Nationalization

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.

The traditional Western stance on compensation was expressed by United States Secretary of State Cordell Hull during the Mexican nationalization of the petroleum industry in 1938, saying 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.{{https://www.youtube.com/%7Cdate=March 2022}}

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 private ownership over socialized assets is illegitimate, exploitative, or a hindrance to further economic development.

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-doctrinal 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 the protection of private property.

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

Part of a series on
Social democracy
History Age of Enlightenment Frankfurt Declaration French Revolution Godesberg Program Humanism Internationalist–defencist schism Keynesianism Labor movement Marxism Orthodox Revisionist Nordic model Reformist–revolutionary dispute Socialism Revolutions of 1848 Utopian socialism Welfare capitalism
Concepts Civil liberties Democracy Economic Industrial Representative Dirigisme Environmentalism Environmental protection Fair trade Gradualism Internationalism Land reform Labor rights Left-wing nationalism Mixed economy Nationalization Negative and positive rights Progressivism Reformism Left Socialism Revolutionary socialism Secularism Social corporatism Social justice Social market economy Socialist state Capitalism Socialism Trade union Tripartism Welfare Welfare state
Variants Democratic socialism Ethical socialism Evolutionary socialism Liberal socialism Socialism of the 21st century Third Way
People Ambedkar Allende Ardern Attlee Awolowo Batlle y Ordóñez Bebel Ben-Gurion Bernstein Betancourt Bhutto Blair Blanc Brandt Branting Brown Callaghan Lázaro Cárdenas Clark Craxi Crosland Corbyn Curtin Daszyński Debs Douglas Drees Ebert Ecevit Engels Fraser Gaitskell Gandhi González Goulart Hardie Hilferding Jaurès Jenkins Junmai Katayama Kautsky Kerensky Kéthly Kirk Lagos Lassalle Layton Lenin Lévesque Liebknecht (father) Liebknecht (son) Luxemburg MacDonald Mandela Marx Myrdal Nehru Palme Plekhanov Prodi Russell Sanders Savage Stauning Thomas Den Uyl Webb Whitlam Wilson Zhordania
Organizations International Trade Union Confederation International Union of Socialist Youth Party of European Socialists Progressive Alliance Socialist International Young European Socialists
By region Austria Germany United States
Related Communism "The Internationale" Socialism Types of socialism
Economics portal  Politics portal  Socialism portal

Nationalization was one of the major mechanisms advocated by reformist socialists and social democrats for gradually transitioning to socialism. In this context, the goals of nationalization were to dispossess large capitalists, redirect the profits of industry to the public purse, and establish some form of workers' self-management as a precursor to the establishment of a socialist economic system.[6]

In the United Kingdom after the Second World War, nationalization gained support by the Labour party and some social democratic parties throughout Western Europe. Although sometimes undertaken as part of a strategy to build socialism, more commonly nationalization was also undertaken and used to protect and develop industries perceived as being vital to the nation's competitiveness (such as aerospace and shipbuilding), or to protect jobs in certain industries.

A re-nationalization occurs when state-owned assets are privatized and later nationalized again, often when a different political party or faction is in power. A re-nationalization 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 publicly listed corporation.

According to research by Paasha Mahdavi, leaders who consider nationalization face a dilemma: "nationalize and reap immediate gains while risking future prosperity, or maintain private operations, thereby passing on revenue windfalls but securing long-term fiscal streams."[7] He argues that leaders "nationalize extractive resources to extend the duration of their power" by using "this increased capital to secure political support."[7]

Nationalization can have positive and negative effects.[8] In 2019 research based on studies from Greenwich University found that the nationalization of key services such as water, bus, railways and broadband in the United Kingdom could save £13bn every year.[9]

Conversely, an assessment from the Institute for Fiscal Studies found that it would add at least £150bn to the national debt and make it harder for the United Kingdom to hit its climate change targets. This analysis was based on the assumption that the UK Government would have to pay the market rate for these industries.[10]

Nationalization can produce adverse effects, such as reducing competition in the marketplace, which in turn reduces incentives to innovation and maintains high prices. In the short run, nationalization can provide a larger revenue stream for government, but can cause the industry to falter in the longer run.[11] The collapse of the Venezuelan oil industry, due to government mismanagement, is a case in point.[12]

Expropriation is the seizure of private property by a public agency for a purpose deemed to be in the public interest. It may also be used as a penalty for criminal proceedings.[13] Unlike eminent domain, expropriation may also refer to the taking of private property by a private entity authorized by a government to take property in certain situations.

Due to political risks that are involved when countries engage in international business, it is important to understand the expropriation risks and laws within each of the countries in which business is conducted in order to understand the risks as an investor in that country.[14]

The term appears as "expropriation of expropriators (ruling classes)" in Marxist theory, and also as the slogan "Loot the looters!" ("грабь награбленное"), which was very popular during the Russian October Revolution.[15] The term is also used to describe nationalization campaigns by communist states, such as dekulakization and collectivization in the USSR.[16]

However, nationalisation is not a specifically socialist strategy, and Marxism's founders were sceptical of its value. As Engels put it:

Therein precisely lies the rub; for, so long as the propertied classes remain at the helm, nationalisation never abolishes exploitation but merely changes its form — in the French, American or Swiss republics no less than in monarchist Central, and despotic Eastern, Europe.

— Friedrich Engels, Letter from Engels to Max Oppenheim, 24 March 1891

Nikolai Bukharin also criticised the term 'nationalisation', preferring the term 'statisation' instead.[17]

Look up nationalization in Wiktionary, the free dictionary.

• The importance of public banking^[Usurped!], article on Indian public sector banks
• Time for Permanent Nationalization by economist Fred Moseley in Dollars & Sense, January/February 2009
• The Corporate Governance of Banks – a concise discussion of concepts and evidence
• Davies, Albert Emil (1922). "Nationalization" . Encyclopædia Britannica (12th ed.).