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Nationalization

Nationalization

Nationalization or Nationalisation is the act of taking assets into state ownership. Usually it refers to private assets being nationalized, but sometimes it may be assets owned by other levels of government, such as municipalities. Similarly, the opposite of nationalization is usually privatization, but sometimes it may be municipalization. Nationalization that happens after a previous privatization is often called renationalization. A key issue in nationalization is whether the private owner is properly compensated for the value of the institution. The most controversial nationalizations are those where no compensation is paid or an amount unreasonably below the likely market rate (expropriation). Many nationalizations through expropriation have come after revolutions, especially communist ones. In some instances, nationalization occurs as the government seizes the corporate property of a criminal. An example is Renault, which was seized by the French government from its owners because they had collaborated with Nazi Germany. The cost of legally buying a large business is such that many legal nationalizations have happened when firms of national importance run into trouble (close to bankruptcy), and could be acquired by the government for little or no money. A classic example is the UK nationalization in the 1970s of the car-maker British Leyland. At other times governments have felt it important to gain control of institutions and industries of strategic economic importance, such as banks or railways, or of important industries struggling economically. (The case of Rolls Royce plc, nationalised in 1971, is an interesting blend of these two arguments - see below). This policy was sometimes known as ensuring government control of the "commanding heights" of the economy, to enable it to manage the economy better in terms of long-term development and medium-term stability. The extent of this policy declined in the 1980s and 1990s as governments increasingly privatized industries that had been nationalized, replacing their strategic economic influence with use of the tax system and of interest rates. Nonetheless, national and local government has seen the advantage of keeping key strategic assets in institutions that are not strongly profit driven, can raise funds outside the public-sector constraints, but retain some public accountability. Recent UK examples include the vesting of the UK rail track in a not-for profit company, and the divestment of much council housing stock to 'arms-length management companies', often with mutual status.

Notable nationalizations

- Britain - British Coal, British Gas, British Petroleum, British Rail, British Steel, British Leyland, British Airways, the Bank of England, and the telephones division of the Post Office (now British Telecom). All the aforementioned were privatized during the Conservative period in power from 1979 to 1997, except the Bank of England which remains state-owned, but semi-independent. Many - particularly British Steel and British Leyland - fared poorly whilst nationalized. Conversely, British Rail (broken up into multiple parts including train operators, train owners, and a track owner; the latter now effectively deprivatised as Network Rail after near-bankruptcy) fared poorly after privatization.

Another example of a successful large nationalised utility was the CEGB, which was for a time the world's largest integrated electricity generator. Nationalisation was used by all political parties. In 1971 the Conservative government of Edward Heath nationalised the strategically-important aero-engine part of the recently-bankrupt Rolls Royce plc. (It is perhaps note-worthy that Rolls-Royce's Filton factory lay within the South Gloucestershire constituency of the then Minister for Aerospace, Frederick Corfield.)
- Canada - Canadian National Railways, created from several systems nation-wide following their bankruptcy during and after the First World War, and since privatized. Nationalization of electricity during the Quiet Revolution of Quebec, by minister René Lévesque and the Lesage government, to create Hydro-Quebec.There is talk of nationalizing the oil and gas industry thought this may lead to increased feelings of Alberta Separatism.
- United States - All U.S. railroads were nationalized as the United States Railroad Administration during World War I as a wartime measure but were returned to their private owers almost immediately after the war. The National Railroad Passenger Corporation (Amtrak) was a government corporation created in 1971 for the express purpose of relieving American railroads of their legal obligation to provide intercity passenger service. They were trying to get out of this obligation anyway, but by taking over their passenger rail assets, Amtrak was able to keep the passenger trains running. In 1976 the Consolidated Rail Corporation (Conrail), another government corporation, was created to take over the operations of six bankrupt rail lines operating primarily in the Northeast U.S.; Conrail was privatized in 1987. Initial plans for Conrail would have made it a truly nationalized system like that during World War I, but an alternate proposal by the Association of American Railroads won out. Organization of the Tennessee Valley Authority entailed the nationalization of the facilities of the former Tennessee Electric Power Company in 1939. In 2001, in response to the September 11th attacks, the then-private airport security industry was nationalized and put under the authority of the Transportation Security Administration.
- Nationalization of the oil industry in numerous countries, including Libya, Kuwait, Mexico, Saudi Arabia, and Venezuela.
- Companies in Cuba after the 1959 revolution bringing Fidel Castro to power in which the assets of foreign (largely U.S.) companies were expropriated without compensation (the USA has long complained about these nationalizations).
- Zimbabwe's nationalization of its food distribution infrastructure.
- 1918, 1948. All manufacturing enterprises in the Soviet Union, in 1918, as well as in other countries of the Soviet bloc (for example, Czechoslovakia in 1948).
- 1918. Many retailing enterprises in the Soviet Union.
- 1944. Renault (seized from Louis Renault after WWII for his collaboration with Nazi Germany). Renault was successful whilst nationalised and remains successful today, after having been privatised in 1996.
- 1948. With the Decree 119 of june 1948 the new romanian communist regime nationalised all the existing private companies and their assests in Romania leading to the transformation of the Romanian economy from a free market economy to a centralised one.
- 1956. Under the presedential decree of 26th July 1956, The Egyptian President Gammal Abdel Nasser nationalised The Canal De Suez(Suez Canal) company. Such act led England, France and Israel to launch a combined attack on Egypt that was stopped by the US and the former Soviet Union.
- 1969. Nationalization of banks in India.
- 1982. The Paris business of M&A advisory firm Rothschild was nationalized and renamed.
- 2003. The Labour Government of New Zealand took an 80% stake in national air carrier Air New Zealand in exchange for a large financial infusion.

Public ownership

Public ownership (also called government ownership or state ownership) is government ownership of any asset, industry, or corporation at any level, national, regional or local (municipal). The process of bringing an asset into public ownership is called nationalization or municipalization. A government owned corporation (sometimes state-owned enterprise, SOE) may resemble a not-for-profit corporation as it may not be required to generate a profit; although governments may also use profitable entities they own to support the general budget. SOE's may or may not be expected to operate in a broadly commercial manner and may or may not have to face competitive tendering. The creation of a government-owned corporation (corporatization) from other forms of government ownership may be a precursor to privatization.

Arguments for and against

See also: arguments for and against privatization and the welfare state

For

- Public services. Some services, such as defence, cannot be provided by the private sector directly - only a government system of taxation can finance them. Others (merit goods), such as education, can be under-provided by the private sector (according to social standards concerning access to them).
- Essential services. In the case of an essential service - particularly one on which lives may depend - nationalization may ensure the continuation of this service regardless of commercial or environmental pressure (saving lives is not always profitable). Furthermore, there may be externalities which mean it is in the interests of all to ensure a good service is available to everyone, even beyond moral concerns.
- Efficiency. In natural monopolies, competition is wasteful, and will tend to be eliminated by competitive forces (leading to a private monopoly or oligopoly). A public sector monopoly can be held to account via democratically-elected governments, in a way in which a private monopoly cannot. (A private monopoly may be subject to regulation, but this may be an inefficient way of securing the public interest.)
- Accountability. As mentioned above, while a governmental monopoly is nonetheless still a monopoly, it is answerable to the electorate rather than a small group of shareholders. (e.g. if the telephone service is nationalised, voters can bring pressure onto the government to provide better services, and parliament may have the power to sack anyone responsible for a reduction in the quality of service).
- Consumer interests. Public ownership can protect consumer interests in sectors where competition is low, where choices are important but made infrequently, and/or where consumers do not have the expertise to make good decisions (such as in health care).
- Common good. A profitable nationalised industry contributes with its profits directly to the common wealth of the whole country, rather than to the wealth of a subset of its population.
- Financial security. Public sector institutions have access to finance at government interest rates, which are (almost) always lower than even the most financially secure private sector firms, because the government cannot go bankrupt, which means less risk to the lender.
- Work ethic. Employees may be more inclined to view their work positively if it is directed by a management appointed by a government that they have a say in electing, rather than a management representing a shareholding minority. Also, they may gain intrinisc satisfaction knowing their work is important and essential for society as a whole. There has been discussion of a public service ethos which makes public sector workers work harder than they would for a private employer.
- Equity. Public ownership can help prevent extreme imbalances of wealth.

