Mixed economy


A mixed economy is commonly defined as an
economic system in which both the private sector and state direct the economy, reflecting
characteristics of both market economies and planned economies. Most mixed economies can
be described as market economies with strong regulatory oversight and governmental provision
of public goods. Some mixed economies also feature a variety of state-run enterprises.
In general the mixed economy is characterised by the private ownership of the means of production,
the dominance of markets for economic coordination, with profit-seeking enterprise and the accumulation
of capital remaining the fundamental driving force behind economic activity. But unlike
a free-market economy, the government would wield indirect macroeconomic influence over
the economy through fiscal and monetary policies designed to counteract economic downturns
and capitalism’s tendency toward financial crises and unemployment, along with playing
a role in interventions that promote social welfare. Subsequently, some mixed economies
have expanded in scope to include a role for indicative economic planning and/or large
public enterprise sectors. There is not one single definition for a mixed
economy, with it defined variously as a mixture of free markets with state interventionism,
or as a mixture of public and private enterprise, or as a mixture between markets and economic
planning. The relative strength or weakness of each component in the national economy
can vary greatly between countries. Economies ranging from the United States to Cuba have
been termed mixed economies. The term is also used to describe the economies of countries
which are referred to as welfare states, such as the Nordic countries. Governments in mixed
economies often provide environmental protection, maintenance of employment standards, a standardized
welfare system, and maintenance of competition. As an economic ideal, mixed economies are
supported by people of various political persuasions, typically centre-left and centre-right, such
as social democrats or Christian democrats. Supporters view mixed economies as a compromise
between state socialism and free-market capitalism that is superior in net effect to either of
those. Etymology
There is no clear definition and precise meaning of the term “mixed economy”.
There are generally two major definitions of “mixed economy”, a political and apolitical
definition. The political definition of “mixed economy” refers to the degree of state interventionism
in a capitalist market economy, portraying the state as encroaching onto the market under
the assumption that the market is the “natural” mechanism for allocating resources. The political
definition precludes an extension to non-capitalist systems and is concerned with public policy
and state influence in a capitalist market system, whereas the apolitical definition
relates to patterns of ownership and management of economic enterprises in a society. The
apolitical definition of “mixed economy” refers to a mix of public and private ownership of
enterprises in the economy and is unconcerned with political forms and public policy.
Philosophy The term “mixed economy” is used to describe
economic systems which stray from the ideals of either the market, or various planned economies,
and “mix” with elements of each other. As most political-economic ideologies are defined
in an idealized sense, what is described rarely—if ever—exists in practice. Most would not
consider it unreasonable to label an economy that, while not being a perfect representation,
very closely resembles an ideal by applying the rubric that denominates that ideal. When
a system in question, however, diverges to a significant extent from an idealized economic
model or ideology, the task of identifying it can become problematic. Hence, the term
“mixed economy” was coined. As it is unlikely that an economy will contain a perfectly even
mix, mixed economies are usually noted as being skewed towards either private ownership
or public ownership, toward capitalism or socialism, or toward a market economy or command
economy in varying degrees. History
The term “mixed economy” arose in the context of political debate in the United Kingdom
in the postwar period, although the set of policies later associated with the term had
been advocated from at least the 1930s. Supporters of the mixed economy, including R. H. Tawney,
Anthony Crosland, and Andrew Shonfield were mostly associated with the British Labour
Party, although similar views were expressed by Conservatives including Harold Macmillan.
Critics of the British mixed economy, including Ludwig von Mises and Friedrich von Hayek,
argued that what is called a mixed economy is a move toward socialism and increasing
the influence of the state in economic life. Elements of a mixed economy
The elements of a mixed economy have been demonstrated to include a variety of freedoms: to possess means of production
to participate in managerial decisions to travel
to buy to sell
to hire to fire
to organize to communicate
to protest peacefully with tax-funded, subsidized, or state-owned
factors of production, infrastructure, and services:
libraries and other information services roads and other transportation services
schools and other education services hospitals and other health services
banks and other financial services telephone, mail and other communication services
electricity and other energy services water systems for drinking, agriculture, and
waste disposal subsidies to agriculture and other businesses
government-granted monopolies to otherwise private businesses
legal assistance government-funded or state-run research and
development agencies and providing some autonomy over personal
finances but including involuntary spending and investments such as transfer payments
and other cash benefits such as: welfare for the poor
social security for the aged and infirm mandatory insurance
and restricted by various laws, regulations: environmental regulation
labor regulation including minimum wage laws consumer regulation
antitrust laws intellectual property laws
incorporation laws protectionism
import and export controls, such as tariffs and quotas
and taxes and fees written or enforced with manipulation of the economy in mind.
Relation to forms of government and other ideas
The mixed economy is most commonly associated with social democratic policies or governments
led by social democratic parties. However, given the broad range of economic systems
that can be described by the term, most forms of government are consistent with some form
of mixed economy. In contemporary uses, “social democracy” usually refers to a social corporatist
arrangement and a welfare state in the context of a developed capitalist economy.
Authors John W. Houck and Oliver F. Williams of the University of Notre Dame have argued
that Catholic social teaching naturally leads to a mixed economy in terms of policy. They
referred back to Pope Paul VI’s statement that government “should supply help to the
members of the social body, but may never destroy or absorb them”. They wrote that a
socially just mixed economy involves labor, management, and the state working together
through a pluralistic system that distributes economic power widely.
Historic examples The American School is the economic philosophy
that dominated United States national policies from the time of the American Civil War until
the mid-twentieth century. It consisted of three core policy initiatives: protecting
industry through high tariffs, government investment in infrastructure through internal
improvements, and a national bank to promote the growth of productive enterprises. During
this period the United States grew into the largest economy in the world, surpassing the
UK by 1880. Dirigisme is an economic policy initiated
under Charles de Gaulle of France designating an economy where the government exerts strong
directive influence. It involved state control of a minority of the industry, such as transportation,
energy and telecommunication infrastructures, as well as various incentives for private
corporations to merge or engage in certain projects. Under its influence France experienced
what is called “Thirty Glorious Years” of profound economic growth.
Social market economy is the economic policy of modern Germany that steers a middle path
between the goals of social democracy and capitalism within the framework of a private
market economy, and aims at maintaining a balance between a high rate of economic growth,
low inflation, low levels of unemployment, good working conditions, public welfare and
public services by using state intervention. Under its influence Germany emerged from desolation
and defeat to become an industrial giant within the European Union.
Mixed socialist economies The concept of a mixed economy is not exclusive
to capitalist economies, and the phrase has been used to characterise some socialist economic
systems. A number of proposals for socialist systems call for a mixture of different forms
of enterprise ownership. For example, Alec Nove’s conception of feasible socialism provides
an outline for an economic system based on a combination of state-enterprises for large
industries, worker and consumer cooperatives, private enterprises for small-scale operations,
and individually owned enterprises. The social democratic theorist Eduard Bernstein
advocated a form of mixed economy, believing that a mixed system of public, cooperative
and private enterprise would be necessary for a long period of time before capitalism
would evolve of its own accord into socialism. See also Mixed economic systems
American School Corporatist economy
Dirigisme Distributism
Nordic model Rhine capitalism
Social corporatism Social market economy
Socialist market economy State-sponsored capitalism
Welfare capitalism Further reading Sources and notes

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