# State ownership

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Ownership of industry, assets, or businesses by a public body

"State property" redirects here. For the socialist concept, see [Social ownership](/source/Social_ownership). For other uses, see [State property (disambiguation)](/source/State_property_(disambiguation)).

Not to be confused with [Common good](/source/Common_good) or [Public good](/source/Public_good).

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Sign denoting state property at a highway [right of way](/source/Right_of_way) in [Chicago](/source/Chicago), [Illinois](/source/Illinois), United States

**State ownership**, also called **public ownership** or **government ownership**, is the [ownership](/source/Ownership) of an [industry](/source/Industry_(economics)), [asset](/source/Asset), [property](/source/Property), or [enterprise](/source/Business) by the national government of a country or [state](/source/State_(polity)), or a [public body](/source/Public_body) representing a community, as opposed to an [individual](/source/Individual) or [private party](/source/Private_property).[1] Public ownership specifically refers to industries selling goods and services to consumers and differs from [public goods](/source/Public_good) and government services financed out of a [government's general budget](/source/Government_budget).[2] Public ownership can take place at the [national](/source/Central_government), [regional](/source/Regional_government), [local](/source/Local_government), or [municipal](/source/Municipal) levels of government; or can refer to non-governmental public ownership vested in autonomous [public enterprises](/source/Public_enterprise).[3] Public ownership is one of the three major forms of property ownership, differentiated from private, [collective](/source/Collective_ownership)/[cooperative](/source/Cooperative), and [common ownership](/source/Common_ownership).[4]

In [market-based](/source/Market-based) economies, state-owned assets are often managed and operated as [joint-stock corporations](/source/Joint-stock_corporation) with a government owning all or a controlling stake of the company's [shares](/source/Share_(finance)). This form is often referred to as a [state-owned enterprise](/source/State-owned_enterprise). A state-owned enterprise might variously operate as a [Nonprofit corporation](/source/Nonprofit_corporation), as it may not be required to generate a profit; as a commercial enterprise in competitive sectors; or as a [natural monopoly](/source/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](/source/Corporatization).

In [Soviet-type economies](/source/Soviet-type_economies), 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](/source/Planned_economy), and thus according to different criteria than enterprises in market and mixed economies. [Nationalization](/source/Nationalization) is a process of transferring private or municipal assets to a central government or state entity. [Municipalization](/source/Municipalization) is the process of transferring private or state assets to a municipal government.

## State-owned enterprise

Main article: [State-owned enterprise](/source/State-owned_enterprise)

A state-owned enterprise is a commercial enterprise owned by a government entity in a [capitalist](/source/Capitalist) market or [mixed economy](/source/Mixed_economy). Reasons for state ownership of commercial enterprises are that the enterprise in question is a [natural monopoly](/source/Natural_monopoly) or because the government is promoting [economic development](/source/Economic_development) and [industrialization](/source/Industrialization). State-owned enterprises may or may not be expected to operate in a broadly commercial manner and may or may not have [monopolies](/source/Monopolies) in their areas of activity. The transformation of public entities and government agencies into government-owned corporations is sometimes a precursor to [privatization](/source/Privatization). [State capitalist](/source/State_capitalist) economies are capitalist market economies that have high degrees of government-owned businesses.

## Relation to socialism

See also: [Social ownership](/source/Social_ownership) and [State socialism](/source/State_socialism)

A house number plaque marking state property in [Riga](/source/Riga), Latvia

Public ownership of the [means of production](/source/Means_of_production) is a subset of [social ownership](/source/Social_ownership), which is the defining characteristic of a [socialist](/source/Socialist) economy. However, state ownership and nationalization by themselves are not socialist, as they can exist under a wide variety of different [political](/source/Political_system) and [economic systems](/source/Economic_system) 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.[5][6]

In the context of socialism, public ownership implies that the [surplus product](/source/Surplus_product) generated by publicly owned assets accrues to all of society in the form of a [social dividend](/source/Social_dividend), 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](/source/Workers'_self-management). 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](/source/Economic_planning) 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](/source/Public_interest), would manage resources and production for the benefit of the public.[7] 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](/source/State_socialism).

