Government Revenue: Nationalization vs Privatization

Now, we've seen both sides of the economic spectrum and everything in between. What system do you support? Well, that's up to you. But no matter what opinion you hold, you must admit that the state, that is the government, has to have some money to run the government. to provide services like a military or healthcare or welfare to build and maintain infrastructure like roads or bridges or post offices which encourage economic growth actually. I mean, if the government doesn't do even a bare minimum of anything, what the hell good is it? If it does nothing for its citizens, why would it even exist? And the answer is it doesn't. So all governments do something. I mean, even those on the rabid conservative right or die-hard libertarians or the tea baggers they would all agree that yeah, your state probably needs a military to protect it and roads are cool, we like driving on roads so where is the government going to get the money to produce those things for the citizens, even if it's a minimum of stuff that they give those citizens? I mean, the government doesn't make anything. They pass laws and print money and stuff, but they don't produce anything of economic value that they then sell in a government store somewhere to raise money to build roads. That's not how it works. How does a government make money to pay the bills, to pay the bureaucrats, to pay the soldiers fighting in the military? There are two ways a government can raise revenue to provide these services. One, Taxes! Everybody's non-favorite. Taxes like an income tax, where every year you gotta pay a percentage of what you've made to the government so they can have their money to pay bills and do stuff. Or a sales tax, every time you go to the grocery store you gotta pay a couple extra pennies on every dollar to get thrown into the government kitty so they can provide services to everybody. Or... Two, the government can outright control some resources or some business. We've talked about some of this stuff already. And an outright controlling resource or business would make money doing that business. Yes, outright control of an industry so that when that business makes money, that money is going into the government bank account. Now, to do this, A state government might sometimes have to nationalize an industry or resource and if they really suck at running it and it's getting ready to go bankrupt, they might consequently be forced to privatize that same resource or industry. And, wait, what? You don't know what those terms mean? Oh, okay. Alright, well, we really need to get hip to these things because they're very important to understanding today's global economy and the economy of your state no matter what state you're in. Nationalization is when a state, the government of a state, physically and literally takes over a resource or an industry from private individuals or private business, takes it out of the private sector, and makes it state property. And the state then starts running the business and making the profit off of it. Now the best example of this in today's world, we have to head south of the border to visit our good friend in Venezuela, President Hugo Hugo Chavez, who is the nationalization champion of planet Earth. He's been in office about a decade and he's nationalized everything he can get his grubby little hands on. A particular note was the oil industry, and here's why he did it and here's how he did it. Most often it's not simply a matter of the state just grabbing it and taking and running saying, Get out of here! Exxon, we hate your guts and we're taking over everything. No, it usually happens more like this. Chavez looked at the situation and said, Okay, Exxon and BP and some other companies come down here and pump out all of the Venezuelan oil. Now we have a contract with them and they give us like a buck or two a barrel, but then they go and sell it for like $100 a barrel. And what's the deal with that? I mean, it's Venezuelan oil. It's our... Oil? Why are we letting this company, a private company, make almost all the profit? We're going to nationalize this. And the way they did it is they went to Exxon and BP and other oil companies and said, Hey, we have these contracts with you. It's our oil. You're in our country. Here's the deal. We're gonna buy you out. Yes, thanks for building the old platform and the old pipelines and all that stuff. Now give us a price. We're buying it all from you and we are going to run it from now on. Exxon actually balked at this and said, no, we're not selling and then Venezuela said, okay, we're writing you a check. Here's the check. Get the hell out. Out. Clear off the oil platforms. The Venezuelan government is now in possession of this and running it. That is the way that it typically happens. An offer is made. Most often times the corporation or company will take the offer and there's negotiation, but if they don't, the state can then just come in and completely seize it and that's kind of what happened in the Venezuelan situation. Now, this is why diehard capitalist, free market capitalist, despise nationalization. They hate it with a passion. And this is also why most of the rich Western countries, including the United States, totally hate nationalization too and why they personally hate Hugo Chavez. Now why is it they hate him so much? Well, because where are most multinational corporations who would be pumping oil out of Venezuela from? Duh! They're from America or Europe, from rich countries. So anytime a business gets its shit nationalized by another country, it will typically go back home to its country of origin and complain to the government and say, Hey! Venezuela just stole our stuff and we're a US corporation, therefore they stole US property and Uncle Sam you should come down there and help us get it back. That's happened many many times in history as a matter of fact. It hasn't happened so much with the Venezuela situation yet. However, you should know this. When Hugo Chavez in Venezuela did this