electricity);

Quality criteria (e.g. beer purity law);

Subsidies (e.g. market entry aid, subsidy programs, subsidies), etc.

The objectives of such measures cover the entire spectrum of political tasks, so that it would go too far to go into detail here. In addition to the motivation for restraints of competition that is more a result of daily politics, there are regulatory reasons that lie in the characteristics of markets. The presence of public goods (with restrictions), merit goods, natural monopolies and external effects leads to undesirable results under competitive conditions. One speaks here of market failure.

Public goods are not made available by the market because no one can be excluded from their use and there are no shortages because their consumption does not compete. The best-known examples are national defense or environmental use. A serious problem of environmental use is the occurrence of (negative) external effects that are not automatically internalized. This aspect is particularly problematic because a consistent allocation according to the polluter pays principle is not always possible and, above all, does not seem politically enforceable. In the international competition for locations, the economy should not be “additionally” burdened. The general public or the next generations therefore often bear the external costs.

Merit goods can indeed be provided by the market, but it is assumed that this is not done to a sufficient (i.e. socially desired) extent. The reason lies in the “distorted” preferences that are expressed for these goods on the market. Examples are education, culture, health and retirement provision, etc.

The case of natural monopoly also requires regulation. In the case of natural monopolies, it makes more economic sense if only one provider is involved. This applies, for example, to supply lines for telecommunications and energy, or to traffic routes.

6. Positive point of view

This approach is the subject of research in the New Political Economy. The positive theory tries to explain the relationships on the basis of real conditions. This approach leads the viewer into the adjacent fields of science of political science and sociology. From a positive point of view, regulation can be interpreted as an interest-driven demand for state action.

The actors can be grouped into interest groups with different degrees of organization. Its aim is to get political decision-makers to intervene in their favor. The spectrum of such groups is extremely broad. It ranges from political parties, trade unions, employers' associations to industry and professional associations, religious associations and sports clubs. Even if not directly, one can indirectly assume that most of these associations have interests that affect the shaping of economic policy. In principle, no formal organization is required to be classified as an interest group. Common goals, attitudes or demands are sufficient (for example from regions or sections of the population). However, it can be assumed that well-organized groups have a greater chance of getting their demands through.

Political science has made a significant contribution to the more precise analysis of group processes (pluralism and systems theory, conflict theory). The basic thesis is that the rivalry of group interests results in a balance that ultimately puts the common good over that of the individual.This is justified with the assumption that the size and thus strength of a group is essentially defined by its number of members and that individual interests cannot be enforced as a result. Of course, the political decision-makers also implement measures that are not explicitly requested. Overall, however, it is assumed that political action is a result of group social pressure.

The (very democratic) idea that the individual receives a voice through the organization has to be put into perspective. Two important reasons can limit this. There are groups that are unable to organize and / or are not capable of conflict. One speaks of a lack of organizational skills when the groups are very heterogeneous (e.g. women, employees). Social goals of general interest are therefore hardly enforceable. Consumer organizations can possibly be seen as an exception. Organizational skills, on the other hand, are sometimes insufficient for interests to be enforced. The interest groups must be capable of conflict. In other words, they must be able to give weight to their claims through the use of threats or sanctions. For example, the unemployed, housewives, pensioners or students are hardly able to do this. No lobby is formed. For these groups or individuals, which are difficult to organize, it remains an important instrument of discipline - the ballot. Ultimately, the group of political decision-makers is also guided by self-interest. The main concern here is to secure power, which in a democracy is legitimized through elections.

These connections leave room for contradicting phenomena that political processes can produce in practice. Above all, it is they who create the need for deregulation. If one relies on this positive point of view when explaining regulation, this means that deregulation efforts are doomed to failure as long as the relevant groups do not stand up for them or explicitly demand them. The deregulation in the areas of transport, telecommunications and energy, which has been carried out in recent years, was in principle only possible because it was initiated and promoted by the European Commission - as a body relatively independent of the votes cast. This development cannot be conclusively explained in any other way.