State ownership was recognized by [Friedrich Engels](/source/Friedrich_Engels) in *Socialism: Utopian and Scientific* as, by itself, not doing away with capitalism, including the process of [capital accumulation](/source/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.[8] Within the United Kingdom, public ownership is mostly associated with the [Labour Party](/source/Labour_Party_(UK)) (a [centre-left](/source/Centre-left) [democratic socialist](/source/Democratic_socialist) party), specifically due to the creation of [Clause IV](/source/Clause_IV) of the "Labour Party Manifesto" in 1918. "Clause IV" was written by [Fabian Society](/source/Fabian_Society) member [Sidney Webb](/source/Sidney_Webb).

## Public property

Main article: [Public property](/source/Public_property)

There is a distinction to be made between state ownership and public property. 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 owned by the population of a state which are mostly available to the entire public for use, such as a public park (see [public space](/source/Public_space)).

## Criticism

In [neoclassical economic theory](/source/Neoclassical_economic_theory), the desirability of state ownership has been studied using [contract theory](/source/Contract_theory). According to the property rights approach based on [incomplete contracting](/source/Incomplete_contracts) (developed by [Oliver Hart](/source/Oliver_Hart_(economist)) and his co-authors), ownership matters because it determines what happens in contingencies that were not considered in prevailing contracts.[9]

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.[10] 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.[11]

In the Hart-Shleifer-Vishny model, it is assumed that all parties have the same information, while Schmitz (2023) has studied an extension of their analysis allowing for [asymmetric information](/source/Information_asymmetry).[12] 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.[13] In the 2010s, some authors showed that the investment technology also matters in the Besley-Ghatak framework if an investing party is indispensable,[14] or if there are bargaining frictions between the government and the private party.[15]

## See also

- [Common ownership](/source/Common_ownership)

- [List of government-owned companies](/source/List_of_government-owned_companies)

- [Municipalization](/source/Municipalization)

- [Nationalization](/source/Nationalization)

- [Private property](/source/Private_property)

- [Property rights (economics)](/source/Property_rights_(economics))

- [Public good](/source/Public_good)

- [Public sector](/source/Public_sector)

- [Public finance](/source/Public_finance)

- [Public property](/source/Public_property)

- [Social ownership](/source/Social_ownership)

- [State-owned enterprise](/source/State-owned_enterprise)

## References

1. **[^](#cite_ref-1)** ["Public Ownership"](https://web.archive.org/web/20180126012439/https://en.oxforddictionaries.com/definition/public_ownership). *Oxford Dictionaries*. Archived from [the original](https://en.oxforddictionaries.com/definition/public_ownership) on January 26, 2018. Retrieved January 25, 2018. Ownership by the government of an asset, corporation, or industry.

1. **[^](#cite_ref-2)** Tupper, Allan (February 7, 2006). ["Public Ownership"](https://www.thecanadianencyclopedia.ca/en/article/public-ownership/). *The Canadian Encyclopedia*. Historica Canada. Retrieved January 25, 2018. public ownership generally refers to enterprises, wholly or partially government owned, which sell goods and services at a price according to use. According to this definition, government-owned railways, airlines, and utilities are examples of public ownership, but hospitals, highways and public schools are not.

1. **[^](#cite_ref-3)** [https://icpe.int/images/publications/Public%20Enterprise%20Volume%2027.pdf](https://icpe.int/images/publications/Public%20Enterprise%20Volume%2027.pdf)public enterprises

1. **[^](#cite_ref-4)** Gregory, Paul R.; Stuart, Robert C. (2003). *Comparing Economic Systems in the Twenty-First Century*. Boston: Houghton Mifflin. p. 27. [ISBN](/source/ISBN_(identifier)) [0-618-26181-8](https://en.wikipedia.org/wiki/Special:BookSources/0-618-26181-8). There are three broad forms of property ownership-private, public, and collective (cooperative).

1. **[^](#cite_ref-5)** Hastings, Adrian; Mason, Alistair; Pyper, Hugh (December 21, 2000). [*The Oxford Companion to Christian Thought*](https://archive.org/details/oxfordcompaniont00hast/page/677). Oxford University Press. p. [677](https://archive.org/details/oxfordcompaniont00hast/page/677). [ISBN](/source/ISBN_(identifier)) [978-0198600244](https://en.wikipedia.org/wiki/Special:BookSources/978-0198600244). Socialists have always recognized that there are many possible forms of social ownership of which co-operative ownership is one. Nationalization in itself has nothing particularly to do with socialism and has existed under non-socialist and anti-socialist regimes. Kautsky in 1891 pointed out that a 'co-operative commonwealth' could not be the result of the 'general nationalization of all industries' unless there was a change in 'the character of the state'.

