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State ownership, also called government ownership and public ownership, is the ownership of an
industry Industry may refer to: Economics * Industry (economics) In macroeconomics, an industry is a branch of an economy that produces a closely related set of raw materials, goods, or services. For example, one might refer to the wood industry ...
,
asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such a ...
, or
enterprise Enterprise (or the archaic spelling Enterprize) may refer to: Business and economics Brands and enterprises * Enterprise GP Holdings Enterprise GP Holdings was a midstream energy holding company based in Houston, Texas Houston ( ) is ...

enterprise
by the
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * The State (newspaper), ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, Un ...
or a
public body A statutory corporation is a statuteA statute reffers to the body of law that are made by legislature of the nation with instrument which govern the state, country or any nation. it includes laws, rules and the reulation whichhas to be followed b ...
representing a community as opposed to an
individual An individual is that which exists as a distinct entity Entity may refer to: Computing * Character entity reference, replacement text for a character in HTML or XML * Entity class, a thing of interest within an entity–relationship model or d ...
or private party. Public ownership specifically refers to industries selling goods and services to consumers and differs from public goods and government services financed out of a government's general budget. Public ownership can take place at the
national National may refer to: Common uses * Nation A nation is a community of people formed on the basis of a common language, history, ethnicity, or a common culture, and, in many cases, a shared territory. A nation is more overtly political than an ...
,
regional In geography, regions are areas that are broadly divided by physical characteristics ( physical geography), human impact characteristics (human geography Image:Snow-cholera-map-1.jpg, upright=1.2, Original map by John Snow showing the Cluster (ep ...
,
local Local may refer to: Geography and transportation * Local (train), a train serving local traffic demand * Local, Missouri, a community in the United States * Local government, a form of public administration, usually the lowest tier of administrati ...
, or
municipal A municipality is usually a single administrative division Administrative division, administrative unitArticle 3(1). , country subdivision, administrative region, subnational entity, first-level subdivision, as well as many similar terms, ...

municipal
levels of government; or can refer to non-governmental public ownership vested in autonomous
public enterprise A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise Business is the activity of making one's living or making money by producing or buying and selling Product (business), products (such as goods an ...
s. Public ownership is one of the three major forms of property ownership, differentiated from private,
collective A collective is a group of entities that share or are motivated by at least one common issue or interest, or work together to achieve a common objective. Collectives can differ from cooperatives in that they are not necessarily focused upon an e ...
/
cooperative A cooperative (also known as co-operative, co-op, or coop) is "an autonomous The federal subject The federal subjects of Russia, also referred to as the subjects of the Russian Federation (russian: субъекты Российск ...
, and
common ownership Common ownership refers to holding the assets of an organization, enterprise Enterprise (or the archaic spelling Enterprize) may refer to: Business and economics Brands and enterprises * Enterprise GP Holdings Enterprise GP Holdings ...
. In
market-based A market economy is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of goods and services wit ...
economies, state-owned assets are often managed and operated as
joint-stock corporation A joint-stock company is a business entity In law, a legal person is any person A person (plural people or persons) is a being that has certain capacities or attributes such as reason, morality, consciousness or self-consciousness, and be ...
s with a government owning all or a controlling stake of the company's
shares In financial markets A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known ...
. This form is often referred to as a
state-owned enterprise A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise where the government or state has significant control through full, majority, or significant minority ownership. Defining characteristics of SOEs are ...
. A state-owned enterprise might variously operate as a
not-for-profit corporation A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that op ...
, as it may not be required to generate a profit; as a commercial enterprise in competitive sectors; or as a
natural monopoly A natural monopoly is a monopoly A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none) is as described by Irving Fisher, a market with the "absence of competition", cre ...

