Define Nationalization in Economics

Nationalization in Economics

 

Introduction

 

The government headed by Z.A. Bhutto privatized all industrial units and banks. The consumer goods industries, steel industries, cement industries automobile industries and all banks ere taken over by the government. Banks are also nationalized with the effect form July 1, 1974 under Nationalization of bank act 1974.

 

 

Definition

 

Its means taking over the management and control of organization owned by private individuals, called nationalization.

 

Advantages of Nationalization

 

1. Fair distribution of credit

 

Before nationalization the directors of banks were used to avail big loans for the promotion of their business and industries. The nationalization of banks remove that wrong practice and made the distributed of credit fair among all indiscriminately. The small businessmen, small industrialist and small farmer could avail for their respective concern.

 

2. Price stability

 

Another advantage of nationalization was that the central bank with the help of nationalized bans could minimize the fluctuations in economies activities. It would discourage the speculation, hoarding and other anti-social activities. That would stabilize the prices.

 

 

3. Financing of agriculture

 

Agricultural sector totally ignored before nationalization of banks, due to uncertainty of production and income which may lead to default. After it govt. provided lib ral loans to farmers. That caused increase in production and agriculture income to the farmer.

 

 

4. Service motive

 

Nationalization was advocated on another ground that nationalized institutions would provide better services to the customers. The commercial approach was replaced by the spirit of service to people.

 

5. No concentration of bank credit

 

Before nationatization there was concentration of bank credit in few hands. Business and industrial monopolies were formed. Nationalization helped in fair distribution of credit and thus eliminated the chances of monopoly formation.

 

6. Removing of wasteful competition

 

The burden of huge publicity expenses was shifted to consumers in the form of raising prices of the products. Nationalization was supposed to eliminate such competition thus providing ultimate relief to the customers.

 

7. Abolition of Malpractices

 

The banks and other private sector enterprises were nationalized to stop the malpractices like that of unlawful transactions, evasion of foreign exchange, evasion of taxes, heavy advances to directors etc.

 

8. Improvement in efficiency

 

The efficiency of nationalized institutions would improve when they would be operated in the interest on nation. Before nationalization, the making of more profit was the only criterion of efficiency.

 

9. Security in depositors

 

People showed more confidence in a state owned organization. Their deposits were safe in nationalized banks.

 

10. Economic growth

 

The rate of economic growth would increase be ause the nationalized bank would formulate the credit policy in accordance with the growing needs of diff r nt sectors.

 

 

 

Disadvantages of Nationalization

 

1. Malpractices

 

The malpractices in nationalized banks were going on. The favoritism still exit in banks in different forms.

 

2. Fall in service standard

 

The service standard had not improved. It had rather deteriorated.

 

3. No stability in price

 

Nationalization of banks had done nothing in the stabilization of prices bec use all the requisites of price stability could not be achieved with nationalization.

 

 

4. Low efficiency

 

The workers are appointed on the basis of their political affiliation rather than their standard of education, capabilities and efficiency. The result was inefficient management and low efficiency was the job security in government service.

 

5. Immigration of skilled persons

 

The able bankers preferred foreign job where they given due regard in the form of high remunerating and other benefits.

 

6. Less chances of promotion

 

The chances of promotion in nationalized banks were less. Their promotion depended on the length of service, whereas private banks consider efficiency for promotion.

 

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