American Deregulation and the European Union

I • he sudden abrogation by the United States 1 Congress of economic regulation of Ameri­can airlines in 1978 caught the world by sur­prise. The air carrier industry worldwide, for practically its entire existence, had been oper­ating under the benevolent supervision of national governments. But in the United States, although air carriers were subject to the eco­nomic control of the Civil Aeronautics Board, they operated within a greater free enterprise system that reflected the philosophy of the national government and American heritage. In Europe, governments after World War II largely embraced socialist economic philosophy and policies. Conceptually, the complete removal of all government economic control of the air carrier industry was a more difficult hurdle for Europeans than for Americans.

Airline management in the United States after deregulation was quick to embrace the competition of the free market. The competitive spirit had been there all along, as demonstrated by the rivalry between American Airlines and United Airlines during the 1970s, as they fought for market share even under CAB constraints. After deregulation, U. S. airlines simply joined the ranks of most other American businesses and operated under the same national laws that

governed everybody else. Competition, after all, ‘ was what the American economy was all about.

In Europe, on the other hand, national governments were quite less ready to accept full free market principles in most economic endeav­ors. Philosophical concerns of government typi­cally ran to issues of citizen welfare, access to medical treatment, worker benefits, and other social entitlements, not to the state of competi­tion in routine business affairs. With the prospect of privatization of air transport, all of these social concerns were present. Added to these concerns was anxiety over the loss of government control in directing the future of their airlines as organs of national influence.

Moreover, the demonstrated economic tur­moil, bankruptcy, and labor strife that American deregulation had unleashed in the United States presented a foreboding view of the future under deregulation, and constituted another justification for European pause. The countries of Europe and the institutions of the EC debated the pros and cons of deregulation and its effect on the greater economy. Their approach was one of caution. The consensus generally formed was that air transport should be more the object of a policy of “liberalization” of regulation than an “abroga­tion” of regulation.

Then there was the matter of national diver­sity. The history of Europe through the first half of the 20th century is a history of conflict based largely on nationality or allegiances. European wars were the historical rule, not the exception. But after World War II, Europeans began to believe that things could be different. The coun­tries that made up the EEC had agreed in the Treaty of Rome to embark on a more enlightened path for the future of Europe; cooperation and free competition, without national constraints, was the course set to be followed. But when it came to implementing the vision, old habits proved hard to break. National interests were dif­ficult to ignore, particularly given the history of the continent. Progress was slow.

In short, the United States was far more pre­pared to deal with the radical idea of economic deregulation of the airlines (free competition) than were the states of Europe. Still, the Treaty of Rome had been signed and ratified; it was the law. It had been the law, in fact, for over 20 years when American deregulation came along in 1978. The institutions of the European Commu­nity had been set up, and they were staffed and operating. Many of those who had been charged with making the EC a reality were serious about their charge, and none more so than those within the European Commission.