natural monopoly
. Governments may also use the profitable entities they own to support the general budget. The creation of a state-owned enterprise from other forms of public property is called
corporatization Corporatization is the process of transforming and restructuring state assets, government agencies, public organizations, or municipally owned corporation, municipal organizations into corporations. It involves the adoption and application of bus ...
. In
Soviet-type economies Soviet-type economic planning (STP) is the specific model of centralized planning A planned economy is a type of economic system where investment, Production (economics), production and the allocation of capital goods takes place according to ec ...
, state property was the dominant form of industry as property. The state held a monopoly on land and natural resources, and enterprises operated under the legal framework of a nominally
planned economy A planned economy is a type of economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of goods and servic ...
, and thus according to different criteria than enterprises in market and mixed economies.
Nationalization Nationalization (or nationalisation) is the process of transforming privately-owned asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangi ...
is a process of transferring private or municipal assets to a central government or state entity.
MunicipalizationMunicipalization is the transfer of private entities, asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used ...
is the process of transferring private or state assets to a municipal government.


State-owned enterprise

A state-owned enterprise is a commercial enterprise owned by a government entity in a
capitalist Capitalism is an economic system An economic system, or economic order, is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, ...
market or
mixed economy A mixed economy is variously defined as an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon ...
. Reasons for state ownership of commercial enterprises are that the enterprise in question is a
natural monopoly A natural monopoly is a monopoly A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none) is as described by Irving Fisher, a market with the "absence of competition", cre ...

natural monopoly
or because the government is promoting
economic development In the economic An economy (; ) is an area of the production Production may be: Economics and business * Production (economics) * Production, the act of manufacturing goods * Production, in the outline of industrial organization, the act o ...
and
industrialization Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society An agrarian society, or agricultural society, is any community whose economy is b ...

industrialization
. State-owned enterprises may or may not be expected to operate in a broadly commercial manner and may or may not have
monopolies A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none) is as described by Irving Fisher, a market with the "absence of competition", creating a situation whe ...

monopolies
in their areas of activity. The transformation of public entities and government agencies into government-owned corporations is sometimes a precursor to
privatization Privatization (or privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heav ...
.
State capitalist State capitalism is an economic system in which the State (polity), state undertakes business and Commerce, commercial (i.e. Profit (economics), for-profit) economic activity and where the means of production are nationalization, nationalized as ...
economies are capitalist market economies that have high degrees of government-owned businesses.


Relation to socialism

Public ownership of the
means of production The means of production is a concept that encompasses the social use and ownership Ownership is the state or fact of exclusive right In Anglo-Saxon law Anglo-Saxon law (Old English Old English (, ), or Anglo-Saxon, is the earliest record ...
is a subset of
social ownership Social ownership is the appropriation of the surplus product Surplus product (german: Mehrprodukt, links=no) is an economic concept explicitly theorised by Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philos ...
, which is the defining characteristic of a
socialist Socialism is a political Politics (from , ) is the set of activities that are associated with making decisions In psychology, decision-making (also spelled decision making and decisionmaking) is regarded as the Cognition, cognitive pr ...

