---
title: "Deregulation — AP Euro Definition & Exam Guide"
description: "Deregulation is the rollback of government control over industry and finance in 1980s Europe, a key Unit 9 response to 1970s stagnation and welfare-state critics."
canonical: "https://fiveable.me/ap-euro/key-terms/deregulation"
type: "key-term"
subject: "AP European History"
unit: "Unit 9"
---

# Deregulation — AP Euro Definition & Exam Guide

## Definition

In AP Euro, deregulation is the reduction of government regulation over industry, banking, and finance in late-20th-century Western Europe, part of the 1980s backlash (led by figures like Margaret Thatcher) against the postwar welfare state after the economic stagnation of the 1970s.

## What It Is

Deregulation means the government steps back. It strips away rules on industry, banking, and finance and lets markets make more of the decisions. In the [AP Euro](/ap-euro "fv-autolink") story, it shows up in the late twentieth century, especially the 1980s, as Western European governments responded to a decade of economic pain.

Here's the arc the CED wants you to know (KC-4.2.IV). After [World War II](/ap-euro/unit-8/world-war-ii/study-guide/U4UCrRJlJSuTdFmINVgr "fv-autolink"), [Marshall Plan](/ap-euro/key-terms/marshall-plan "fv-autolink") money fueled an "economic miracle" of growth, and governments used that prosperity to build cradle-to-grave welfare states. Then the 1970s hit. Oil shocks, inflation, and stagnation made the welfare state look expensive and bloated. Critics, backed by free-market economic theory, argued the state was the problem, not the solution. Deregulation was their answer. Leaders like Margaret Thatcher in Britain cut regulations, weakened labor unions, and privatized state-owned companies. Think of deregulation as the pendulum swinging back. The postwar decades were the high-water mark of state involvement in the economy, and deregulation is that tide going out.

## Why It Matters

Deregulation lives in **[Unit 9](/ap-euro/unit-9 "fv-autolink") (Cold War and Contemporary Europe), Topic 9.6: Postwar Economic Developments**. It directly supports learning objective **9.6.A**: explain state-based economic developments after WWII *and the responses to these developments*. Deregulation IS the response. The essential knowledge (KC-4.2.IV) spells out the whole sequence: growth funds the [welfare state](/ap-euro/key-terms/welfare-state "fv-autolink"), stagnation triggers criticism, and governments limit the welfare state. If you can't explain why deregulation happened, you only know half of Topic 9.6.

It also matters thematically. AP Euro loves the long-run question of how much the state should manage the economy, a debate running from [mercantilism](/ap-euro/unit-1/technological-advances-age-exploration/study-guide/1enqWWyjgHxXchQ2fAtx "fv-autolink") through laissez-faire to Keynesianism and back. Deregulation is the most recent chapter of that argument, which makes it perfect evidence for continuity-and-change essays about governments and economies.

## Connections

### Welfare State and the Economic Miracle (Unit 9)

Deregulation only makes sense as a reaction. Marshall Plan reconstruction created the "[economic miracle](/ap-euro/key-terms/economic-miracle "fv-autolink")," the miracle funded cradle-to-grave welfare programs, and when growth stalled in the 1970s, deregulation was the rollback. Learn it as one cause-and-effect chain, not three separate facts.

### [Deindustrialization (Unit 9)](/ap-euro/key-terms/deindustrialization)

These two travel together in 1980s Britain. As Thatcher deregulated and cut subsidies, old industries like coal and steel shrank or closed, unions lost power, and the economy shifted toward finance and services. Deregulation accelerated [deindustrialization](/ap-euro/key-terms/deindustrialization "fv-autolink") in many regions.

### [Capitalist Consumerism (Unit 9)](/ap-euro/key-terms/capitalist-consumerism)

The postwar boom made consumerism central to Western European life (KC-4.2.IV.A). Deregulation doubled down on the market side of that culture, betting that freer competition and private ownership would deliver more for consumers than state planning could.

### Laissez-Faire Economics (Units 4-6)

Deregulation is basically a 1980s revival of Adam Smith. The free-market arguments used against the welfare state echo the classical liberal case against mercantilism and state intervention. That makes deregulation great evidence for a continuity argument spanning the whole course.

## On the AP Exam

Multiple-choice questions usually test deregulation as a *response*. Stems ask things like "the economic crisis of the 1970s led to which policy transformation?" or "which economic theory gained prominence in the 1980s as a response to the perceived failures of the welfare state?" You need the causal chain (1970s stagnation → welfare-state criticism → deregulation and privatization), not just the definition. Thatcher's Britain is the go-to example, including selling off state-owned telecom, aerospace, and utility companies while curbing union power.

On essays, deregulation is high-value comparison evidence. The 2017 LEQ asked for a significant similarity and difference in European governments' role in the economy across periods. Deregulation is your "difference" evidence for the late twentieth century, the moment the state pulled back after decades of expansion. Pair it with the postwar welfare state for an instant change-over-time argument.

## deregulation vs Privatization

They're partners, not synonyms. Deregulation removes government *rules* on how businesses operate. Privatization transfers government *ownership* of companies (like British Telecom) to private investors. Thatcher did both at once, which is why they blur together, but an MCQ can test the distinction. A deregulated industry can still contain state-owned firms, and a privatized firm can still face heavy regulation.

## Key Takeaways

- Deregulation is the late-20th-century reduction of government control over industry, banking, and finance in Western Europe.
- It was a direct response to the economic stagnation of the 1970s, which made the expensive postwar welfare state a target for criticism (KC-4.2.IV).
- Margaret Thatcher's Britain is the textbook example, combining deregulation with privatization of state-owned companies and curbs on labor unions.
- Deregulation reflects free-market economic theories that gained prominence in the 1980s by questioning state management of the economy.
- On essays, deregulation works as change-over-time evidence, marking the rollback of state economic involvement after the postwar welfare-state expansion.
- Don't confuse deregulation (removing rules) with privatization (selling state-owned firms), even though they often happened together.

## FAQs

### What is deregulation in AP Euro?

Deregulation is the reduction of government regulation of industry, banking, and finance in late-20th-century Western Europe. It's covered in Topic 9.6 as the response to 1970s economic stagnation and criticism of the welfare state.

### Did deregulation get rid of the welfare state in Europe?

No. Deregulation limited and trimmed welfare programs, but it didn't dismantle them. The CED's language is precise here, stagnation led to "criticism and limitation" of the welfare state, not its abolition. Most Western European countries kept national health systems and pensions.

### How is deregulation different from privatization?

Deregulation removes government rules on business; privatization sells government-owned companies to private investors. Thatcher did both in 1980s Britain, selling off state telecom, aerospace, and utility companies, but they're distinct policies and AP questions can test the difference.

### Why did Western European governments turn to deregulation in the 1980s?

The economic stagnation of the 1970s (oil shocks, inflation, slow growth) made the postwar welfare state look unaffordable. Free-market economic theories gained traction by blaming heavy state involvement, and leaders like Thatcher responded by cutting regulations and shrinking the state's economic role.

### Is deregulation on the AP Euro exam?

Yes. It falls under learning objective 9.6.A and KC-4.2.IV in Unit 9, and it's strong evidence for essays about the state's role in the economy. The 2017 LEQ asked exactly that kind of comparison question about European governments' economic role across periods.

## Related Study Guides

- [9.6 Contemporary Western Democracies](/ap-euro/unit-9/contemporary-western-democracies/study-guide/62fKzNuE3YVkrAE6QVVT)

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