to Exxon, the US six months later froze all Venezuela assets in the United States and is suing the state of Venezuela in a world court as is Exxon to get their stuff back, to get more money back from this nationalization. That is kind of how it happens in today's world. Make sense? Now let's get to privatization because it's way easier. It's the opposite. Privatization is when a government sells off an industry or just leases out or gives away. the rights to the resources of their country to private industry. You guys go do it. You'll probably do it better, faster, cheaper. Have it. The government's not going to get involved in this. The best example of this in the modern world, and there are many, but the one I like the most is Japan. Sold its post office. I know, I mean, isn't that what makes big boy countries big boy countries? Is that they have cool things like a military and a post office? Yeah, but Japan looked at it and said, No, I mean it was good for a long time and it helps the economy and it's good for the country but we're gonna let a private enterprise person do it. They'll probably do it better and cheaper. We won't have to pay for it. It'll be great. So they privatized their post office. Yeah, you do anything you want. Which does kind of bring up in the future, will people privatize their militaries? Will states privatize their militaries and just have a mercenary for higher army? Could be, who knows? Let's actually ask some folks who might have an opinion on this. Hey fellas, how do you guys feel about the privatization of an industry in your country? Well, I don't know. I mean if the government's gonna give away all the resources and industries of the state to the private sector, they darn tootin' better heavily regulate that private sector to protect the workers and protect the environment. And we're gonna have to raise taxes then on those industries and those products to raise revenue for the government. to spend on the people for social programs and stuff, just so you know. Good! Great! Give it to private enterprise! Let them run the business! Get the pro-regulation, pro-rules, pro-labor, pro-environment government the hell out of the way! And let us make the money doing the business. And nationalization? Well, goody, goody gumdrops! We should run that stuff! I mean, all the resources and industries in our state are really property of all of us in the state. Let the government run it all, make the money off of it, and therefore they have more money to provide more benefits to the peoples in our state like welfare or roads and bridges or health care. Whoopee! Blasphemy! That's just a slippery slope heading towards communism when the government starts taking over everything. Ah! Yeah, as you can see there are pros and cons to a state running the show for an industry resource or alternatively for letting private business run the show entirely. I mean, let's face it, government bureaucracies are mired in red tape and rules and regulations and standards that have to be enforced and what the hell do government workers know about growing food or pumping oil or lending money? You have to let specialists. who know their stuff, run these industries if you want the best results. They're the people trained for it. And the competitive nature of free market capitalism and private businesses encourages streamlining of industry costs Savings which can be passed on to the consumer making everything cheaper for everybody. They also lead to experimentation and innovation which makes everything better in the economy. Companies compete with each other and bad companies go out of business and good companies thrive. And this makes the economy grow with new products and new services and new ways of doing stuff. I mean it's kind of good. At the same time, however, Shouldn't the people of the state benefit from the resource base of the state? Isn't the oil and the gas and the coal and the water and the post offices and the pure labor of the workers the property of all the people in the state? Why should all the money go to a private industry who's just gonna come in, take all that shit, use what they can, pay pennies on the dollar for it, then turn around and sell it for hundreds of dollars? Won't the concentration of wealth into fewer and fewer hands mean less stuff for the masses, more inequality overall in the society? Shouldn't the state just make all the money it can from the resources of the state and use that money to give the people the stuff they need or want? Or at least they could do that instead of taxing the people. It would not be for that. I mean, nationalize it, take it over, let the government run it, give all the wealth back to the citizens or at least not tax them. Now, are all the countries that nationalize something, nationalize a resource or industry, Are they just trying to be communist? Are they swinging over the left? Are they going to take everything over and give away all of the wealth to all the peoples whether they're slack asses or not? No, no, no. Not really. There are several reasons why any country might nationalize an industry or resource in today's world. In times of war or emergency a government will very often times nationalize critical industries which they can't do without in times of war or an emergency. Things like the steel industry or even food production. World War II, you've got to have steel to keep making tanks and airplanes to fight the Nazis. So you can't have a disruption. You can't have people price gouging the government to try to make more money at the time. You can't have that so a government will come in and take over the steel industry and say, okay, here's the deal. We're in a state of war. You will do what we say. Later we'll privatize, but at this period We are in charge. You keep working, but we're in charge. The second reason a government might nationalize an industry is when the social good far outweighs the cost of running that industry or resource. And that gets back to things like a post office. A post office really doesn't