Nationalization

Question:  I am not a socialist, but I have a question on the nature of socialism. How does nationalization take place in non-communist European countries? I heard it was through purchasing the company. How is this a violation of property rights if your company is being purchased?

Answer:  The right of property is a right of action: the right to pursue the material benefits one needs to live and flourish, and the absolute right of possession once these have been secured. So, property rights include the freedom to use or voluntarily trade away one’s possessions as one sees fit, including the right not to give up or sell one’s property at any price. It is a violation of this right to conduct a transaction on the basis of force—as opposed to voluntary trade—even if some monetary compensation is paid in an attempt to excuse what is, at root, an act of robbery.

As you point out, there is indeed a range of methods employed to nationalize industries and businesses. The Soviet Union engaged in outright, violent takeovers of all economic enterprises; when the U.K. and other European countries nationalized transportation, gas, steel, and other industries, they usually provided at least some measure of compensation to the previous owners of those assets.

These purchases—if they can even be called such—do not magically resolve the conflict between nationalization and property rights. They pose numerous questions that, since they cannot go unanswered, are instead settled by government force. In any forced purchase, the government sets the price and all other terms of the sale according to its own wishes and whatever it happens to find politically convenient. A free market is based on trades executed for the mutual benefit and consent of both parties, whereas European-style nationalization gives one side the power to dictate terms to the other.

Keep in mind also that governments cannot raise funds except by taxation. Every dollar the government spends is one it took from someone by force. Politicians may believe they are respecting property rights by compensating the owners of the assets they confiscate, but all they are really doing is shifting the burden—the theft—onto the backs of the taxpayers.

Eminent domain is similar to the issue you raised, and has been around even longer than nationalization. As a legal principle, it represents the doctrine that governments may appropriate property for the public good. It is enshrined in the U.S. Constitution’s Fifth Amendment, which states in part, “private property [shall not] be taken for public use, without just compensation.” This is part of what Ayn Rand meant in the conclusion to Atlas Shrugged when she alluded to the Constitution’s “contradictions in its statements that had once been the cause of its destruction.” Eminent domain fatally undermines property rights because it denies the absolute right of possession that those rights must imply.

The laws that uphold property rights, if they are to have any real meaning and significance, must not be made a matter of convenience or political necessity, to be undercut or revoked whenever the mood suits enough politicians. When you really own something, you’re free to either trade it away for some agreed price or even to hold onto it for the rest of your life. So like any other right, including the right to life (from which the right to property is derived), property rights are absolute. Forced purchases, even with monetary compensation offered as alms to the ones losing their property in the confiscation, are an offense against these rights.

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