Major Issues of Nationalization - Essay Example

Nationalization is a policy which is followed by countries throughout the world to secure their economic interests. The purpose of it is to reduce the exposure of their country’s particular sector and further its growth through proper utilization of domestic consumption. Developing countries such as China and India have nationalized their Banks in the past. While India opened its banks for foreign investment in the early 1990s following its policy of economic liberalization, China continues to safeguard the interests of its banks.

The major reason behind the nationalization of industries is the safeguarding of its interests in the wake of intense international competition. Nationalization also occurs if there is a change in government and the political ideology of the government demands a dramatic change in the country’s economic policy. Many times nationalization has been used to promote industries in the country which cannot be made dependent on foreign companies as they cater directly to the people. For example, after Independence from British rule India nationalized its steel industries although it took help from Russia to build steel plants in Rourkela and Bhilai.

The most important reason for foreign intervention is the geopolitical and economic interests of powerful states. The interventions don’t necessarily have to be military. Economic sanction is a weapon often used to punish the country for being too close to foreign companies. Recently, the UK has imposed economic sanctions on Iran because of its nuclear programs. Other countries are to follow soon. Another case of geopolitical interests is Iraq where the allied forces invaded on the pretext of Weapons of Mass Destruction. But even after Hans Blix reported on the absence of WMDs, the Allied forces continued their operations. Many people argue that the main reason behind the invasion was oil.

Similarly, corporate interests influence the foreign policies of a country. China has been very interfering in the internal matters of its neighbouring country Nepal because of its corporate interests. The Nepalese market is flooded with Chinese goods. Corporate interests may not lead to military invasions but they certainly influence countries to adopt protectionist measures. Ideological interests in democracy are also a major factor which leads to interventions. Human welfare is also cited as one of the major reasons but there is considerable debate about the authenticity of such claims. While US intervention in Iraq was justified in removing the despotic rule of Saddam Hussein, no such action has been taken in Zimbabwe against Robert Mugabe.

Countries seek ideological conformity. The reason for this can be the tendency of many autocratic regimes to impose a ban on multinational corporations. For example, leaders like Saddam Hussein, Colonel Gaddafi and Fidel Castro have opposed US domination in their countries and closed their countries for foreign businesses. On the other hand, democracies are much easy to manipulate (thanks to corruption).

Out of the three factors discussed above geopolitical interventions are most common. The most common combination is that of factor (1) and (3). Most of the powerful countries can ignore ‘misbehaving’ democratic countries but they are very intolerant of communist or autocratic governments. When India conducted nuclear tests in the late 1990s, sanctions were imposed on it but it didn’t lead to the country’s invasion. On the other hand, undemocratic Iraq was invaded, and destroyed, based on mere suspicion of Weapons of Mass Destruction.

Afghanistan faces a very complicated situation regarding its policy of Nationalization. The present Afghan government was helped to come into power by the Allied forces. They toppled the Taliban government and helped Afghanistan in its rebuilding. If Afghanistan nationalizes its mineral production then it would seem to be an ungrateful step towards the allied forces.

Many other emerging superpowers in the region might try to take advantage of Afghanistan’s vulnerability. Such a situation will prove the validity of the Resource Curse theory. China, russia and even India will interfere in its policies and try to use Afghanistan’s mineral resources for their benefit. China and India are emerging economies which have a huge demand for Afghan minerals. The positive outcome of nationalization will be that Afghanistan will send a signal to the whole world about its neutrality. It will also focus to improve the economic conditions of its people by regulating the labour markets and wages.

The decision of Afghanistan to not nationalize mineral production might lead to a situation where its ‘resource curse’ leads to it falling back into the trap of many-partite conflict. An open-door policy will make other powerful countries even more active in the region. Even without foreign interference the ‘resource curse’ can operate in other ways such as inviting unwelcome labour from neighbouring Pakistan which would destabilise the local economy. The positive side of a liberal economy would be that Afghanistan will get the technological and economic investment that it desperately needs.

I don’t think that there would be a foreign invasion of Afghanistan if it chooses to nationalize its extractive industries. This is because Afghanistan is a very weak country and it will raise international debates if an invasion occurs. One more factor is the economic recession and countries such as the US and the UK reducing their army size. These countries have tasted the cost of invasion in Afghanistan and they would not want to repeat their mistake.

If I was hired to work as a consultant to the Afghanistan government then I will advise them to open their industry to foreign competition. When there will be competition among companies for Afghanistan’s resources then there will be an increase in demand which would lead to Afghanistan receiving more money for its resources. If I could predict the geopolitical policies of powerful nations such as the US, I would still advise the Afghanistan government to maintain neutrality like Switzerland and focus on its economic prosperity rather than get embroiled in international politics.