Nationalization
Nationalization or
nationalisation is the act of taking assets into
public ownership/
state ownership. Usually it refers to private assets being nationalized, but sometimes it may be assets owned by other levels of government, such as
municipalities. Similarly, the opposite of nationalization is usually
privatization, but sometimes it may be
municipalization. Nationalization that happens after a previous privatization is often called
renationalization. Nationalizations are distinguished from
property redistributions in that in the former case, the government seeks to acquire the taken
property for itself (generally for financing purposes; e.g., a
nationalized copper mine), whereas in the latter the government appropriates property from some and gives it to others.
A key issue in nationalization is whether the private owner is properly compensated for the value of the institution. The most controversial nationalizations are those where no compensation is paid or an amount unreasonably below the likely market rate as
expropriations. Many nationalizations through expropriation have come after
revolutions, especially
socialist ones.
Individualists and
libertarians soundly reject government asset-seizures outright on
ethical grounds, observing that governments cannot legitimately be bestowed rights, by individuals, which are not innate to individuals (i.e., since no individual has a "right to steal", no government can legitimately
coerce transfers of property; and "nationalization" consequently is just a
euphamism for stealing).
The traditional Western view as to the question of compensation has been that declared by former US Secretary of State Cordell Hull , in the event of the 1938 Mexican nationalizations, that compensation should be made "prompt, effective and adequate", meaning that the nationalizing state had an obligation under international law to pay the deprived party the full value of the property taken. Opposing views as regards to this has been taken mainly by developing countries, claiming that the question of compensation was a question solely up to the sovereign state to decide upon, in line with the Calvo doctrine. Communist states have held that no compensation is due, based on communist notions of private property. In 1962, the UN General Assembly adopted resolution 1803 on 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". This clearly establishes that at least
some compensation is due, and further that the question is a matter of international law, thus denouncing both the traditional Calvo-doctrinist view, and the communist view. The amount to be paid is "appropriate" compensation, the wording representing a compromise between the traditional views, taking into account both developing countries' interests in being able to undertake reforms without being prevented from this due to lack of money for compensation, and the classical Western interests in protection of private property. The solution, then, as to the amount of compensation due, is that this will have to be assessed on a case-to-case basis in order to establish what is appropriate.
In some instances, nationalization occurs as the government seizes the corporate property of a criminal. An example is
Renault, which was seized by the
French government from its owners because they had collaborated with
Nazi Germany.
The cost of legally buying a large business is such that many legal nationalizations have happened when firms of national importance run into trouble (close to
bankruptcy), and could be acquired by the government for little or no money. A classic example is the
UK nationalization in the
1970s of the car-maker
British Leyland. At other times governments have felt it important to gain control of institutions and industries of strategic economic importance, such as banks or railways, or of important industries struggling economically. The case of
Rolls-Royce, nationalized in 1971, is an interesting blend of these two arguments. This policy was sometimes known as ensuring government control of the "commanding heights" of the economy, to enable it to manage the economy better in terms of long-term development and medium-term stability. The extent of this policy declined in the
1980s and
1990s as governments increasingly privatized industries that had been nationalized, replacing their strategic economic influence with use of the tax system and of interest rates.
Nonetheless, national and local government has seen the advantage of keeping key strategic assets in institutions that are not strongly profit driven, can raise funds outside the public-sector constraints, but retain some public accountability. Examples from the last five years in the
United Kingdom include the vesting of the British railway infastructure firm
Railtrack in the not-for profit company
Network Rail, and the divestment of much council housing stock to 'arms-length management companies', often with mutual status.
*
Canada -
Canadian National Railways, created from several systems nation-wide following their bankruptcy during and after the
First World War, and since privatized. Nationalization of electricity in the
Province of Quebec, the
Lesage government, to create
Hydro-Quebec.
*
United Kingdom - The following companies were created following the nationalization of one or more companies in the given year:
**1927
BBC - British Broadcasting Company Ltd (A privately owned company) became British Broadcasting Corporation, a Public Corporation operating under a Royal Charter.
**1939
BOAC later to become
British Airways (BA) - combining the private
British Airways Ltd and the state owned
Imperial Airways **1946
British Coal,
Bank of England - had had private shareholders who were bought out by the state.
**1947
Central Electricity Generating Board,
Cable & Wireless was nationalised and became part of the
GPO**1948 National rail, water transport, some road haulage and passenger transport under the
British Transport Commission. Separate elements operated as
British Railways,
British Road Services, and
British Waterways**1949
British Gas**1950s s Iranian assets by their government
**1967
British Steel**1971
Rolls-Royce (1971) Ltd - The strategically-important aero-engine part of the recently-bankrupt
Rolls Royce Limited.
