Nationalization
Nationalization is the process of taking a privately owned industry or asset and placing it under government control. In most cases, nationalization is implemented to provide a public good or service, increase efficiency, to prevent a large scale financial collapse, or to ensure that the resources benefit citizens of a particular country.
Nationalization can involve a variety of different strategies, ranging from regulations designed to ensure that a business is managed in a certain way to complete transfers of ownership to the government. In its most extreme form, the former owners are dispossessed of all shares in a company and the government becomes the sole owner and manager of the enterprise. In some cases, the government may enter into a joint-ownership agreement with the private sector.
Nationalization often serves social and political objectives, as well as economic ones. Many nations pursue nationalization for the purpose of promoting industrialization, stimulating economic growth, boosting the national employment rate, and providing public services. Nations might also consider it a source of revenue, if profits from the newly nationalized company are significant. In countries where industries are highly concentrated, nationalization is often seen as a way to break up monopolies and increase competition, especially in the areas of finance, energy, and telecommunications.
In many countries, nationalization is unpopular. Some argue that it can be expensive and can result in a loss of efficiency in the newly nationalized industry, as government bureaucracies and regulations tend to be slower and less adaptable than private enterprises. Nationalization can also invite accusations of corruption, a concentration of power, and a lack of transparency in the operation of the business.
A classic case of nationalization that had far-reaching and long-lasting effects was the decision taken in the United Kingdom in 1945 to nationalize the nationwide coal industry and in 1948, to nationalize the railroads. The major Great Western Railway lines, the railway network in Scotland, and the London, Midland, and Scottish railway were combined under the British Railways banner in 1948. In 1951, several major banks and insurance companies were nationalized as well.
In the developed world today, nationalization is most commonly used to bail out businesses that are in financial trouble. This involves the government providing a financial infusion in the form of a loan and/or taking partial or full ownership of the business. This was the case in 2008 when several major banks in the United States and Europe were nationalized as part of the governments response to the global financial crisis.
At its core, nationalization is an attempt to balance the needs and wants of the state, the company, and the people. Nationalization can lead to greater efficiency and resources, but it can also create more bureaucracy and cost more money than private-sector solutions. Ultimately, it is in the best interest of the citizens and the nation that nationalization is done strategically and with the utmost care and deliberation.
