Nationalization

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Nationalization (British English: nationalisation) is the act of transferring assets into public ownership. It usually refers to the transfer of private assets, but may also mean assets owned by other levels of government, such as municipalities. The opposite of nationalization is usually privatization, but may also be municipalization. A renationalization occurs when assets are nationalized after a previous privatization. Nationalizations are distinguished from property redistributions in that in the former case, the government retains control of the property after acquisition.

Some nationalizations take place when a government seizes criminal property. For example, the French government seized Renault because its owners had collaborated with Nazi Germany.

Contents 1 Compensation 2 Notable nationalizations by country 2.1 Canada 2.2 India 2.3 Russia and the Soviet Union 2.3.1 Soviet Union (1918-1992) 2.3.2 Russia 2.4 United Kingdom 2.4.1 British Assets nationalised by other countries 2.5 United States 2.6 Other countries 3 See also 4 Footnotes

[edit] Compensation

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 or an amount unreasonably below the likely market value of the nationalized assets is paid, and are known as expropriations. Many nationalizations through expropriation have come after revolutions.

The traditional Western stance on compensation was expressed by United States Secretary of State Cordell Hull, during the 1938 Mexican nationalization of the petroleum industry, that compensation should be "prompt, effective and adequate." According to this view, the nationalizing state is obligated under international law to pay the deprived party the full value of the property taken. 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. Socailist states have held that no compensation is due, based on socialist notions of private property.

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 both 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.

When nationalizing a large business, the cost of compensation is so great that many legal nationalizations have happened when firms of national importance run close to bankruptcy and can be acquired by the government for little or no money. A classic example is the UK nationalization of the British Leyland Motor Corporation. At other times, governments have considered it important to gain control of institutions of strategic economic importance, such as banks or railways, or of important industries struggling economically. The case of Rolls-Royce plc, nationalized in 1971, is an interesting blend of these two arguments. 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.

Nonetheless, national and local governments have seen the advantage of keeping key strategic assets in institutions that are not strongly profit-driven and can raise funds outside the public-sector constraints, but still retain some public accountability. Examples from the last five years in the United Kingdom include the vesting of the British railway infrastructure firm Railtrack in the not-for-profit company Network Rail, and the divestment of much council housing stock to "arms-length management companies," often with mutual status.

[edit] Notable nationalizations by country

[edit] Canada

• 1918 Canadian National Railways, created from several systems nationwide following their bankruptcy during and after World War I, and since privatized.
• 1944 Hydro-Québec, nationalized electricity concerns in Quebec by the Lesage government.

[edit] India

1 Jan. 1949 Reserve Bank of India nationalised (Ref.- Reserve Bank of India cronology of events)The Reserve Bank of India was state-owned at the time of Indian independence.

• 1953 Air India under the Air Corporations Act 1953.
• 1969 Nationalization of 14 Indian banks.

[edit] Russia and the Soviet Union

[edit] Soviet Union (1918-1992)

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• 1918, 1948 All manufacturing enterprises in the Soviet Union, in 1918, as well as in other countries of the Eastern bloc (for example, Czechoslovakia in 1948).
• 1918 Many retailing enterprises.

[edit] Russia

• 1998 State began seizing Gazprom assets. claiming that the company owed back taxes, from 2004 reversal of privatization of Gazprom which had been reduced to 38.37% in the mid 1990's with the intention having been full privatization, the stake has since been increased to 50% with Vladimir Putin's plan being to increase the stake to 100%, Gazprom is also buying up both Russian and other international Utility companies.

[edit] United Kingdom

The following companies were created following the nationalization of one or more companies in the given year:

• 1875 Suez Canal Company - The Egyptian share in the company was bought out by the British Government.
• 1916 Nationalisation of pubs and breweries in Carlisle, apparently as a means of restricting alcohol consumption by armaments factory workers. They remained nationalized for decades.[1]
• 1926 Central Electricity Board introduced under The Electricity (Supply) Act 1926 founded National Grid UK and set up a national standard for electricity supply in the UK.
• 1927 British Broadcasting Company (a privately owned company) became British Broadcasting Corporation (BBC), a public corporation operating under a Royal Charter.
• 1933 London Transport
• 1938 Nationalisation of UK Coal Royalties [2]
• 1939 BOAC later to become British Airways (BA) - combining the private British Airways Ltd. and the state owned Imperial Airways
• 1946 British Coal, Bank of England - had had private shareholders who were bought out by the state.
• 1947 Central Electricity Generating Board, Cable & Wireless was nationalised and became part of the GPO
• 1948 National rail, water transport, some road haulage, passenger transport and Thomas Cook & Son under the British Transport Commission. Separate elements operated as British Railways, British Road Services, and British Waterways, also National Health Service taking over a mixture of previously Local Authority, private commercial and charitable organisations.
• 1949 British Gas
• 1951 Iron and Steel Industry (denationalised by the following Conservative Government) [3]
• 1967 British Steel
• 1971 Rolls-Royce (1971) Ltd - The strategically-important aero-engine part of the recently-bankrupt Rolls Royce Limited.
• 1973 Water companies of England and Wales
• 1976 British Leyland Motor Corporation - became British Leyland upon nationalization
• 1977 British Aerospace - combining the major aircraft companies British Aircraft Corporation, Hawker Siddeley and others. British Shipbuilders - combining the major shipbuilding companies including Cammell Laird, Govan Shipbuilders, Swan Hunter, Yarrow Shipbuilders
• 1997 Docklands Light Railway - John Prescott while trying to deflect demands that Railtrack be renationalised boasted to the 1997 Labour Party Conference that he had nationalised this (it was broadcast at the time in BBC TV coverage so there must be a citable reference to it somewhere).
• 2001 Railtrack - although not nationalised as such the takeover by Network Rail of the railway infrastructure in 2002 following the liquidation of Railtrack, which although not a state owned company has no shareholders and is underwritten by the State. In addition prior to this the government began to make use of a residual shareholding of 0.2% (including voting rights) in Railtrack Group Plc leftover from the original sale. [4]