1. **[^](#cite_ref-6)** Ellman, Michael (1989). *Socialist Planning*. Cambridge University Press. p. 327. [ISBN](/source/ISBN_(identifier)) [0-521-35866-3](https://en.wikipedia.org/wiki/Special:BookSources/0-521-35866-3). State ownership of the means of production is not necessarily social ownership and state ownership can hinder efficiency.

1. **[^](#cite_ref-7)** Arnold, Scott (1994). [*The Philosophy and Economics of Market Socialism: A Critical Study*](https://archive.org/details/philosophyeconom00arno). Oxford University Press. pp. [44](https://archive.org/details/philosophyeconom00arno/page/n58). [ISBN](/source/ISBN_(identifier)) [978-0195088274](https://en.wikipedia.org/wiki/Special:BookSources/978-0195088274). For a variety of philosophical and practical reasons touched on in chapter 1, the most obvious candidate in modern societies for that role has been the state. In the past, this led socialists to favor nationalization as the primary way of socializing the means of production…The idea is that just as private ownership serves private interests, public or state ownership would serve the public interest.

1. **[^](#cite_ref-8)** Frederick Engels. ["Socialism: Utopian and Scientific (Chpt. 3)"](https://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm). [Marxists.org](/source/Marxists.org). Retrieved 2014-01-08.

1. **[^](#cite_ref-9)** Hart, Oliver (1995). ["Firms, Contracts, and Financial Structure"](https://ideas.repec.org/b/oxp/obooks/9780198288817.html). Oxford University Press.

1. **[^](#cite_ref-10)** Hart, Oliver; Shleifer, Andrei; Vishny, Robert W. (1997). ["The Proper Scope of Government: Theory and an Application to Prisons"](https://dash.harvard.edu/bitstream/1/30727607/1/w5744.pdf) (PDF). *The Quarterly Journal of Economics*. **112** (4): 1127–1161. [doi](/source/Doi_(identifier)):[10.1162/003355300555448](https://doi.org/10.1162%2F003355300555448). [ISSN](/source/ISSN_(identifier)) [0033-5533](https://search.worldcat.org/issn/0033-5533). [S2CID](/source/S2CID_(identifier)) [16270301](https://api.semanticscholar.org/CorpusID:16270301).

1. **[^](#cite_ref-11)** Hoppe, Eva I.; Schmitz, Patrick W. (2010). "Public versus private ownership: Quantity contracts and the allocation of investment tasks". *Journal of Public Economics*. **94** (3–4): 258–268. [doi](/source/Doi_(identifier)):[10.1016/j.jpubeco.2009.11.009](https://doi.org/10.1016%2Fj.jpubeco.2009.11.009).

1. **[^](#cite_ref-12)** Schmitz, Patrick W. (2023). ["The proper scope of government reconsidered: Asymmetric information and incentive contracts"](https://mpra.ub.uni-muenchen.de/117742/1/Proper-Scope-of-Gov-Asym-Inform_DP.pdf) (PDF). *European Economic Review*. **157** 104511. [doi](/source/Doi_(identifier)):[10.1016/j.euroecorev.2023.104511](https://doi.org/10.1016%2Fj.euroecorev.2023.104511). [ISSN](/source/ISSN_(identifier)) [0014-2921](https://search.worldcat.org/issn/0014-2921). [S2CID](/source/S2CID_(identifier)) [259487043](https://api.semanticscholar.org/CorpusID:259487043).

1. **[^](#cite_ref-13)** Besley, Timothy; Ghatak, Maitreesh (2001). "Government versus Private Ownership of Public Goods". *The Quarterly Journal of Economics*. **116** (4): 1343–1372. [CiteSeerX](/source/CiteSeerX_(identifier)) [10.1.1.584.6739](https://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.584.6739). [doi](/source/Doi_(identifier)):[10.1162/003355301753265598](https://doi.org/10.1162%2F003355301753265598). [JSTOR](/source/JSTOR_(identifier)) [2696461](https://www.jstor.org/stable/2696461). [S2CID](/source/S2CID_(identifier)) [39187118](https://api.semanticscholar.org/CorpusID:39187118).

1. **[^](#cite_ref-14)** Halonen-Akatwijuka, Maija (2012). "Nature of human capital, technology and ownership of public goods". *Journal of Public Economics*. Fiscal Federalism. **96** (11–12): 939–945. [CiteSeerX](/source/CiteSeerX_(identifier)) [10.1.1.173.3797](https://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.173.3797). [doi](/source/Doi_(identifier)):[10.1016/j.jpubeco.2012.07.005](https://doi.org/10.1016%2Fj.jpubeco.2012.07.005). [S2CID](/source/S2CID_(identifier)) [154075467](https://api.semanticscholar.org/CorpusID:154075467).

