Nationalised industries
Yvonne Harvey, Contributor

Yes friends, I'm here again. I trust that your holiday was quiet and rewarding and that you were able to do some measure of school work.

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

Light and power industries in most Caribbean countries are presently nationalised or have been nationalised at some point in time. In many cases water supplies, airline industries, and railway industries are also nationalised. Please note, however, that some industries are nationalised in one Caribbean country and not in another.

Countries that have a more controlled economy tend to also have more nationalised industries. Many nationalised industries were formerly public utility companies. A nationalised industry does not have shareholders like the private and public company or the cooperative.

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 a loss. However, they will no longer have a say in how the business is run, since ownership and control is now in the 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 example, 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. Multinationals are an example of this.

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.

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, the latter, such as nationalised industries create more employment.

Employment also tends to be more secure than within the private sector.

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.

'economies of scale'

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

7. Nationalisation makes standardisation possible. Standardised output is usually more uniform 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 in this area.

Keep safe until then. See you next week.

These students do needlework during a clothing and textile class at Ascot High School, recently. - Anthony Minott/Freelance Photographer

Yvonne Harvey teaches at Glenmuir High School.