Nationalization

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Nationalization (or nationalisation) is the process of transforming private assets into public assets by bringing them under the public ownership of a national government or state. [1] Nationalization usually refers to private assets or assets owned by lower levels of government, such as municipalities, being transferred to the state. The opposites of nationalization are privatization and demutualization. When previously nationalized assets are privatized and subsequently returned to public ownership at a later stage, they are said to have undergone renationalization. Industries that are usually subject to nationalization include transport, communications, energy, banking, and natural resources.

Municipality An administrative division having corporate status and usually some powers of self-government or jurisdiction

A municipality is usually a single administrative division having corporate status and powers of self-government or jurisdiction as granted by national and regional laws to which it is subordinate. It is to be distinguished (usually) from the county, which may encompass rural territory or numerous small communities such as towns, villages and hamlets.

Privatization can mean different things including moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heavily regulated private company or industry becomes less regulated. Government functions and services may also be privatized; in this case, private entities are tasked with the implementation of government programs or performance of government services that had previously been the purview of state-run agencies. Some examples include revenue collection, law enforcement, and prison management.

Demutualization is the process by which a customer-owned mutual organization (mutual) or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form of shares in the successor company, a cash payment, or a mixture of both. Mutualization or mutualisation is the opposite process, wherein a shareholder-owned company is converted into a mutual organization, typically through takeover by an existing mutual organization. Furthermore, re-mutualization depicts the process of aligning or refreshing the interest and objectives of the members of the mutual society.

Contents

Nationalization may occur with or without compensation to the former owners. Nationalization is distinguished from property redistribution in that the government retains control of nationalized property. Some nationalizations 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. [2]

Property, in the abstract, is what belongs to or with something, whether as an attribute or as a component of said thing. In the context of this article, it is one or more components, whether physical or incorporeal, of a person's estate; or so belonging to, as in being owned by, a person or jointly a group of people or a legal entity like a corporation or even a society. Depending on the nature of the property, an owner of property has the right to consume, alter, share, redefine, rent, mortgage, pawn, sell, exchange, transfer, give away or destroy it, or to exclude others from doing these things, as well as to perhaps abandon it; whereas regardless of the nature of the property, the owner thereof has the right to properly use it, or at the very least exclusively keep it.

Renault French automobile manufacturing company

Groupe Renault is a French multinational automobile manufacturer established in 1899. The company produces a range of cars and vans, and in the past has manufactured trucks, tractors, tanks, buses/coaches and autorail vehicles.

Nationalization is to be distinguished from "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. By itself, nationalization has nothing to do with socialism, having been historically carried out for various different purposes under a wide variety of different political systems and economic systems. [3] However, nationalization is, in most cases, opposed by laissez faire capitalists as it is perceived as excessive government interference in, and control of, economic affairs of individual citizens.

Economic system system of production and exchange

An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities and who receives the output of production.

Socialism is a range of economic and social systems characterised by social ownership of the means of production and workers' self-management, as well as the political theories and movements associated with them. Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity. There are many varieties of socialism and there is no single definition encapsulating all of them, with social ownership being the common element shared by its various forms.

In geopolitics, a political system defines the process for making official government decisions. It is usually compared to the legal system, economic system, cultural system, and other social systems. However, this is a very simplified view of a much more complex system of categories involving the questions of who should have authority and what the government influence on its people and economy should.

Compensation

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.

A government is the system or group of people governing an organized community, often a state.

Debt deferred payment, or series of payments, that is owed in the future

Debt is when something, usually money, is owed by one party, the borrower or debtor, to a second party, the lender or creditor. Debt is a deferred payment, or series of payments, that is owed in the future, which is what differentiates it from an immediate purchase. The debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest. Loans, bonds, notes, and mortgages are all types of debt. The term can also be used metaphorically to cover moral obligations and other interactions not based on economic value. For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a "debt of gratitude" to the second person.

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.

United States Secretary of State U.S. cabinet member and head of the U.S. State Department

The Secretary of State is a senior official of the federal government of the United States of America, and as head of the United States Department of State, is principally concerned with foreign policy and is considered to be the U.S. government's equivalent of a Minister for Foreign Affairs.

Cordell Hull American politician, U.S. Secretary of State from 1933 to 1944

Cordell Hull was an American politician from Tennessee best known as the longest-serving U.S. Secretary of State, holding the position for 11 years (1933–1944) in the administration of President Franklin Delano Roosevelt during most of World War II. Hull received the Nobel Peace Prize in 1945 for his role in establishing the United Nations, and was referred to by President Roosevelt as the "Father of the United Nations".

