What is Nationalization?

Nationalization occurs when a national government or state takes ownership of a private industry or private assets.

Although the term typically refers to private assets it can also refer to assets owned by low levels of government (local government).

Industries that are most commonly nationalized include: banking, natural resources, energy, communications, and transport.

Nationalizing big industries was one of the main beliefs that reformist socialists advocated to transition from capitalism to socialism (an ideology called state socialism). In today’s definition, capitalism refers to capital (means of production) being owned privately.

Nationalization reasonsNationalizations can occur either because a socialist government decides that the state should own certain companies, or to save strategic collapsing businesses, as happened with many banks during the 2008 financial crisis.

In state socialism, governments dispossess large capitalists in an attempt to drive profits to the public.

Nationalization is currently common in developing countries that experience frequent leadership and regime changes. In this context, nationalization is a way for politicians to gain more economic power.



 

Privatization is the opposite of nationalization and is the process of spinning off government-owned companies into the private business sector.

In the United States nationalization is quite rare. The last time the United States nationalized an industry was following the September 11th national disaster in 2001, when the government took over and controlled airport security.

There are some people who argue that the US government takeover of failing companies, such as GM and AIG, is nationalization. However, although the US did bailout these companies, the government exerts little to no control over them.