Essay on Nationalization – A Panacea for Economic Ills

Nationalization of business and industries was considered a panacea for all economic ills in all the socialist countries. In the former USSR it worked wonders for six decades in the field of industries. The country came up as a big industrial power in the world. Nationalization brought rewards in Czechoslovakia, Poland and other satellites of Russia for a few decades. Once, the industries start in the public sector; continue to be so without making any other experiment. They fell like a house of cards in 1990-91.

The cult of nationalization in Europe had a historical bearing. The concept was an offshoot of the theories propounded by Karl Marx and Friedrich Engels. It was an outcome of proletarianism. England and Germany which were the most progressive industrial countries in the days of Marx took the theory of the philosopher as a warning.

The industrialists started many welfare schemes and the State brought forth legislation to check the exploitation of workers. As the worker was satisfied he never insisted upon shifting the reins of industrial and trade establishments from the private hands to the public sector. Nationalization is a rare phenomenon in most of the democratic progressive countries of the West. Japan, the most progressive industrial country in the world has no nationalization.

Even China the last fort of Communism has invited foreign industrialists and has allowed private enterprises by Chinese themselves.

If one says that the socialist countries through nationalization, made a great success it is true. But it was a historical necessity. Since all the feudal lords, in Russia, were killed or rendered penniless there were no economic resources with the individuals. Naturally if the country had to start industries only the government could do it. The state worked as entrepreneur as the capital was owned by the State.

Actually communistic or socialistic economic set-up was State Capitalism. Once it suits a country it continues. But the myth is exploded both in Deng’s China and Boris Yeltsin’s Russia by inviting private enterprises in industries.

In the agriculture sector it failed badly in Russia. In industries people (workers) were paid wages on the basis of work they did. In the agriculture sector it was a commune work. The land was owned by the commune and the peasant got according to his needs. The sluggish and the laborious both got the same. The farmer lost his interest and stopped working hard. The produce shrunk so much that Russia had to and has to import food grains from the privately owned farms of the West. An experiment was made in Russia. The people were allowed to have kitchen farms and to keep the produce with them. It was found that the production of the kitchen farms was generally double of that of the same area in the commune. In kitchen farm the people had personal interest. The yield was more.

If this happens in a country where people were devoted to their ideology and had a high degree of national consciousness what would happen in most of the countries of the third world where national integrity is at low ebb. It is very difficult for a democratic regime like that of India to enforce work cult with an iron hand. The result is that public sector organizations in the country have been running with heavy losses.

The work in a public sector organization is no one’s work. If one enters a public sector administrative unit or public dealing organization like nationalized banks, Life Insurance Corporation, General Insurance Corporation one finds at least one-third of the staff doing nothing. A bank clerk leaves his desk at 2.30. He is safeguarded by one of the biggest trade unions in the world. Still, more and more staff is appointed every year.

Most of the industrial units in public sector do not work to full capacity in India. The capital investment is not utilized to full capacity. Combined with the sulggishness of the worker the production never reaches the optimum point. Naturally the industry shows heavy losses. The loss is compensated by increasing the prices in the commodity market. That is the fate of Iron and Steel Industry. Since most of iron and steel is manufactured in public sector the loss affects almost all industries even in the private sector. While Tata shows profits the five public sector plants show heavy losses.

In India most of the public utility services are in the public sector. Railways, bus services, electric supply, fertilizers, heavy chemicals, heavy electrical, postal services, telephone, wireless and telegram services-all are in the public sector.

The efficiency of services and the quality of products has never been at per with the products and services available in the private sector. ONGC shows profit as it imports cheap crude and sells it dear. HMT, of course is a unit that shows profits and produces quality products.

One of the problems in the public sector industries in India is that they are mostly headed not by technocrats but by bureaucrats. Delaying tactics and corruption are common features of bureaucracy. These bring inefficiency to the industrial units. It is an infection caught by all. The other problem in the public sector is the pilfering and stealing.

According to many reports it is a common feature of nationalized mines that a permit of four trucks entails one to let eight pass after greasing the palm at different levels. In state transport units and industrial units the spares sometimes disappear even before entering the workshop. In a democratic country, where morality is at discount, corruption is rampant and national consciousness is almost absent nationalization is not a panacea for economic ills. It gives rise to many ills besides the economic ones.