International law regulations governing international relations

International law, also known as public international law or law of nations, is the set of rules, norms, and standards generally regarded and accepted in relations between nations. It establishes normative guidelines and a common conceptual framework for states to follow across a broad range of domains, including war, diplomacy, trade, and human rights. International law thus provides a mean for states to practice more stable, consistent, and organized international relations.

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.

Sovereign state Political organization with a centralized independent government

In international law, a sovereign state, sovereign country, or simply state, is a nonphysical juridical entity that is represented by one centralized government that has sovereignty over a geographic area. International law defines sovereign states as having a permanent population, defined territory, one government, and the capacity to enter into relations with other sovereign states. It is also normally understood that a sovereign state is neither dependent on nor subjected to any other power or state.

The Calvo Doctrine is a foreign policy doctrine which holds that jurisdiction in international investment disputes lies with the country in which the investment is located. The Calvo Doctrine thus proposed to prohibit diplomatic protection or (armed) intervention before local resources were exhausted. An investor, under this doctrine, has no recourse but to use the local courts, rather than those of their home country. As a policy prescription, the Calvo Doctrine is an expression of legal nationalism. The principle, named after Carlos Calvo, an Argentine jurist, has been applied throughout Latin America and other areas of the world.

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.

Political support

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. [4]

In the United Kingdom after the Second World War, nationalization gained support by the Labour party and some social democratic parties throughout 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.[ citation needed ]


Examples

Chile

In 1972 the Chilean government acquired control of the major foreign-owned section of the Chilean copper mining industry. The process, commonly described as the Chilenización del cobre [5] , started under the government of Carlos Ibáñez del Campo, and culminated during the government of President Salvador Allende, who completed the nationalization.

Colombia

Granahorrar Bank was a bank based in Colombia (1972- 1998). When it was open, it was part of a business conglomerate called Grupo Grancolombiano. The conglomerate also owned Banco de Colombia (Bancolombia), which is Colombia's largest bank. In 1982, the conglomerate underwent a period of crisis. Consequently, the Colombian government nationalized Granahorrar Bank; effectively, the government took over the bank by force from its private owners. [6]

Germany

The railways were nationalized after World War I. Deutsche Bahn, the German railway company is owned by the Federal Republic. In 2008, it was agreed to "float" a portion of the business, meaning an end to the 100% share the German Federal Republic had in it, with a plan that 25% of the overall share would be sold to the private sector [7] . However the onset of the financial crisis of 2007–08 saw this cancelled. [8]

Mexico

In 1982, President José López Portillo started the nationalization of the Mexican banking system, in response to the debt crisis. Under the Carlos Salinas de Gortari presidency (1988–1994) the nationalized banks were privatized very rapidly between 1991 and 1992 to Mexican family groups. [9]

Venezuela

Since 2007, the government of Hugo Chávez started the nationalization of different companies. It started with the world’s biggest oil companies (May 1, 2007). On April 3, 2008, Chávez ordered the nationalization of cement industry and on April 9, the nationalization of Venezuelan steel mill, among other industries such as cement and rice processing and packaging plants. [10] [11] [12] [13]

See also

Related Research Articles

Anti-capitalism political ideology

Anti-capitalism encompasses a wide variety of movements, ideas and attitudes that oppose capitalism. Anti-capitalists, in the strict sense of the word, are those who wish to replace capitalism with another type of economic system.

A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. There is no single definition of a mixed economy, but rather two major definitions. The first of these definitions refers to a mixture of markets with state interventionism, referring to capitalist market economies with strong regulatory oversight, interventionist policies and governmental provision of public services. The second definition is apolitical in nature and strictly refers to an economy containing a mixture of private enterprise with public enterprise.

Private property legal designation of the ownership of property by non-governmental legal entities

Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property, which is owned by a state entity; and from collective property, which is owned by a group of non-governmental entities. Private property can be either personal property or capital goods. Private property is a legal concept defined and enforced by a country's political system.

The process of expropriation "occurs when a public agency takes private property for a purpose deemed to be in the public interest". 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.

State ownership

State ownership is the ownership of an industry, asset, or enterprise by the state or a public body representing a community as opposed to an individual or private party. Public ownership specifically refers to industries selling goods and services to consumers and differs from public goods and government services financed out of a government’s general budget. Public ownership can take place at the national, regional, local, or municipal levels of government; or can refer to non-governmental public ownership vested in autonomous public enterprises. Public ownership is one of the three major forms of property ownership, differentiated from private, collective/cooperative, and common ownership.

