Question

Describe the advantages and disadvantages of nationalization of banks

Answer 1

Advantages

The advantages of Nationalization is given below:

1. Safeguards the interests of Laborers:Nationalization also came to be regarded as holding the key to better relations between labor and management. Under private capitalism the managers are agents acting for a host of owners. They have therefore to oppose the demands of labor in every case to safeguard the owners’ interests and to keep their own position absolutely safe and clear. This would not be so under a system of nationalized industries, because the interests of the laborers would not be opposed to those of the managers. Both would act on behalf of the nation and get such rewards for their services as the nation is willing to pay.

2. Technical efficiency and lower cost of production: The managers, freed from their tutelage to the industrial overlords, would devote themselves entirely to improving technical efficiency and lowering the cost of production.

3. Cooperation and prosperity for all: The industrial world, under private capitalism, is torn as under by strife and discords. There are frequent stoppages of production or, at least, the quantity and quality of work have to suffer as a result of this bitterness. Nationalization would do away with industrial unrest and usher in a period of cooperation and prosperity for all.

4. Increased earnings of the State:Nationalization of some important industries would enable the State to earn large revenue easily and without any extra cost.

5. Control over prices of war supplies: During war, nationalization would help because the government could not be forced to pay exorbitant prices for war supplies by a handful of war profiteers.

6. Employment opportunities: In periods of unemployment, people could be given employment expanding the activities of the nationalized industries.

7. Economic and political growth: In short, nationalization would help the State to order the political and economic life of the nation more conveniently both in peace and in war. Without mastery over certain industries, at least, the government would be solely at the mercy of the economic lords. With nationalization the tables are turned and the State can dictate its own terms to those industrial magnates as are allowed to remain.

Disadvantages

Nationalization was a slogan raised by these who were impressed by the wastes of private capitalism and wanted to introduce considerations of social welfare in the management of a nation’s economic affairs. The disadvantages of Nationalization is summarized below:

1. Lack of individual initiative: The men who shout these slogans do not always stop to consider if there can be any progress if individual initiative is stopped. Social philosophers have often pointed out that in a regime of nationalized industries, the spur of individual advancement will never be as powerful as it is today. Men will have a tendency to work in accordance with a dull routine rather than strike out a new path.

2. Lack of freedom: It is only when men can think and act freely as individuals that they can produce new ideas and make new inventions.

3. Lack of Spirit of competition: Then we must not forget that although modem industry is often dominated by monopolies, there is some rivalry among them and the spirit of competition is not entirely dead.

4. Rigid system: State ownership of industries may mean rigid routine and a dead uniformity.

5. Less intervention of public in economic affairs: Moreover, there is a danger in making the government the sole master of economic affairs. In private Capitalism the government can act as the balance-wheel; if any­thing goes wrong, we can look to the government for redress.

Answer 2

• Nationalization of banks means taking over the control of the being initially owned by the private sector into the hands of the national government by purchasing the majority stake.  
• Nationalization of banks has led to the various benefits, firstly the Prevention of monopoly. Initially the private banks were controlled  by corporate families. Nationalization of banks helps the economy be more equitable and open the Bank Credit System for all.
• It also helps in improving the working conditions as well as reducing the regional imbalance. There were various disadvantages of nationalization of banks.
• It leads to poor productivity and inefficiency. This happened because the banks were not properly managed and mostly used for political rather than productive purposes.