Against

- Waste. Government ownership may lead to waste (x-inefficiency) if it proves unable to motivate management and personnel through appropriate incentives, including appropriate pay and threat of redundancy.
- Consumer choice. Public ownership in an industry which could be competitive in private hands may stifle innovation if proper incentives are not provided by the government. Consumer choice may be reduced and there may be no alternative sources - and no catalysts for alternative sources - of goods or services that better meet consumer preferences.
- Misinvestment/over-investment. Public ownership of profitable services may lead to "gold-plating" (over-investment in assets) if decisions are driven by engineering ideals and not efficiency concerns.
- Unprofitable companies survive. Public ownership of a loss-making service or industry (such as flu vaccines) may inhibit the changes needed to ensure long-term profitability (or permit bankruptcy). This may mean subsidising unnecessary losses indefinitely.
- Misallocations of labor and money. The government may be inefficient in running production, trading, or service operations, in the sense of causing misallocations of labor and capital, with consequent reductions in the standard of living and economic growth.
- Accountability. Accountability to the market may be eliminated, and accountability through government may be an insufficient replacement, particularly if an industry or service does not have a high public profile or if the government is not democratic.
- Influenced by politics. Decision-making in the public sector may be prone to interference from politicians for political or populist reasons. The industry may be over-staffed in order to reduce unemployment; it may be forced to conduct transactions or actions in certain areas in order to win local votes; it may be forced to manipulate its prices in order to control inflation. Of course, some of these measures may be considered positive rather than negative, but if they are not taken properly, in the long run they are likely to be an inefficient way to meet the desired goals.

Municipalities

A municipality or "general-purpose district" (compare with: "special-purpose district") is an administrative local area generally composed of a clearly defined territory and commonly referring to a city, town, or village government. Municipalities are not necessarily the same as townships. In most countries, this is the smallest administrative subdivision that has its own democratically elected representative leadership. In several European countries, municipalities as second level entities are referred to as communes.

Municipalities as second level entities

- In Australia, a municipality is a city, or shire and is a subdivision of a state
- In Austria, a municipality (Gemeinde) is part of a district (Bezirk), which is in turn part of a state (Bundesland).
- In Belgium, a municipality (gemeente/commune) is part of a province (provincie/province)
- In Bosnia and Herzegovina, a municipality (općina or opština) is
- part of a canton (kanton)
- a subdivision (grouped in regions)
- In Brazil, a municipality (município) is part of a state (estado)
- In Canada, a municipality is a city, town, township, county, or regional municipality which has been incorporated by statute by the legislatures of the Provinces and territories of Canada. It is also a specific designation for certain municipalities in Quebec and Ontario.
- In Chile, a municipality (comuna) is part of a province (provincia)
- In Croatia, a municipality (općina) is part of a county (županija)
- In Denmark, a municipality (kommune) is part of a county (amt)
- In Finland, a municipality (kunta/kommun) is part of a province (lääni/län)
- In France, a municipality (commune) is part of a department (département)
- In Germany, a municipality (Gemeinde) is part of a district (Kreis). Larger entities of the same level are named town (Stadt).
- In Greece, a municipality is either an urban demoi or rural koinotetes which is then part of a prefecture (nomos) and then a larger region known as a periphery.
- In Italy, a municipality (comune) is part of a province (provincia) which is part of a region (regione).
- In Japan, any government other than the Japanese national government is called a municipality.
- In Mexico, a municipality (municipio) is a subdivision of a state (estado) and a borogh (delegación) is a subdivision of the Federal District (see municipalities of Mexico and Boroughs of the Mexican Federal District).
- In the Netherlands, a municipality (gemeente) is part of a province (provincie).
- Every part of mainland New Zealand is part of either a "city" (mostly urban) or a "district" (mostly rural). The term "municipality" has become rare in New Zealand since about 1979 and has no legal status.
- In Norway, a municipality (kommune) is part of a county (fylke)
- In the Philippines, a municipality (bayan) is part of a province (lalawigan) and is composed of barangays.
- In Poland, a municipality (commune) (gmina) is a part of a county (powiat).
- In Portugal, a municipality (município) is subdivision of a district (distritos).
- In Puerto Rico, a municipality (municipio) is a city. Each municipality has an elected mayor.
- In Romania, a municipality (municipiu) is a town or a city ranked by law at this level. See Municipality in Romania for more information.
- In Serbia, a municipality (opština) is part of a county (okrug)
- In South Africa, municipalities are subdivisions of a province, and are ranked by size. In descending order: metropolitan, district, local.
- In Sweden, a municipality (kommun) is part of a county (län).
- In Switzerland, a municipality (commune/Gemeinde/comune) is part of a canton (canton/Kanton/cantone) and defined by cantonal law.
- In the United States, the entities that have status as a municipality vary from state to state. Cities, towns, boroughs, or villages are common terms for municipalities. Townships, counties, and parishes are not generally considered to be municipalities, although there are exceptions. In some states, towns have a non-municipal status similar to townships.

First level entities and other forms of municipalities

- In the People's Republic of China, a municipality (直辖市 in pinyin: zhíxiéshì) is a city with equal status to a province: Beijing, Tianjin, Shanghai, and Chongqing (see Municipality of China)
- In the Republic of China on Taiwan, a municipality (直轄市 in Wade-Giles: chi-hsia-shih) is a city with equal status to a province: Taipei and Kaohsiung. (see Municipality of China)
- In Portugal, a municipality (município/concelho) is the primary local administrative unit. Although it is a part of a district (distrito) for certain national administrative purposes, the municipality is not subordinate to the district and decentralization is doing away with the districts. A municipality contains one or more freguesias.
- In Puerto Rico, there are no first order administrative divisions, and the municipalities (municipio) serves as second-order, but first level, administrative divisions.
- In Montenegro, a municipality (opština) is the topmost regional division
- Municipalities of Libya, some very large.
- In Slovenia, a municipality (občina) is the primary local administrative unit. There are 193 of them, 11 of which have a special "Urban" status with additional autonomy.
- In Spain, a municipality (município) is the primary local administrative unit. It is a part of a province (provincia) for all national administrative purposes. A municipality contains one or more parroquias. In the Galiza region, the municipalities are called concellos.

Privatization

Privatization (sometimes privatisation, denationalization, or, especially in India, disinvestment) is the process of transferring property, from public ownership to private ownership and/or transferring the management of a service or activity from the government to the private sector. The opposite process is nationalization or municipalization.

