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Nationalization

Definition

Nationalization is the process of transforming private assets into public assets by bringing them under the public ownership of a national government or state. 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 by a later government, they are said to have undergone renationalization. Industries that are usually subject to nationalization include transport, communications, energy, banking and natural resources.

What is 'Nationalization'

Nationalization refers to the process of a government taking control of a company or industry, which generally occurs without compensation for the loss of the net worth of seized assets and potential income. The action may be the result of a nation's attempt to consolidate power, resentment of foreign ownership of industries representing significant importance to local economies or to prop up failing industries.

Explaining 'Nationalization'

Nationalization is more common in developing countries. Privatization, which is the transfer of government-run operations into the private business sector, occurs more frequently in developed countries.

Nationalization and Oil

The oil industry has experienced nationalization actions for decades, dating back to Mexico’s nationalization of the assets of foreign producers such as Royal Dutch and Standard Oil in 1938 and Iran's nationalization of the assets of Anglo-Iranian 1951. The result of Mexico's nationalization of foreigners’ oil assets was the creation of PEMEX, which is one of the largest oil producers in the world. After the nationalization of Anglo-Iranian, Iran's economy fell into disarray and Britain was allowed back in as a 50% partner a few years later. In 1954, Anglo-Iranian was renamed the British Petroleum Company.

Nationalization in the United States

The United States has technically nationalized several companies, usually in the form of a bailout in which the government owns a controlling interest. The bailouts of AIG in 2008 and General Motors Company in 2009 amounted to nationalization, but the U.S. government exerted very little control over these companies. The government also nationalized the failing Continental Illinois Bank and Trust in 1982, finally selling it to Bank of America in 1994.

Nationalization FAQ

What does it mean to nationalize something?

Nationalization is about the move of the government in taking control of an organization or industry, which for the most part happens without pay for the loss of the total assets' net worth nor its potential income

Why is nationalization bad?

Nationalization is considered bad because it is usually followed up by Expropriation (Theft), i.e. instead of the government paying full Fair Market Value for the company involved, Companies with good ideas make more money and pivot, while companies with bad ideas lose money and decline.

What is the difference between Privatisation and Nationalisation?

Privatization is the process by which a government-owned business or a publicly-owned business is transferred into private ownership. Nationalization is simply the process by which privately-owned business is transferred into government or public ownership.

What is an example of nationalization?

Nationalization usually refers to private assets or to assets owned by lower levels of government (such as municipalities) being transferred to the state. ... For example, in 1945 the French government seized the car-maker Renault because its owners had collaborated with the Nazi occupiers of France.

What does nationalization business mean?

Nationalization is about the move of the government in taking control of an organization or industry, which for the most part happens without pay for the loss of the total assets' net worth nor its potential income

What is Nationalisation and Privatisation?

Privatization is the process by which a government-owned business or a publicly-owned business is transferred into private ownership. Nationalization is simply the process by which privately-owned business is transferred into government or public ownership.

Why is Nationalisation important?

Arguments for Nationalisation include A private natural monopoly could easily exploit its monopoly power and set higher prices to consumers. Government ownership of a natural monopoly prevents this exploitation of monopoly power. If industry demand is 10,000 – then the most efficient number of firms is one.

Further Reading


Bank nationalization, financial savings, and economic development: a case study of India
www.jstor.org [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

Explaining hydrocarbon nationalization in Latin America: Economics and political ideologyExplaining hydrocarbon nationalization in Latin America: Economics and political ideology
www.tandfonline.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

Nationalization, privatization, and the allocation of financial property rightsNationalization, privatization, and the allocation of financial property rights
link.springer.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

Bank Nationalization, Restructuring and Reprivatization: The Case of Korea since the Asian Financial CrisisBank Nationalization, Restructuring and Reprivatization: The Case of Korea since the Asian Financial Crisis
papers.ssrn.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

From privatization to re-nationalization: what went wrong with privatizations in Argentina?From privatization to re-nationalization: what went wrong with privatizations in Argentina?
www.tandfonline.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

Finance and politics: special interest group influence during the nationalization and privatization of ConrailFinance and politics: special interest group influence during the nationalization and privatization of Conrail
papers.ssrn.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

Is Hollywood America? The trans‐nationalization of the American film industryIs Hollywood America? The trans‐nationalization of the American film industry
nca.tandfonline.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

The political economy of corporate finance: evidence from 're-nationalization'in ChinaThe political economy of corporate finance: evidence from 're-nationalization'in China
papers.ssrn.com [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …

The International Political Economy of Bank Nationalization: Mexico in Comparative PerspectiveThe International Political Economy of Bank Nationalization: Mexico in Comparative Perspective
www.jstor.org [PDF]
The Indian government nationalized the commercial banking system in July 1969 in the belief that it would give the Reserve Bank of India (RBI) more effective control over the activities of commercial banks. Initially, 14 major banks were brought unde direct state …



FAQ


What does it mean to nationalize something?

Nationalization is about the move of the government in taking control of an organization or industry, which for the most part happens without pay for the loss of the total assets' net worth nor its potential income

Why is nationalization bad?

Nationalization is considered bad because it is usually followed up by Expropriation (Theft), i.e. instead of the government paying full Fair Market Value for the company involved, Companies with good ideas make more money and pivot, while companies with bad ideas lose money and decline.

What is the difference between Privatisation and Nationalisation?

Privatization is the process by which a government-owned business or a publicly-owned business is transferred into private ownership. Nationalization is simply the process by which privately-owned business is transferred into government or public ownership.

What is an example of nationalization?

Nationalization usually refers to private assets or to assets owned by lower levels of government (such as municipalities) being transferred to the state. ... For example, in 1945 the French government seized the car-maker Renault because its owners had collaborated with the Nazi occupiers of France.

What does nationalization business mean?

Nationalization is about the move of the government in taking control of an organization or industry, which for the most part happens without pay for the loss of the total assets' net worth nor its potential income

What is Nationalisation and Privatisation?

Privatization is the process by which a government-owned business or a publicly-owned business is transferred into private ownership. Nationalization is simply the process by which privately-owned business is transferred into government or public ownership.

Why is Nationalisation important?

Arguments for Nationalisation include A private natural monopoly could easily exploit its monopoly power and set higher prices to consumers. Government ownership of a natural monopoly prevents this exploitation of monopoly power. If industry demand is 10,000 – then the most efficient number of firms is one.

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