Nationalization  

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The Birth of Venus (detail), a 1486 painting by Sandro Botticelli
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The Birth of Venus (detail), a 1486 painting by Sandro Botticelli

Nationalization, also spelled nationalisation, is the act of taking an industry or assets into the public ownership of a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being transferred to the public sector to be operated by or owned by the state. The opposite of nationalization is usually privatization or de-nationalisation, but may also be municipalization.

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

The motives for nationalization are political as well as economic. It is a central theme of certain brands of 'state socialist' policy that the means of production, distribution and exchange, should be owned by the state on behalf of the people or working class to allow for rational allocation of output, consolidation of resources, and rational planning or control of the economy. Many socialists believe that public ownership enables people to exercise full democratic control over the means whereby they earn their living and provides an effective means of distributing output to benefit the public at large, and a means for providing public finance.

Nationalized industries, charged with operating in the public interest, may be under strong political and social pressures to give much more attention to externalities. They may be obliged to operate some loss making activities where social benefits are clearly greater than social costs - for example, rural postal and transport services. As an instance, the United States Postal Service is guaranteed its nationalised status by the Constitution. The government has recognized these social obligations and, in some cases, provides subsidies for such non-commercial operations.

Since the nationalised industries are state owned, the government is responsible for meeting any debts incurred by these industries. The nationalized industries do not normally borrow from the domestic market other than for short-term borrowing. However, if profitable, the profit is often used as a means to finance other state services such as social programs and government research which can help lower the tax burden.

Nationalization may occur with or without compensation to the former owners. If it takes place without compensation it is a case of expropriation. 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, the French government seized the car-makers Renault because its owners had collaborated with the Nazi occupiers of France.

Contents

Compensation

A key issue in nationalization is payment of compensation to the former owner. The most controversial nationalizations, known as expropriations, are those where no compensation, or an amount far below the likely market value of the nationalized assets, is paid. Many nationalizations through expropriation have come after revolutions.

The traditional Western stance on compensation was expressed by United States Secretary of State Cordell Hull, during the 1938 Mexican nationalization of the petroleum industry, 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. 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. Communist states have held that no compensation is due, based on socialist notions of private properties.

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 both the traditional Calvo-doctrinist 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 protection of private property.

When nationalizing a large business, the cost of compensation is so great that many legal nationalizations have happened when firms of national importance run close to bankruptcy and can be acquired by the government for little or no money. A classic example is the UK nationalization of the British Leyland Motor Corporation. At other times, governments have considered it important to gain control of institutions of strategic economic importance, such as banks or railways, or of important industries struggling economically. The case of Rolls-Royce plc, 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 governments have seen the advantage of keeping key strategic assets in institutions that are not strongly profit-driven and can raise funds outside the public-sector constraints, but still retain some public accountability. Examples from the last five years in the United Kingdom include the vesting of the British railway infrastructure 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.

Notable nationalizations by country

Argentina

Australia

Bolivia

  • 2006 On May 1, 2006, newly elected Bolivian president Evo Morales announces plans to nationalize the country's natural gas industry; foreign-based companies are given six months to renegotiate their existing contracts.

Canada

Channel Islands

  • 2003 Aurigny Air Services was bought by the States of Guernsey to keep precious routes from the island to London.

Chile

Croatia

The HDZ government, on the break-up of Yugoslavia, nationalized private agricultural, non communist nationalized, property and rezoned it under the guise of forest statesmanship when their publicly professed agenda was to only complete the nationalization of the communists. Much of this land is in the process of being restituted and the model rethought.

Cuba

The Castro government gradually expropriated all foreign-owned private companies after the Cuban Revolution of 1959. Most of these companies were owned by U.S. corporations and individuals. Bonds at 4.5% interest over twenty years were offered to U.S. companies, but the offer was rejected by U.S. ambassador Philip Bonsal, who requested the compensation up front.<ref name="Thomas">Template:Cite book</ref> Only a minor amount, $1.3 million, was paid to U.S. interests before deteriorating relations ended all cooperation between the two governments.<ref name="Thomas"/> The United States established a registry of claims against the Cuban government, ultimately developing files on 5,911 specific companies. The Cuban government has refused to discuss the effective and adequate compensation of U.S. claims. The United States government continues to insist on compensation for U.S. companies. In 1966-68, the Castro government nationalized all remaining privately owned business entities in Cuba, down to the level of street vendors.

Czechoslovakia

  • 1948-1990 All manufacturing enterprises.

