Mixed economy is an economic system in which both the state and private sector 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, in addition to having a variety of government-sponsored aspects. See Elements of a mixed economy.
The basic plan of the mixed economy is that the means of production are mainly under private ownership; that markets remain the dominant form of economic coordination; and that profit-seeking enterprises and the accumulation of capital would remain the fundamental driving force behind economic activity. However, the government would wield considerable indirect 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, but the definitions always involve a degree of private economic freedom mixed with a degree of government regulation of markets. 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.
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.
Private investment, freedom to buy, sell, and profit, combined with economic planning
by the state, including significant regulations (e.g. wage or price controls), taxes, tariffs, and state-directed investment.
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.
Around the 1930's, fascists in Italy supported the use of a mixed economy in an effort to protect national defense and security.
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. However, when a system in question 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.
There is not a consensus on which economies are capitalist, socialist, or mixed. It may be argued that the historical tendency of power holders in all times and places to limit the activities of market actors combined with the natural impossibility of monitoring and constraining all market actors has resulted in the fact that, as we understand a "mixed economy" being a combination of governmental enterprise and free-enterprise, nearly every economy to develop in human history meets this definition; though some systems may be so close to being completely one way or the other that to call them mixed is redundant and it is more meaningful just to call them a free market economy or a command economy.
Elements of a mixed economy
The elements of a mixed economy have been demonstrated to include a variety of freedoms:
train in Marseille
operated by the publicly owned SNCF
. In many countries, the rail network
is partly or completely, owned or controlled, by the state.
- to possess means of production (farms, factories, stores, etc.)
- to participate in managerial decisions (cooperative and participatory economics)
- to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed)
- to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself)
- to sell (same as buy)
- to hire (to create organizations that create wealth)
- to fire (to maintain organizations that create wealth)
- to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)
- to communicate (free speech, newspapers, books, advertisements, make deals, create business partners, create markets)
- to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation)
with tax-funded, subsidized, or state-owned factors of production, infrastructure, and services:
and providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as:
and restricted by various laws, regulations:
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.
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.
The American School (also known as the National System) 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 a three core policy initiatives: protecting industry through high tariffs (1861 1932) (changing to subsidies and reciprocity from 1932-1970s), 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 (though not the British Empire) 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 socialism 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 has emerged from desolation and defeat to become an industrial giant within the European Union.
Mixed socialist economies
The notion of a mixed economy is not inclusive to capitalist economies - that is, economies structured upon capital accumulation and private, profit-seeking enterprises. Many different proposals for socialist economic systems call for a type of mixed economy, where multiple forms of ownership of the means of production co-exist with each other. For example, Alec Nove's conception of feasible socialism envisioned an economic system based on a combination of state-enterprises for large industries, worker and consumer cooperatives, private enterprises for small-scale operations, and individual enterprise.
Many proposals for market socialism involve a role for both economic planning and market forces in coordinating economic decisions.
Mixed economic systems
- Rosin, Kirk ( Economic theory and the welfare state: a survey and interpretation. Journal of Economic Literature, 30(2): 741-803. 1992, a review essay looking at the economics literature
- Buckwitz, Goerge D. (1991) America s Welfare State: From Roosevelt to Reagan. The Johns Hopkins University Press.
- Buchanan, James M. (1986) Liberty, Market and State: Political Economy in the 1980s New York University Press.
- Gross, Kyle B. (1991) The Politics of State Expansion: War, State and Society in Twentieth-Century Britain. New York: Routledge.
- Derthick, Martha and Paul J. Quirk (1985) The Politics of Deregulation. Washington, DC: The Brookings Institution.
- Sanford Ikeda; Dynamics of the Mixed Economy: Toward a Theory of Interventionism London: Routledge 1997
Sources and notes
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