1. **[^](#cite_ref-15)** Schmitz, Patrick W. (2015). ["Government versus private ownership of public goods: The role of bargaining frictions"](https://doi.org/10.1016%2Fj.jpubeco.2015.09.009). *Journal of Public Economics*. **132**: 23–31. [doi](/source/Doi_(identifier)):[10.1016/j.jpubeco.2015.09.009](https://doi.org/10.1016%2Fj.jpubeco.2015.09.009).

## Further reading

- Jewellord Nem Singh; Geoffrey C. Chen (2018), *[State-owned enterprises and the political economy of state–state relations in the developing world](https://www.tandfonline.com/doi/full/10.1080/01436597.2017.1333888)*, Third World Quarterly, 39:6, 1077–1097, [doi](/source/Doi_(identifier)):[10.1080/01436597.2017.1333888](https://doi.org/10.1080%2F01436597.2017.1333888)

v t e Property By owner Collective Common Communal Community Crown Customary Cooperative Private Public Self Social State Unowned By nature Croft Estate (landed) Intangible Intellectual indigenous Personal Tangible real Commons Common land Common-pool resource Digital Global Information Knowledge Theory Bundle of rights Commodity fictitious commodities Common good (economics) Excludability First possession appropriation homestead principle Free-rider problem Game theory Georgism Gift economy Labor theory of property Law of rent rent-seeking Legal plunder Natural rights Ownership Property rights primogeniture usufruct women's Right to property Rivalry Tragedy of the commons anticommons Applications Acequia (watercourse) Ejido (agrarian land) Estate legal literary real Forest types Huerta Inheritance executor Land tenure Property law alienation easement restraint on alienation real estate title Rights Air Fishing Forest-dwelling (India) Freedom to roam Grazing pannage Hunting Land aboriginal indigenous squatting Littoral Mineral Bergregal Right of way Water prior-appropriation riparian Disposession/ redistribution Bioprospecting biopiracy Collectivization Eminent domain Enclosure Eviction Expropriation Farhud Forced migration population transfer repatriation Illegal fishing Illegal logging Land Back Land reform Legal plunder Piracy Poaching Primitive accumulation Privatization Regulatory taking Slavery bride buying human trafficking spousal husband-selling wife selling wage Tax burden incidence inheritance optimal poll progressive property regressive Theft Yard-sale model Scholars (key work) Frédéric Bastiat The Law Ronald Coase Friedrich Engels The Origin of the Family, Private Property and the State Henry George Progress and Poverty Garrett Hardin David Harvey John Locke Two Treatises of Government Karl Marx Das Kapital Marcel Mauss The Gift John Stuart Mill Elinor Ostrom Karl Polanyi The Great Transformation Pierre-Joseph Proudhon What Is Property? David Ricardo Murray N. Rothbard The Ethics of Liberty Jean-Jacques Rousseau The Social Contract Adam Smith The Wealth of Nations Categories: Property Property law by country

v t e Public services Municipalization Nationalization Progressive tax Concepts Common good Free-culture movement Free newspaper Government budget Product sample Public administration Public bad Public domain Public good (economics) Public health Public interest Public land Public ownership Public policy Public rights Public sphere Public procurement Public trust Public value Universal access to education Universal basic services Basic services Civil service Fire department Housing First Law enforcement Postal service Savings system Public broadcasting Public transport Universal basic services Public utility Electric utility Oil & gas Telecommunication Municipal broadband Public infrastructure Public water system Waste management Public works Drinking fountain Drug checking Free clinic Free education Infrastructure Needle and syringe programmes Public art Public bank Public bookcase Public computer Public hospital Public library Public open space Public school Public space Public toilet Public university Reagent testing Supervised injection site Urban park Social services Publicly funded health care Public housing Job creation Job guarantee Single-payer health care National health insurance Social insurance Social pension Social security Youth services See also Commons Free public transport Government auction Public float Public holiday Public offering Public sector Public security Public use Public viewing area Category Commons

Authority control databases International GND National Japan Czech Republic Other Encyclopedia of Modern Ukraine

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Adapted from the Wikipedia article [State ownership](https://en.wikipedia.org/wiki/State_ownership) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/State_ownership?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.