By KATE ARONOFF, March 2, 2020, in The New Republic
Whether Sanders’s platform really calls for taking over “major parts” of the economy is up for debate. In the 1970s, Sanders talked favorably about “public ownership of utilities, banks, and major industries,” and he urged President Richard Nixon to “give serious thought” to nationalizing oil companies during the 1973 oil crisis. That’s a while ago, though.
Sanders has since said his vision of democratic socialism isn’t about either workers or the federal government owning all the “means of production.” His Green New Deal plan does call for publicly owned clean power generation, and he’s joined calls in California to bring PG&E—the bankrupt California utility found to have sparked deadly wildfires—under the control of the state government there. He advocates the expanded use of already federalized institutions like the Tennessee Valley Authority and Power Marketing Administrations and for giving workers an ownership stake in corporations.
Even if all these plans were enacted, a Sanders presidency might still be considerably behind its predecessors when it comes to seizing private property. Far from an unprecedented and radical act, federal government takeovers of one form or another—often called nationalization—have a rich history in American politics, particularly when it comes to navigating out of big crises.
Sanders isn’t the first politician to propose public ownership of parts of the power sector. In his successful 1932 presidential bid, Franklin D. Roosevelt railed against the “monstrosity” of private utility holding companies and argued that people should have the right to take control of their privately owned power lines. He didn’t want all utilities under public ownership, to be sure, but “where a community—a city or county or a district—is not satisfied with the service rendered or the rates charged by the private utility,” Roosevelt said in one campaign speech, “it has the undeniable basic right, as one of its functions of Government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service.”
The New Deal that followed displaced all manner of private business. Having started in the Hoover administration, the response to Black Monday nationalized several functions of the banking sector through the creation of institutions like the Reconstruction Finance Corporation, the Federal National Mortgage Association (“Fannie Mae”), and Export-Import Bank, before ultimately nationalizing the country’s gold reserves. The Tennessee Valley Authority, created to provide power and jobs to the hard-hit mountainous region, was formed in part by nationalizing the Tennessee Electric Power Company, over the protests of its executives. Building on the TVA’s early success, the Rural Electrification Administration, or REA, quite literally electrified the nation with public power: At the time, some 90 percent of rural homes lacked electricity, their inhabitants being too poor for private power companies to see a profit in serving them. Like the TVA, rural electric cooperatives were set up in the name of affordable power and rural economic development, with the federal government providing funds and technical assistance to construct utilities owned and operated by their members. In just 10 years, with a $100 million annual appropriation from Congress—$1.8 billion a year, in 2020 dollars—the REA built 380,000 miles of transmission lines: 42 percent of the transmission lines ever built in the United States. Many still exist and, today, co-ops and other publicly owned utilities, including the TVA, serve 49 million Americans.
To meet war production demands as fighting began in Europe, Roosevelt revived World War I’s National War Labor Board, allowing him to intervene in labor conflicts that threatened manufacturing, on the side of both management and labor. Over Roosevelt’s veto in 1943, Congress then passed the War Labor Disputes Act, which let the government nationalize any facilities that might be needed in the war effort. He would use the authority on coal-mining and oil-drilling operations, railroads, department-store chains, and the U.S. subsidiaries of foreign-owned eyeglass, champagne, and beer companies, among several others. John Ohly, a lawyer in the Office of Assistant Secretary of War, once said “the government was taking over approximately one plant a week” in the three-month lead-up to V-J Day.
Nationalization—in which the federal government brings privately held assets under public authority—is not the only form of public ownership or direction of industry. The government can assume direction of previously private facilities or—as was more common in World War II—seize facilities and use federal authority to decide what they produce. The government can also buy up a controlling equity stake and proceed to leverage the power of its shares.
In a purely free-market society, everything from the Post Office to the Centers for Disease Control and Prevention would be run on a for-profit basis. Like just about every place on earth, the U.S. has a mixed economy, featuring a range of ownership structures and government involvement in key sectors, from tax breaks to preferential leasing and regulations to fully public services and bodies. Businesses derive benefit from some of these public goods: for example, transit infrastructure and an educated workforce.
