What is Nationalization Why choose Types and Consequences


Nationalization or nationalizing  is a term that we constantly hear, although we are unaware of what it consists of, how it works, or what it implies to make this decision.

Nationalization, in general terms, means the  forced acquisition of a company or private property by the State . In reality, nationalizing is nothing more than a  measure of a  political- economic nature  that countries can exercise through their state sovereignty. As a result, it implies that the State becomes the administrator of a  company ,  a group of assets or land  that previously had a private nature. Acquisition usually occurs in a forced manner.

Specifically, they can be transferred:

  • Property ownership, usually real estate.
  • Companies, both national and international. In the case of companies with foreign capital, the nationalization of the specific sector that is located in Spanish territory would take place (for example, a factory that has different plants throughout Europe and one of them, the one located in Spain, may be subject to nationalization Think of a car factory, based in Germany, but whose Spanish plant needs expropriation from the Spanish State).
  • Production factors.
  • Industrial properties.
  • Water matter: swamps, transfers.
  • Infrastructure sector: aqueducts, underground passages.
  • Health sector: private clinics, consultations.
  • Energy sector (light, gas).

In these cases,  the transfer of power from the owners to the State occurs and is supported by law . The goods or company acquired become part of the wealth of the nation and leave private property, becoming under the control of the Government in question. The legal techniques or businesses that are carried out are usually the  sale, expropriation or confiscation .

The State usually offers a consideration to the other party in payment of the operation, normally in the form of  State bonds , although it is not mandatory.

On the opposite side, there is privatization: the parties involved are the same, these are the State and a company (generally) whose owner is private or individual. However, they take diametrically opposite directions:  privatization is configured as the opposite process  and implies the sale of a company that until then was state-owned to the private sector.

Why choose to nationalize?

The general reasons why a government opts for the nationalization of private assets may be different depending on the context and may even follow political strategies. However, the main ones can be:

  • State security reasons.
  • Economic plans.
  • Help companies with solvency problems.

Types of nationalization

Nationalization can be:

  • Of companies : transforms a private company into a state company. If the State decides to intervene in a company, it can do so in two ways:
    • Direct intervention: assumes ownership and passes directly to its ownership.
    • Indirect intervention: without assuming ownership, but managing their interests and ordering their administration.
  • Of activities and services : the Public Administration considers that a certain activity has such a public character that it considers that its exclusive property should be reserved. However, the phenomenon of  concessions can occur here;  the State delegates the carrying out and development of said activity to a third party, without losing the state character.

Consequences of nationalizing goods or services

  • It supposes to the State a  greater control  on the most elementary aspects of the life in the country. Think of the nationalization of services such as light or electricity, and the  monopoly  that exists over them.
  • It can undermine the ability of private sector entrepreneurs to conduct their business. In fact, in the business and commercial sector, nationalization is understood as a threat because they consider that the State is intervening in their commercial relations and is depriving them of future investments or stagnating their businesses.
  • The Government guarantees the protection of national interests  and, in the event of the nationalization of a service, its correct distribution and use for all in favor of collective equality.
  • It implies  movements in the labor sector , both of state officials and of workers in the common regime of the company that becomes state-owned: workforce restructuring, new regimes and hiring… so it will be necessary to be very exhaustive and opt for the common welfare.
  • It implies the State‘s response to all citizens, as a common and unified entity, positioning itself as guarantor.
  • It supposes a  protection to the enterprise sector  and can avoid the bankruptcy of these.
  • It is a  mechanism against inflation .
  • It implies higher  income for the State , although certain sectors of the private economy see in this sense a window open to corruption and improper income in public coffers to the detriment of the free development of private commerce.

Understanding nationalization as a protection system or as a control system will depend on the Government’s policy, the ideology of each citizen and your own point of view; What is certain is that nationalization is a very current and recurring action and, through this article, you already have the basic notions so that you can form your own conclusion.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *


Back to top button