OCKOURI BARNES

MOB GROUP WORK - NATIONALIZED INDUSTRIES

REASONS PRIVATE SECTOR ENTERPRISES MAY BE NATIONALIZED

1. Natural Monopoly- A natural monopoly is a monopoly in an industry in which high
infrastructural costs and other barriers to entry relative to the size of the market gives the
largest supplier in an industry often the first supplier in a market gives an overwhelming
advantage over potential competitors. This frequently occurs in industries where capital
costs predominate, creating economies of scale that are large in relation to the size of the
market; examples include public utilities such as water services and electricity. A
company with a natural monopoly might be the only provider of a product or service in
an industry or geographic location. A private natural monopoly could easily exploit its
monopoly power and set higher prices to consumers. Government ownership of a natural
monopoly prevents this exploitation of monopoly power.

2. Profit Shared With the Taxpayer- If a private business was established for example:
Virgin Coaster Services decided to set the bus fares high the profit margin would go to a
small number of wealthy shareholders. If the same service was run by a nationalized
Jamaican company such as JUTC any profit from profitable coaster services would go to
government revenues and enable lower tax rates.

3. Government Investment- Some industries require long term investment to improve

services over time. This long term investment may not be profitable in the short term so
without government intervention they may suffer from lack of long term investment.

4. Free Market Failure- A company might be under operation in a free market system and
fails however when managed by the government the business can make decent profit
showing that nationalized industries can be successful in running a service that has the
potential to be profitable.

5. To avoid unemployment- Nationalisation may affect employment within those services

that private companies are likely to terminate due to unprofitability, for example: a
nationalised railway service is more likely to maintain staffing for rural services and
stations whereas private owners are more likely to cut staff and remove the less profitable
services
Nationalisation vs Privatisation