[edit] British Assets nationalised by other countries

• 1950s British Petroleum's Iranian assets by their government (actually a nationalisation of part of a part-nationalised company), in addition the Egyptian Government nationalised the Suez Canal in 1956 which was owned by the Suez Canal Company which was part owned by the British State.

[edit] United States

• All United States railroads were nationalized as the United States Railroad Administration during World War I as a wartime measure but were returned to their private owners almost immediately after the war. The National Railroad Passenger Corporation (Amtrak) was a government-owned corporation created in 1971 for the express purpose of relieving American railroads of their legal obligation to provide inter-city rail service. They were trying to get out of this obligation anyway, but by taking over their passenger rail assets, Amtrak was able to keep the passenger trains running. In 1976 the Consolidated Rail Corporation (Conrail), another government corporation, was created to take over the operations of six bankrupt rail lines operating primarily in the Northeastern United States; 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.
• Organization of the Tennessee Valley Authority entailed the nationalization of the facilities of the former Tennessee Electric Power Company in 1939.
• In 2001, in response to the September 11th attacks, the then-private airport security industry was nationalized^{[citation needed]} and put under the authority of the Transportation Security Administration.

[edit] Other countries

• Philippines - During the administration of Ferdinand Marcos, important companies such as PLDT, Philippine Airlines, Meralco and the Manila Hotel were nationalized. Other companies were sometimes absorbed into these government-owned corporations, as well as other companies, such as Napocor and the Philippine National Railways, which in their own right are monopolies (exceptions are Meralco and the Manila Hotel). Today, these companies have been reprivatized and some, such as PLDT and Philippine Airlines, have been de-monopolized. Others, like government-formed and owned Napocor, are in the process of privatization.
• Nationalization of the oil industry in numerous countries, including Libya, Kuwait, Mexico, Nigeria, Saudi Arabia, and Venezuela.
• Cuba - 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.^[1] Only a minor amount, $1.3 million, was paid to U.S. interests before deterioratng relations ended all cooperation between the two governments.^[1] 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.
• Zimbabwe's nationalization of its food distribution infrastructure.
• 1944 Renault (seized from Louis Renault after World War II for his collaboration with Nazi Germany). Renault was successful whilst nationalised and remains successful today, after having been privatized in 1996.
• 1946 USAMGIK nationalized all South Korean private railroad companies and made Department of Transportation. This now becomes Korail.
• 1947 Nationalization of Qantas, the leading airline of Australia.
• 1948 With the Decree 119 of June 1948 the new Romanian communist regime nationalised all the existing private companies and their assets in Romania leading to the transformation of the Romanian economy from a market economy to a planned economy.
• 1948 The Australian government attempted to nationalize the banks, but the act was declared unconstitutional by the High Court of Australia.
• 1953 Iranian Prime Minister Mohammed Mossadegh nationalized the Anglo-Persian Oil Company in Iran.
• 1956 On July 26, 1956 Egyptian President Gamal Abdel Nasser nationalized the Suez Canal Company company provoking the United Kingdom, France and Israel to launch a combined attack on Egypt that was stopped by the U.S. and the former Soviet Union.
• 1972 Nationalization of Olympic Airlines, main airline of Greece. The company was bought out by its founder, Aristotle Onassis.
• 1972 Chilean nationalization of copper mining industry by the government of Salvador Allende. A very important step for a small country which happens to be the biggest copper producer in the world.
• Bank of Valletta is founded following nationalisation of the National Bank of Malta
• 1982 The Paris business of M&A advisory firm Rothschild was nationalized and renamed.
• 1982 The nationalization of the Mexican banking system made by President José López Portillo, later in the Carlos Salinas de Gortari presidency (1988-1994) a large number of banks were privatized.
• 2003 The Labour Government of New Zealand took an 80% stake in national air carrier Air New Zealand in exchange for a large financial infusion.
• 2006 On May 1, 2006, newly elected Bolivian leader Evo Morales announces plans to nationalize the country's natural gas industry; foreign-based companies are given six months to renegotiate their existing contracts.

[edit] See also

• Eminent domain
• Expropriation
• Privatization
• Reprivatization
• Public ownership
• Railway nationalization

[edit] Footnotes