7. Reasons and goals for deregulation

Dealing with deregulation - from a normative point of view - inevitably leads to fundamental questions about society and its conception of the organization of human coexistence. Where are the limits of individual freedom? What is socially desirable? From what and to what extent is the individual to be protected? How far should the state itself act as a market participant? The discourse about it is as old as the questions themselves. One cannot therefore wait for their final answer. You don't have to. The crucial question is posed a little differently: The instrumentalization of competition for socio-political goals is problematic and therefore always controversial. It is not the fact that these goals are the basis of regulation, but rather their improper implementation that often deserves criticism. So it's not necessarily about the "if", but rather about the "how". When explaining this development, one quickly comes back to the positive view of the problem.

It is absolutely necessary, even if it has only been done to a disappointing degree in practice, to separate market and political failure. The undesirable side effects attributed to competition must actually result from the inadequate functioning of the market mechanism. They are not to be confused with distortions caused by poor regulation. For example, the competition has no ethical values ​​that automatically take environmental protection issues into account in the energy industry. If the promotion of renewable energy sources is really wanted politically, appropriate steering intervention must be made. Various instruments are available for this. If you don't use them or only use them half-heartedly or even use the wrong ones, that has nothing to do with failure of the competition. The development is particularly serious if the developments based on incorrect regulation are to be compensated for with more extensive regulation.

That this happens regularly in reality is - from a positive point of view - not surprising. In order to assert their own interests (re-election), political decision-makers are forced to make concessions to various groups. The result is often multi-regulation. Political goals are then attempted to achieve through several, sometimes contradicting, measures. For example, the government is committed to achieving certain climate protection goals. For this purpose, the CO2 pollution is to be reduced through suitable measures (ecological tax, promotion of renewable energy sources, etc.) At the same time, however, coal mining is heavily subsidized. From the government's point of view, this is quite rational. This secures the approval of both camps.

Actually, regulation should not have to be justified as a measure restricting freedom, rather than deregulation, because competition is a value in itself. In fact, it's actually the other way around. Regulations are very stable. Once implemented, it is unlikely to break down. It is true that the reasons for the state intervention may no longer apply or have at least become weaker. (Of course it also happens that there have never been any reasonable reasons). Nevertheless, there is massive resistance when it comes to dismantling these regulations. The conditions protected by regulation are not given up without a fight. Preservation of the vested rights is the aim of the interest groups.

Today, one argument dominates the entire economic policy debate: the creation and preservation of jobs. This argument is made at every opportunity. No politician - dependent on votes - wants to be responsible for the destruction of jobs. In fact, jobs are often lost with deregulation. The competition reveals efficiency potential. However, the calculation is only complete if you contrast the new jobs that are created (with a time delay). The long-term damage caused by the blockade of structural change must also be taken into account. This cementing of structures harbors great danger for an economy. It is an important rationale for deregulation.

At the moment the deregulation debate is topical again. In Europe and also in the Federal Republic of Germany, telecommunications and energy supply were opened up to competition. Post and railways are gradually being reformed. The main reason for this development is the international trend towards deregulation.

In Germany, the density of regulation has increased steadily over the years. The necessary reforms could not be implemented. Only international, and above all European, deregulation efforts increased the pressure to act. This development coincides with the findings of the positive theory. Well-organized, powerful groups prevent reforms that are at their expense. A resolution of the conflict is often achieved by shifting the decision to the next higher level, which is then no longer directly dependent on the respective interests. This also shows the importance of Europe for national policy-making. Decisions are shifted to the European level and made there with a little more distance. For the individual governments, they then represent the overarching framework that cannot be ignored. This then has to be accepted by the interest groups, which actually often happens. However, the time frame required for this can be very large.

From a normative point of view, regulation leads to an improvement in the economic allocation. From a positive point of view, this is not necessarily the case. If regulation is understood as the result of social group pressure, a reform of regulation only means that the balance of power has changed and that other interests have received greater attention. Due to the phenomenon of multi-regulation, doubts seem appropriate as to whether some deregulations even deserve this designation. But none of this should be used as an occasion to refrain from efforts in this direction. The aim must therefore be to apply the deregulation as broadly as possible so that the overall density of regulation is loosened. Existing regulations should be checked more regularly and their effects assessed. New interventions would have to be limited in time to simplify their dismantling. The cost component must not be neglected either. The costs of administration and monitoring should be in a reasonable ratio to the benefits. There is still sufficient need for reform here.

