What Is A Mixed Economy
The characteristics of both socialism as well as capitalism are reflected in a mixed economy. In fact it includes both, government and private control. It is also termed as a marriage or a golden path, between socialism and capitalism. There is freedom in the economy along with market regulation by the government in the mixed economy. In the national economy the weakness and strength of each company could vary much between nations. Economies in Cuba and America have been termed as mixed economies.
Mixed Economy – Explained
Both government control and free enterprise exist in a mixed economy. The government even adopts a monopoly in certain mixed economy areas. Both sectors are basically partners that work in the development process of the country. It is only when both the sectors cooperate that the mixed economy system works efficiently.
A mixed economy is seen prevailing in a number of developed nations. With a mix of two different philosophies in the economy, the country faces a number of consequences which include detrimental, neutral or beneficial consequences. Dual economy is the other term used for a mixed economy.
Industries are owned privately for reasons that include efficiency in the economy, individual freedom and the incentive to be productive and innovative in a competitive market. The government on its part addresses concerns like protection of the environment, maintaining proper standards required for the purpose of employment and as well as competition. It has been that ownership of state, centralized planning in the economy in varying degrees, ownership of state of particular production means for the purpose of meeting social or national objectives are also included in some of the mixed economies.
People of different types of political persuasions including the Christian democrats, social democrats or typically the centre-right and the centre-left support a mixed economy. In fact this economy is viewed a compromise between the laissez-faire capitalism and socialism. More than one type of economic system is incorporated in a mixed economy. Both state owned and private owned enterprises are contained in this economy. The disadvantages of both the planned economic system and market economic system are overcome in a mixed economy.
Features Of A Mixed Economy
• The government monitors forces prevailing in the market.
• Private and government individuals own the resources. In other words both the private and public sector, coexist with each other.
• The areas and roles of both the private and public sectors are defined well.
• There is no rivalry between the private and public sector.
• People are free to select a desired occupation and also have the freedom of consumption in a mixed economy. A private production technique is chosen by the private entrepreneurs.
What Are The Advantages Of A Mixed Economy
• Inequality of income is lesser in a mixed economy since an important role of regulation is played by the government.
• The government carries out an analysis of cost versus benefit thus help to reduce the social costs of activities related to business.
• Consumers and producers have the sovereignty to select what has to be produced and consumed. However the government possesses the right to stop the production of services and goods that are harmful.
What Are The Disadvantages Of A Mixed Economy
It has been seen that the line between the private and public sectors is not very clear, or gets blurred as from time to time, it shifts one way or another. In the longer run the mixed economy gradually evolves in the direction where the government has greater control while freedom of individuals becomes lesser. It is conceded by a lot of people that somewhere a line between both the sectors, needs to be drawn. However as a whole it is tough for the society to determine where that point is. Hence in a mixed economy the process is evolutionary.
An Example To Explain A Mixed Economy
One of the most prominent examples of a mixed economy is the United States economy. In this economy both, government regulation and private enterprise, form an integral part. Rights are reserved by businesses, to deny, employ employment or incorporate whoever they may wish, provided no illegal practices for employment and discrimination are engaged. Production means are owned privately and private citizen can invest, sell or purchase as per their choice. In America, a strong presence of regulation by the government has been felt. This is because it is felt that the government is able to provide some of the services better as compared to the private enterprises.
It has been seen that stronger emphasis is laid in many of the countries on freedom of individuals etc. however it has been accepted generally that services like repairing and constructing highways, national defence, maintaining vital records of citizens like birth and death certificates are performed best by government control only.
Role Of The Government In A Mixed Economy
• Promoting industries in regions that are underdeveloped or backward and where the inducement for making investments is low.
• Promotion of certain basic industries and economic infrastructure that have longer periods of gestation and huge investment are generally looked after by the government.
• Development of production industries related to the public sector.
• Services like libraries, postal services, railway lines, healthcare etc are run by the government in the mixed economy. Certain industries that are not run or owned by the government are influenced by in the form of regulations like controlling wages or in the form of taxes.
Role Of Private Sector In A Mixed Economy
Efforts made by the public sector have to be supplemented by the private sector. The public enterprises provide opportunities for investment which the private sector can take advantage of. While the public sector works according to a definite plan with the purpose of achieving particular objectives and aims, the private sector is not left alone to develop according to the way it wants. To help achieve aims and objectives of plans made, there are a number of incentives and controls provided for regulation of the private sector.