Mixed economy

From Academic Kids

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Significant freedom to buy, sell, and profit limited by significant regulations, taxes, and fees.

A mixed economy is an "economy that combines capitalism and socialism" [1] (http://www.bartleby.com/59/18/mixedeconomy.html). Some sources prefer the use of "command economy" over "socialism" in defining a mixed economy (see external links below). Relevant aspects include a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning (which may include state ownership of some of the means of production).

Most Western countries, including the United States, have a mixed economy.



As most political-economic ideologies are defined in an idealized sense, the ideals that are described by these definitions rarely if ever exists in practice. With this said, 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 to identify economic systems which stray from the ideals of either capitalism or various command economies and "mix" with elements of each other. As it is unlikely that any economy contains a perfectly even mix, mixed economies are usually noted as being skewed either toward capitalism or statism in varying degrees.

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.

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 tranport 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, 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 or subsidized services and infrastructure:

  • legal assistance
  • libraries and other information services
  • roads and other transportation services
  • schools and other education services
  • hospitals and other health services (contrary to popular belief, even in the US, the health system is only partially private)
  • personal and property protection at home and abroad (police, military)

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
  • government subsidies to business

and restricted by various laws, regulations:

  • environmental regulation (example: toxins in land, water, air)
  • labor regulation including minimum wage laws
  • consumer regulation (example: product safety)
  • antitrust laws
  • intellectual property laws
  • incorporation laws

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).

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.

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' ". [2] (http://www.nytimes.com/2005/03/21/international/asia/21rice.html?)

See also

  • Dirigisme "is an economic term designating an economy where the government exerts strong directive influence."
  • Public sector "is that part of economic and administrative life that deals with the delivery of goods and services by and for the government, whether national, regional or local"
  • 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."
  • Pluralism "In an authoritarian or oligarchic society, power is concentrated and decisions are made by few members. By contrast, in a pluralistic society, power and decision-making (and the ownership of the results of exercising power) are more diffused."

External links



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