Steel nationalized
The steel industry in Britain was nationalized on November 24th, 1949, with the passage of the Labour government's Iron and Steel Act. This was reversed by the Conservative government elected in 1951, but the industry was nationalized again in 1967 under a Labour government as British Steel Corporation.
The problem with steelmaking in Britain has been that political control meant that the post-war industry was never properly capitalized and modernized. Its processes were outdated and expensive, inefficiently operating below capacity, and new competitors overseas were entering the market to undercut it on both price and delivery dates. Meanwhile government price controls hindered the domestic industry, as did higher coal and oil costs.
Following the 1967 re-nationalization, the Labour government's main objective was to keep employment as high as it could, especially in depressed regions where most of the steel plants were located. Many of plants were kept going by subsidies, since they were now loss-making. Nationalized industries are often under-capitalized simply because governments always have more pressing claims on their finances. Parents and patients shout louder at elections than do future steelworkers. The constant temptation is to divert funds to current spending and postpone investment in plant and infrastructure.
The industry was privatized in 1988 by the Conservative government of Margaret Thatcher. It became British Steel plc, and its employees were given a free quota of shares, plus a two-for one offer if they bought more at discounted prices. The company later merged with the Dutch steelmaker Koninklijke Hoogovens, to form Corus Group, and Corus itself was taken over by the Indian group, Tata Steel.
Tata itself has faced troubles, and saw British Steel go into liquidation earlier this year, kept going by the Official Receiver since then. Earlier this month, Chinese firm Jingye agreed to invest £1.2bn in British Steel as it signed a deal to rescue the UK steelmaker, and said it would seek to "preserve thousands of jobs in a key foundation industry for the UK."
One of the lessons we learn from the story of steelmaking in Britain is that nationalization doesn't work. It places industries into the political domain rather than the economic one. Their output and activities become directed to serving government priorities rather than market ones. Decisions are made to win voter support that make no economic sense. In nationalized industries the unions are able to acquire greater power in terms of wages and conditions, and this often makes such industries non-competitive internationally, leading governments to protect them by tariffs or subsidies.
The second lesson is that economies are dynamic; their reality is churn. Industries will always face new challenges and new forms of competition and will need to be flexible and adaptable if they are to survive and prosper. With new countries exploiting their natural resources and low-cost labour to produce cheap steel, the British steel industry might well have prospered by going upmarket into high quality products instead of the mass-market stuff. It did to some extent, but not sufficiently, and not soon enough. This flexibility and adaptability is something private businesses do much better than government-run nationalized ones do.