B. Subject of deregulation using the example of energy

The most recent case of deregulation is the opening of the market in the electricity industry. This example is intended to clarify an important point:

If regulation is relaxed in an economic sector, this has lasting effects that go far beyond this sector. The regulation of the adjoining areas must therefore be checked for its expediency. You can keep your goals. But the instruments must be adapted to the current situation.

The example was chosen because it has strong environmental implications and was heavily discussed in public. A conflict of objectives is feared as a result of the market opening. The competition should lead to falling electricity prices and thus relieve the economy. On the other hand, higher prices are seen as an incentive to use energy sparingly. Due to the opposite development, it is feared that ecological concerns will be neglected.

9. Starting position

The Energy Industry Promotion Act (EnWiG) of December 13, 1935, or Energy Industry Act for short, formed the framework for the development of the German energy industry. Since the municipalities are the owners of their roads and paths (with the exception of federal highways) they can have their use remunerated and do so with the so-called concession fee. The energy supply companies (EVU) are dependent on the public roads due to the line-bound nature and pay the fee linked to the sales volume once a year. Since the concession fee is of considerable magnitude, this source of income is of considerable importance for the municipalities. All the more so since these funds are not part of the state financial equalization scheme and therefore remain in full in the municipal budget. The energy suppliers were able to enforce a clause in the concession contracts in which the municipalities undertook not to consider any further EVU with the rights of use. As a result, the companies enjoyed a monopoly position.

The protective wall of the EVU was completed by demarcation agreements. In these private-sector contracts, the contracting parties undertake not to be active in the other's supply area (horizontal demarcation) or not to be involved in the value chain of the other (vertical demarcation). There were also contracts in which the producer companies split the supply of the distribution companies among themselves. One speaks of indirect demarcation.

This complete monopoly protection was covered by the law against restraints of competition (GWB). Here the energy industry was explicitly defined as an exception. According to Section 103 GWB, both concession and demarcation agreements were permitted.

The monopoly position of the EVU was also taken as an opportunity to intervene by the state and impose additional obligations on them. The most important interventions were:

Obligation to provide care

Accordingly, all natural and legal persons resident in the supply area must be supplied under the same general tariff conditions.

Price and Investment Supervision

The economics ministers of the federal states had an influence on elementary business investment decisions such as the construction of new plants, closures and even extensions and conversions.

Federal tariff regulation It regulates the prices for tariff customers.

The state energy supervisory authority also influenced market access and business conditions.

The law on the feeding of electricity from renewable energies into the public network of December 7, 1990 contains a further obligation. It obliges the power supply companies to feed in such electricity and to remunerate it in a certain amount, whereby a lower limit is set for these payments.

In the overview, some characteristics are listed that justified the previous electricity industry exemption from competition. As a result, the longstanding discussion has been able to weaken the significance of each of these points.

Since the EVU could easily pass on their costs to their customers and no competitive pressure disciplined them, a relatively high price level developed. This is the main point of criticism that the RUs were exposed to.

10. The aim of deregulation

The goal of deregulation can be summed up relatively easily. The introduction of competition puts pressure on energy suppliers to provide their services as efficiently as possible. You will become dynamic entrepreneurs in the sense of Schumpeter who produce the most innovative products possible. Companies that fail to do this drop out. The result is fair market prices and products and greater consumer sovereignty. The entire economy benefits from this development.

There is no special or even spectacular thought behind the liberalization in the energy sector. Because that is the principle of our economic order. One area of ​​the economy is simply released from its special role. From the point of view of those affected, this change is far more spectacular. Your self-image must be redefined. The dependencies and balance of power of yesterday no longer exist today.

11. Starting point and design of deregulation

On December 19, 1996, the European Parliament and Council Directive on common rules for the internal market in electricity (EIBR) was passed and came into force on February 19, 1997. The implementation in the national law of the member states should take place by February 19, 1999.

In the EU, major industrial customers can now freely choose their supplier. The market is being opened up gradually and will initially apply (until 1999) to customers who purchase more than 40 gigawatts of electricity. On average in the EU, this equates to an electricity market opening of 23%. The opening must be expanded to 20 gigawatts by 2003 and 9 gigawatts by 2006. This would correspond to an EU average of 28% or a third of market opening. With this, efforts to deregulate, which have lasted for over a decade, have come to a temporary end.