make that much money, but man, it's really good for all the citizens of the society and it really promotes economic growth. It promotes interaction and trade and lots of things. It's just good for everybody. So why doesn't a private industry run it? Well, like I said, because it really doesn't make that much money. But a government could come in and say, Hey, but it's so good. We'll spend the tax dollars, we'll have the post office. And many countries ...have of course pushed the envelope even further and said, like, healthcare. We're going to nationalize the healthcare industry because we think, overall, having a healthy group of people in our country is way better than having a bunch of sick people. The benefits from having a healthy population will far outstrip the cost of running the industry. That's why many states have a national healthcare system. The third reason that a state may nationalized industry is to save a flailing business. If a company is just getting ready to go bankrupt and it's a very big or very important company or it employs lots of people or it's critical. to something in the economy, then oftentimes in today's world, particularly right now in today's world, a government will go in and say, hey, we're going to take it over, help you guys out, because if we don't, we'll lose millions of jobs, or it'll cause a recession or depression, or lots of bad things will happen. So, times of war and emergency, when the social good outweighs the cost, or to save a flailing industry is why any country Capitalist or socialist may nationalize a country. Let me give you a couple other examples here to see how this is playing out in the modern world as well. And we'll continue to pick on oil. We already talked about Venezuela. Let's go to the Middle East. Many countries in the Middle East nationalize their oil industry. And can you blame them? And I ain't even saying you're supposed to be a commie or on the left side of the spectrum, but Saudi Arabia, Kuwait, these are countries that a hundred years ago were impoverished and the outside foreign corporations are the ones that controlled most of the oil in those countries and made the lion's share of the profits on that oil. So BP or Exxon would go into Saudi Arabia and say, Hey, we'll get All the oil out for you and here we're going to give you a 50 cents a barrel. Isn't that a great deal? We're going to go sell it for 500 a barrel. And about 1950-1960 many of the Middle Eastern countries looked at this equation and said, What? What's going on here? We think we're going to nationalize and take over this industry because now oil is worth a shit ton of money and we would like us to have that shit ton of money here in our country. So thanks BB, thanks Exxon, thanks Hocal. We are going to take this over and we are going to make the $100-$500 a barrel. And again, can you blame them? They have used the trillions and trillions of dollars they've made off of those nationalized industries to give free education and free healthcare and free everything to the citizens of their state. In that situation, the social good far outstrips the cost of actually running the industry, so of course the state does it. Let's stick with oil and go to Russia now to see how these things flip flop back and forth. 100 years ago, oil was in private hands. Private business ran the oil industry of Russia but then they had this little thing called the Communist Revolution and of course if you're going to be a communist state you have to nationalize everything. The state takes over all of it and of course they did that to take over the oil industry for the give to the Russians and when that happened they nationalized it. The government owned and controlled the oil industry and that went on for decades and decades, but then the Soviet Union collapsed in 1990 and the Russian government said, Hey, we're broke and we don't got the money to even pay workers salaries so privatize it. They privatized their oil industry and went into private hands. But then a decade later, Russia had gotten its act back together by the year 2000 and when Vladimir Putin had come to office and he looked at this equation again and said, Why did we give away all our oil? Oil is worth a hell ton of money right now. Oh, we're going to take that back. So they re-nationalized it again. All those crazy Russians. And they have made trillions again off of their oil industry in the last decade. Can you blame them? They actually did a partial nationalization. There are still some private industry in Russia, but they took back over the lion's share of the oil industry so they can control it and make most of the money off of it. But, having said all that about oil in the Middle East and Russia, Privatization has been all the rage for decades now all over the world. Many governments around the world have sold off ownership of resources or business operations to private industry mostly due to shifting economic systems. On one side or the other. Specifically, Communist Soviet Union collapsed and went to full-on capitalism. So they owned everything and they sold it all off. Communist China, while it didn't collapse, has given up on the communist thing too and they have been rapidly shifting to a capitalist system specifically the last 30 years. They're the Wild West of capitalism there. So they have been selling off control of the steel industry and this industry and the milk industry. The Chinese said, now we're just not going to deal with it. Let private hands take care of it. They can make more money doing it. We'll just tax them. Also though, socialist India. India since its inception in 1947 looked around and said, hey, we got like a a billion poor people here. We have to take care of these poor people. We have to provide lots of benefits so we're going to try to run as much as possible in the economy and control it as much as possible to give benefits to our citizens and they have pretty much given it up in the last decade. They said, oh my are you kidding me? We can't control all this mess. There's