Overview

Privatization is frequently associated with industrial or service-oriented enterprises, such as mining, manufacturing or power generation, but it can also apply to any asset, such as land, roads, or even rights to water. In recent years, government services such as health, sanitation, and education have been particularly targeted for privatization in many countries. In theory, privatization helps establish a "free market", as well as fostering capitalist competition, which its supporters argue will give the public greater choice at a competitive price. Conversely, free-market detractors view privatization negatively, arguing that entrusting private businesses with control of essential services reduces the public's control over them and leads to excessive cost cutting in order to achieve profit and a resulting poor quality service. In general, privatization was common during the immediate post-World War 2 period, but privatization became a more dominant economic trend (especially within the United States and the United Kingdom) during the 1980s and 1990s. This trend of privatization has often been characterized as part of a "global wave" of neoliberal policies, and some observers argue that this was greatly influenced by the policies of Reagan and Thatcher. The term "privatization" was coined in 1948 and is thought to have been popularized by The Economist during the 1980s.

Types of privatization

In terms of outright privatization (that is, sale of a business), there are three major types:
- share issue privatization (SIP) - selling shares on the stock market
- asset sale privatization - selling the entire firm to an investor, usually by auction
- voucher privatization - shares of ownership are distributed to all citizens, usually for free or at a very low price. Share issue privatization is the most common type. Voucher privatization has mainly been used in the transition economies of Central and Eastern Europe - countries such as Russia, Poland and Czechoslovakia. Share issue can broaden and deepen domestic capital markets, boosting liquidity and potentially economic growth, but if the capital markets are insufficiently developed it may be difficult to find enough buyers, and transaction costs (eg underpricing required) may be higher. Risks (political risk, currency risk) are also higher, deterring foreign portfolio investors. As a result, asset sales are more common in developing countries.

Arguments for and against

See also: arguments for and against public ownership and the welfare state

For

Advocates of privatization argue that governments run businesses inefficiently for the following reasons:
- Performance. The government may only be interested in improving a company in cases when the performance of the company becomes politically sensitive.
- Improvements. Conversely, the government may put off improvements due to political sensitivity — even in cases of companies that are run well.
- Corruption. The company may become prone to corruption; company employees may be selected for political reasons rather than business ones.
- Goals. The government may seek to run a company for social goals rather than business ones (this is conversely seen as a positive effect by critics of privatization).
- Capital. It is claimed by supporters of privatization, that privately-held companies can more easily raise capital in the financial markets than publicly-owned ones.
- Unprofitable companies survive. Governments may "bail out" poorly run businesses with money when, economically, it may be better to let the business fold.
- Political influence. Nationalized industries can be prone to interference from politicians for political or populist reasons. Examples include making an industry buy supplies from local producers (when that may be more expensive than buying from abroad), forcing an industry to freeze its prices/fares to satisfy the electorate or control inflation, increasing its staffing to reduce unemployment, or moving its operations to marginal constituencies. It is argued that such measures can cause nationalized industries to become uneconomic and uncompetitive.
- Profiteering. Private companies make a profit by persuading consumers to buy their products and not the products of their competitors. Proponents of privatization argue that private corporations thus need to serve exactly the needs of their clients; and the more their clients are willing to pay, the better they serve the needs. Proponents also suggest that this means the corporations need to focus on even more marginal groups (who might not get their voice heard through the democratic system, yet still can pay for services). In particular, the Performance, Goals, and Unprofitable companies survive reasons are held to be the most important because money is a scarce resource: if government-run companies are losing money, or if they are not as profitable as possible, this money is unavailable to other, more efficient firms. Thus, the efficient firms will have a harder time finding capital, which makes it difficult for them to raise production and create more employment. The basic argument given for privatization is that governments have few incentives to ensure that the enterprises they own are well run. On the other hand, private owners, it is said, do have such an incentive: they will lose money if businesses are poorly run. The theory holds that, not only will the enterprise's clients see benefits, but as the privatized enterprise becomes more efficient, the whole economy will benefit. Ideally, privatization propels the establishment of social, organizational and legal infrastructures and institutions that are essential for an effective market economy. Another argument for privatization is that to privatize a company which was non-profitable (or even generated severe losses) when state-owned means taking the burden of financing it off the shoulders and pockets of taxpayers, as well as freeing some national budget resources which may be subsequently used for something else. Especially, proponents of the laissez-faire capitalism will argue, that it is both unethical and inefficient for the state to force taxpayers to fund the business that can't work for itself. Also, they hold that even if the privatized company happens to be worse off, it is due to the normal market process of penalizing businesses that fail to cope with the market reality or that simply are not preferred by the customers. Many privatization plans are organized as auctions where bidders compete to offer the state the highest price, creating monetary income that can be used by the state.

