Reasons For Nationalisation | Advantages And Disadvantages

Hello, Welcome to another Class on Reasons for NATIONALISATION.

Table Of Contents

1. Meaning of Nationalisation
2. Reasons for Nationalisation.
3. Advantages of Nationalisation.
4. Disadvantages of Nationalisation.
5. Revision Questions

Meaning Of Nationalisation

Meaning: Nationalisation is a deliberate policy by which government takes over the control and ownership of private enterprises due to economic, political, social or strategic reasons. In other words, Nationalisation is the process by which the government takes over the ownership and management of an industry from private control by bringing it under its exclusive control. Enterprises are brought under state control and ownership as a result of economic, political, social and strategic reasons. Nationalised Industries exist to provide services; they are not profit oriented.

Reasons For Nationalisation

1. Strategic reasons: Government can take over the ownership and control of an enterprise for strategic reasons from like security, defense and political consideration.
2. To prevent exploitation: Nationalisation of enterprises can take place in order to prevent monopolistic exploitation of the citizens.
3. Political Reasons: Break in diplomatic relations between two countries can necessitate nationalisation. Political differences can encourage retaliatory measures being taken by two countries against each other, e.g, America and Iraq at the instance of the Gulf war.
4. To avoid Foreign dominance of the economy: Government can take over some companies in order to prevent dominance of the economic and foreigners.
5. Need for Large capital: For an industry to perform effectively and efficiently, it may need large capital which can only be provided by the government. Hence government may decide to take over such enterprises, e.g, RailWay.
6. To prevent wasteful competition: In order to prevent wasteful competition among companies government can come in and take over ownership and management.
7. To provide uninterrupted services: Government can take over an enterprise in order to ensure constant and uninterrupted supply of such products or services.

Advantages And Disadvantages Of Nationalisation

Let’s first of all take a look at the advantages Of Nationalisation:

1. Help to check Exploitation: Nationalisation of industry helps to check exploitation by foreign businessmen.
2. Ensure steady supply of service: It ensures the provision and steady supply of essential services.
3. Elimination of waste: Nationalisation helps to prevent and eliminate wasteful competition.
4. Encouragement of efficient use of resources: It encourages more efficient use of economic resources.
5. Protection of strategic Industries: It helps to protect and develop key strategic Industries which can be left in private hands.
6. Ensures equitable distribution of resources: It also ensures equitable distribution of resources as well as correcting imbalance in the means of production.
7. Elimination of Monopoly: Another advantages of Nationalisation is to eliminate Monopoly by private businessmen.
8. Mobilization of capital: Large capital can be mobilized to ensure large scale investment.
9. Helps for planning purposes: It helps the government to influence and control various economic activities for planning purposes.
10. Employment opportunities: It create more employment opportunities.

Disadvantages of Nationalisation

1. Prevention of private initiatives: Private initiative can be destroyed when government takes over all Industries.
2. Low productivity and inefficiency: Lack of competition can encourage low productivity and inefficiency.
3. Consumers can be exploited: By nationalising and Enterprise, government may confer Monopoly Power which can be used to exploit the consumers, e.g, PHCN.
4. Corruption and mismanagement: Most nationalised Industries are not efficiently managed because of corruption and mismanagement.
5. Excessive control may hinder development: Excessive government control of the economy may hinder development.
6. It can lead to Retaliation: Nationalization can lead to retaliation from other countries.
7. Resources can be misallocated: Another disadvantages of naturalisation is that the resources of the country can be misallocated as a result of political interference.

Revision Questions

1. What is the meaning of National?
2. State five Reasons for Nationalisation.
3. Outline four advantages of Nationalisation and four disadvantages of Nationalisation

Now in my next class I will be taking you on Indigenization, with thier advantages and disadvantages. Don’t miss it, to join the class [Click Here]