In the Federal Republic of Germany, the implementation of the European Directive was completed with an amendment to the Energy Industry Act. This law came into force on April 29, 1998 and essentially provides for the following regulations:

The previously closed supply areas for gas and electricity will be completely abolished. In theory, this means that every customer today has the option of purchasing electricity and gas from a provider of their choice.

The normal model for network access should be negotiated network access. There is no state regulation of access prices. The associations of electricity consumers and electricity producers were encouraged to come to an agreement on the rules for determining network charges.

The priority of electricity from cogeneration and renewable energy is mentioned in the law.

Transitional provisions were made for the protection of lignite in the new federal states.

The companies in the electricity industry were obliged to report separately.

Regardless of the changes to the Energy Industry Act, a general provision was included in the 6th amendment to the Act against Restraints of Competition. The refusal of the transmission in a network becomes an abuse, which is explicitly defined in the new cartel law (§ 19 (4), 4th in the 6th amendment to the GWB). This amendment to the law came into force on January 1, 1999.

12. Consequences of deregulation

What do proponents of deregulation expect?

With the competition comes the splitting of the value chain into its individual links. There are still integrated offers, but the market is divided into generation, transmission, distribution and trading.

The transmission and distribution area retains its monopoly character. New market participants can establish themselves at all other levels. They come from a wide variety of areas. These new players create increased competition. Because the former monopoly companies are now also fighting for customers. The intensifying generation competition and the regulation of network access conditions lead to more efficiency and lower prices.

Consumer freedom of choice is increasing.Within the European market, the influence of national borders is said to play an increasingly minor role, even if there are still many deficits here.

What did the opponents of liberalization fear?

Above all, greater efficiency also means fewer staff. If one orientates oneself on the Scandinavian countries, the productivity there is much higher. It is unclear whether and when the number of jobs to be cut can be compensated for by new business areas or by new companies.

The gap between what is politically desirable and what is economically sensible is widening. For most small EVUs, it is cheaper to buy them than to produce them in-house. Under competitive conditions, the future of environmentally friendly power generation options such as combined heat and power and the use of renewable energy sources is uncertain.

There is not much reason for the municipalities to be happy anymore. Concern about their license fee and the maintenance of municipal majorities is in the foreground.

The craft is facing new, perhaps overpowering competition in its traditional business fields.

The development is still at the beginning. Well-founded statements about the consequences of deregulation will only be possible in a few years. In general, it can be said that in the long run the opening of the network and all the new opportunities it brings are economically much more important than the short-term price advantages associated with deregulation. An open, so to speak, “democratized” network creates the prerequisites for many new energy supply options, from “green electricity” from renewable energy to local heating from small decentralized combined heat and power plants. The opening of the grid is a kind of cornerstone for a future energy supply.

Further reading: Deregulation Commission: Market opening and competition, Stuttgart 1991; Hensing, 1./Pfaffenberger, W./Ströbele, W .: Energy Industry. An introduction to theory and politics, Munich 1998; Koch, L .: Evolutionary Economic Policy. An elementary analysis with examples from development policy, Tübingen 1996; Streit, M .: Theory of Economic Policy, Munich 1991.

Economic policy program to reduce the influence of the state in the economy and to create more room for maneuver for individual companies. This is intended to contribute to regaining the dynamism of the industrial economy. The deregulation policy extends not only to the liberalization of market regulations in individual industrial sectors, but also relates generally to the dismantling of the application system, permits, bureaucratic difficulties, requirements, reservations and often unpredictable additional demands. Particularly affected are building law, social law and landscape and environmental protection. Behind the efforts to replace individual decisions with collectively determined orders stood the notion of the superior insight and foresight of state organs. In fact, as a result of the regulations, essential business decisions have actually passed to the state administration, while the financial responsibility remained with the companies. They protect themselves from the uncontrollable consequences of their activities by foregoing initiatives, postponing investments, investing abroad or by refraining from setting up businesses. According to econometric estimates, 20 to 30% of the shadow economy is attributed to state regulation. The possibility of deregulation consists in the federal and state governments restricting themselves to framework regulations, foregoing detailed, binding norms and granting individual decision-making powers within the framework set.

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