just too much going on and we don't run it that well and we get this big blow to bureaucracy so sell it and they have sold off a lot of their stuff. including things like the train system, transportation systems in India have been privatized and the telecommunications system privatized. They're really on the bandwagon towards full on capitalism. Let it go. Let private industry take care of it. This shift has also occurred though because of what I just referenced in India. The bloated bureaucracies of these states they just can't manage and streamline the businesses as well as private industry can. I mean, not even close. And the governments figure correctly in most cases that they can actually make way more money by just taxing the products that the private industry will produce once they privatize. all those industries. So, we're not going to make the stuff. Let somebody else do it and we'll just levy a tax on it. Or maybe we'll sell licenses to businesses to produce this stuff or to pull out this oil or to do whatever. And we're going to make a lot more money just off of taxes and fees than actually having to produce everything and do everything and pay all the bills ourselves and then try to squeak a profit off the top of that. I mean, you think about running a business. You have to have workers and workman's comp and people get sick and you have health care insurance and they retire, you have to pay pensions, or if there's an environmental disaster or spill you have to clean it up. India and many governments say, Oh, the hell with that. We don't want all that mess. We're just gonna tax the hell out of you and we'll get the money from that. We're just gonna check at the end of the month on taxes and we're done. And it's a pretty good system for a lot of folks. The privatization thing has also been going on though because Big corporations have gotten really big in the last several decades too. And these big corporations and multinational corporations they have a lot of power and they can lobby governments very hard and exert a lot of pressure on states to free up those resources and privatize those industries and let them go so then they can get their hands on them and make a hell of a lot of money. And I gotta stick up for the corporations here. They do do things well. And that's the argument that can be made time and time again. Let's be honest. Who can get the oil out of Nigeria better? The government of Nigeria or Exxon? Sorry to my Nigerian friends, but Nigeria regularly ranks one of the most corrupt nations on the planet. Everybody's got to pay off everybody just to get a dog license. There's no way. The Nigerian government would be as efficient, even remotely as efficient, as getting up oil out of the ground and getting it to the markets as Exxon would. A private business which is home to do that one thing. That's why privatization has been all of the rage. But... Am I suggesting that nationalization is now dead? Ohohohohoho! Au contraire, mon frere. It is back and back with a passion right now in your lifetimes. And Here is the cover of The Economist from February 2009. The Economist is actually a center-right publication. They are full-on, full, big-time supporters of free market capitalism and little government regulation and don't have the government messing in the economy. And here's their cover from February of 2009 with an arm reaching out of the grave. The return of economic nationalism. That's right. It's terrifying to the free market capitalist. Ah, they're gonna come take our stuff. And they don't like it. The economists didn't like it. But what are they referring to here? Well, they're referring to current events of the 2008 recession. But there are also some other things going on that I'm going to get to first. I already pointed out Hugo Chavez, our man down in Venezuela, is the expropriating madman of the century. And his leftist revolution, social revolution, moving things to the left, has actually been spreading across big parts of Latin America and perhaps even Africa. He nationalized the oil in his country, the cement, grocery stores, milk, hell, he'll try to grab anything he can. But more importantly than him personally doing in Venezuela is that this movement has been gaining steam in places like Bolivia, Ecuador, Nicaragua that have said, yes, we think we're going to take over the gas industry of our state too. We're going to take over the water industry that was in private hands. Why would that have been in private hands anyway? That should be property of the state. So this is a movement which is gaining steam in some parts of the world, mostly Latin America right now, places with extr- extreme poverty rates and extreme wealth disparity see this tactic of nationalization as the only way to level the playing field against multinational corporations or corporations in general or the West, the rich countries from which most of these corporations are from. But Hugo and the Latin leftists are not alone anymore. Think about the 2008 meltdown recession in the United States which turned into a global phenomenon has even the Western countries scrambling and nationalizing like no one would have believed just a few years ago. It started with US President George Bush who nationalized Freddie Mac and Fannie Mae, financial institutions that were getting ready to collapse because they were too important to collapse. And then US President Barack Obama picked up the ball and ran with it. Partly nationalizing banks, financial institutions, car manufacturers. and couple all this nationalization activity with the Obama administration's move to heavily regulate healthcare, perhaps socializing the medicine, and he looks like a full-on nationalizing leftist commie. Well, let's be real. The dude is not really trying to recreate all the success of the Soviet Union, but he is certainly changing the economic landscape of the United States. And now let's turn to looking at where the United States and many other states in the world fit into the economic spectrum we have now outlined.