Against

Opponents of privatization dispute the claims made by proponents of privatization, especially the ones concerning the alleged lack of incentive for governments to ensure that the enterprises they own are well run, on the basis of the idea that governments must answer to the people. It is argued that a government which runs nationalized enterprises poorly will lose public support and votes, while a government which runs those enterprises well will gain public support and votes. Thus, democratic governments, under this argument, do have an incentive to maximize efficiency in nationalized companies, due to the pressure of future elections. Furthermore, opponents of privatization argue that it is undesirable to let private entrepreneurs own public institutions for the following reasons:
- Profiteering. Private companies do not have any goal other than to maximize profit. In a democratic system, each person gets one equal vote; but on the market, people "vote" with their money, so those with more money get more "votes". Critics of privatization therefore argue that a private company will serve the needs of those who are most willing (and able) to pay, as opposed to the needs of the majority.
- Corruption. Buyers of public property have often, most notably in Russia, used insider positions to enrich themselves - and civil servants in the selling positions - grossly.
- No public accountability. The public does not have any control or oversight of private companies.
- Cuts in essential services. If a government-owned company providing an essential service (such as water supply) to all citizens is privatized, its new owner(s) could stop providing this service to those who are too poor to pay, or to regions where this service is unprofitable.
- Inefficiency. A centralized enterprise is generally more cost effective than multiple smaller ones. Therefore splitting up a public company into smaller private chunks will reduce efficiency.
- Natural monopolies. Privatization will not result in true competition if a natural monopoly exists.
- Concentration of wealth. Profits from successful enterprises end up in private pockets instead of being available for the common good.
- Insecurity. Nationalized industries are usually guaranteed against bankruptcy by the state. They can therefore borrow money at a lower interest rate to reflect the lower risk of loan default to the lender. This does not apply to private industries.
- Downsizing. In cases where public services or utilities are privatized, this can create a conflict of interest between profit and maintaining a sufficient service. A private company may be tempted to cut back on maintenance or staff training etc, to maximize profits.
- Waste of risk capital. Public services are per definition low-risk ventures that don't need scarce risk capital (which is more needed elsewhere). In practical terms, there are many pitfalls to privatization. Privatization has rarely worked out ideally because it is so intertwined with political concerns, especially in post-communist economies or in developing nations where corruption is endemic. Even in nations with advanced market economies like Britain, where privatization has been popular with governments (if not all of the public) since the Thatcher era, problems center on the fact that privatization programs are very politically sensitive, raising many legitimate political debates. Who decides how to set values on state enterprises? Does the state accept cash or government-provided coupons? Should the state allow the workers or managers of the enterprise to gain control over their own workplace? Should the state allow foreigners to buy privatized enterprises? Which levels of government can privatize which assets and in what quantities? In the short-term, privatization can potentially cause tremendous social upheaval, as privatizations are often accompanied by large layoffs. If a small firm is privatized in a large economy, the effect may be negligible. If a single large firm or many small firms are privatized at once and upheaval results, particularly if the state mishandles the privatization process, a whole nation's economy may plunge into despair. For example, in the Soviet Union, many state industries were not profitable under the new system, with the cost of inputs exceeding the cost of outputs. After privatization, sixteen percent of the workforce became unemployed in both East Germany and Poland. The social consequences of this process have been staggering, impoverishing millions, but to little social benefit in many post-Communist countries. On the other hand, proponents claim that Poland's and East Germany's economies will fare better in the long term, with positive social consequences that one can already see in those countries. In the process, Russia has gone from having one of the world's most equal distributions of wealth in the Soviet era to one of the least today. There has been a dearth of large-scale investment to modernize Soviet industries and businesses still trade with each other by means of barter. In speaking about the transformations in the post-communist countries, however, one must take into account the specifics of the communist and socialist regime which ruled those countries for decades. There are no easy answers regarding those issues. Some argue that it was the cumulation of mismanagement and inattention to the market realities that lead to such fatal consequences, given that most of the assets of those companies had not renovated for decades and their technology was outdated. Further, opening of the markets for import of the products which, in many cases, offered higher quality or lower prices, has given the consumers new array of choices to compete with the old national industries. Privatization in the absence of a transparent market system may lead to assets being held by an oligarchy of a few very wealthy people at the expense of the general population. This may discredit the process of economic reform in the opinion of the public and outside observers. This has occurred notably in Russia, Mexico, and Brazil. Moreover, where free-market economics are rapidly imposed, a country may not have the bureaucratic tools necessary to regulate it. This has been a pertinent problem in Russia and in many South American countries, although some other Central European countries, such as Poland and the Czech Republic, fared better in this respect, partly through the support of the European Union. Paradoxically, while Britain has long had a market economy, it also faced this issue after it privatized utilities in the Thatcher era; Britain's utilities regulator was often criticized as being ineffective. Most economists argue that if a privatized company is a natural monopoly, or exists in a market which is prone to serious market failures, consumers may be worse off when the company is in private hands. This seems to have been the case with rail privatization in the UK and in New Zealand; in both countries, public disaffection has led to government intervention. In cases where privatization has been successful, it is because genuine competition has arisen. A good example of this is long-distance telecommunications in Europe, where the former state-owned enterprises lost their monopolies, competitors entered the market, and prices for international calls fell dramatically. British Rail is an example of privatization program that has been deemed a failure and largely abandoned. The track-owning company has been effectively repossessed by the British government, and many of the train-running companies are at risk of having their concession removed on the grounds that they fail to provide adequate services. One of them, Connex, actually had its franchise cut short in June 2003 by the government for what the Strategic Rail Authority called "poor financial management." In this case, one of the causes for the necessary renationalization was the incomplete nature of the privatization, not leaving enough incentive for the firm to make capital investments. However, in other cases, particularly in poor countries, privatized enterprises cannot be renationalized so easily. These governments do not have the political will to do it, and there is strong pressure exerted by international lending agencies to maintain the privatization. Additionally, investors may be scared away by nationalization programs, fearing that any business they start may be taken from them Many have argued that the strategy of privatization in Russia differed from those seen in more successful post-communist economies such as Hungary and Poland. The defects of the process in Russia, combined with capital market liberalization and failure to establish institutional infrastructure, have led to incentives for capital flight, contributing to post-communist economic contraction in Russia. Likewise, countries such as Argentina, which embarked upon far-reaching privatization programs, selling off valuable, profitable industries such as energy companies, have seen the rapid impoverishment of their governments. Revenue streams which could previously be directed towards public spending suddenly dried up, resulting in a severe drop in government services. Privatization can also have a ripple effect on local economies. State-owned enterprises are often required by law to patronize national or local suppliers. Privatized companies, in general, do not have that restriction, and hence will shift purchasing elsewhere. Bolivia underwent a rigorous privatization program in the mid 1990s, with disastrous impact on the local economy in the short term. The Wall Street Journal has reported that the World Bank, historically a supporter of denationalization in developing countries, has also begun to voice concerns over privatization. It no longer believes that privatization should be recommended in all cases. Nobel Prize winner Joseph Stiglitz has written a book on the subject called Globalization and its Discontents. Mexico's President Vicente Fox has come under criticism for his plans to privatize Mexico's electrical power generating industry. Finally, it has been argued that the Chinese economic reform has illustrated that economic reform can take place in the absence of large-scale privatization, though the Chinese government is starting some privitization programs itself. The above arguments have centered on whether or not it is practical to apply privatization in the real world, but some reject the profit incentive, the theoretical basis for privatization, itself. Some opponents of privatization argue that because the driving motive of a private company is profit, not public service, the public welfare may be sacrificed to the demands of profitability. There is no definitive answer, but it is very often argued that essential services, such as water, electricity, health, primary education, and so forth, should be left in public hands. This argument, of course, relies on the view on the obligations of the state, regarding what it should or should not be obliged to do. What is seen as desirable by a socialist may not be by a supporter of capitalism, and vice versa.

Outcomes

Academic studies show that in competitive industries with well-informed consumers, privatization consistently improves efficiency. Such efficiency gains mean a one-off increase in GDP, but through improved incentives to innovate and reduce costs also tend to raise the rate of economic growth. The type of industries to which this generally applies include manufacturing and retailing. Although typically there are social costs associated with these efficiency gains, many economists argue that these can be dealt with by appropriate government support through redistribution and perhaps retraining. In sectors that are natural monopolies or public services, the results of privatization are much more mixed. In general, if the performance of the existing public sector operation is sufficiently bad, privatization will tend to improve matters. However, much of this may be due to the imposition of related reforms such as improved accounting systems, regulatory systems, and increased financing, rather than privatization itself. Indeed, some studies show that the greatest gains from privatization are achieved in the pre-privatization period as reforms are made to prepare for the transfer to private hands. In liberal economic theory, a private monopoly behaves much the same as a public one.

Alternatives to privatization

Corporatization

Notable privatizations

See also: List of privatizations Privatization programmes have been undertaken in many countries across the world, falling into three major groups. The first is privatization programmes conducted by transition economies in Central and Eastern Europe after 1989 in the process of instituting a market economy. The second is privatization programmes carried out in developing countries under the influence of international financial institutions such as the World Bank and IMF. The third is privatization programmes carried out by developed country governments, the most comprehensive probably being those of New Zealand and the United Kingdom in the 1980s and 1990s.

Anti-privatization campaigns

Privatization proposals in key public service sectors such as water and electricity are in many cases strongly opposed by opposition political parties and civil society groups. Usually campaigns involve demonstrations and political means; sometimes they may become violent (eg Cochabamba Riots of 2000 in Bolivia; Arequipa, Peru, June 2002). Opposition is often strongly supported by trade unions. Opposition is usually strongest to water privatization - as well as Cochabamba (2000), recent examples include Ghana and Uruguay (2004). In the latter case a civil-society-initiated referendum banning water privatization was passed in October 2004.

