Nationalization (British/Commonwealth spelling nationalisation) is the process of taking a private industry or private assets into public ownership by 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 be the state. The opposite of nationalization is usually privatization or de-nationalization, but may also be municipalization. Industries that are usually subject to nationalization include transport, communications, energy, banking and natural resources.
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.
Nationalization was one of the major means advocated by reformist socialists for transitioning from capitalism to socialism. Socialist ideologies that favor nationalization are typically called state socialism. In this context, the goals of nationalization were to dispossess large capitalists and redirect the profits of industry to the public purse, as a precursor to the long-term goals of establishing worker-management and reorganizing production toward use.
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 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 nationalized status by the Constitution. The government has recognized these social obligations and, in some cases, provides subsidies for such non-commercial operations.
Since nationalized industries are state owned, the government is responsible for meeting any debts. The nationalized industries do not normally borrow from the domestic market other than for short-term borrowing. If they are profitable, the profit is often used 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. 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-makers Renault because its owners had collaborated with the Nazi occupiers of France.
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. Socialist states have held that no compensation is due, based on the view that the former owners acquired ownership through exploitation, or that private ownership over socialized assets is illegitimate and exploitative of employees.
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 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.
In the United States, the Fifth Amendment requires just compensation if private property is taken for public use.
1949Petroleum (the state oil concern, YPF, had been established in 1922; mineral resources were nationalized with Article 40 of the 1949 Constitution; the latter was abrogated in 1956, but oil was renationalized in 1958 and private firms operated afterward via leases)
Most utilities were nationally owned before being privatized in 1994.
2006 On May 1, 2006, newly elected Bolivian president Evo Morales announced plans to nationalize the country's natural gas industry; foreign-based companies were given six months to renegotiate their existing contracts.
2008 On May 1, 2008, the nationalization of Bolivia's leading telecommunications company Entel was completed, previously having been owned by Telecom Italia.
2010 On May 1, 2010, the government nationalized the country's main hydroelectric plant, thereby assuming control over most of Bolivia's electrical generation and end-user sales.
2012 On May 1, 2012, the Morales government nationalized power grid operator Transportadora de Electricidad (TDE), until then 99.94% owned by Red Eléctrica de España. TDE owns and runs 73% of the power lines in Bolivia.
On the break-up of Yugoslavia, The HDZ government nationalized private agricultural 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 reinstated and the model rethought.
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. Only a minor amount, $1.3 million, was paid to U.S. interests before deteriorating relations ended all cooperation between the two governments. 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.
Nationalization dates back to the 'regies' or state monopolies 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. A second wave followed in 1982.
1938 Société Nationale des Chemins de Fer Français (SNCF) (originally a 51% State holding, increased to 100% in 1982)
1945 Several nationalizations in France, including most important banks and Renault. 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.
1982 A large part of the banking sector and industries of strategic importance to the state, especially in electronics and communications, were nationalized under the new president François Mitterrand and the PS-led government. Many of those companies were privatized again after 1986.
The 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.
1938 The Expropriation of the Petroleum Industry: President Lázaro Cárdenas issued a decree that the petroleum companies were in rebellion against the government and under the powers granted him under the Expropriation Act passed by the Congress of Mexico in late 1936 expropriated them. March 19, 1938, union personnel took control of the properties.
2008 The 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.
2013SNS Bank is nationalized. It had been in trouble for more than a year, not able to find a private investor. On Febuari 1st 2013, Jeroen Dijselbloem (Dutch minister of Finance) declares SNS nationalized.
1972: On January 2, 1972, Prime ministerZulfiqar Ali Bhutto, after East Pakistan broke away, announced the nationalisation of all major industries, including iron and steel, heavy engineering, heavy electricals, petrochemicals, cement and public utilities except textiles industry and lands.
1974 In the years following the Carnation Revolution, the Junta de Salvação Nacional and Provisional Governments nationalized all the banking, insurance, petrol and industrial companies. Among those companies were Companhia União Fabril (CUF), the assets of the Champalimaud family and SONAE. Along with the telecommunications companies, which were state-owned even before the Revolution, many of the nationalized companies were reprivatized in the 1980s and 1990s. In the agricultural sector, according to government estimates, about 900,000 hectares (2,200,000 acres) of agricultural land were occupied between April 1974 and December 1975 in the name of land reform; about 32% of the occupations were ruled illegal. In January 1976, the government pledged to restore the illegally occupied land to its owners, and in 1977, it promulgated the Land Reform Review Law. Restoration of illegally occupied land began in 1978.
1948 With the Decree 119 of June 11, 1948, the new communist regime nationalised all private companies and their assets leading to the transformation of the economy from a market economy to a planned economy.
1950 With the Decree 92 of April 19, 1950, a huge number of private houses and lands are confiscated.
1998 The Yeltsin government began seizing Gazprom assets, claiming that the company owed back taxes. Privatization of Gazprom from the mid-1990s 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.
2013 The space industry is being renationalized. The government created a new corporation—United Rocket and Space Corporation—in August 2013 because of a string of recent rocket launch failures. According to Deputy Prime Minister Dmitry Rogozin, "The failure-prone space sector is so troubled that it needs state supervision to overcome its problems." The October 2013 plan calls for re-nationalization of the space industry, with sweeping reforms including a new unified command structure and reducing redundant capabilities.
1918 All manufacturing enterprises, many retailing enterprises, any private enterprises, the whole bank system, agrarian sector, others. Later the government of Lenin introduced the New Economic Policy that shifted the country somewhat towards market economics until the end of the revolutionary period and Stalin's acquisition of power.
