The Extent and Significance of the Nationalization of Foreign-Owned Assets in Developing Countries, 1956–1972

By M. L. WILLIAMS* Introduction THE nationalization of foreign-owned assets stands at the centre of the economic conflict between developing and developed countries. As an extreme form of government action against both the private and foreign sectors it finds support from socialists and nationalists-and is feared (and insured against) by capitalists and investors. In the middle, governments and international agencies discuss, debate, and legislate. Obviously the subject is important, yet there have been extraordinarily few analytical studies.' There are probably two main reasons for this; in the first place nationalization lies somewhere along a continuum of government policies towards the private sector. Compared with, say, punitive taxation, the effects of nationalization on foreign income may be rather small; particularly when an investor is given full compensation and a management contract which allows him to retain leverage and safeguard his global operations. Secondly, the subject may be discussed in a variety of contexts, without being central to any of them-for example the general relation between the state and the private sector in developing countries, or the effect of private foreign investment policies on aid and other capital flows. I would argue that nationalization itself should be brought to the centre of the stage. The subject is analytically interesting, and, as I will show, empirically important. The crucial question is the value of nationalization as a policy instrument for attacking the problems of development. There is no reason why the effects of nationalization, and the criteria for its success and problems in implementation, cannot be discussed in the same way as for taxation policy. My aim here, however, is more modest. I hope nevertheless to prepare the ground for future analysis by giving an empirical outline of the significance of nationalization in recent years, comparing