socialist
economy. However, state ownership and nationalization by themselves are not socialist, as they can exist under a wide variety of different
political Politics (from , ) is the set of activities that are associated with Decision-making, making decisions in Social group, groups, or other forms of Power (social and political), power relations between individuals, such as the distribution of res ...
and
economic system An economic system, or economic order, is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its environm ...
s for a variety of different reasons. State ownership by itself does not imply social ownership where income rights belong to society as a whole. As such, state ownership is only one possible expression of public ownership, which itself is one variation of the broader concept of social ownership. In the context of socialism, public ownership implies that the
surplus product Surplus product (german: Mehrprodukt, links=no) is an economic concept explicitly theorised by Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher A philosopher is someone who practices philosophy ...
generated by publicly owned assets accrues to all of society in the form of a
social dividend The social dividend is the return on the capital assets and natural resources owned by society in a socialist Socialism is a political Politics (from , ) is the set of activities that are associated with making decisions In psycho ...
, as opposed to a distinct class of private capital owners. There is a wide variety of organizational forms for state-run industry, ranging from specialized technocratic management to direct
workers' self-management Workers' self-management, also referred to as labor management and organizational self-management, is a form of organizational management Management (or managing) is the administration of an organization, whether it is a business, a not-for ...
. In traditional conceptions of non-market socialism, public ownership is a tool to consolidate the means of production as a precursor to the establishment of
economic planning Economic planning is a resource allocation In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Co ...
for the allocation of resources between organizations, as required by government or by the state. State ownership is advocated as a form of social ownership for practical concerns, with the state being seen as the obvious candidate for owning and operating the means of production. Proponents assume that the state, as the representative of the
public interest The public interest is "the welfare or well-being Well-being, also known as ''wellness'', ''prudential value'' or ''quality of life'', refers to what is intrinsically valuable relative ''to'' someone. So the well-being of a person is wha ...
, would manage resources and production for the benefit of the public. As a form of social ownership, state ownership may be contrasted with cooperatives and common ownership. Socialist theories and political ideologies that favor state ownership of the means of production may be labelled
state socialism State socialism is a Political ideology, political and economic ideology within the socialist movement advocating state ownership of the means of production, either as a temporary measure or as a characteristic of socialism in the transition from ...
. State ownership was recognized by
Friedrich Engels Friedrich Engels ( ,"Engels"
''
in ''Socialism: Utopian and Scientific'' as, by itself, not doing away with capitalism, including the process of capital accumulation and structure of wage labor. Engels argued that state ownership of commercial industry would represent the final stage of capitalism, consisting of ownership and management of large-scale production and manufacture by the state. Within the United Kingdom, public ownership is mostly associated with the
Labour Party Labour Party or Labor Party may refer to: Angola *MPLA, known for some years as "Popular Movement for the Liberation of Angola – Labour Party" Antigua and Barbuda *Antigua and Barbuda Labour Party Argentina *Labour Party (Argentina) Armenia ...
(a
centre-left Centre-left politics (British English British English (BrE) is the standard dialect A standard language (also standard variety, standard dialect, and standard) is a language variety that has undergone substantial codification of gramma ...
democratic socialist Democratic socialism is a political philosophy Political philosophy is the philosophical study of government, addressing questions about the nature, scope, and legitimacy of public agents and institutions and the relationships between them. ...
party), specifically due to the creation of
Clause IV Clause IV is part of the constitution A constitution is an aggregate of fundamental principles A principle is a proposition or value that is a guide for behavior or evaluation. In law, it is a rule Rule or ruling may refer to: Human ...
of the "Labour Party Manifesto" in 1918. "Clause IV" was written by
Fabian Society The Fabian Society is a British socialist organisation whose purpose is to advance the principles of democratic socialism Democratic socialism is a political philosophy that supports political democracy within a socially owned economy, wi ...
member
Sidney Webb Sidney James Webb, 1st Baron Passfield, (13 July 1859 – 13 October 1947) was a British socialist, economist and reformer, who co-founded the London School of Economics , mottoeng = To understand the causes of things , established = 189 ...

Sidney Webb
.


User rights

When ownership of a resource is vested in the state, or any branch of the state such as a
local authority Local government is a generic term for the lowest tiers of public administration Public administration is the implementation of government policy Public policy is a course of action created and/or enacted, typically by a government ...
, individual use "rights" are based on the state's management policies, though these rights are not
property rights The right to property, or the right to own property (cf. ownership Ownership is the state or fact of exclusive rights and control over property, which may be any asset, including an object, land or real estate, intellectual property, or until th ...
as they are not transmissible. For example, if a family is allocated an apartment that is state owned, it will have been granted a
tenancy A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, ...
of the apartment, which may be lifelong or inheritable, but the management and control rights are held by various
government department Ministry or department, also less commonly used secretariat, office, or directorate are designations used by a first-level Executive (government), executive bodies in the Machinery of government, machinery of governments that manage a specific s ...
s.