to provide services like a military or healthcare or welfare to build and maintain infrastructure like roads or bridges or post offices which encourage economic growth actually. I mean, if the government doesn't do even a bare minimum of anything, what the hell good is it? If it does nothing for its citizens, why would it even exist? And the answer is it doesn't. So all governments do something.

I mean, even those on the rabid conservative right or die-hard libertarians or the tea baggers they would all agree that yeah, your state probably needs a military to protect it and roads are cool, we like driving on roads so where is the government going to get the money to produce those things for the citizens, even if it's a minimum of stuff that they give those citizens? I mean, the government doesn't make anything. They pass laws and print money and stuff, but they don't produce anything of economic value that they then sell in a government store somewhere to raise money to build roads. That's not how it works.

How does a government make money to pay the bills, to pay the bureaucrats, to pay the soldiers fighting in the military? There are two ways a government can raise revenue to provide these services. One, Taxes! Everybody's non-favorite.

Taxes like an income tax, where every year you gotta pay a percentage of what you've made to the government so they can have their money to pay bills and do stuff. Or a sales tax, every time you go to the grocery store you gotta pay a couple extra pennies on every dollar to get thrown into the government kitty so they can provide services to everybody. Or... Two, the government can outright control some resources or some business. We've talked about some of this stuff already.

And an outright controlling resource or business would make money doing that business. Yes, outright control of an industry so that when that business makes money, that money is going into the government bank account. Now, to do this, A state government might sometimes have to nationalize an industry or resource and if they really suck at running it and it's getting ready to go bankrupt, they might consequently be forced to privatize that same resource or industry. And, wait, what?

You don't know what those terms mean? Oh, okay. Alright, well, we really need to get hip to these things because they're very important to understanding today's global economy and the economy of your state no matter what state you're in. Nationalization is when a state, the government of a state, physically and literally takes over a resource or an industry from private individuals or private business, takes it out of the private sector, and makes it state property.

And the state then starts running the business and making the profit off of it. Now the best example of this in today's world, we have to head south of the border to visit our good friend in Venezuela, President Hugo Hugo Chavez, who is the nationalization champion of planet Earth. He's been in office about a decade and he's nationalized everything he can get his grubby little hands on. A particular note was the oil industry, and here's why he did it and here's how he did it. Most often it's not simply a matter of the state just grabbing it and taking and running saying, Get out of here!

Exxon, we hate your guts and we're taking over everything. No, it usually happens more like this. Chavez looked at the situation and said, Okay, Exxon and BP and some other companies come down here and pump out all of the Venezuelan oil.

Now we have a contract with them and they give us like a buck or two a barrel, but then they go and sell it for like $100 a barrel. And what's the deal with that? I mean, it's Venezuelan oil.

It's our... Oil? Why are we letting this company, a private company, make almost all the profit? We're going to nationalize this.

And the way they did it is they went to Exxon and BP and other oil companies and said, Hey, we have these contracts with you. It's our oil. You're in our country. Here's the deal.

We're gonna buy you out. Yes, thanks for building the old platform and the old pipelines and all that stuff. Now give us a price.

We're buying it all from you and we are going to run it from now on. Exxon actually balked at this and said, no, we're not selling and then Venezuela said, okay, we're writing you a check. Here's the check.

Get the hell out. Out. Clear off the oil platforms.

The Venezuelan government is now in possession of this and running it. That is the way that it typically happens. An offer is made.

Most often times the corporation or company will take the offer and there's negotiation, but if they don't, the state can then just come in and completely seize it and that's kind of what happened in the Venezuelan situation. Now, this is why diehard capitalist, free market capitalist, despise nationalization. They hate it with a passion. And this is also why most of the rich Western countries, including the United States, totally hate nationalization too and why they personally hate Hugo Chavez.

Now why is it they hate him so much? Well, because where are most multinational corporations who would be pumping oil out of Venezuela from? Duh! They're from America or Europe, from rich countries.

So anytime a business gets its shit nationalized by another country, it will typically go back home to its country of origin and complain to the government and say, Hey! Venezuela just stole our stuff and we're a US corporation, therefore they stole US property and Uncle Sam you should come down there and help us get it back. That's happened many many times in history as a matter of fact. It hasn't happened so much with the Venezuela situation yet. However, you should know this.

When Hugo Chavez in Venezuela did this to Exxon, the US six months later froze all Venezuela assets in the United States and is suing the state of Venezuela in a world court as is Exxon to get their stuff back, to get more money back from this nationalization. That is kind of how it happens in today's world. Make sense?