Egypt

  • 1956 On July 26, 1956 Egyptian President Gamal Abdel Nasser nationalized the Suez Canal Company, provoking the United Kingdom, France and Israel to launch a combined attack on Egypt that was stopped by the first UN Peacekeeping force.

France

Nationalization in France dates back to the 'regies' or state monopolies first organized under the Ancien Régime, for example, the monopoly on tobacco sales. Communications companies France Telecom and La Poste are relics of the state postal and telecommunications monopolies.

There was a major expansion of the nationalised sector following World War II.<ref name="Myers49">Myers (1949)</ref> A second wave followed in 1982.

  • 1938 Societe Nationale des Chemins de Fer Francais (SNCF) (originally a 51% State holding, increased to 100% in 1982)<ref name="Myers49"/>
  • 1945 Several nationalizations in France, including most important banks and Renault.<ref name="Myers49"/> The firm was seized for Louis Renault's alleged collaboration with Nazi Germany, although this condemnation was without judgement and after his death, making this case remarkable and rare. A later judgement (1949) admitted that Renault's plant never collaborated. Renault was successful but unprofitable whilst nationalised and remains successful today, after having been privatized in 1996.
  • 1946 Charbonnages de France, Electricite de France (EdF), Gaz de France (GdF)
  • 1982 A large part of the banking sector and industries of strategic importance to the state were nationalized under the new president François Mitterrand and the PS-led government. Many of those companies were privatized again after 1986.

The Paris regional transport operator, Regie Autonome des Transports Parisiens (RATP), can also be counted as a nationalised industry.

Germany

The German railways were nationalised after World War I. Partial privatisation of Deutsche Bahn is currently underway, as of 2008.

Most enterprises in East Germany were nationalised following World War II. After reunification, an agency, Treuhand, was established to return them to private ownership. However, due to structural and economic problems inherent in the previous regime, many of these had to be liquidated.

  • 2008 Renationalization of the "Bundesdruckerei" (Federal Print Office), which had been privatized in 2001.

Greece

Iceland

India

The nationalised banks were credited by some, including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009.<ref>PSU banks' policies saved India from financial blushes: Chidambaram</ref><ref>The importance of public banking</ref>

Iran

Ireland

Railways in the Republic of Ireland were nationalised in the 1940s as Coras Iompair Eireann.

Israel

  • 1983 Nationalization of the major Israeli banks: Bank Hapoalim, Bank Leumi, Discount Bank, Mezrachi bank due to the Bank stock crisis that struck Israel in 1983.

Italy

The regime of Benito Mussolini extended nationalisation, creating the Istituto per la Ricostruzione Industriale (IRI) as a State holding company for struggling firms, including the car maker Alfa Romeo. A parallel body, Ente Nazionale Idrocarburi (Eni) was set up to manage State oil and gas interests.

Japan

Malta

Mexico

The Netherlands

  • 2008 The Dutch State nationalizes the Dutch activities of Belgian-Dutch banking and insurance company Fortis, which had come in solvability problems due to the international financial crisis.

New Zealand

  • 2001 Central government purchased the Auckland railway network from TranzRail.
  • 2003 The Labour Government of New Zealand took an 80% stake in near-bankrupt national air carrier Air New Zealand in exchange for a large financial infusion.
  • 2004 The rest of the country's rail network is purchased from Toll New Zealand, formerly known as TranzRail. A new state owned enterprise, ONTRACK, was established to maintain the rail infrastructure.
  • 2008 The rolling stock of Toll New Zealand was purchased by central government, bringing the rail system under total state ownership and renamed as KiwiRail.

Pakistan

  • 1972 On January 2, 1972, Zulfiqar Ali Bhutto, after the fall of East Pakistan, announced the nationalisation of all major industries, including iron and steel, heavy engineering, heavy electricals, petrochemicals, cement and public utilities.<ref name="USCS">Template:Cite news</ref>

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 reprivatized and some, such as PLDT and Philippine Airlines, have been de-monopolized. Others, like government-formed and owned Napocor, are in the process of privatization.

Poland

Portugal

After the Carnation Revolution, the Junta de Salvação Nacional (temporary government) nationalized all the banking, insurance, petrol and industrial companies. Along with the telecommunications companies, which were state-owned even before the Revolution, many of the nationalized companies were reprivatized.

2008: BPN - Banco Português de Negócios bank nationalised to prevent its collapse.