The socialist market economy (SME) is the economic system and model of economic development employed in the People's Republic of China. The system is based on the predominance of public ownership and state-owned enterprises within a market economy. The term "socialist market economy" was first used during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China's economic reforms. Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or "primary stage" of developing socialism. Despite this, many Western commentators have described the system as a form of state capitalism.

The social dividend is the return on the capital assets and natural resources owned by society in a socialist economy. The concept notably appears as a key characteristic of market socialism, where it takes the form of a dividend payment to each citizen derived from the property income generated by publicly owned enterprises, representing the individual’s share of the capital and natural resources owned by society.

Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish socialism from capitalism, and was one of the fundamental defining characteristics of socialism initially shared by Marxian socialists, evolutionary socialists, social anarchists and Christian socialists.

Nationalisation in Pakistan Pakistani economic policies

The Nationalisation process in Pakistan was a policy measure programme in the economic history of Pakistan, first introduced, promulgated and implemented by the first democratically elected Prime Minister Zulfikar Ali Bhutto and the Pakistan Peoples Party to lay the foundation of socialist economics reforms to improve the growth of national economy of Pakistan. Since the 1950s, the country had undergone a speedy industrialisation and became an industrial paradise in Asia. But, as time progressed, the labour trade unions and labour-working class had increasingly strained relations with the industrial business oligarch class, having neglected to improve working conditions and failing to provide a healthy and safe environment for the workers in these industrial industries.

Privatisation in Pakistan Economic programme

The Privatization process in Pakistan was a policy measure programme in the economic period of Pakistan. It was first conceived and implemented by the then-people-elected Prime Minister Nawaz Sharif and the Pakistan Muslim League, in an attempt to enable the nationalized industries towards market economy, immediately after the economic collapse of the Soviet Union in 1989–90. The program was envisaged and visioned to improve the GDP growth of the national economy of Pakistan, and reversal of the nationalization programme in 1970s— an inverse of the privatization programme.

State socialism is a classification for any socialist political and economic perspective advocating state ownership of the means of production either as a temporary measure in the transition from capitalism to socialism, or as characteristic of socialism itself. It is often used interchangeably with state capitalism in reference to the economic systems of Marxist–Leninist states such as the Soviet Union to highlight the role of state planning in these economies, with the critics of said system referring to it more commonly as "state capitalism". Libertarian and democratic socialists claim that these states had only a limited number of socialist characteristics. However, Marxist–Leninists maintain that workers in the Soviet Union and other Marxist–Leninist states had genuine control over the means of production through institutions such as trade unions.

Social ownership is any of various forms of ownership for the means of production in socialist economic systems, encompassing public ownership, employee ownership, cooperative ownership, citizen ownership of equity, common ownership and collective ownership. Historically social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned by a single entity or network of entities representing society, but the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy. Social ownership of the means of production is the common defining characteristic of all the various forms of socialism.

Socialist economics comprises the economic theories, practices, and norms of hypothetical and existing socialist economic systems.

Granahorrar Bank was a bank based in Colombia that was open from 1972 to 1998. When it was open, it was part of a business conglomerate called Grupo Grancolombiano. The conglomerate also owned Banco de Colombia (Bancolombia), which is Colombia's largest bank.

Julio Carrizosa Mutis was a Colombian businessman active in the construction and financial sectors in Colombia.

References

  1. "Definition of NATIONALIZATION". www.merriam-webster.com.
  2. Chrisafis, Angelique (December 14, 2011). "Renault descendants demand payout for state confiscation". The Guardian. London.
  3. Hastings, Mason and Pyper, Adrian, Alistair and Hugh (December 21, 2000). The Oxford Companion to Christian Thought. Oxford University Press. p. 677. ISBN   978-0198600244. 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’.
  4. 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."
  5. The History of Codelco
  6. "Pelea de Socios". Semana (Sección Economía) (in Spanish). No. 815. 12 January 1998. Retrieved 24 May 2018.
  7. "Partial sale of DB agreed" Railway Gazette International May 2008 page 289.
  8. "DB flotation on hold" Railway Gazette International November 2008 page 843.
  9. Marois, Thomas (2008). "The 1982 Mexican Bank Statization and Unintended Consequences for the Emergence of Neoliberalism". Canadian Journal of Political Science. 41 (1): 143–167. doi:10.1017/s0008423908080128.
  10. Al Jazeera English - Americas - Chavez nationalises cement industry Archived 2008-05-11 at the Wayback Machine
  11. "Venezuela Seizes Cemex - Forbes.com". Archived from the original on October 10, 2008.
  12. "Venezuela to nationalize steelmaker Sidor: union". Reuters. April 9, 2008.
  13. "Chavez sends army to rice plants". BBC News. March 1, 2009. Retrieved May 20, 2010.