Nationalization

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    Nationalization

    Definition: The process of taking an industry or assets into government ownership by a national

    government or state. It usually refers to private assets, but may also mean assets

    owned by lower levels of government, such as municipalities, being transferred to the

    public sector to be operated and by the state.

     

    Advantages

    • The ability of the state to direct investment in key industries
    • The distribution of state profits from nationalized industries for the overall national good
    • The ability to direct producers to social rather than market goals
    • Greater control of the industries by and for the workers
    • The benefits and burdens of publicly funded research and development are extended to the wider populace

     

    Disadvantages

    • Costly management. The management of the nationalized industry is complicated and unwieldy. There are numerous departments and paid persons i.e. directorate, regional office conduct its management.
    • Lack of decision making. All the necessary matters are decided by various official and committees. In case of conflicting views, quick decision cannot be made for the urgent matters which are dangerous in business.
    • Lack of efficiency. Nationalized industries are managed by salaried persons who are generally found less efficient as compared with privately owned concerns. There is also lack of flexibility and adaptability which are asset of private ownership.
    • There is extensive and rigid procedure of the state machinery by which event is dealt. Such stipulated rules has made the process of work very complicated which results in delay and loss of initiative.
    • Absence of profit motive. The salaried persons are not concerned with profit. Therefore, nationalized undertaking hardly run successfully due to lack of personal interest
    • Chances of loss. The loss of the nationalized enterprises is regarded as the loss of the nation. So the structure of nationalized economy will greatly affected by the failure of such scheme.
    • Limited investment. Investors hesitate to invest large sum of money due to risk of nationalization. Therefore the volume of investment remains limited in private sector.

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