References

- Clarke, Thomas (ed.) (1994) "International Privatisation: Strategies and Practices" Berlin and New York: Walter de Gruyter, ISBN 3110135698
- Clarke, Thomas and Pitelis, Christos (eds.) (1995) "The Political Economy of Privatization" London and New York: Routledge, ISBN 041512705X
- Nellis, John and Kikeri, Sunita (2002), [http://ssrn.com/abstract=636224 "Privatization in Competitive Sectors: The Record to Date"] (June 2002). World Bank Policy Research Working Paper No. 2860.
- Nancy Birdsall and John Nelllis (2002), [http://www.cgdev.org/docs/cgd_wp006.pdf "Winners and Losers: Assessing the Distributional Impact of Privatization"], Center for Global Development Working Paper No 6., May 2002
- William L. Megginson and Jeffry M. Netter (2001), [http://faculty-staff.ou.edu/M/William.L.Megginson-1/prvsvpapJLE.pdf "From State To Market: A Survey Of Empirical Studies On Privatization"], Journal of Economic Literature June 2001
- Juliet D’Souza, William L. Megginson (1999), [http://faculty-staff.ou.edu/M/William.L.Megginson-1/prv90pap.pdf "The Financial and Operating Performance of Privatized Firms during the 1990s"], Journal of Finance August 1999

External links

- [http://www.privatization.org Privatization.org] (pro-privatization)
- [http://www.ncpa.org/pd/private/priv.html Privatization page on the NCPA website]
- [http://www.projectcommunis.org Project Communis] (privatization research blog)
- [http://zfacts.com/p/486.html Privatization of Social Security] The original 1983 Cato/Heritage plan—now almost complete.
- [http://www.uberculture.org uberculture.org] (Non-profit organization committed to challenging the corporatization of culture and the privatization of the commons)
- [http://www.lesproductionsisca.ca/ Les Productions ISCA] - Independent documentary film company based in Montréal, Canada that addresses issues related to privatisation
- [http://rru.worldbank.org/Privatization/ Privatization Database] (World Bank Group)
- [http://rru.worldbank.org/PapersLinks/Impact-Infrastructure-Privatization/ Reading list on the impact of infrastructure privatization]
- [http://rru.worldbank.org/PapersLinks/Privatization-Strategy/ Reading list on privatization strategy]
- [http://rru.worldbank.org/PapersLinks/Impact-Privatization-Competitive-Industries/ Reading list on the impact of privatization in competitive industries] Category:Macroeconomics

Expropriation

Eminent domain (US), compulsory purchase (England and Wales), compulsory acquisition (Australia) or expropriation (Canada, South Africa) in common law legal systems is the power of the state to appropriate private property for its own use without the owner's consent. The term eminent domain is used primarily in the United States, where the term was derived in the mid-19th Century from a legal treatise written by the Dutch jurist Hugo Grotius in 1625. The term compulsory purchase, also originating in the mid-19th Century, is used primarily in England and Wales, and other jurisdictions that follow the principles of English law. Originally, the power of eminent domain was assumed to arise from natural law as an inherent power of the sovereign. Governments most commonly use the power of eminent domain when the acquisition of real property is necessary for the completion of a public project such as a road, and the owner of the required property is unwilling to negotiate a price for its sale. In many jurisdictions the power of eminent domain is tempered with a right that just compensation be made for the appropriation. Some coined the term expropriation to refer to "appropriation" under eminent domain law, and may especially be used with regard to cases where no compensation is made for the confiscated property. Examples include the 1960 Cuban expropriation of property held by U.S. citizens, following a breakdown in economic and diplomatic relations between the Eisenhower Administration and the Cuban government under Fidel Castro. The term "condemnation" is used to describe the act of a government exercising its authority of eminent domain. It is not to be confused with the term of the same name that describes the legal process whereby real property, generally a building, is deemed legally unfit for habitation due to its physical defects. Condemnation via eminent domain indicates the government is taking the property; usually, the only thing that remains to be decided is the amount of just compensation. Condemnation of buildings on grounds of health and safety hazards or gross zoning violation usually does not deprive the owner of the property condemned but requires the owner to rectify the offending situation. The exercise of eminent domain is not limited merely to real property. Governments may also condemn the value in a contract such as a franchise agreement (which is why many franchise agreements will stipulate that in condemnation proceedings, the franchise itself has no value).

Origins

The power of eminent domain in English law derives from the form of real property. Many landowners assume that their property right is absolute under the law, but this is rarely the case. Instead, a county or other authority has created the property in fee simple, a concept that derives from feudal fiefs. The same authority may void (or condemn) the fee and seize the land, as when a landowner fails to pay property tax. According to William Blackstone, :"The reason of originally granting out this complicated kind of interest, so that the same man shall, with regard to the same land, be at one and the same time tenant in fee-simple and also tenant at the lord's will, seems to have arisen from the nature of villenage tenure. ... Though they were willing to enlarge the interest of their villeins, by granting them estates which might endure for their lives, or sometimes by descendible to their issue, yet did not care to manumit them entirely; and for that reason it seems to have been contrived, that a power of resumption at the will of the lord, should be annexed to these grants, whereby the tenants were still kept in a state of villenage, and no freehold at all was conveyed to them in their respective lands." English-speaking countries that never had the feudal system have perpetuated the system of fee-simple property, including the power of eminent domain, for legal continuity.

United States

In the United States, the Fifth Amendment to the Constitution requires that just compensation be paid when the power of eminent domain is used, and requires that "public use" of the property be demonstrated. Most courts have interpreted "just compensation" to be the fair market value of the condemned property. Over the years the definition of "public use" has expanded to include economic development plans which use eminent domain seizures to enable commercial development for the purpose of generating more tax revenue for the local government. [http://reclaimdemocracy.org/civil_rights/public_use_corporate_abuse.php] Critics contend this perverts the intent of eminent domain law and tramples personal property rights. In Calder v. Bull, , Justice Chase thought it was preposterous for the government to take one person's property with no restriction and give it to another private party for their own profit. The definition of 'public use' was mostly viewed as 'use by the public' until the 20th century. The Supreme Court started expanding the definition in the 1920's to condemn slums [http://www.cato.org/pubs/journal/cj4n3/cj4n3-8.pdf]. In 1981, in Michigan, the Michigan Supreme Court, building on the precedent set by Berman v. Parker, , permitted the neighborhood of Poletown (a section of Detroit, Michigan) to be taken in order to build a General Motors plant. Courts in other states relied on this decision, which was overturned in 2004 [http://michiganimc.org/feature/display/6334/index.php], as precedent. This expansion of the definition was argued before the United States Supreme Court in February 2005 [http://www.uncommonthought.com/mtblog/archives/092904-a_new_take_on_eminen.php], in Kelo v. New London [http://www.supremecourtus.gov/docket/04-108.htm], 125 S. Ct. 2655, 162 L. Ed. 2d 439, when the city of New London, Connecticut wanted to condemn 115 residences, among other things. The Supreme Court decided in favor of New London, in a narrow June 2005 5-4 ruling—a decision that gives local governments wide latitude to decide when a seizure is for "public purposes", including economic development. The court hinted, however, that states could pass laws limiting the purposes for which eminent domain could be used. The controversial ruling sparked a backlash among citizens, and several states immediately began attempts to pass laws limiting eminent domain to either traditional uses (roads and public buildings) or to eliminate blight. In other cases, eminent domain has been used by communities to take control of planning and development. Such is the case of the Dudley Street Initiative [http://www.dsni.org/], a community group in Boston, Massachusetts, which attained the right to eminent domain and has used it to reclaim vacant properties for the purpose of positive community development.