Now let's get to privatization because it's way easier. It's the opposite. Privatization is when a government sells off an industry or just leases out or gives away.

the rights to the resources of their country to private industry. You guys go do it. You'll probably do it better, faster, cheaper. Have it.

The government's not going to get involved in this. The best example of this in the modern world, and there are many, but the one I like the most is Japan. Sold its post office. I know, I mean, isn't that what makes big boy countries big boy countries? Is that they have cool things like a military and a post office?

Yeah, but Japan looked at it and said, No, I mean it was good for a long time and it helps the economy and it's good for the country but we're gonna let a private enterprise person do it. They'll probably do it better and cheaper. We won't have to pay for it.

It'll be great. So they privatized their post office. Yeah, you do anything you want.

Which does kind of bring up in the future, will people privatize their militaries? Will states privatize their militaries and just have a mercenary for higher army? Could be, who knows? Let's actually ask some folks who might have an opinion on this.

Hey fellas, how do you guys feel about the privatization of an industry in your country? Well, I don't know. I mean if the government's gonna give away all the resources and industries of the state to the private sector, they darn tootin' better heavily regulate that private sector to protect the workers and protect the environment. And we're gonna have to raise taxes then on those industries and those products to raise revenue for the government. to spend on the people for social programs and stuff, just so you know.

Good! Great! Give it to private enterprise!

Let them run the business! Get the pro-regulation, pro-rules, pro-labor, pro-environment government the hell out of the way! And let us make the money doing the business.

And nationalization? Well, goody, goody gumdrops! We should run that stuff! I mean, all the resources and industries in our state are really property of all of us in the state. Let the government run it all, make the money off of it, and therefore they have more money to provide more benefits to the peoples in our state like welfare or roads and bridges or health care.

Whoopee! Blasphemy! That's just a slippery slope heading towards communism when the government starts taking over everything.

Ah! Yeah, as you can see there are pros and cons to a state running the show for an industry resource or alternatively for letting private business run the show entirely. I mean, let's face it, government bureaucracies are mired in red tape and rules and regulations and standards that have to be enforced and what the hell do government workers know about growing food or pumping oil or lending money? You have to let specialists.

who know their stuff, run these industries if you want the best results. They're the people trained for it. And the competitive nature of free market capitalism and private businesses encourages streamlining of industry costs Savings which can be passed on to the consumer making everything cheaper for everybody. They also lead to experimentation and innovation which makes everything better in the economy.

Companies compete with each other and bad companies go out of business and good companies thrive. And this makes the economy grow with new products and new services and new ways of doing stuff. I mean it's kind of good. At the same time, however, Shouldn't the people of the state benefit from the resource base of the state?

Isn't the oil and the gas and the coal and the water and the post offices and the pure labor of the workers the property of all the people in the state? Why should all the money go to a private industry who's just gonna come in, take all that shit, use what they can, pay pennies on the dollar for it, then turn around and sell it for hundreds of dollars? Won't the concentration of wealth into fewer and fewer hands mean less stuff for the masses, more inequality overall in the society? Shouldn't the state just make all the money it can from the resources of the state and use that money to give the people the stuff they need or want? Or at least they could do that instead of taxing the people.

It would not be for that. I mean, nationalize it, take it over, let the government run it, give all the wealth back to the citizens or at least not tax them. Now, are all the countries that nationalize something, nationalize a resource or industry, Are they just trying to be communist?

Are they swinging over the left? Are they going to take everything over and give away all of the wealth to all the peoples whether they're slack asses or not? No, no, no. Not really.

There are several reasons why any country might nationalize an industry or resource in today's world. In times of war or emergency a government will very often times nationalize critical industries which they can't do without in times of war or an emergency. Things like the steel industry or even food production. World War II, you've got to have steel to keep making tanks and airplanes to fight the Nazis.

So you can't have a disruption. You can't have people price gouging the government to try to make more money at the time. You can't have that so a government will come in and take over the steel industry and say, okay, here's the deal. We're in a state of war. You will do what we say.

Later we'll privatize, but at this period We are in charge. You keep working, but we're in charge. The second reason a government might nationalize an industry is when the social good far outweighs the cost of running that industry or resource. And that gets back to things like a post office. A post office really doesn't make that much money, but man, it's really good for all the citizens of the society and it really promotes economic growth.

It promotes interaction and trade and lots of things. It's just good for everybody. So why doesn't a private industry run it? Well, like I said, because it really doesn't make that much money. But a government could come in and say, Hey, but it's so good.

