Nationalization – Definition

Cite this article as:"Nationalization – Definition," in The Business Professor, updated July 31, 2019, last accessed October 29, 2020, https://thebusinessprofessor.com/lesson/nationalization-definition/.

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Nationalization Definition

When a company or an industry which was formerly privately owned is taken over by the government, nationalization has taken place. Nationalization can be described as a process of changing private companies, industries and assets into public properties. In this situation, the government takes control of a private company with or without paying any compensation to the private owners.

A number of reasons give rise to nationalization, this includes prevention of labor layoffs, especially in large scale, prevention of exploitation and foreign takeovers, among others.

A Little More on What is Nationalization

Certain countries resolve to nationalization in a bid to savage industries that are significant to the economy. This happens when the government takes control of an industry to save it from being owned by foreigners. In most cases, developing countries witness nationalization more while industries in developed economies undergo privatization.

The government of a country can take ownership of a firm or industry, with or without compensation and this is a risk to private businesses. Nationalization benefits the economy unlike privatization that benefits private owners more.

Nationalization and Oil

Nationalization is not restricted to any specific company or industry, this means any industry can be taken over by the government with or without compensation. One of the major industries that has been nationalized overtime is the oil industry.

The most common instances of nationalization of the oil industry was in 1938 when the Mexican government took over the assets of Royal Dutch and Standard Oil. Also, the Iranian government nationalized the assets of Anglo-Iranian in 1951. The most recent nationalization was that of Exxon Mobil’s Cerro Negro in 2007.

Nationalization in the United States

Nationalization of companies and industries is not a strange concept in the United States. Nationalization in the US often take the form of bailouts in which the government controls the companies but in a mild way. Government control of the companies is minimal. Common examples of companies nationalized in the United States include; Continental Illinois Bank and Trust in 1982, General Motors Company in 2009 among others. Nationalization is used as a means to savage failing companies in the United States.

References for “Nationalization

 

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