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The Creation of Modern Capitalism Essay

According to the Organization for Economic Co-Operation and Development (2008), nationalization occurs when the government decides to take up a private property such as an industry or the assets of private individuals into public ownership. Thomas (1805) also states that the opposite of nationalization is privatization or municipalization which as he states, occurs when assets owned by the state are privatized. History of Nationalization in UK According to Thomas (1805), in 1946 the coal industry that was under the National Coal Board that was later known as the British Coal was nationalized.

Later, the National Bank of England was also nationalized and its private shareholders were compensated by the state. In 1947 Cable and Wireless Ltd was also nationalized and its shareholders compensated. Other companies nationalized in that year were both the Central Electricity Generating Board and the area electricity boards. According to Vikramaditya and Khanna (2005), the National railway, the water transport system and road passenger transport system were nationalized and placed under the British Transport Board in 1948.

Eric Richards (1973) also states that in the Local authority gas supply undertakings in Scotland, England, and Wales were nationalized in 1949. According to Eric (1973) Iron and Steel Industry were denationalized

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in 1951 by the preceding Conservative Government. It was later in the year 1967 that the British Steel was nationalized. He also states that in the year 1977, there were some major aircraft companies such as the British Aircraft Corporation that were nationalized and placed under one name and that it was in the same year that the British Shipbuilders was also nationalized by the British government.

This final nationalization managed to combine all the major shipbuilding companies into one entity that was owned by the state. Thus, this was how nationalization took place in Britain between this time period. Yet, what were the major reasons for nationalization? Reasons for nationalization 1. Political Reasons According to the World Socialist Movement (2007), when a good or service is deemed as a public good, its production is nationalized because its production is for the interest of the country.

However, there are cases where the country considers production of certain services like security provision or production of certain goods like firearms politically dangerous to be left in the hands of the private sector. Under such circumstances, the production process of such goods is nationalized. Also, as Thomas and Smout (1969) add, there are times when rulers of the land might also in their own selfish interest, use their influence and their political power to ensure the nationalization of a private company. Economic Reasons

According to Michael (2000) there is a strong belief in some countries that every means of production, distribution and exchange should be owned by the country. The country under such circumstances is termed as a trustee of the people’s property. Nick (2008) also states that in this way, citizens in such countries who posses socialistic ideas believe that when there is nationalization, people are able to have a full democratic control over their means of earning a living. In this way, as the socialists say, the state provides an effective means of redistributing wealth and income among its citizens in a more equitable manner (James 1767).

The Unsatisfactory Nature of Nationalization 1. Limitation of funding options John and Gordon (2005). State that since it is the state that owns the nationalized industries, the state is thus responsible for clearing their debts should such debts occur. This is because these nationalized industries do not normally borrow from domestic markets apart from when the borrowing is on short term basis. The Labor Party (2009) adds that because of these limitations, the nationalized industry stands at a risk of closure should the government not be ready to settle its debts or should the government be broke. 2. Expropriation

This is when nationalization occurs without the compensation of the former owners of the company being nationalized. Under such circumstances, legal cases normally follow leading to the government incurring much in court proceedings. Also, it denies these former owners their means of survival and discourages them from any will of future investments (Simon and Chris 2008). 3. Job Loss In some time, as Pietro and Paolo (2000) state, the workers may also be accorded retirement without compensation leading to high unemployment rate. This decreased economic strength and ensured that illegal activities are increased due to the unemployment rate.

4. Collapse of the financial markets When the government nationatilizes all business sources, a problem occurs due to the fact that incase the government finances collapses, the nationalized businesses also collapse. This leads to a high risk of the collapse of the financial sectors if there is high nationalization of businesses. Therefore, though the labor market was boasting of creating over three million jobs, these jobs were only to be found in the capitalized sector and thus made the economy riskier to run (Simon and Chris 2008).

5. High Government Spending According to James (1767), the government of Britain spent a lot of money in bailing out broke companies and also in paying the salaries of employees connected to the nationalized sectors. Also, Nicholas (2009) says that there was a tendency of employees on capitalized industries being paid higher salaries than their counterparts on privatized industries. Thus, the government spending rose significantly as more businesses were nationalized.

According to the words found in the Organization for Economic Co-Operation and Development (2008), increased government spending, does not create productive employment opportunities in the private sector. Instead, Francis sys that such spending creates pensions which are services that must be paid for at a high financial and social cost and on the expense of the taxpayers. 6. False economic Security In the Editorial (2008), it is said that large portions of Britain are now almost completely dependent upon government spending due to nationalizations that were done by the government.

