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This article aims to account for the 1940s nationalizations and to develop a general theme which embraces the whole of British industry. It argues that natural monopoly and externalities go a long way towards explaining why transport and fuel were taken into public ownership and why manufacturing was not. The neo-marxist characterization of capitalist society plays only a limited role. Similarly the presence of a Labour government accounts for many of the institutional arrangements, but the shift to public ownership was ultimately determined by economic factors present throughout the nineteenth and twentieth centuries.