Nationalization

Description of Nationalization. Explanation.

Definition Nationalization. Description.

Nationalization is the process whereby a government takes over the assets, control and business of a company. It involves a transfer of property rights from the private sector to the public sector.

When it is carried out under a proper legal system and when the private owners are compensated fairly, there is nothing wrong with it, although the results in economic sense generally are poor.

But especially when performed by a country without or in violation of a proper legal system or when the private owners (investors) are not compensated fairly, nationalization is extremely negative news for its existing investors and a strong signal to potential investors to avoid investing in such a country.

Gaining control of certain companies of strategic economic importance typically involves infrastructural companies, such as railways, airports, airlines, banks. Sometimes also industrial firms.

The opposite is called: privatization.