Nationalization Socialist response to the inequalities of Capitalism

What is nationalization? Nationalization is when a government takes over an industry and that industry comes under government control. This is usually done for one of two reasons: –The industry is central to the functioning of the daily lives of the citizens. For example: the water company –The industry is a major industry in the nation and the revenues that it generates could be fairly distributed to all the citizens For example: the oil industry.

Why are we studying this now? Not limited to Latin America –Nationalization has occurred in many countries and in many contexts China: all industries Canada: railroad industry 1918 Cuba: all industries by 1968 Ireland: Anglo-Irish Bank in response to the financial crisis in 2009 Mexico: oil industry in 1938 Russia: Gazprom (oil industry) in 1998 UK: bus companies in 1969 USA: private airport security firms 2001 in response to the 9/11 attacks USA: passenger rail service in 1971(AMTRAK)

What about Latin America? Advocated by Latin American Socialists such as Hugo Chavez and Evo Morales –Hugo Chavez: Oil industry (2007) Cement industry (2008) Rice processing (2009) Some French owned supermarkets (2010) Glass manufacturing (2010) Steel (2010) Almost all of these had been foreign owned in whole or in part –Evo Morales: Natural Gas industry

Why is Chavez doing all of this? Response to imperialism or the perception of imperialism –Many large foreign countries came to Latin America to develop these industries due to proximity to natural resources. These countries needed foreign expertise. Foreign companies needed raw materials. –Foreign companies are perceived to be not giving a fair share of the profits to the people of the country in question.

History of Oil Industry in Venezuela Discovery ( ) Venezuelan control ( ) Oil boom and nationalization ( ) Government reassertion of control (1999- Present)

Discovery of Oil 1912 Royal Dutch Shell Standard Oil Huge profits (Dutch Disease)

Dutch Disease Economy reliant on one commodity Others parts of economy do not develop Forces country to import goods

Venezuelan Control 1943 Hydrocarbons Act Foreign companies could not profit from oil more than Venezuela Few income taxes Over supply and price decline OPEC 1960 Venezuelan Oil Corporation

Oil Boom and Nationalization 1973 Middle East oil embargo High revenue High government spending 1976 Petroleos de Venezuela (PDVSA) 1980’s plummeting oil prices; weakened OPEC

Reasserting Control PDVSA pumping as much oil as possible Needed to decrease supply to increase price PDVSA had become too independent PDVSA was largest Latin American company in 2000 and ranked in the lowest 50 in regards to effiency Administration was too large, career oil executives Chavez removed PDVSA career management from high positions and replaced them with Socialist allies Oil revenues (for the most part) are to be used for: health care, education, and government savings fund)

Assessing Nationalization Is nationalizing an industry a good thing or a bad thing? What are the potential benefits of nationalization? What are the potential problems with nationalization? What industries in your home country do you think should be nationalized? Are there any industries that are nationalized that should not be?