Benefits/ advantages/merits of nationalization of enterprises

Merits of nationalization of enterprises

• Reduces wasteful competition/duplication of activities.
• Encourages large scale production/increased output/economies of scale/economic growth.
• Reduces consumer exploitation by charging affordable prices/provision of public utilities/makes goods available to low income earners.
• Makes it easy to respond to structural changes when need arises.
• Nationalization of private enterprises enables the country get rid of foreign domination with all its associated evils.
• lt promotes/ensures/encourages economic stability e.g. price control.
• Promotes equitable distribution of resources/wealth and income.
• It minimizes profit and income repatriation by foreign investors.
• It encourages government to manage vital investment/strategic enterprises.
• Reduces social costs
• It controls private monopoly and its negative effects
• It generates revenue for the government i.e. nationalized industries generate revenue for the government.
• Protects consumers against consumption of undesirable products.
• It increases employment opportunities.

Demerits of nationalization of enterprises

• It leads to inefficiency and therefore production of low quality output.
• Encourages corruption and thus misuse of funds.
• Consumer choice is restricted due to limited variety of goods and services/reduces consumer sovereignty.
• It is associated with bureaucracy and thus slows decision making/Red Tape
• High Government Expenditure on running nationalized enterprises may subject nationals to high taxation.
• Political interference in running of nationalized enterprises e.g. political appointment of managers.
• Leads to low tax revenue.
• Leads to resource misallocation since it interferes with price mechanism .
• Discourages private investment