Nationalization

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Nationalization or nationalisation is the act of taking assets into public ownership/state ownership. Usually it refers to private assets being nationalized, but sometimes it may be assets owned by other levels of government, such as municipalities. Similarly, the opposite of nationalization is usually privatization, but sometimes it may be municipalization. Nationalization that happens after a previous privatization is often called renationalization. Nationalizations are distinguished from property redistributions in that in the former case, the government retains control of the property after acquisition.

A key issue in nationalization is whether the private owner is properly compensated for the value of the institution. The most controversial nationalizations are those where no compensation or an amount unreasonably below the likely market value of the nationalized assets is paid, and are known as expropriations. Many nationalizations through expropriation have come after revolutions.

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[edit] Opposing views

Individualists and libertarians soundly reject government asset-seizures outright on ethical grounds, observing that governments cannot legitimately be bestowed rights, by individuals, which are not innate to individuals (i.e., since no individual has a "right to steal", no government can legitimately coerce transfers of property; and "nationalization" consequently is just a euphemism for stealing).

The traditional Western view as to the question of compensation has been that declared by former US Secretary of State Cordell Hull, in the event of the 1938 Mexican nationalizations, that compensation should be made "prompt, effective and adequate", meaning that the nationalizing state had an obligation under international law to pay the deprived party the full value of the property taken. Opposing views as regards to this has been taken mainly by developing countries, claiming that the question of compensation was a question solely up to the sovereign state to decide upon, in line with the Calvo doctrine. Communist states have held that no compensation is due, based on communist notions of private property. In 1962, the UN General Assembly adopted Resolution 1803 on Permanent Sovereignty over National Resources, which states that in the event of nationalisation, the owner "shall be paid appropriate compensation in accordance with international law". This clearly establishes that at least some compensation is due, and further that the question is a matter of international law, thus denouncing both the traditional Calvo-doctrinist view, and the communist view. The amount to be paid is "appropriate" compensation, the wording representing a compromise between the traditional views, taking into account both developing countries' interests in being able to undertake reforms without being prevented from this due to lack of money for compensation, and the classical Western interests in protection of private property. The solution, then, as to the amount of compensation due, is that this will have to be assessed on a case-to-case basis in order to establish what is appropriate.

In some instances, nationalization occurs as the government seizes the corporate property of a criminal. An example is Renault, which was seized by the French government from its owners because they had collaborated with Nazi Germany.

The cost of legally buying a large business is such that many legal nationalizations have happened when firms of national importance run into trouble (close to bankruptcy), and could be acquired by the government for little or no money. A classic example is the UK nationalization in the 1970s of the car-maker British Leyland although in the case of BL the government had to invest money to keep it running and providing employment. At other times governments have felt it important to gain control of institutions and industries of strategic economic importance, such as banks or railways, or of important industries struggling economically. The case of Rolls-Royce, 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 government has seen the advantage of keeping key strategic assets in institutions that are not strongly profit driven, can raise funds outside the public-sector constraints, but 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.

[edit] Notable nationalizations by country

[edit] Canada

Canadian National Railways, created from several systems nation-wide following their bankruptcy during and after the First World War, and since privatized. Nationalization of electricity in the Province of Quebec, by the Lesage government, to create Hydro-Quebec.

[edit] India

[edit] Russia & Soviet Union

Soviet Union 1918-92
Russian Federation - President Vladimir Putin 31 December 1999-
  • Gazprom 1998 State began seizing Gazprom assets claiming that the company owed back taxes, from 2004 reversal of privatisation of Gazprom which had been reduced to 38.37% in the mid 1990's with the intention having been full privatisation, the stake has since been increased to 50% with Vladimir Putin's plan being to increase the stake to 100%, Gazprom is also buying up both Russian and other international Utility companies.

[edit] United Kingdom

The following companies were created following the nationalization of one or more companies in the given year:

Conservative Government
  • 1875 Suez Canal Company - The Egyptian share in the company was bought out by the British Government.
National Government 1915-22
  • 1916 Nationalisation of pubs and breweries in Carlisle, apparently as a means of restricting consumption of alcohol by workers in armaments factories, they remained nationalised for decades.[1]
Conservative Government 1924-29
National Governments 1931-45
Labour Governments 1945-51
Labour Governments 1964-70
Conservative Government 1970-74
Labour Governments 1974-79
Labour Governments 1997-
  • 1997 Docklands Light Railway - John Prescott while trying to deflect demands that Railtrack be renationalised boasted to the 1997 Labour Party Conference that he had nationalised this (it was broadcast at the time in BBC TV coverage so there must be a citable reference to it somewhere).
  • 2001 Railtrack - although not nationalised as such the takeover by Network Rail of the railway infrastructure in 2002 following the liquidation of Railtrack, which although not a state owned company has no shareholders and is underwritten by the State. In addition prior to this the government began to make use of a residual shareholding of 0.2% (including voting rights) in Railtrack Group Plc leftover from the original sale. [4]
British Assets nationalised by other countries
  • 1950s British Petroleums Iranian assets by their government (actually a nationalisation of part of a nationalised company), in addition the Egyptian Government nationalised the Suez Canal in 1956 which was owned by the Suez Canal Company which was part owned by the British State.

Most of the nationalizations took place under Labour governments and many of the major nationalised industries were privatized in whole or part from 1979 to 1997 under Conservative governments with the process continuing although slowing under the Labour Government since 1997. Although technically not nationalisations the Conservative Government from 1979-97 did create Channel 4 a publicly owned broadcaster in the UK, in 1982 and it has been argued (notably by Tony Benn) that The National Lottery created in 1994 is effectively a form of nationalised gambling.

[edit] United States

All United States railroads were nationalized as the United States Railroad Administration during World War I as a wartime measure but were returned to their private owners almost immediately after the war. The National Railroad Passenger Corporation (Amtrak) was a government corporation created in 1971 for the express purpose of relieving American railroads of their legal obligation to provide intercity passenger service. They were trying to get out of this obligation anyway, but by taking over their passenger rail assets, Amtrak was able to keep the passenger trains running. In 1976 the Consolidated Rail Corporation (Conrail), another government corporation, was created to take over the operations of six bankrupt rail lines operating primarily in the Northeast U.S.; Conrail was privatized in 1987. Initial plans for Conrail would have made it a truly nationalized system like that during World War I, but an alternate proposal by the Association of American Railroads won out. Organization of the Tennessee Valley Authority entailed the nationalization of the facilities of the former Tennessee Electric Power Company in 1939. In 2001, in response to the September 11th attacks, the then-private airport security industry was nationalized and put under the authority of the Transportation Security Administration.

[edit] Other Countries

[edit] The CIA and Oil Nationalization

The CIA was responsible in the overthrow of Iran's Premier Mohammed Mossadegh after he nationalized the Angolo-Iranian Oil Company.The coup was known as Operation Ajax and it involved engineering mass protests against Mossadegh which led to his arrest.

Hugo Chavez of Venezuela attempted to nationalize Venezuela's oil early in his presidency but his plans were aborted after a failed 2002 coup. Hugo Chavez blamed the CIA in orchestrating the 2002 coup just as the CIA had done against Mohammed Mossadegh. [5][6]

[edit] See also

cs:Znárodnění de:Verstaatlichung es:Estatización fr:Nationalisation id:Nasionalisasi he:הלאמה lt:Nacionalizacija nl:Nationalisering no:Nasjonalisering nn:Nasjonalisering pl:Nacjonalizacja pt:Nacionalização ro:Naţionalizare ru:Национализация fi:Kansallistaminen sv:Förstatligande uk:Націоналізація zh:國有化

Nationalization

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