Economists distinguish between nationalization and socialization, which refers to the process of restructuring the economic framework, organizational structure, and institutions of an economy on a socialist basis. By contrast, nationalization does not necessarily imply social ownership and the restructuring of the economic system. Historically, states have carried out nationalizations for various different purposes under a wide variety of different political systems and economic systems.[5]
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]
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 a nation's competitiveness (such as aerospace and shipbuilding), or to protect jobs in certain industries.
Nationalization has had varying levels of support throughout history. After the Second World War, nationalization was supported by some social democratic parties throughout Western Europe, such as the British Labour Party. In the United States, potentially nationalizing healthcare is often a topic of political disagreement and makes frequent appearances in debates between political candidates. A 2019 poll found that about half of residents support the measure.[7]
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.[citation needed]
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."[8] He argues that leaders "nationalize extractive resources to extend the duration of their power" by using "this increased capital to secure political support."[8]
Economic analysis
Nationalization can have positive and negative effects.[9] 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.[10]
Conversely, a 2019 assessment from the Institute for Fiscal Studies found that the Labour Party's proposed policies for nationalization 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.[11]
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.[12] The collapse of the Venezuelan oil industry, due to government mismanagement, is a case in point.[13]
Expropriation
"Expropriation" redirects here. For the 1974 Chilean film, see The Expropriation.
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.[14] Expropriation differs from eminent domain in that the property owner is not compensated for the seized property. 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.[15]
Trends
Studies have found that nationalization follows a cyclical trend. Nationalization rose in the 1960s and 1970s, followed by an increase in privatization in the 80s and 90s, followed again by an increase in nationalization in the 2000s and 2010s.[16]
However, nationalization is not a specifically socialist strategy, and Marxism's founders were skeptical 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.[19]
^
Alistair, Mason; Pyper, Hugh (21 December 2000). Hastings, Adrian (ed.). The Oxford Companion to Christian Thought. Oxford University Press. p. 677. ISBN978-0198600244. Retrieved 8 December 2019. At the heart of its vision has been social or common ownership of the means of production. Common ownership and democratic control of these was far more central to the thought of the early socialists than state control or nationalization, which developed later. [...] Nationalization in itself has nothing particularly to do with socialism and has existed under non-socialist and anti-socialist regimes. Kautsky in 1891 pointed out that a 'co-operative commonwealth' could not be the result of the 'general nationalization of all industries' unless there was a change in 'the character of the state'[.]
^The Economics of Feasible Socialism Revisited, by Nove, Alexander. 1991. (P.176): "Nationalisation arouses no enthusiasm, in the minds of most socialists and anti-socialists. It would probably be agreed that hopes which reposed on nationalisation have been disappointed. Conservatives hold that this is due to defects inherent in nationalisation, that private enterprise based on private ownership is inherently superior. (Mrs Thatcher's government tried to ensure that this was so by preventing essential investments and ordering the nationalized industries to sell off their more successful undertakings.)...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."
^Richard PipesProperty and Freedom, Vintage Books, A division of Random House, Inc., New York, 1999, ISBN0-375-70447-7, page 214.
^Economy of transition period, Chapter Seven 'The latter term, indeed, certainly is not perfect. First, it mixes "nation" ("whole") with the state, i.e. the ruling class. Second, it has shade of national states epoch. We keep it because it is absolutely rooted, though there are no logical grounds for its existence.'
