Nationalization

Nationalization (or Nationalisation), also known as public ownership or socialization (or Socialisation) is the act of taking private assets into government or state ownership. It is the opposite of privatization.

Arguments for nationalization

• In the case of an essential service - particularly one on which lives may depend - nationalisation may ensure the continuation of this service regardless of commercial or environmental pressure. Although a governmental monopoly is nonetheless still a monopoly, it is answerable to the electorate rather than a small group of shareholders.
• Nationalisation can help remove extreme imbalances of wealth.
• Nationalisation and the threat of same reduces the ability of non-governmental organisations to challenge or influence a democratically-elected government's power.
• By creating a publicly accountable monopoly, nationalisation eliminates wasteful competition and transaction costs (e.g. instead of three companies producing the same thing resulting in duplication and inefficiency, one nationally-owned company can make the same product).
• A profitable nationalised industry contributes with its profits directly to the common wealth of the whole country, rather than to the wealth of a subset of its population.
• More accountability to voters - e.g. if the telephone service is nationalised, voters can bring pressure onto the government to provide better services, and parliament may have the power to sack anyone responsible for a reduction in the quality of service.
• Nationalised industries are guaranteed against bankruptcy and so can borrow money at lower interest rates to reflect the lower risk to the lender.
• Employees may be more inclined to view their work positively if it is directed by a management appointed by a government that they have a say in electing, rather than a management representing a shareholding minority.

Arguments against nationalization

• Nationalisation may create a Government monopoly in a sector which might otherwise be innervated by competition.
• The perceived 'invulnerability' of a Government monopoly can stifle an industry's willingness and ability to compete. A government which is unable or unwilling to create a competitive nationalized industry becomes forced to expend ever-greater amounts of tax revenue on that industry, at least until such time as the industry is improved.
• The government may be inefficient in running production, trading, or service operations, in the sense of causing misallocations of labor and capital, with consequent reductions in the standard of living and economic growth.
• Groups may object violently to losing their private assets, particularly in cases where the financial compensation, if any, paid to the former owners of a nationalised industry is less than the actual or perceived 'going rate'.
• Accountability to the market (i.e., consumer choices) may be reduced and there may be no alternative sources - and no catalysts for alternative sources - of goods or services that better meet consumer preferences.
• Nationalised industries may be prone to interference from politicians for political or populist reasons. The industry may be over-staffed in order to reduce unemployment; it may be forced to conduct transactions or actions in certain areas in order to win local votes; it may be forced to manipulate its prices in order to control inflation, for example. (of course, some of these measures may be considered positive rather than negative)

Notable nationalizations

• Renault (seized from Louis Renault after WWII for his collaboration with Nazi Germany). Renault was successful whilst nationalised and remains successful today, after having been privatised in 1996.
• Britain - British Coal, British Gas, British Petroleum, British Rail, British Steel, British Leyland, British Airways and Britain's Post Office (from which British Telecom emerged). All the aforementioned were privatised during the Conservative period in power from 1979-1997. Many - particularly British Steel and British Leyland - fared poorly whilst nationalised. Conversely, both Britain's Post Office and British Rail (now Railtrack) fared poorly after privatisation.
• Nationalization of the oil industry in numerous countries, including Kuwait, Mexico, Saudi Arabia, and Venezuela.
• All manufacturing enterprises in the Soviet Union, in 1918.
• Many retailing enterprises in the Soviet Union, in 1918.
• Nationalisation of Banks in India in 1969.
• Companies in Cuba (the USA has long complained about these nationalizations).
• Nationalization of electricity during the Quiet Revolution of Quebec, by minister René Lévesque and the Lesage government, to create Hydro-Quebec.
• Zimbabwe's nationalisation of its food distribution infrastructure.

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