This creates a false economic security upon the mind of the British of a strong and stable economic growth. Incase anything were to happen to the government and it could no longer finance their salaries on government spending budgets, there would exists a greater depression as never witnessed before. Thus, David (1814) adds that whereas the citizens of Britain tend to believe that their economy is strong and stable, the reality is that the economy is very fragile. Lessons Drawn

Dale (2008) says the nationalization of the banking system has reduced economic growth, increased borrowing and handed the taxpayers a larger public sector to support. Abul (2009) also state that this nationalization of banks has created more public service pensions payable by the government. According to Francis, while the number of people employed by these retail banks has increased, the majority of that increase has been in jobs that exist on the fringes of the public sector like the retail banks.

This leads to the perilous issues already discussed in this paper. Abul (2009) adds that in Britain, two job openings out of every three between 2008 and 2009 have been in sectors dominated by the public services. He also states that the nationalized retail banks have played a significant role in this job creation. This action, according to Angela 2009) this has created an unproductive overhang of interest payments. She also adds that there is an increase of the public service pensions which will burden the economy for a very long time.

Thus the result of this nationalization is that Britain is entering a deep recession and is poorly equipped to weather economic storms should they arise. As a solution to all these, Britain should be able to assess the size of the public sector and denationalize accordingly. The government should also try to change its accounting system to be more favorable to private investments to enhance a more sure economic stability. The government should reduce its borrowings and acknowledge the full cost of public sector pensions. Conclusion

In conclusion, I can state in the words of Abul (2009) that The British government should realize that a vibrant private sector which creates jobs for both skilled and unskilled workers is the key to a vibrant and stable economy. I feel that it is also imperative that the government must restore public trust the nationalization structures it lays down and correctly research on the effects of unprecedented nationalization on its economy. This way, the current underlying problems shall have been solved. References Bassett D (2008) “The Hole We Are in and How to Get Out of It,” Reform, p.

35, available: http://www. reform. co. uk/documents/The%20hole%20we%20are%20in%20(updated%20version)%20FINAL. pdf{9 April 2009} Bassett D, Bosanquet N, Haldenby A, Parsons L & Truss E(2008) A Lost Decade: Counting the Opportunity Cost of Public Spending, 1999-2008,” Reform, pp. 20, 22, available: http://www. reform . co. uk/documents/A%20lost%20decade. pdf {9 April 2009} Briscoe S & Giles C (2008), “Public Sector Fuelled the Jobs Boom,” Financial Times, available: http://www. ft. com/cms/s/0/ab95cd9e-b991-11dd-99dc 0000779fd18c. html {9 April 2009}

Buchanan D (1814) Observations on the Subjects Treated of in Dr. Smith’s Inquiry into the Nature and Causes of the Wealth of Nations Vol 4, p. 144 Denham-Steuart J (1767) An Inquiry into the Principles of Political Economy vol1, vol2, vol3 Editorial, (2008) “The Big Boss State,” Financial Times, available: http://www. ft. com/cms/s/0/fbf4e914-ba4f-11dd-92c9-0000779fd18c. htm l {9 April 2009} Garibaldi P & Mauro P (2000), “Job Creation: Why Some Countries Do Better,” International Monetary Fund, available: http://www. imf. org/external/pubs/ft/issues/issues20/index. html {9 April 2009}

Khanna V S (2005). The Economic History of the Corporate Form in Ancient India. University of Michigan Labour Party (2009), “Gordon Brown Speaks to Conference,” September 23, 2008, available: http://www. labour. org. uk/Gordon_brown_conference{9 April 2009} Monaghan A, (2009) “UK National Debt Highest Since 1978 as RBS Goes on the Books,” Daily Telegraph, available: http://www. telegraph. co. uk/finance/economics/4305807/ UK-national-debt-highest-since-1978-as-RBS-goes-on-the-books. html{9 April 2009} Nationalization,” 1997-2008 Microsoft® Encarta® Online Encyclopedia 2008 available: http://uk. encarta. msn. com{9 April 2009}

Newman F W Lectures on Political Economy London Organization for Economic Co-Operation and Development (2008), OECD Economic Outlook No. 84, Annex Table 26, available: http://www. oecd. org/dataoecd/5/51/2483816. xls {9 April 2009} Perelman M (2000) The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation.. Duke University Press Richards E (1973) The Leviathan of Wealth: The Sutherland Fortune in the Industrial Revolution. .Scott J & Marshall G (2005). In A Dictionary of Sociology, Third Edition, Oxford University Press.

Selkirk T D (1805) Observations on the Present State of the Highlands of Scotland. Smout T C (1969) A History of the Scotish People 1560 – 1830, Taher A (2009), “‘Soviet’ Britain Swells amid the Recession,” Sunday Times, 9 April 2009 http://business. timesonline. co. uk/tol/business/economics/ article5581225. ece{9 April 2009} Watt N (2009), “Cameron: Britain May Have to Seek IMF Bail-Out,” Guardian, available: http://www. guardian. co. uk/politics/2009/jan/23/davidcameron- conservatives {9 April 2009} World Socialist Movement (2007) “What Is Capitalism?. ” World Socialism.

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