The Arusha Declaration was proclaimed in 1967 by President Julius Nyerere, which aimed to achieve self-reliance through nationalising key sectors of the economy such as banks, large industries and plantations were therefore nationalised. This failed, worsening Tanzania's economic problems until foreign aid and liberalisation took effect in the 1980s and 1990s.
After the abolition of Capitulations of the Ottoman Empire by the Treaty of Lausanne (1923), foreign concessions were suppressed, rail transport, electric power generation and distribution, telephone network and other big industrial firms were nationalized by Turkish government between 1928 and 1940.
1974British Petroleum - the combination of a 50% stake bought by Winston Churchill as First Lord of the Admiralty after World War I with around a 25% stake acquired by the Bank of England from Burmah Oil made the government directly or indirectly BP's majority shareholder, though commercial independence was maintained. The shares were all sold during the 1980s.
1997Docklands Light Railway - John Prescott announced to the 1997 Labour Party Conference that he had nationalised this, although it was already in public hands anyway.
2001Railtrack - The owner and operator of the railway infrastructure, Railtrack, was not nationalised as such. However, its replacement Network Rail, whilst not a state-owned company, has no shareholders (company limited by guarantee) and is underwritten by the state. Prior to this the government began to make use of a residual shareholding of 0.2% (including voting rights) in Railtrack Group Plc left over from the original sale.
2008Northern Rock - announced by Alistair Darling, Chancellor of the Exchequer on 17 February 2008 as 'a temporary measure'. The bank will be run at 'arm's length' as a commercial business and sold to a private buyer in the future.
2008Bradford & Bingley (mortgage book only) - announced by Alistair Darling, Chancellor of the Exchequer on 29 September 2008. The loans part of the company was nationalised, while the commercial bank was sold.
2009 On 13 November, Directly Operated Railways, a government company, took over the East Coast Main Line railway franchise that National Express had bought in 2007 for £1.4 billion, a sum originally to be paid over seven years. The nationalised service operates as East Coast and includes services from London to York and Edinburgh. It has been stated by the government that their control is a temporary measure, initially to last two years.
1971: The National Railroad Passenger Corporation (Amtrak) is a government-owned corporation created in 1971 for the express purpose of relieving American railroads of their legal obligation to provide inter-city passenger rail service. The (primarily) freight railroads had petitioned to abandon passenger service repeatedly in the decades leading up to Amtrak's formation.
1976: The Consolidated Rail Corporation (Conrail) was created to take over the operations of six bankrupt rail lines operating primarily in the Northeast; 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.
2009: Some economists consider the government's actions through the Troubled Asset Relief Program with regards to Citigroup to have been a partial nationalization. Proposal was made that banks like Citigroup be brought under a conservatorship model similar to Fannie Mae and Freddie Mac, that some of their "good assets" be dropped into newly created "good bank" subsidiaries (presumably under new management), and the remaining "bad assets" be left to be managed under the supervision of a conservatorship structure. The government's actions with regard to General Motors in replacing the CEO with a government-approved CEO is likewise being considered as nationalization. On June 1, 2009, General Motors filed for bankruptcy, with the government investing up to $50 billion and taking 60% ownership in the company. President Obama stated that the nationalization was temporary, saying, "We are acting as reluctant shareholders because that is the only way to help GM succeed"
2007 On May 1, 2007, the government stripped the world's biggest oil companies of operational control over massive Orinoco Belt crude projects, a controversial component in President Hugo Chávez's nationalization drive.
2008 On April 3, 2008, Chávez ordered the nationalization of the cement industry.
2008 On April 9, 2008, Chávez 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.
2008 On August 19, 2008, Chávez 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. Chávez has been looking to nationalize the concrete and steel industries of his country to meet home building and infrastructure goals.
2009 On February 28, 2009, Chávez ordered the army to take over all rice processing and packaging plants.
2010 On January 20, 2010, Chávez signed an ordinance to nationalize six supermarkets under the system of retail stores of a French company because of increasing price and speculation hoarding illicit.
2010 On June 24, 2010, Venezuela announced the intention to nationalize oil drilling rigs belonging to the U.S. company Helmerich & Payne.
2010 On October 25, 2010, Chávez announced that the government was nationalizing two U.S.-owned Owens-Illinois glass-manufacturing plants.
2010 On October 31, 2010, Chávez said his government will take over the Sidetur steel manufacturing plant. Sidetur is owned by Vivencia, which had two mineral plants appropriated by the government in 2008.
After the Fall of Saigon in 1975, the government nationalized nearly all the property of the "landlords" and "comprador" in South Vietnam, property of the church and of the government of South Vietnam. All private enterprise was nationalized without compensation down to the street vendors, however "shadow companies" continued to operate.
^The Economics of Feasible Socialism Revisited, by Nove, Alexander. 1991. (P.176): "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."
^ abIftikhar Firdous (December 15, 2011). "Railways, Steel Mills taken off the chopping block". The Tribune Express, Iftikhar Firdous. Retrieved 31 May 2012. "In a major blow to the economic liberals in government, the federal cabinet decided against the privatisation of eight of the largest state-owned companies, including Pakistan Steel Mills"
^"Portugal". Country Studies (U.S. Library of Congress). "In the mid-1980s, agricultural productivity was half that of the levels in Greece and Spain and a quarter of the EC average. The land tenure system was polarized between two extremes: small and fragmented family farms in the north and large collective farms in the south that proved incapable of modernizing. The decollectivization of agriculture, which began in modest form in the late 1970s and accelerated in the late 1980s, promised to increase the efficiency of human and land resources in the south during the 1990s."