Europe

In many European nations, the European Convention on Human Rights provides protection from appropriation of private property by the state. Article 8 of the Convention provides that "Everyone has the right to respect for his private and family life, his home and his correspondence" and prohibits interference with this right by the state, unless the interference is in accordance with law and necessary in the interests of national security, public safety, economic well-being of the country, prevention of disorder or crime, protection of health or morals, or protection of the rights and freedoms of others. This right is expanded by Article 1 of the First Protocol to the Convention, which states that "Every natural person or legal person is entitled to the peaceful enjoyment of his possessions". Again, this is subject to exceptions where state deprivation of private possessions is in the public interest, is in accordance with law, and, in particular, to secure payment of taxes. In France, the Declaration of the Rights of Man and of the Citizen similarly mandates just and preliminary compensation before expropriation. In England and Wales, and other jurisdictions that follow the principles of English law, the related term compulsory purchase is more commonly used. The operative statutes are the Compulsory Purchase Act 1965 and the part IX of the Town and Country Planning Act 1990.

Australia

In Australia, s51(xxxi) of the Constitution permits the federal government to make laws with respect to "the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws". This has been construed to not necessarily mean just compensation as a just term might not of necessity be monetary or proprietary recompense. However, it is for the court to determine what is just and it may be necessary to imply a need for compensation in the interests of justice, lest the law be invalidated (Andrews v Howell (1941) 65 CLR 255). For the purposes of s51(xxxi), money is not property which may be compulsarily acquired; the Commonwealth must also derive some benefit from the property acquired and not merely seek to extinguish the previous owner's title (Mutual Pools and Staff Pty Ltd v Commissioner of Taxation (1992) 173 CLR 450). A statutory right to sue has been considered "property" under this section (Smith v ANL Ltd (2000) 176 ALR 449).

Other countries

Many countries recognise eminent domain to a much lesser extent than the English-speaking world or do not recognise it at all. Japan, for instance, has very weak eminent domain powers, as evidenced by the high-profile opposition to the expansion of Narita International Airport, and the disproportionate amounts of financial inducement given to residents on sites slated for redevelopment in return for their agreement to leave (one well-known recent case being that of Roppongi Hills). On the other hand, countries such as China practice eminent domain as many times as necessary to make space for new communities and government structures.

Etymology

The Latin term dominium eminens ("supreme lordship") was used in the 17th century by Grotius to describe the concept explained above.

External links

- Main, Carla [http://www.policyreview.org/oct05/main.html How Eminent Domain Ran Amok] Policy Review (October 2005)
- [http://www.cnsnews.com/ViewCulture.asp?Page=%5CCulture%5Carchive%5C200511%5CCUL20051104a.html "House Passes Private Property Protection Act", US House of Representatives, November 3, 2005]
- [http://thomas.loc.gov/cgi-bin/query/D?c109:3:./temp/~c109ZOpgqV:: " H. R. 4128 IN THE SENATE OF THE UNITED STATES , ", House passes HR4128 by 376-38, November 4, 2005]
- [http://clerk.house.gov/evs/2005/roll568.xml "FINAL VOTE RESULTS FOR ROLL CALL 568 on HR4128", How did your representatives vote?, November 4, 2005]
- [http://a257.g.akamaitech.net/7/257/2422/23jun20051201/www.supremecourtus.gov/opinions/04pdf/04-108.pdf "KELO ET AL. v. CITY OF NEW LONDON ET AL. (PDF)", Supreme Court Decision, June 23, 2005]
- [http://www.washtimes.com/commentary/20050919-085408-3231r.htm "Eminent domain up close"] by Susette Kelo of Kelo v. City of New London
- http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1096536915218230.xml "Panelists discuss eminent domain" by Thomas Ott, Cleveland Plain Dealer, September 30, 2004]
- [http://www.washtimes.com/commentary/20040904-104702-3620r.htm Commentary in The Washington Times by Dana Berliner, 2004]
- [http://www.freep.com/money/autonews/jeep17e_20040817.htm "GOVERNMENT VS. PRIVATE PROPERTY OWNERS: DCX expansion forces small repair shop to give up land" Sarah A. Webster, August 17, 2004, Detroit Free Press]
- [http://www.newpatriot.us/node/15 "Eminent Domain Nightmares:] Interview with Dino Paspalakis on his fight against eminent domain abuse" Interviewer: Bill Mabon, February 8, 2005, NewPatriot Radio
- [http://washingtontimes.com/national/20050804-120711-4571r.htm Alabama limits eminent domain Washington Times August 4, 2005]
- [http://www.wired.com/news/technology/0,1282,68894,00.html?tw=wn_story_page_prev2 Government Usage of Eminent Domain in Lucent Project Denies Patent Owners Profits Wired News, September 20, 2005] Category:Real property law

Revolution

:This article is about revolution in the sense of a drastic change. For other meanings of the word, see revolution (disambiguation). A revolution is a relatively sudden, and absolutely drastic change (a "complete turn-around"). This may be a change in the social or political institutions over a relatively short period of time, or a major change in its culture or economy. Some revolutions are led by the majority of the populace of a nation, others by a small band of revolutionaries. Compare rebellion.

Social and political revolutions

Political revolutions are often characterised by violence, and vast changes in power structures that can often result in further, institutionalised, violence, as in the Russian and French revolutions (with the "Purges" and "the Terror", respectively). A political revolution is the forcible replacement of one set of rulers with another (as happened in France and Russia), while a social revolution is the fundamental change in the social structure of a society, such as the Protestant Reformation or the Renaissance.However, blurring the line between these two categories, most political revolutions wish to carry out social revolutions, and they have basic philosophical or social underpinnings which drive them. The most common revolutions with such underpinnings in the modern world have been liberal revolutions and communist revolutions. In contrast, a coup d'état often seeks to change nothing more than the current ruler. Some political philosophers regard revolutions as the means of achieving their goals. Most anarchists advocate social revolution as the means of breaking down the structures of government and replacing them with non-hierarchal institutions. With Marxist communists, there is a split between those who supported the Soviet Union and other so-called 'communist states' and those who were/are critical of those states (some even rejecting them as non-communist, see state capitalism), for example trotskyists. Social and political revolutions are often "institutionalized" when the ideas, slogans, and personalities of the revolution continue to play a prominent role in a country's political culture, long after the revolution's end. As mentioned, communist nations regularly institutionalize their revolutions to legitimize the actions of their governments. Some non-communist nations, like the United States, France, or Mexico also have institutionalized revolutions, and continue to celebrate the memory of their revolutionary past through holidays, artwork, songs, and other venues.

Ancient revolutions

- Fall of the Qin Dynasty in China, 206 BCE
- Great Jewish Revolt (66-70) and Bar Kokhba's revolt (132-135) against the Roman Empire.
- Popular revolt in late medieval Europe 14th - early 16th century, a series of attempted revolutions against the nobility

Liberal revolutions

(known to Marxists as bourgeois revolutions) :Some of these are Atlantic Revolutions.
- English Revolution – (1642-1653) – Commenced as a civil war between Parliament and King, culminating in the execution of Charles I and the establishment of a republican Protectorate.
- Glorious Revolution – (England in (1688) – Overthrow of King James II and establishment of a Whig-dominated Protestant constitutional monarchy.
- American Revolution – (1774-1783) – Established independence of the 13 colonies from Great Britain, creating the republic of the United States of America
- French Revolution – (1789) – Regarded as one of the most influential of all Revolutions, frequently associated with the rise of the bourgeoisie and the downfall of the aristocracy.
- Irish Rebellion – (1798) – Failed attempt to overthrow British rule in the country.
- Haitian Revolution – (1804) – Successful slave rebellion led by Jean-Jacques Dessalines. Established Haiti as the first free, black republic.
- July Revolution (1830)
- Belgian Revolution (1830)
- Rebellions of 1837 – (1837-1838) – Failed republican revolutions against British rule in Canada.
- Revolutions of 1848 – (1848) – Wave of failed liberal and republican revolutions that swept Europe.
- Taiping Rebellion – 1851 Rebellion against the Qing Dynasty and Manchu domination.
- Indian rebellion of 1857 Also called the War of Independence of 1857 and popularly known in the West as the Sepoy Mutiny, this rebellion was against British imperialism and marks the end of Mughal rule in India.
- Russian Revolution of 1905 – (1905) – Failed bourgeois-liberal revolution against Tsar Nicholas II
- Mexican Revolution – (1910) – Overthrow of dictator Porfirio Díaz, seizure of power by Institutional Revolutionary Party.
- Xinhai Revolution – (1911) – Overthrow of ruling Qing Dynasty and establishment of the Republic of China.
- February Revolution – (1917) – Liberal revolution against Tsar Nicholas II
- German Revolution – (1918) – Overthrow of the Kaiser by a workers' revolution, establishment of the Weimar Republic.

