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] Nationalisation 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 nationalisation is usually privatisation or de-nationalisation, but may also be municipalisation. Industries that are usually subject to nationalisation include transport, communications, energy, banking and natural resources.

Re-nationalisation occurs when state-owned assets are privatised and later nationalised again, often when a different political party or faction is in power. A re-nationalisation process may also be called reverse privatisation. 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.^{[citation needed]}

Nationalisation was one of the major means advocated by reformist socialists for transitioning from capitalism to socialism. Socialist ideologies that favor nationalisation are typically called state socialism. In this context, the goals of nationalisation were to dispossess large capitalists and redirect the profits of industry to the public purse, as a precursor to the long-term goals of establishing worker-management and reorganising production toward use.^[2]

Nationalised 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 recognised these social obligations and, in some cases, provides subsidies for such non-commercial operations.

Since nationalised industries are state owned, the government is responsible for meeting any debts. The nationalised 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.

Nationalisation may occur with or without compensation to the former owners. Nationalisation is distinguished from property redistribution in that the government retains control of nationalised property. Some nationalisations 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]

Compensation[edit]

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 nationalising 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 socialised 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 nationalisation, 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[edit]

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

Notable nationalizations by country[edit]

References[edit]

^ http://www.merriam-webster.com/dictionary/nationalisation
^ 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 nationalised 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."
^ Chrisafis, Angelique (December 14, 2011). "Renault descendants demand payout for state confiscation". The Guardian (London).