Public sector businesses - Part 3
Yvonne Harvey, Contributor

Juan Carlos Espinola (left), United Nations Development Programme resident representative, is in discussion with Dr. Donald Rhodd (right) in the presence of St. Jago High School students during the launch of the Duke of Edinburgh's award for secondary and tertiary institutions. The ceremony was held at the Jamaica Pegasus hotel in St. Andrew recently. - Norman Grindley/Deputy Chief Photographer

Nationalised industries 1

Yes friends, I'm here again. This week, we will begin our coverage of nationalised industries as we continue our analysis of public sector businesses. Nationalised industries refer to businesses (firms or industries) that were once in the hands of the private sector, but have now been taken over by the state or Government.

Firms or industries that are nationalised are usually those that are seen as beneficial to the country, but can no longer be run efficiently by the private owners. In some instances, the private sector offers the good or service, but the price that consumers are required to pay is considered by government to be too high. Thus, Government nationalises or takes over the business from private hands.

Light and power industries in most Caribbean countries are nationalised or have been nationalised at some point in time. In many cases also, water supplies, airline industries, and railway industries are nationalised. Please note however, that some industries are nationalised in one Caribbean country and not in another. Also, countries that have a more controlled economy tend to have more nationalised industries. Many nationalised industries were formerly public utility companies.

A nationalised industry does not have shareholders as private and public companies or cooperatives do. When an industry is nationalised, shareholders are given government stock in return for their shares. They will receive interest on this stock whether the industry makes a profit or loss. However, they will no longer have a say in how the business is run, since ownership and control are now in Government's hands.

Why nationalise?

1. Nationalisation often occurs when private owners do not have the capital required to provide the essential good or service efficiently and cheaply to consumers. For e.g., the capital outlay required for the airline and railway industries is quite significant and not many private investors can or are willing to come up with such amounts. Many governments have therefore, injected large sums of money into industries that have been nationalised.

2. Many private sector businesses are owned by foreigners who repatriate the profits. For example, multinationals. When nationalisation occurs, ownership, control and profits remain in the region. Profits are thus transferred from private individuals to the wider community. This often leads to regional economic development, which is a plus for the region.

3. Through nationalisation, private monopolies are prevented or are broken up if they exist. These private monopolies often restrict quantity and cause prices to rise substantially.

Private monopolies only benefit the few monopolist owners, while nationalisation benefits the society at large.

4. While both private and public sector businesses employ persons to work for them, public sector businesses such as nationalised industries creates more employment for persons. Also the employment tends to be more secure than private sector employment.

5.Private sector businesses in general are not willing to expand for the benefit of society. Therefore, expansion comes with the realisation of increased profits. The state on the other hand considers social welfare and hence will move for nationalisation.

6. With nationalisation, governments may be able to reap 'economies of scale'. These economies or advantages of large scale production can be passed on to consumers in many forms, including lower prices.

7. Nationalisation makes standardisation possible. Standardised output is usually more uniformed and efficient.

8. There are some industries that provide essential goods and services and would be better owned and managed by the state or Government.

9. Governments nationalise in order to revive or revitalise a declining industry. They do this by 'pumping' new investment into the industry.

This is where we will stop for today. Next week, we will complete nationalised industries and consider a question.

Yvonne Harvey teaches at Glenmuir High School.