When Thomas Hanna, research director at Democracy Collaborative, a left-leaning political-economy think tank, was putting together a report on the history of nationalization in the U.S. since World War I, he told me he “didn’t find any sort of larger trends or rhyme or reason about why one type of intervention or nationalization would be popular or one was unpopular.” Some takeovers enjoyed wide support and others fierce opposition. When Woodrow Wilson nationalized rail companies during World War I, the robber barons who ran them were—much to the surprise of the White House—more than happy to accept the buyout. Concerted pushback to nationalization as such began during the Truman administration, when the Supreme Court ruled against his nationalization of steel mills to support the Korean War. That turn also coincided with McCarthyism and the purge of Communists from left-leaning unions more inclined to support public ownership. By the 1970s, Hanna says, “the business sector had gotten itself organized” against the New Deal consensus on the role of the state in the economy. “You have this shift,” he says, “where you still have government interventions—significantly more government interventions in the 1970s as economic problems mount—but it’s bailouts, not direct ownership. By the mid-1970s, nationalization was not really on the table anymore ideologically.”
Nationalization still happened but under other names. Two months after the September 11 attacks, George W. Bush signed the Aviation and Transportation Security Act. Passed unanimously through the Senate, that bill nationalized airport security, with the creation of the Transportation Security Administration, whose functions to that point had been performed by a patchwork of the now-displaced private security companies contracted out by individual airports. The Aviation and Transportation Security Act, Hanna pointed out in his report, resulted in the largest single expansion of the federal workforce since World War II.
Just after the recession, the Obama administration spent $700 billion to bail out troubled banks, insurers, and car companies to prevent a depression. As many claimed at the time, this was effectively nationalization without subsequent direction of the companies: Though it did demand some standards and regulations in return, the government chose not to exercise all that much say over how those companies were run. The 500 million shares in GM the government bought up in March 2009, for instance—60.8 percent of its total market capitalization—gave the White House all the leverage it needed to mandate any number of changes, from fuel efficiency to higher wages. Instead, Obama vowed that “the federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions.”
Far from a radical socialist sledgehammer, nationalization and its variants have been used by both Democratic and Republican administrations, sometimes to wide acclaim. The fuel and utilities industries, which Sanders’s platform focuses on, present a particularly good case for some kind of government intervention.
Thanks to oil and gas companies, who’ve ridden high on cheap debt since the last recession, energy carries the largest corporate debt burden of any sector. In the past month, the coronavirus has suppressed demand for oil, bringing prices below $50 a barrel (now below $20/barrel in early April), flirting close to the break-even price for producers in the American Southwest’s prolific Permian Basin. As the Wall Street Journal has reported, $137 billion worth of oil and gas debts will mature between 2020 and 2022, much of that from companies with negative cash flows; amid a recession, that could spell disaster. Presidential candidates have yet to present a plan for what happens if these companies—which meet a significant portion of the world’s oil demand and produce a sizable chunk of its emissions—go bust, leaving the workers and communities who depend on them stranded. Nationalizing these companies as their valuations plummet, some progressive economic advocates argue, could provide a pathway for such communities and the country as a whole to transition quickly toward a low-carbon economy, rather than suffering larger disruptions as CEOs and investors walk away with whatever’s left; coal miners have seen the latter all too often.
The Democratic Socialists of America are now running a number of campaigns to bring electric utilities under public ownership, with the aim of decarbonizing them along a science-based timeline. In the Bay Area, that’s meant calling on Governor Gavin Newsom to take control of PG&E, which is sitting in tens of billions of dollars’ worth of wildfire liabilities, thanks in large part to neglecting basic safety and maintenance measures. It’s worth noting, as well, that publicly owned utilities aren’t a rarity, either in the United States or abroad, where privatization has looked to make them accountable to shareholders rather than ratepayers.
Nationalization, of course, is no panacea to what’s ailing the planet: There are plenty of publicly owned bad actors out there. But it seems like an odd tool to remove from the toolbox.
Kate Aronoff is a staff writer at The New Republic.@KateAronoff