Romania

  • 1948 With the Decree 119 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 market economy to a planned economy.

Russia

Template:Unreferenced

  • 1998 The Yeltsin government began seizing Gazprom assets, claiming that the company owed back taxes. Privatization of Gazprom from the mid 1990's had been reduced to 38.37% with the intention of achieving full privatization. However, the stake of the Russian Government in Gazprom has since been increased to 50% with Vladimir Putin's plan to increase the stake to a controlling position. Gazprom is also buying up both Russian and other international Utility companies.

South Korea

  • 1946 USAMGIK nationalized all South Korean private railroad companies and made Department of Transportation. This now becomes Korail.

Soviet Union

  • 1918 All manufacturing enterprises, many retailing enterprises, any private enterprises, the whole bank system, agrarian sector, others. Basically everything was nationalized in the name of the Revolution (a justification phrased used upon the nationalization process), no private ownership was allowed. Later the government of Lenin introduced the New Economic Policy that slightly reverted process, however upon the death of the Soviet vozhd (Lenin) Stalin renewed the process again.

Spain

  • 1941 Spain's railways were nationalised, as RENFE, in the aftermath of the Spanish Civil War.
  • 1983 Nationalization without compensation of the Spanish Rumasa. Separate business were later privatized.

Sri Lanka

  • 1958 The Government nationalised Bus transport (creating the Ceylon Transport Board). The Colombo Port was also nationalised the same year.
  • 1961 The local subsidiaries of the foreign owned petroleum companies, Caltex, Esso and Shell had formed a cartel, in order to break which they were nationalised. The Insurance companies and the Bank of Ceylon were also nationalised in the same year.
  • 1971 Graphite mines nationalised.
  • 1972 Locally owned Tea and Rubber plantations were nationalised under the Land Reform law.
  • 1975 Sterling plantation companies (owned by British plantation companies) were nationalised.
  • 2009 Seylan Bank nationalised to prevent its collapse.

Sweden

  • 1939-1948 Nationalisation of most of the private Railway companies.
  • 1957 The mining company LKAB is nationalized. The state had owned 50% of the corporation's shares, with options to buy the remainder, since 1907.<ref>A Historic Journey Luossavaara-Kiirunavaara Aktiebolag, April 2006</ref>
  • 1992 A large part of Sweden's banking sector is nationalized.<ref>Stopping a Financial Crisis, the Swedish Way</ref>

United Kingdom

The following companies/industries were the subject of nationalisation in the given year:

British assets nationalised by other countries

United States

Venezuela

  • 2007 On May 1, 2007, Venezuela stripped the world's biggest oil companies of operational control over massive Orinoco Belt crude projects, a controversial component in President Hugo Chavez's nationalization drive.
  • 2008 On April 3, 2008, President Hugo Chavez ordered the nationalization of the cement industry.<ref>Al Jazeera English - Americas - Chavez nationalises cement industry</ref>
  • 2008 On April 9, 2008, Hugo Chavez ordered the nationalization of Venezuelan steel mill Sidor, in which Luxembourg-based Ternium currently holds a 60% stake. Sidor employees and the Government hold a 20% stake respectively.<ref>Template:Cite news</ref>
  • 2008 On August 19, 2008, Hugo Chavez ordered the take-over of a cement plant owned and operated by Cemex, an international cement producer. While shares of Cemex fell on the New York Stock Exchange, the cement plant comprises only about 5% of the company's business, and is not expected to adversely affect the company's ability to produce in other markets. Chavez has been looking to nationalize the concrete and steel industries of his country to meet home building and infrastructure goals.<ref>Venezuela Seizes Cemex - Forbes.com</ref>
  • 2009 On February 28, 2009, Hugo Chavez ordered the army to take over all rice processing and packaging plants.<ref>Template:Cite news</ref>
  • 2010 On January 20, 2010, Hugo Chavez signed an ordinance to nationalize six supermarkets in Venezuela under the system of retail stores of a French company because of increasing price and speculation hoarding illicit.<ref>Venezuela quốc hữu hóa 6 siêu thị ngoại quốc Template:Vi</ref>
  • 2010 On June 24, 2010, Venezuela announced the intention to nationalize oil drilling rigs belonging to the U.S. company Helmerich & Payne.<ref>Template:Cite news</ref>

Zimbabwe

  • Zimbabwe has nationalized its food distribution infrastructure.

Other countries

See also

References

Template:Reflist

Bibliography

On banks nationalization





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