Nationalization

Nationalization or Nationalisation is the act of taking assets into 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.

Related Topics:
State ownership - Municipalities - Privatization - Municipalization

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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 is paid or an amount unreasonably below the likely market rate (expropriation). Many nationalizations through expropriation have come after revolutions, especially communist ones.

Related Topics:
Expropriation - Revolution - Communist

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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.

Related Topics:
Renault - French - Nazi Germany

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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. 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 plc, nationalised in 1971, is an interesting blend of these two arguments - see below). 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.

Related Topics:
Bankruptcy - UK - 1970s - British Leyland - Rolls Royce plc - 1980s - 1990s

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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. Recent UK examples include the vesting of the UK rail track in a not-for profit company, and the divestment of much council housing stock to 'arms-length management companies', often with mutual status.

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