**1973
Water companies of England and Wales**1976
British Leyland - when the
British Leyland Motor Corporation was nationalized
**1977
British Aerospace - combining the major aircraft companies
British Aircraft Corporation,
Hawker Siddeley Aviation and others.
British Shipbuilders - combining the major shipbuilding companies including
Cammell Laird,
Govan Shipbuilders,
Swan Hunter Shipbuilders,
Yarrow Shipbuilders Ltd :Most of the nationalizations took place under
Labour governments and many of the major nationalised industries were privatized in whole or part from 1979 to 1997 under
Conservative governments.
*
United States - All U.S.
railroads were nationalized as the
United States Railroad Administration during
World War I as a wartime measure but were returned to their private owners almost immediately after the war. The
National Railroad Passenger Corporation (Amtrak) was a
government corporation created in
1971 for the express purpose of relieving American railroads of their legal obligation to provide
intercity passenger service. They were trying to get out of this obligation anyway, but by taking over their passenger rail assets, Amtrak was able to keep the passenger trains running. In
1976 the
Consolidated Rail Corporation (Conrail), another government corporation, was created to take over the operations of six bankrupt rail lines operating primarily in the
Northeast U.S.; Conrail was privatized in
1987. Initial plans for Conrail would have made it a truly nationalized system like that during World War I, but an alternate proposal by the
Association of American Railroads won out. Organization of the
Tennessee Valley Authority entailed the nationalization of the facilities of the former
Tennessee Electric Power Company in
1939. In
2001, in response to the September 11th attacks, the then-private airport security industry was nationalized and put under the authority of the
Transportation Security Administration.
*
Philippines - During the administration of
Ferdinand Marcos, important companies such as
PLDT,
Philippine Airlines,
Meralco and the
Manila Hotel were nationalized. Other companies were sometimes absorbed into these government-owned corporations, as well as other companies, such as
Napocor and the
Philippine National Railways, which in their own right are
monopolies (exceptions are Meralco and the Manila Hotel). Today, these companies have been reprivitized and some, such as PLDT and Philippine Airlines, have been de-monopolized. Others, like government-formed and owned Napocor, are in the process of privitization.
* Nationalization of the oil industry in numerous countries, including
Libya,
Kuwait,
Mexico,
Saudi Arabia, and
Venezuela.
* Companies in
Cuba after the
1959 revolution bringing
Fidel Castro to power in which the assets of foreign (largely U.S.) companies were expropriated without compensation (the
USA has long complained about these nationalizations).
*
Zimbabwe's nationalization of its food distribution infrastructure.
* 1918, 1948. All manufacturing enterprises in the
Soviet Union, in
1918, as well as in other countries of the
Soviet bloc (for example,
Czechoslovakia in
1948).
* 1918. Many retailing enterprises in the
Soviet Union.
* 1944.
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 privatized in
1996.
* 1948. With the Decree 119 of June
1948 the new Romanian communist regime nationalised all the existing private companies and their assets in
Romania leading to the transformation of the Romanian economy from a
free market economy to a
centralized one.
* 1948. The Australian government attempted to nationalize the banks, but the act was declared unconstitutional by the
High Court of Australia.
* 1953. Iranian Prime Minister
Mohammad Mossadegh nationalized the
Anglo-Iranian Oil Company in Iran.
* 1956. On 26th July 1956 Egyptian President
Gammal Abdel Nasser nationalized the
Canal de Suez company. Such act led
England,
France and
Israel to launch a combined attack on
Egypt that was stopped by the
U.S. and the former
Soviet Union.
* 1969. Nationalization of
banks in
India.
* 1972. Nationalization of
Olympic Airways, main airline of
Greece. The company was bought out by its founder,
Aristotle Onassis.
*
Chile 1972. Nationalisation of
copper mining industry by the government of
Salvador Allende. A very important step for a small country which happens to be the biggest copper producer in the world.
*
Bank of Valletta is founded following nationalisation of the
National Bank of Malta* 1982. The Paris business of
M&A advisory firm
Rothschild was nationalized and renamed.
*
2003. The Labour Government of
New Zealand took an 80% stake in national air carrier Air New Zealand in exchange for a large financial infusion.
*
2006. On
May 1, newly elected
Bolivian leader
Evo Morales announces plans to nationalize the country's
natural gas industry; foreign-based companies are given six months to renegotiate their existing contracts.
*
Eminent domain*
Expropriation*
Privatization*
Reprivatization*
Public ownership*
Railway nationalization
