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Nationalization ( nationalisation in British English) is the process of transforming privately owned into public assets by bringing them under the State ownership of a Government or state. Nationalization contrasts with privatization and with demutualization. When previously nationalized assets are privatized and subsequently returned to public ownership at a later stage, they are said to have undergone renationalization (or deprivatization). Industries often subject to nationalization include telephones, electric power, fossil fuels, railway company, , iron ore, state media, mail, , and Water industry (sometimes called the commanding heights of the economy), and in many jurisdictions such entities have no history of private ownership.
Nationalization may occur with or without financial compensation to the former . 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-maker Renault because its owners had collaborated with the 1940–1944 Nazi occupiers of France.
Economists distinguish between nationalization and socialization, which refers to the process of restructuring the economic framework, organizational structure, and institutions of an economy on a socialist basis. By contrast, nationalization does not necessarily imply social ownership and the restructuring of the economic system. Historically, states have carried out nationalizations for various different purposes under a wide variety of different and .
Although sometimes undertaken as part of a strategy to build socialism, more commonly nationalization was also undertaken and used to protect and develop industries perceived as being vital to a nation's competitiveness (such as aerospace and shipbuilding), or to protect jobs in certain industries.
Nationalization has had varying levels of support throughout history. After the Second World War, nationalization was supported by social democratic and democratic socialist parties in Western Europe, Australia, and New Zealand. In the United States, potentially nationalizing healthcare is often a topic of political disagreement and makes frequent appearances in debates between political candidates. A 2020 poll shows that a majority (63%) of Americans support a nationalized healthcare system.
A re-nationalization occurs when state-owned assets are privatized and later nationalized again, often when a different political party or faction is in power. A re-nationalization 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 public company.
According to research by Paasha Mahdavi, leaders who consider nationalization face a dilemma: "nationalize and reap immediate gains while risking future prosperity, or maintain private operations, thereby passing on revenue windfalls but securing long-term fiscal streams." He argues that leaders "nationalize extractive resources to extend the duration of their power" by using "this increased capital to secure political support."
Nationalization may produce other effects, such as reducing competition in the marketplace, which in turn reduces incentives to innovation and maintains high prices. In the short run, nationalization can provide a larger revenue stream for government but may cause that industry to falter depending on the motivations of the nationalizing party.
Nationalization was employed by the Panamanian Government towards the Panama Canal, which came under the Panama Canal Authority in 1999 to internationally positive effect. Likewise, the Suez Canal was nationalized multiple times throughout history. In Germany, the Bundesdruckerei Bundesdruckerei was nationalized in 2008 with positive revenue and net income since.
Due to political risks that are involved when countries engage in international business, it is important to understand the expropriation risks and laws within each of the countries in which business is conducted in order to understand the risks as an investor in that country.Flynn, Chris. Avoiding Expropriation and Managing Political Risk in Emerging Market. Lexology. p. 1.
However, nationalization is not a specifically socialist strategy, and Marxism's founders were skeptical of its value. As Engels put it:
Nikolai Bukharin also criticised the term nationalisation, preferring the term statisation instead. Economy of transition period, Chapter Seven 'The latter term, indeed, certainly is not perfect. First, it mixes "nation" ("whole") with the state, i.e. the ruling class. Second, it has shade of national states epoch. We keep it because it is absolutely rooted, though there are no logical grounds for its existence.'
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