Nationalisation

• Nationalization


  The process of taking an industry into public ownership, where the government buys up assets or industry from the private sector and runs the services themselves
• Nationalization


  • The industry is completely in the hands of the public sector/government
• Arguments in favor of nationalization

  • Greater potential for economies of scale
  • Public sector focus on service provision and maximizing social welfare
  • Less likely to have market failures from positive/negative externalities
  • Allows for macroeconomic control of wages and employment
• Arguments against nationalization


  • Risk of diseconomies of scale
  • Lack of incentive to minimize costs and avoid complacency/waste
  • Lower supernormal profits and less dynamic efficiency
  • Expensive for taxpayers
  • Lack of competition leading to higher prices
  • Greater risk of moral hazard
  • Political priorities overriding commercial issues
• Public-private partnerships (PPPs)


  Can combine benefits of private sector efficiency and public sector service provision
• Strong regulation of private sector


  May be better than full nationalization if there is sufficient competition
• Objectives of private firms vary - not all are pure profit maximizers
• Need to consider size of firms and economies of scale when evaluating nationalization