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Nationalization (nationalisation in [English]) is the process of transforming privately-owned assets into public assets by bringing them under the public ownership of a national government or state. [1] Nationalization contrasts with privatization and with 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 often subject to nationalization include telecommunications, electric power, fossil fuels, railways, airlines, iron ore, media, postal services, banks, and water (sometimes called the commanding heights of the economy), and in many jurisdictions such entities have no history of private ownership.


Nationalization may occur with or without financial 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-maker Renault because its owners had collaborated with the 1940–1944 Nazi occupiers of France. [2] In September 2021, Berliners voted to expropriate over 240,000 housing units, many of which were being held unoccupied as investment property. [3] [4]

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]

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. [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 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]

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]

Marxist theory

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. [17] The term is also used to describe nationalization campaigns by communist states, such as dekulakization and collectivization in the USSR. [18]

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]

See also

Related Research Articles

Socialism is an economic and political philosophy encompassing diverse economic and social systems characterised by social ownership of the means of production, as opposed to private ownership. It describes the economic, political, and social theories and movements associated with the implementation of such systems. Social ownership can take various forms, including public, community, collective, cooperative, or employee. Traditionally, socialism is on the left wing of the political spectrum. Types of socialism vary based on the role of markets and planning in resource allocation, and the structure of management in organizations.

State capitalism is an economic system in which the state undertakes business and commercial economic activity and where the means of production are nationalized as state-owned enterprises. The definition can also include the state dominance of corporatized government agencies or of public companies in which the state has controlling shares.

<span class="mw-page-title-main">Anti-capitalism</span> Political ideology and movement opposed to capitalism

Anti-capitalism is a political ideology and movement encompassing a variety of attitudes and ideas that oppose capitalism. In this sense, anti-capitalists are those who wish to replace capitalism with another type of economic system, such as socialism or communism.

A mixed economy is an economic system that accepts both private businesses and nationalized government services, like public utilities, safety, military, welfare, and education. A mixed economy also promotes some form of regulation to protect the public, the environment, or the interests of the state.

Eminent domain, land acquisition, compulsory purchase, resumption, resumption/compulsory acquisition, or expropriation is the power of a state, provincial, or national government to take private property for public use. It does not include the power to take and transfer ownership of private property from one property owner to another private property owner without a valid public purpose. This power can be legislatively delegated by the state to municipalities, government subdivisions, or even to private persons or corporations, when they are authorized by the legislature to exercise the functions of public character.

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 or cooperative property, which is owned by one or more non-governmental entities.

A state-owned enterprise (SOE) is a government entity which is established or nationalised by a national or provincial government, by an executive order or an act of legislation, in order to earn profit for the government, control monopoly of the private sector entities, provide products and services to citizens at a lower price, implement government policies, and/or to deliver products & services to the remote locations of the country. The national government or provincial government has majority ownership over these state owned enterprises. These state owned enterprises are also known as public sector undertakings in some countries. Defining characteristics of SOEs are their distinct legal form and possession of financial goals and developmental objectives. SOEs are government entities established to pursue financial objectives and developmental goals.

<span class="mw-page-title-main">State ownership</span> Ownership of industry, assets, or businesses by a public body

State ownership, also called public ownership or government 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 a market economy with the predominance of public ownership and state-owned enterprises. The term "socialist market economy" was introduced by Jiang Zemin during the 14th National Congress of the Chinese Communist Party (CCP) in 1992 to describe the goal of China's economic reforms.

Common ownership refers to holding the assets of an organization, enterprise or community indivisibly rather than in the names of the individual members or groups of members as common property.

The social dividend is the return on the natural resources and capital assets 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.

<span class="mw-page-title-main">Nationalisation in Pakistan</span> Pakistani economic policies

The Nationalisation process in Pakistan was a policy measure programme in the economic history of Pakistan, made Pakistan's industrialization worse and lifted the trust of businessmen and investors. It first introduced, promulgated and implemented by Zulfikar Ali Bhutto and 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. 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.

State socialism is a political and economic ideology within the socialist movement that advocates state ownership of the means of production. This is intended either as a temporary measure, or as a characteristic of socialism in the transition from the capitalist to the socialist mode of production or to a communist society. State socialism was first theorised by Ferdinand Lassalle. It advocates a planned economy controlled by the state in which all industries and natural resources are state-owned.

Socialism with Chinese characteristics is a set of political theories and policies of the Chinese Communist Party (CCP) that are seen by their proponents as representing Marxism–Leninism adapted to Chinese circumstances and specific time periods, consisting of Deng Xiaoping Theory, Three Represents, Scientific Outlook on Development, and Xi Jinping Thought. According to CCP doctrine, Xi Jinping Thought is considered to represent Marxist–Leninist policies suited for China's present condition while Deng Xiaoping Theory was considered relevant for the period when it was formulated.

