A mixed economy is an economy that contains both private and public, or state owned (or controlled) enterprises. According to the American Heritage Dictionary, a mixed economy is defined as:
- An economic system that allows for the simultaneous operation of publicly and privately owned enterprises. [1]
There is not one single definition for a mixed economy [2], but relevant aspects include; a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning (which may include intervention for environmentalism and social justice, or state ownership of some of means of production).
There is not a consensus on which countries are capitalist, which are socialist, and which are mixed economies. Economies in countries ranging from the United States [3] to Cuba [4] have been termed mixed economies.
Philosophy
Freedom to buy, sell, and profit limited by regulations, taxes, and tariffs.
A mixed economy contains private ownership of the means of production, infrastructure, and institutions but may also contain state-ownership of some of these things. It allows for private financial decisions by businesses and individuals, but not absolute nor near absolute autonomy, as many of these decisions are otherwise overridden by government.
The term mixed economy was coined to identify economic systems which stray from the ideals of either capitalism or various command 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 either toward capitalism or statism in varying degrees.
Objection to the term
A
TGV train in
Paris operated by the publically owned
SNCF. In many countries, the
rail network is partly or completely, owned or controlled, by the state.
Ludwig von Mises argues, in Human Action, that there is no such thing as a mixed economy. He says "the market economy or capitalism, as it is usually called, and the socialist economy preclude one another. There is no mixture of the two systems possible or thinkable; there is no such thing as a mixed economy, a system that would be in part capitalist and in part socialist." He reasons that even state-owned enterprises are subject to market forces; government may tax citizens to subsidize losses but those taxes exert a market force. He says that state ownership of the some of the means of production "is a step on the way toward socialism, but not in itself socialism."
Which economies are mixed?
There is not a consensus on which economies are capitalist, socialist, or mixed. For example, while many would call the economy in the U.S. capitalist, others call it mixed. For example, according to economic and business historian Robert Hessen: "a fully free economy (true laissez-faire) never has existed, but governmental authority over economic activity has sharply increased since the eighteenth century, and especially since the Great Depression...Today the United States, once the citadel of capitalism, is a "mixed economy" in which government bestows favors and imposes restrictions with no clear or consistent principle in mind." [5]
Elements of a mixed economy
The elements of a mixed economy typically include a variety of freedoms:
- to possess means of production (farms, factories, stores, etc.)
- 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, advertizements, 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 services and infrastructure:
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 form of government
While governments with harsh restrictions on economic and civil liberties can choose to begin a process to implement a mixed economy, many believe that it cannot be long sustained without causing that government to also implement more and more of the elements of a liberal democracy (or, conversely, that implementing liberal democractic reforms inevitably leads to liberalization of the economy). For example, "the mainstream view holds that China’s WTO entry and the opening of its media system to foreign owners will inevitably undermine the CCP’s authoritarian control and facilitate press freedom." [6]
The economic freedoms that are a necessary part the capitalist portion of a mixed economy are part of a continuum of freedoms, ranging from those that require no governance to those that require very substantial governance in regard to (for example) establishing rule of law that protects private property and free markets (the details are beyond the scope of this article). Many say that economic freedoms are themselves important defining elements of a liberal democracy. [7]
The western democracies implemented elements of capitalism and democracy over the last 300 years or so and perhaps are an example of this.
While the future of China is anyone's guess, many think China can not long follow the economic path the western democracies took without also, perhaps in spite of itself, implementing - over time, incrementally - the elements of liberal democracy. "When China's leaders 'look around them in Asia, they will see that freedom works,' (Secretary of State Condoleezza Rice) said (March 19, 2005) in Tokyo. 'They will see that freedom of religion and respect for human rights are part of the foundation of decent and successful societies' ". [8]
Historic Examples
- American System "is an economic philosophy that dominated the United States policies from 1861 until 1929 that consisted of a three-part policy of: protecting industry through high tariffs or subsidies, government investment in infrastructure through internal improvements, and a national bank to promote the growth of productive enterprises. Under it's influence the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by 1900."
- Dirigisme "is an economic policy initiated under Charles DeGaulle 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 it's influence France experience what is called "Thirty Glorious Years" of profound economic growth."
- Social market economy "is the economic policy of modern Germany that steeres a middle path between socialism and liberalism and aimes 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 it's influence Germany has emerged from desolation and defeat to become an industrial giant within the European Union."
See Also
- Corporatism "Historically, corporatism or corporativism (Italian corporativismo) is a political system in which legislative power is given to corporations that represent economic, industrial and professional groups."
- Pluralism "In a pluralistic society, power and decision-making (and the ownership of the results of exercising power) are more diffused."
- Public sector "is that part of economic and administrative life that deals with the delivery of goods and services by and for the government."
- Public-private partnership "a system in which a government service or private business venture is funded and operated through a partnership of government and one or more private sector companies."
- Welfare state "In many "welfare states", welfare is not actually provided by the state, but by a combination of independent, voluntary, mutualist and government services."
Sources
- ^ Dictionary.com - Mixed Economy
- ^ A variety of definitions for mixed economy.
- ^ About.com - A Mixed Economy: The Role of the Market
- ^ The Challenges of Cuba's Economy - An Interview with Dr. Antonio Romero
The content of this page is retrieved from http://en.wikipedia.org/wiki/Mixed_economy under GFDL
