Nationalization

Nationalization (or Nationalisation) also known as Socialization (or Socialisation) and Communization (or Communisation) is the act of taking private assets into government or state ownership. It is the opposite of privatization.

Table of contents

1 Arguments for nationalization 2 Arguments against nationalization 3 Notable nationalizations

Arguments for nationalization

• Elimination of a private monopoly in an essential service.
• Removing an extreme imbalance of wealth.
• Elimination of 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
• 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 the responsibles
• Profitable nationalised industries, contribute their profits to the common-good instead of to private shareholders.
• Nationalised industries are guaranteed against bankruptcy and so can borrow money at lower interest rates to reflect the lower risk to the lender.
• Improvement in industrial relations. Employees will be more inclined to cooperate with a management appointed by a government that they have a say in electing, than with a management representing a shareholding minority.

Arguments against nationalization

• Government inefficiency in running production, trading, or service operations may cause 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 when no compensation is paid.
• Lack of accountability to the market, i.e., consumer choices may be reduced and there may be no alternative sources for goods or services that better meet consumer preferences.
• Nationalised industries can be prone to interference from politicians for political or populist reasons. Such as for example, making an industry buy supplies from local producers, when that may be more expensive than buying from abroad, forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce unemployment, or moving its operations to marginal constituencies, these can cause nationalised industries to become uneconomic and not competitive.

Notable nationalizations

• Renault (seized from Louis Renault after WWII for his collaboration with Nazi Germany)
• British Coal
• British Gas
• British Rail
• British Telecom
• UK Electricity Supply Industry - including electricity generation, transmission (CEGB), distribution and retailing (Electricity Boards).
• 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
• Companies in Cuba - (the USA has long complained about these nationalizations).