The Case for Economic Democracy: Chapter 6.3

Nationalizing Companies

Welcome to Chapter 6.3 of my book, “The Case for Economic Democracy.” If you’re new here, I’m releasing it chapter-by-chapter to premium subscribers, every Friday. If you’d like to read it — as well as support my work and access every JoeWrote has to offer — upgrade to a premium subscription today.

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The world-famous Renault car company is partly owned by the French government. (Photo by Sébastien Chiron on Unsplash)

Previous sections of Chapter 6 have examined other forms of economic democracy, specifically unions and worker cooperatives. This section looks at the approach to nationalizing a company or industry, making it the property of a nation’s people. Enjoy!

Nationalization

The final approach to economic democracy is its largest form — nationalization. When a democratic country nationalizes an individual company or entire industry, it becomes the shared property of the people. The direction and profits of the business are no longer controlled by the few, but the many. For example, were the United States to nationalize Amazon (more on how that could happen later), the direction of the company would no longer be determined by the decisions of Jeff Bezos and the Amazon board, but by American voters.

The main obstacle to the nationalization of industry is the public perception of how state-run industry would function. A century of Red Scare politics has left most Americans opposed to public control of industry. Throughout the Cold War, mischaracterizations of both the Soviet and American economies have led to a misconception that: “Unlike the American free market, government-run business is clunky, inefficient, and doomed to fail.” This misunderstanding rests on the myth that American businesses are “free” and exist absent government intervention, while the now-extinct Soviet businesses were centrally planned government enterprises plagued by corruption, false data, and bumbling bureaucracy. In reality, many American companies — especially the large corporations that comprise the bulk of our economy — incorporate some form of central planning, either through government funding, permitting, or planning assistance.

For example, most American homes get electricity from a private company. At the end of every month, they are sent a bill from an electric company like Eversource, Southern California Edison, or Pacific Gas & Electric. Yet, these Americans did not engage in the “free market activity” of choosing their electricity provider. According to the popular idea of the “free market,” consumers are free to decide between competing businesses by weighing cost, quality, and other factors. But this is not the case with America’s power grid. Unlike less-important consumer products such as soap and video games, consumers have no choice for their electricity. They do not research different power companies, balance cost against service, and make a decision. Rather, when they purchase a new home or move into a new apartment, their power provider is already determined for them by the architecture of power lines. Their only choice is between paying the determined rate, or forfeiting a modern lifestyle and living in the dark.

The reason for this lack of choice is that America’s power grid is both privately owned and centrally planned. To ensure every American household has electricity, contracts between governments and power companies stipulate that the companies must deliver electricity to every home in their jurisdiction, even if it would come at a financial loss. Though the company still turns a profit for its private shareholders, this is central planning. And while the system is flawed in that American consumers have to pay exorbitant rates for what is a staple of modern life, the distribution of electricity through central planning works exceptionally well. The majority of the time, Americans can access electricity by simply flipping a light switch.

So while the concept of “nationalization” might seem scary, the reality is we are surrounded by it, from one degree to another. If your job requires you to take a train from the suburbs to the city, there’s a good chance you travel on Amtrak, the government-owned train company. Or, if you take either a bus or your car to work, you’re benefitting from government involvement in the fossil fuel industry, which is subsidized with over $20 billion a year.^[16]