We'll spend the tax dollars, we'll have the post office. And many countries ...have of course pushed the envelope even further and said, like, healthcare. We're going to nationalize the healthcare industry because we think, overall, having a healthy group of people in our country is way better than having a bunch of sick people. The benefits from having a healthy population will far outstrip the cost of running the industry.

That's why many states have a national healthcare system. The third reason that a state may nationalized industry is to save a flailing business. If a company is just getting ready to go bankrupt and it's a very big or very important company or it employs lots of people or it's critical.

to something in the economy, then oftentimes in today's world, particularly right now in today's world, a government will go in and say, hey, we're going to take it over, help you guys out, because if we don't, we'll lose millions of jobs, or it'll cause a recession or depression, or lots of bad things will happen. So, times of war and emergency, when the social good outweighs the cost, or to save a flailing industry is why any country Capitalist or socialist may nationalize a country. Let me give you a couple other examples here to see how this is playing out in the modern world as well.

And we'll continue to pick on oil. We already talked about Venezuela. Let's go to the Middle East. Many countries in the Middle East nationalize their oil industry.

And can you blame them? And I ain't even saying you're supposed to be a commie or on the left side of the spectrum, but Saudi Arabia, Kuwait, these are countries that a hundred years ago were impoverished and the outside foreign corporations are the ones that controlled most of the oil in those countries and made the lion's share of the profits on that oil. So BP or Exxon would go into Saudi Arabia and say, Hey, we'll get All the oil out for you and here we're going to give you a 50 cents a barrel. Isn't that a great deal? We're going to go sell it for 500 a barrel.

And about 1950-1960 many of the Middle Eastern countries looked at this equation and said, What? What's going on here? We think we're going to nationalize and take over this industry because now oil is worth a shit ton of money and we would like us to have that shit ton of money here in our country.

So thanks BB, thanks Exxon, thanks Hocal. We are going to take this over and we are going to make the $100-$500 a barrel. And again, can you blame them? They have used the trillions and trillions of dollars they've made off of those nationalized industries to give free education and free healthcare and free everything to the citizens of their state. In that situation, the social good far outstrips the cost of actually running the industry, so of course the state does it.

Let's stick with oil and go to Russia now to see how these things flip flop back and forth. 100 years ago, oil was in private hands. Private business ran the oil industry of Russia but then they had this little thing called the Communist Revolution and of course if you're going to be a communist state you have to nationalize everything. The state takes over all of it and of course they did that to take over the oil industry for the give to the Russians and when that happened they nationalized it. The government owned and controlled the oil industry and that went on for decades and decades, but then the Soviet Union collapsed in 1990 and the Russian government said, Hey, we're broke and we don't got the money to even pay workers salaries so privatize it.

They privatized their oil industry and went into private hands. But then a decade later, Russia had gotten its act back together by the year 2000 and when Vladimir Putin had come to office and he looked at this equation again and said, Why did we give away all our oil? Oil is worth a hell ton of money right now. Oh, we're going to take that back. So they re-nationalized it again.

All those crazy Russians. And they have made trillions again off of their oil industry in the last decade. Can you blame them? They actually did a partial nationalization. There are still some private industry in Russia, but they took back over the lion's share of the oil industry so they can control it and make most of the money off of it.

But, having said all that about oil in the Middle East and Russia, Privatization has been all the rage for decades now all over the world. Many governments around the world have sold off ownership of resources or business operations to private industry mostly due to shifting economic systems. On one side or the other. Specifically, Communist Soviet Union collapsed and went to full-on capitalism.

So they owned everything and they sold it all off. Communist China, while it didn't collapse, has given up on the communist thing too and they have been rapidly shifting to a capitalist system specifically the last 30 years. They're the Wild West of capitalism there.

So they have been selling off control of the steel industry and this industry and the milk industry. The Chinese said, now we're just not going to deal with it. Let private hands take care of it.

They can make more money doing it. We'll just tax them. Also though, socialist India.

India since its inception in 1947 looked around and said, hey, we got like a a billion poor people here. We have to take care of these poor people. We have to provide lots of benefits so we're going to try to run as much as possible in the economy and control it as much as possible to give benefits to our citizens and they have pretty much given it up in the last decade. They said, oh my are you kidding me?

We can't control all this mess. There's just too much going on and we don't run it that well and we get this big blow to bureaucracy so sell it and they have sold off a lot of their stuff. including things like the train system, transportation systems in India have been privatized and the telecommunications system privatized.