The socialist mode of production, or simply (Marxist) socialism or communism as Karl Marx and Friedrich Engels used the terms communism and socialism interchangeably, is a specific historical phase of economic development and its corresponding set of social relations that emerge from capitalism in the schema of historical materialism within Marxist theory. The Marxist definition of socialism is that of production for use-value, therefore the law of value no longer directs economic activity. Marxist production for use is coordinated through conscious economic planning. According to Marx, distribution of products is based on the principle of "to each according to his needs"; Soviet models often distributed products based on the principle of "to each according to his contribution". The social relations of socialism are characterized by the proletariat effectively controlling the means of production, either through cooperative enterprises or by public ownership or private artisanal tools and self-management. Surplus value goes to the working class and hence society as a whole.

Social ownership is a type of property where an asset is recognized to be in the possession of society as a whole rather than individual members or groups within it. Social ownership of the means of production is the defining characteristic of a socialist economy, and can take the form of community ownership, state ownership, common ownership, employee ownership, cooperative ownership, and citizen ownership of equity. Within the context of socialist economics it refers particularly to the appropriation of the surplus product, produced by the means of production, or the wealth that comes from it, to society at large or the workers themselves. Traditionally, 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 and integrated by a single entity or network of entities representing society. However, 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.

Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.

A socialist state, socialist republic, or socialist country, sometimes referred to as a workers' state or workers' republic, is a sovereign state constitutionally dedicated to the establishment of socialism. The term communist state is often used synonymously in the West, specifically when referring to one-party socialist states governed by Marxist–Leninist communist parties, despite these countries being officially socialist states in the process of building socialism and progressing toward a communist society. These countries never describe themselves as communist nor as having implemented a communist society. Additionally, a number of countries that are multi-party capitalist states make references to socialism in their constitutions, in most cases alluding to the building of a socialist society, naming socialism, claiming to be a socialist state, or including the term people's republic or socialist republic in their country's full name, although this does not necessarily reflect the structure and development paths of these countries' political and economic systems. Currently, these countries include Algeria, Bangladesh, Guyana, India, Nepal, Nicaragua, Sri Lanka and Tanzania.

In the theoretical works of Karl Marx and Friedrich Engels and subsequent Marxist writers, socialization is the process of transforming the act of producing and distributing goods and services from a solitary to a social relationship and collective endeavor. With the development of capitalism, production becomes centralized in firms and increasingly mechanized in contrast to the pre-capitalist modes of production where the act of production was a largely solitary act performed by individuals. Socialization occurs due to centralization of capital in industries where there are increasing returns to scale and a deepening of the division of labor and the specialization in skills necessary for increasingly complex forms of production and value creation. Progressive socialization of the forces of production under capitalism eventually comes into conflict with the persistence of relations of production based on private property; this contradiction between socialized production and private appropriation of the social product forms the impetus for the socialization of property relations (socialism).


  1. "Definition of NATIONALIZATION". Merriam-Webster. nationalize [...] 2 : to invest control or ownership of in the national government[.]
  2. Chrisafis, Angelique (December 14, 2011). "Renault descendants demand payout for state confiscation". The Guardian. London.
  3. Winck, Ben (27 September 2021). "A majority in Berlin's election just voted to strip 240,000 rentals from major landlords and fight the city's housing crisis". Business Insider.
  4. Berry, Alex (26 September 2021). "Germany: Berlin locals vote to expropriate real estate giants". Deutsche Welle.
  5. Alistair, Mason; Pyper, Hugh (21 December 2000). Hastings, Adrian (ed.). The Oxford Companion to Christian Thought . Oxford University Press. p.  677. ISBN   978-0198600244 . 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'[.]
  6. 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."
  7. Lopes, Lunna (2019-10-15). "KFF Health Tracking Poll – October 2019: Health Care In The Democratic Debates, Congress, And The Courts". KFF. Retrieved 2022-12-01.
  8. 1 2 Mahdavi, Paasha (2021). Power grab: political survival through extractive resource nationalization. Cambridge University Press. doi:10.1017/9781108781350. ISBN   9781108781350. S2CID   243736481 . Retrieved 2020-03-12.
  9. "Nationalization | economic policy".
  10. Ellis, Mark (2019-11-24). "Nationalisation of public services could save £13billion every year". mirror. Retrieved 2020-01-06.
  11. "Labour nationalisations 'would cost tens of billions and risk years of disruption', claims IFS". 2019-12-03. Retrieved 2020-01-06.
  12. "Nationalization". Corporate Finance Institute. Retrieved 2021-09-29.
  13. Monaldi, Francisco (March 2018). "The collapse of the Venezuelan Oil Industry and its global consequences" (PDF). Atlantic Council.
  14. Caves, R. W. (2004). Encyclopedia of the City. Routledge. p. 251.
  15. Flynn, Chris. Avoiding Expropriation and Managing Political Risk in Emerging Market. Lexology. p. 1.
  16. Chang, Roberto; Hevia, Constantino; Loayza, Norman (March 2018). "Privatization and Nationalization Cycles". Macroeconomic Dynamics. 22 (2): 331–361. doi:10.1017/S1365100516000195. hdl: 10986/4227 . ISSN   1365-1005.
  17. Orlando Figes, A People's Tragedy: Russian Revolution, 1996, ISBN   0-7126-7327-X.
  18. Richard Pipes Property and Freedom, Vintage Books, A division of Random House, Inc., New York, 1999, ISBN   0-375-70447-7, page 214.
  19. 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.'