Socialist and/or Communist revolutions

- The Revolutionnary Commune of Paris – 1871
- Russian Revolution – (1917) – The most famous and influential modern revolution, culminating in the Bolshevik seizure of power and the establishment of the Soviet Union.
- German Revolution – (1919)) – Failed revolution in Germany led by Rosa Luxemburg and Karl Liebknecht
- Hungarian revolutions – 1919 and 1949
- Mongolia – 1921
- Spanish Revolution – 1936
- North Korea – 1948
- Chinese Revolution – (1949) – Victory of Communist-led peasant rebellion under Chairman Mao over the ruling Nationalist Party, establishment of People's Republic of China.
- Algerian Revolution – (1954 – 1962) – Revolutionary war of independence against French imperialism.
- North Vietnam – period of 1945-1954
- Cuban Revolution – (1959) – Fidel Castro-led rebellion against U.S.-backed dictator Fulgencio Batista; victory of revolutionary government of Fidel Castro.
- The Congo – 1964 and 1968
- The Zanzibar Revolution of 1964, see [http://home.globalfrontiers.com/Zanzibar/zanzibar_revolution.htm]
- Cultural Revolution – (1966-1976) Maoist led turmoil in People's Republic of China.
- South Yemen – 1967
- France, May 1968 – (1968) – Students' and workers' revolt against the Government of Charles de Gaulle.
- Libya – 1969
- Somalia – 1969
- Benin – 1972
- Ethiopia – 1974
- Carnation Revolution – (1974) in Portugal – Left-wing popular overthrow of right-wing dictatorship.
- Guinea-Bissauan Revolution – 1974
- Cambodia – 1975
- South Vietnam – 1975
- Laos – 1975
- Madagascar – 1975
- Cape Verde – 1975
- Mozambique – 1975
- Angola – 1975
- Afghanistan – 1978
- Grenada – 1979
- Nicaraguan Revolution – (1979) – Popular overthrow of the Somoza dictatorship by progressive/Marxist peasant movement.
- Burkina Faso – 1983
- Bolivarian Revolution – (1998) – Venezuela elects populist Hugo Chávez.

Eastern European anti-Communist revolutions

- Hungarian Revolution – (1956) Workers' and peasants' left-wing revolution against the imposed Communist Party-run state dictatorship, suppressed by Soviet forces.
- Singing Revolution – (1988) Bloodless overthrow of Communist Party-run state in Estonia.
- Romanian Revolution – (1989) Violent overthrow of Communist Party-run state in Romania.
- Velvet Revolution – (1989) Bloodless overthrow of Communist Party-run state in Czechoslovakia.

Islamist revolutions

- Iranian Revolution – (1979) – Popular overthrow of US-backed Shah, culminating in an Islamist cleric-led theocracy.
- Taliban – (1996) – Islamist movement in Afghanistan

Color revolutions

Note that some of these (particularly the rose and orange revolutions) only changed one government with another, and did not modify the political or economic systems of their countries. As such, they are purely political revolutions.
- Rose Revolution in Georgia (2003)
- Orange Revolution in Ukraine (2004)
- Cedar Revolution in Lebanon (2005)
- Tulip Revolution or Yellow Revolution in Kyrgyzstan (2005)

Cultural, intellectual, and philosophical revolutions

- Renaissance
- Protestant Reformation
- Scientific revolution
- Sexual revolution
- Quiet Revolution
- Consciousness Revolution

Technological revolutions

(although these revolutions always have an influence on culture)
- Agrarian Revolution
- Digital Revolution
- Neolithic Revolution
- Price revolution
- Industrial Revolution
- Second Industrial Revolution

Renault

Renault S.A. is a French vehicle manufacturer producing small to upper-midsize cars, vans, buses and trucks. When its cars were imported to and sold in the United States during the 1950s and 1960s, it was decided to pronounce the name as "Ren-ALT" in marketing to the American public, and the Anglicized pronunciation continues in common usage. However, Renault is correctly pronounced "Rhen-oh" (as it is commonly in the UK).

History

The Renault corporation was founded in 1898 as Société Renault Frères by Louis Renault and his brothers Marcel and Fernand. Louis was a bright, aspiring young engineer who had already designed and built several models before teaming up with his brothers, who had honed their business skills working for their father's textiles firm; Louis handled design and production, Marcel & Fernand handled company management. The brothers immediately recognized the publicity that could be gotten for their vehicles by participation in motor racing and Renault made itself known through achieving instant success in the first city-to-city races held in France, resulting in rapid expansion for the company. Both Louis and Marcel Renault raced company vehicles, but Marcel was killed in an accident during the 1903 Paris-Madrid race. Although Louis Renault never raced again, his company remained very involved, including their Renault AK 90CV winning the first ever Grand Prix motor racing event in 1906. Louis was to take full control of the company as the only remaining brother in 1906 when Fernand retired for health reasons. The Renault reputation for innovation was fostered from very early on - in 1899 Renault launched the first production sedan car as well as patenting the first turbocharger. At the time, cars were very much luxury items, and the price of the smallest Renaults available being 3000 francs reflected this; an amount it would take ten years for the average worker at the time to earn. As well as cars, Renault manufactured taxis, buses and commercial cargo vehicles in the pre-war years, and during World War I (1914 - 1918) branched out into ammunition, military airplanes and vehicles such as the revolutionary Renault FT-17 tank. Renault became the world's leading manufacturer of airplane engines, and the success of the company's military designs were such that Renault himself was honored by the Allies for his company's contributions to their victory. By the end of the war, Renault was the number one private manufacturer in France. Between the two world wars, Louis Renault enlarged the scope of his company, producing agricultural and industrial machinery. However, Renault struggled to compete with the increasingly popular small, affordable "people's cars" from Volkswagen and Fiat, while problems with the stock market and the workforce also adversely affected the company's growth.