They're really on the bandwagon towards full on capitalism. Let it go. Let private industry take care of it. This shift has also occurred though because of what I just referenced in India. The bloated bureaucracies of these states they just can't manage and streamline the businesses as well as private industry can.

I mean, not even close. And the governments figure correctly in most cases that they can actually make way more money by just taxing the products that the private industry will produce once they privatize. all those industries.

So, we're not going to make the stuff. Let somebody else do it and we'll just levy a tax on it. Or maybe we'll sell licenses to businesses to produce this stuff or to pull out this oil or to do whatever.

And we're going to make a lot more money just off of taxes and fees than actually having to produce everything and do everything and pay all the bills ourselves and then try to squeak a profit off the top of that. I mean, you think about running a business. You have to have workers and workman's comp and people get sick and you have health care insurance and they retire, you have to pay pensions, or if there's an environmental disaster or spill you have to clean it up. India and many governments say, Oh, the hell with that.

We don't want all that mess. We're just gonna tax the hell out of you and we'll get the money from that. We're just gonna check at the end of the month on taxes and we're done. And it's a pretty good system for a lot of folks. The privatization thing has also been going on though because Big corporations have gotten really big in the last several decades too.

And these big corporations and multinational corporations they have a lot of power and they can lobby governments very hard and exert a lot of pressure on states to free up those resources and privatize those industries and let them go so then they can get their hands on them and make a hell of a lot of money. And I gotta stick up for the corporations here. They do do things well.

And that's the argument that can be made time and time again. Let's be honest. Who can get the oil out of Nigeria better? The government of Nigeria or Exxon?

Sorry to my Nigerian friends, but Nigeria regularly ranks one of the most corrupt nations on the planet. Everybody's got to pay off everybody just to get a dog license. There's no way. The Nigerian government would be as efficient, even remotely as efficient, as getting up oil out of the ground and getting it to the markets as Exxon would.

A private business which is home to do that one thing. That's why privatization has been all of the rage. But...

Am I suggesting that nationalization is now dead? Ohohohohoho! Au contraire, mon frere.

It is back and back with a passion right now in your lifetimes. And Here is the cover of The Economist from February 2009. The Economist is actually a center-right publication. They are full-on, full, big-time supporters of free market capitalism and little government regulation and don't have the government messing in the economy. And here's their cover from February of 2009 with an arm reaching out of the grave.

The return of economic nationalism. That's right. It's terrifying to the free market capitalist. Ah, they're gonna come take our stuff. And they don't like it.

The economists didn't like it. But what are they referring to here? Well, they're referring to current events of the 2008 recession. But there are also some other things going on that I'm going to get to first. I already pointed out Hugo Chavez, our man down in Venezuela, is the expropriating madman of the century.

And his leftist revolution, social revolution, moving things to the left, has actually been spreading across big parts of Latin America and perhaps even Africa. He nationalized the oil in his country, the cement, grocery stores, milk, hell, he'll try to grab anything he can. But more importantly than him personally doing in Venezuela is that this movement has been gaining steam in places like Bolivia, Ecuador, Nicaragua that have said, yes, we think we're going to take over the gas industry of our state too.

We're going to take over the water industry that was in private hands. Why would that have been in private hands anyway? That should be property of the state. So this is a movement which is gaining steam in some parts of the world, mostly Latin America right now, places with extr- extreme poverty rates and extreme wealth disparity see this tactic of nationalization as the only way to level the playing field against multinational corporations or corporations in general or the West, the rich countries from which most of these corporations are from. But Hugo and the Latin leftists are not alone anymore.

Think about the 2008 meltdown recession in the United States which turned into a global phenomenon has even the Western countries scrambling and nationalizing like no one would have believed just a few years ago. It started with US President George Bush who nationalized Freddie Mac and Fannie Mae, financial institutions that were getting ready to collapse because they were too important to collapse. And then US President Barack Obama picked up the ball and ran with it. Partly nationalizing banks, financial institutions, car manufacturers.

and couple all this nationalization activity with the Obama administration's move to heavily regulate healthcare, perhaps socializing the medicine, and he looks like a full-on nationalizing leftist commie. Well, let's be real. The dude is not really trying to recreate all the success of the Soviet Union, but he is certainly changing the economic landscape of the United States. And now let's turn to looking at where the United States and many other states in the world fit into the economic spectrum we have now outlined.

Transcript for:Government Revenue: Nationalization vs Privatization

Transcript for:
Government Revenue: Nationalization vs Privatization