Nationalization

Nationalization

Nationalisation (an alternative spelling is nationalization) is the process of taking a private industry or private assets into public ownership by a national government or state.[1] Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being transferred to be the state. The opposite of nationalization is usually privatization or de-nationalization, but may also be municipalization. Industries that are usually subject to nationalization include transport, communications, energy, banking and natural resources.

Renationalization occurs when state-owned assets are privatized and later nationalized again, often when a different political party or faction is in power. A renationalization process may also be called reverse privatization. Nationalization has been used to refer to either direct state-ownership and management of an enterprise or to a government acquiring a large controlling share of a nominally private, publicly listed corporation.

Nationalization was one of the major means advocated by production toward use.[2]

Nationalized industries, charged with operating in the public interest, may be under strong political and social pressures to give much more attention to externalities. They may be obliged to operate loss-making activities where it is judged that social benefits are greater than social costs — for example, rural postal and transport services. The government has recognized these social obligations and, in some cases, provides subsidies for such non-commercial operations.

Since nationalized industries are state owned, the government is responsible for meeting any debts. The nationalized industries do not normally borrow from the domestic market other than for short-term borrowing. If they are profitable, the profit is often used to finance other state services, such as social programs and government research, which can help lower the tax burden.

Nationalization may occur with or without compensation to the former owners. Nationalization is distinguished from property redistribution in that the government retains control of nationalized property. Some nationalizations take place when a government seizes property acquired illegally. For example, in 1945 the French government seized the car-makers Renault because its owners had collaborated with the Nazi occupiers of France.[3]

Contents

  • Compensation 1
  • Political support 2
  • Notable nationalizations by country 3
  • See also 4
  • References 5
  • Bibliography 6
    • On banks nationalization 6.1
  • External links 7

Compensation

The traditional Western stance on compensation was expressed by United States Secretary of State Cordell Hull during the 1938 Mexican nationalization of the petroleum industry that compensation should be "prompt, effective and adequate." According to this view, the nationalizing state is obligated under international law to pay the deprived party the full value of the property taken.

The opposing position has been taken mainly by developing countries, claiming that the question of compensation should be left entirely up to the sovereign state, in line with the Calvo Doctrine. Socialist states have held that no compensation is due, based on the view that the former owners acquired ownership through exploitation, or that private ownership over socialized assets is illegitimate and exploitative of employees.

In 1962, the United Nations General Assembly adopted Resolution 1803, "Permanent Sovereignty over National Resources", which states that in the event of nationalization, the owner "shall be paid appropriate compensation in accordance with international law." In doing so, the UN rejected the traditional Calvo-doctrinist view and the Communist view. The term "appropriate compensation" represents a compromise between the traditional views, taking into account the need of developing countries to pursue reform even without the ability to pay full compensation, and the Western concern for protection of private property.

In the United States, the Fifth Amendment requires just compensation if private property is taken for public use.

Political support

In the United Kingdom after the Second World War, nationalization gained support by the Labour party and some social democratic parties throughout Europe.

Notable nationalizations by country

See also

References

  1. ^ http://www.merriam-webster.com/dictionary/nationalization
  2. ^ The Economics of Feasible Socialism Revisited, by Nove, Alexander. 1991. (P.176): "The original notion was that nationalization would achieve three objectives. One was to dispossess the big capitalists. The second was to divert the profits from private appropriation to the public purse. Thirdly, the nationalized sector would serve the public good rather than try to make private profits...To these objectives some (but not all) would add some sort of workers' control, the accountability of management to employees."
  3. ^

Bibliography

On banks nationalization

  • Dougherty, Carter, Stopping a Financial Crisis, the Swedish Way, The New York Times," September 23, 2008.
  • Hilferding, Rudolf (1981) Finance Capital: A Study of the Latest Phase of Capitalist Development (London: Routledge & Kegan Paul), p. 234. ISBN 0-7100-0618-7, ISBN 978-0-7100-0618-9
  • Vladimir Lenin (1917) Nationalisation of the Banks, published in October 1917 in pamphlet form
  • Lohr, Steve, From Japan's Slump in 1990s, Lessons for U.S., The New York Times, February 9, 2008.

External links

  • The importance of public banking - article on Indian public sector banks
  • Time for Permanent Nationalization by economist Fred Moseley in Dollars & Sense magazine, January/February 2009
  • The Corporate Governance of Banks - a concise discussion of concepts and evidence
  •