Public property

There is a distinction to be made between state ownership and
public property Public property is property that is dedicated to public use. The term may be used either to describe the use to which the property is put, or to describe the character of its ownership (owned collectively by the population of a Sovereign state, sta ...
. The former may refer to assets operated by a specific state institution or branch of government, used exclusively by that branch, such as a research laboratory. The latter refers to assets and resources that are available to the entire public for use, such as a public park (see
public space A public space is a place that is generally open and accessible to people. Roads (including the pavement), public square A town square (or square, plaza, public square, city square, urban square, or piazza) is an open public space commonl ...
).


Criticism

In
neoclassical economic theory Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are driven by the supply and demand, supply and demand model. According to this line of thought, the value of a ...
, the desirability of state ownership has been studied using
contract theory In economics, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of information asymmetry. Because of its connections with both agency (law), agency and incentives, contract theory ...
. According to the property rights approach based on incomplete contracting (developed by Oliver Hart and his co-authors), ownership matters because it determines what happens in contingencies that were not considered in prevailing contracts. The work by Hart, Shleifer and Vishny (1997) is the leading application of the property rights approach to the question whether state ownership or private ownership is desirable. In their model, the government and a private firm can invest to improve the quality of a public good and to reduce its production costs. It turns out that private ownership results in strong incentives to reduce costs, but it may also lead to poor quality. Hence, depending on the available investment technologies, there are situations in which state ownership is better. The Hart-Shleifer-Vishny theory has been extended in many directions. For instance, some authors have also considered mixed forms of private ownership and state ownership. Moreover, the Hart-Shleifer-Vishny model assumes that the private party derives no utility from provision of the public good. Besley and Ghatak (2001) have shown that if the private party (a non-governmental organization) cares about the public good, then the party with the larger valuation of the public good should always be the owner, regardless of the parties' investment technologies. More recently, some authors have shown that the investment technology also matters in the Besley-Ghatak framework if an investing party is indispensable or if there are bargaining frictions between the government and the private party.


See also

*
Common ownership Common ownership refers to holding the assets of an organization, enterprise Enterprise (or the archaic spelling Enterprize) may refer to: Business and economics Brands and enterprises * Enterprise GP Holdings Enterprise GP Holdings ...
*
List of government-owned companies This is a world-wide list of government-owned companies. This list can be considered as non-exhaustive because of lack of space and time. For example, as of October 2019, China alone has more than 350 individual entries in its :Government-owned com ...
*
MunicipalizationMunicipalization is the transfer of private entities, asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used ...
*
Nationalization Nationalization (or nationalisation) is the process of transforming privately-owned asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangi ...
*
Private ownership Private property is a legal designation for the ownership of property by non-governmental Legal personality, legal entities. Private property is distinguishable from public property, which is owned by a state entity, and from Collective ownershi ...
*
Property rights (economics) Property rights are constructs in economics Economics () is a social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. E ...
*
Public good (economics) In economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societie ...
*
Public sector The public sector (also called the state sector) is the part of the economy composed of both public service A public service is a service Service may refer to: Activities :''(See the Religion section for religious activities)'' * Administ ...
*
Public finance Public finance is the study of the role of the government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''Sta ...
*
Public property Public property is property that is dedicated to public use. The term may be used either to describe the use to which the property is put, or to describe the character of its ownership (owned collectively by the population of a Sovereign state, sta ...
*
Social ownership Social ownership is the appropriation of the surplus product Surplus product (german: Mehrprodukt, links=no) is an economic concept explicitly theorised by Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philos ...
*
State-owned enterprise A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise where the government or state has significant control through full, majority, or significant minority ownership. Defining characteristics of SOEs are ...


References

{{DEFAULTSORT:Public Property
State capitalism State capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea ...
Economic systems Ownership Property law Socialism
State socialism State socialism is a Political ideology, political and economic ideology within the socialist movement advocating state ownership of the means of production, either as a temporary measure or as a characteristic of socialism in the transition from ...