Post War

During World War II, Louis Renault's factories worked for Nazi Germany. He was, for this reason, arrested during the liberation of France in 1944 and died in prison before having prepared his defense. An autopsy later proved that his neck had been broken, suggesting that he was murdered. His industrial assets were seized by the Communist-dominated provisional government of France, based on the collaboration accusation. The Renault factories became a public industry (known as Régie Nationale des Usines Renault). In the years immediately following its nationalization Renault experienced something of a resurgence, led by the rear engine 4CV model, which was launched in 1946 and proved itself a capable rival for cars such as the Morris Minor and Volkswagen Beetle, its success (more than half a million sold) making sure it remained in production until 1961. As with earlier Renault models, the company made extensive use of motor racing to promote the 4CV, the car winning both the Le Mans 24 Hours and Mille Miglia races as well as the Monte Carlo rally. However, despite the success of its flagship model, the company continued to be blighted by labor unrest, and indeed continued to be well into the 1980s. 1980s] The 4CV's replacement, the Dauphine, sold extremely well as the company expanded production and sales further abroad, including Africa and North America. The car did not sell well in North America and it was outdated by the start of the 1960s. In an attempt to revive its flagging fortunes, Renault launched two cars which were to become phenonemonally successful - the Renault 4 and Renault 8 in 1961 and 1962 respectively. The 4 in particular was to continue in production until 1992. Both cars continued Renault's motor racing traditions with great success in rallying, a tradition which was further upheld by collaborations with the Alpine company (which most famously produced the Renault-powered Alpine A110). As well as the 4 and 8, the company achieved success with the more upmarket Renault 16 launched in 1966, which continued Renault's reputation for innovation by being the world's first hatchback larger than subcompact size as well as the first hatchback with folding rear seats, which became and remains the universal standard hatchback design. The company's compact and economical Renault 5 model, launched in 1972, was another success, particularly in the wake of the 1973 energy crisis. The 5 remained in production until 1984 when it was replaced by the Super5. The formula was much the same however, and the Super5 inherited its styling lines from its father. Endangered like all of the motor industry by the energy crisis, during the mid seventies the already expansive company diversified further into other industries and continued to expand globally, including into South East Asia. The energy crisis also provoked Renault's attempt to reconquer the North American market; despite the Dauphine's success in the United States in the late 1950s, Renault had virtually disappeared from North America by the 1970s. However, in the early part of the decade, when the energy crisis-hit continent required small, economical cars, Renault began to make plans to return through a collaborative partnership with the American manufacturer AMC. This was one of a series of collaborative ventures undertaken by Renault in the late 1960s and 1970s, as the company established subsidiaries in Eastern Europe and South America (many of which remain active to the present day) and forged technological cooperation agreements with Volvo and Peugeot (for instance, for the development of the PRV V6 engine). Renault continued to increase its control over AMC, eventually owning 55% of the company by 1980. Unfortunately the American Renault-AMC partnership was not successful - the cars had so-so reliability and by the time the Renault range was ready to become established in the American market, the energy crisis was over, taking with it much of the trend for economical, compact cars. Renault sold some interesting models in the USA in the 1980's, especially the simple looking but fun Renault Alliance GTA convertible - a real automatic-top convertible with a simple but clean euro-style design with a gently sloping hood, as well as a 2.0 liter engine - big for a car of its class; and the ahead-of-its-time Renault Fuego coupe; Renault sold other models here in the 80's. Renault sold AMC to Chrysler in 1987 and the brand and its cars subsequently disappeared (though the subsidiary Jeep brand remained). Jeep In the late seventies and early eighties Renault increased its involvement in motorsport, with novel inventions such as turbochargers in their Formula One cars. The company's road car designs were revolutionary also - the Renault Espace was one of the first minivans and was to remain the most well-known minivan in Europe for at least the next two decades. The second-generation Renault 5, the European Car Of The Year-winning Renault 9, and the most luxurious Renault yet, the 25 were all released in the early 1980s, building Renault's reputation.

Restructuring

Although its cars were successful both on the road and on the track Renault was losing a billion francs a month and reported a deficit of 12.5 billion in 1984. The government intervened and Georges Besse was installed as chairman; he set about cutting costs dramatically, selling off many of Renault's non-core assets, withdrawing almost entirely from motorsports, and laying off many employees. Although this succeeded in halving the deficit by 1986, Besse's treatment of the workforce resulted in him being assassinated by the left wing terrorist group Action Directe in 1986. He was replaced by Raymond Lévy, who continued along the same lines as Besse, slimming down the company considerably with the result that by the end of 1987 the company was more or less financially stable. A revitalized Renault launched several successful new cars in the early 1990s, including the phenonemonally successful 5 replacement the Clio, the second generation Espace, the Twingo, the Laguna, and the 19. The return to success on the road was matched by a return to success on the racetrack - Renault-powered cars won the Formula One World Championship in 1992, 1993, 1996 and 1997 with Williams and in 1995 with Benetton.

Privatisation

It was eventually decided that the company's state-owned status was detrimental to its growth, and it was privatized in 1996. This new freedom allowed the company to venture once again into Eastern Europe and South America, including a new factory in Brazil and upgrades for the infrastructure in Argentina and Turkey. Turkey In the twenty-first century, Renault was to foster a reputation for distinctive, outlandish design. The second generation of the Laguna and Megane featured ambitious, angular designs which turned out to be highly successful. Less successful were the company's more upmarket models. The Avantime, a bizarre coupe/minivan hybrid, sold very poorly and was quickly discontinued while the luxury Vel Satis model did not sell as well as hoped. As well as its distinctive styling, Renault was to become known for its car safety - it is currently the car manufacturer with the largest number of models achieving the maximum 5 star rating in EuroNCAP crash tests. The Laguna was the first car to achieve a 5 star rating and in 2004 the Modus was the first small car to achieve this rating.

Current situation

The government of France owns 15.7 per cent of the company. Louis Schweitzer has been the Chairman of Renault since 1992 and CEO from 1992 to 2005. In 2005, Carlos Ghosn (also CEO of Nissan) has become Renault's CEO, Louis Schweitzer staying Chairman. Renault has a stake of 44.4 per cent in Japanese automaker Nissan together with which they form the Renault-Nissan Alliance. Nissan in turn took a 15 per cent stake in Renault in 2002. Renault also owns Samsung Motors (Renault Samsung Motors) and Dacia, as well as retaining a minority stake in Volvo Trucks. In 2004, Renault was the fifth most popular car maker in Britain behind the Ford Motor Company, Vauxhall Motors, Peugeot and Volkswagen. The most popular French car in Britain is currently the Renault Clio, which has been a strong seller throughout Europe since its launch 14 years ago. For 2004 Renault reported a 43% rise in net income to €3.5 billion and 5.9% operating margin, of which Nissan contributed €1,767 million. The Group (Renault, Dacia, Renault Samsung Motors) posted a 4.2% increase in worldwide sales to a record 2,489,401 vehicles, representing a global market share of 4.1%. Renault retained it's position as the leading brand in Europe with 1.8 million passenger cars and light commercial vehicles sold and market share of 10.8%. Renault, together with associated brands Dacia and Renault Samsung, aims to sell 4 million vehicles worldwide in 2010.

Nationalization

Notable nationalizations

See also

Public ownership

Arguments for and against

For

Against

See also

Municipalities

Municipalities as second level entities

First level entities and other forms of municipalities

See also

Privatization

Overview

Types of privatization

Arguments for and against

For

Against

Outcomes

Alternatives to privatization

Corporatization

Notable privatizations

Anti-privatization campaigns

See also

References

External links

Expropriation

Origins

United States

Europe

Australia

Other countries

Etymology

Further reading

External links

Revolution

Social and political revolutions

Ancient revolutions

Liberal revolutions

Socialist and/or Communist revolutions

Eastern European anti-Communist revolutions

Islamist revolutions

Color revolutions

Cultural, intellectual, and philosophical revolutions

Technological revolutions

See also

Renault

History

Post War

Restructuring

Privatisation

Current situation

Corporate gov