Mixed Economic System Definition
A Mixed Economic System is a combination of both capitalistic and socialistic ideals allowing protection of private assets while simultaneously allowing liberty in the use of capital together with federal intervention in economic decision making to achieve social objectives involving trade protection, fiscal stimulus in the form of trade subsidies, tax credit being common illustrations of federal influence thereby allowing public-private partnership treaty.
A mixed economy is an economic arrangement of a free market and socialistic ideals which makes it follow a pattern of capitalism and socialism together. Mixed economies uphold private ownership of production activities but within governmental control.
Mixed economies involve governmental control on companies that provide essential goods and services used by the public at large like airport, transport, mining, electricity, telecom, railways, water supply, food, medicine, banking, and defense. All present age economies are examples of mixed economies though there being widespread criticism by various economists on the economic bearings of mixed economic systems.
Types of Mixed Economies
There are broadly two types of Mixed economies:
- #1 – Partial State Control – Here the ownership of factors of production like a factory, machinery, Plant are owned by the Private entities and the Govt plays a regulatory role.
- #2 – Total Government Control – The state directly influences the functioning of the entities. The Govt invests its own money into the business and is solely responsible for the activities of the companies. It bears the risk of loss and owns the profits of the company.
- #3 – Public-Private Control – Here there is a joint ventureJoint VentureA joint venture is a commercial arrangement between two or more parties in which the parties pool their assets with the goal of performing a specific task, and each party has joint ownership of the entity and is accountable for the costs, losses, or profits that arise out of the venture. between the state and private players. The western countries are the first type of mixed economy while Asian countries like India are the second type of mixed economies.
Features of Mixed Economic Systems
Present-day economics are asynchrony of more than two economic systems. The public and private sectors work together while vying for the same set of resources. Mixed economic systems do not prohibit the private sector from profiteering but do impose regulatory measures on industries of national significance and public consumption. The world economies in modern-day times in the world are mostly mixed economies involving socialistic and capitalistic features.
- #1 – Coexistence of Multiple Sectors: In this system, the three major sectors viz. private, public and mixed sectors thrive together in peace. The mixed sector is jointly driven by government and private companiesPrivate CompaniesA privately held company refers to the separate legal entity registered with SEC having a limited number of outstanding share capital and shareowners. with more than half control by the Government.
- #2 – Co-operatives: In a mixed economy there is a cooperative sector whose objective is to provide financial support to cooperative societies involved in agriculture, animal husbandry or warehousing.
- #3 – Freedom of Operation: The choice to produce goods and provide services, buy capital assets, choice of profession, products or services is given to the public but to check monopolistic forces the government maintains state control.
- #4 – Economic Management: There is a federal planning body in a mixed economy. All sectors of the economy adhere to the economic plan of the state to fulfill various set targets. Economic planning is not rigid but acts as a common guideline for the overall prosperity and growth of the national economy.
- #5 – Welfare of Society: One of the prime targets of a mixed economy is social welfare. It fights to reduce the gap between the rich and the poor by providing job opportunities and reducing poverty. The other targets being social and economic security, health care and free or subsidized education up to high school for all.
Characteristics of a Mixed Economic System
Following are the characteristics of a mixed economic system –
#1 – Co- Survival of Public and Private Sectors
There is a harmonious co-survival of public, private and combined sectors. The private sector firms are profit-oriented. Production in these sectors is controlled by private entities. However, the state reserves control over such entities. Industries in the public sector are social welfare centered entities largely controlled by Govt. bodies. The combined sectors work in cohesion in public-private partnershipsPublic-private PartnershipsPubic-private partnership refers to a collaborative model whereby the government agency collaborates with a private sector organization to accomplish a large-scale infrastructure project through private funding. Such projects include the construction of dams, bridges, airports, roads, etc..
#2 – Economic Planning
In a mixed economy the govt. takes concern of both the public and private sectors in economic and fiscal planning taking measures favoring both. There is just resource allocation attempting to coincide with the productive strength of capitalismCapitalismCapitalism is an economic system consisting of businesses, resources, capital goods, and labour. Private entities own it, and the income is derived by the level of production of these factors. Because of the private hands, these entities can be operated efficiently and maximize their production activity also. and just distribution of socialism. The government policies are framed so that there is the existence of public companies in rural areas also providing stimulus packages and tax relies on private companies to set shop in backward areas.
#3 – Safeguarding of Consumer Rights
The interests of the end consumers are protected in a mixed economy. The consumers are given enhanced freedom to buy products and services of their choice. The government regulates the prices of the products so that they may not be exploited by Private groups.
#4 – Protection of Labor Rights
The government protects the working class from exploitation by private parties. The factories Act, Minimum wages Act are some of the measures taken to protect the interests of the labor force.
Advantages of Mixed Economic System
The following are the advantages of a mixed economic system –
- A mixed economy safeguards personal freedom. Under a mixed economy, People have a choice of consumption, profession, enterprise and thought.
- A mixed economy reduces income disparity between sections of society by providing equal opportunities for employment and education. There is almost just distribution of national wealth between all citizens of the country thereby reducing the income gap.
- A mixed economy enables central planning and control thus economic upheavals are avoided.
- A mixed economy helps poor economies to have fast and balanced economic development.
- There is scope for research and development.
- It promotes fair pricing and distribution of goods and services as the market is regulated by Govt owned bodies. It promotes fair completion and avoids predatory pricingPredatory PricingPredatory pricing is a pricing strategy in which the prices of products and services are set at such a low level that it becomes nearly impossible for others to compete in the existing market and forces them to leave..
Disadvantages of Mixed Economy
The following are the disadvantages of a mixed economic system –
- In a mixed economy, the market equilibrium is tough to maintain because of public and private interests.
- Problems of corruption, Kick-backsKick-backsKickback is an unethical payment for obtaining preference over some capable person for any discriminatory or special treatment for supplying any goods or provision of service or getting any work done through cash, credits, goods, preferential allocation, or any other valuable material or service., black market, nepotism are quite prevalent in a mixed economy.
- Excessive state control in a mixed economy hinders the growth of private sector industries.
While a mixed economy is good for the economy as a whole, the balanced growth of public and private parties and the market equilibrium should be maintained.
This has been a guide to Mixed Economic System and its definition. Here we discuss types, characteristics of the mixed economic systems along with advantages, and disadvantages. You can learn more from the following articles –