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A mixed economy is an economy that has a mix of economic systems. It is usually defined as an economy that contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and command economy.
There is not one single definition for a mixed economy , but relevant aspects include; a degree of private economic freedom, including privately owned industry, intermingled with centralized economic planning, which includes intervention for environmentalism and social welfare, or state ownership of some of means of production.
For some states, there is not a consensus on whether they are capitalist, socialist, or mixed economies. Economies in states ranging from the United States  to Cuba  have been termed mixed economies. By most definitions, Canada could be referred to as a mixed economy, as Canadian health care is nationalized in order to provide health care free of charge.
The term mixed economy was coined to identify economic systems which stray from the ideals of either the free 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.
- 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. 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."
But eighteenth century economics was actually defined by the mercantilist system, the imperial command economy which Adam Smith wrote Wealth of Nations in protest of. His omission of this fact, or the supposition that mercantilist monarchs exercised less "governmental authority over economic activity" than what is seen today, vividly demonstrates the poverty of Robert Hessen's argument. Actually, economies of command have been the historical rule and not the exception. The systems of rule by greater and lesser monarchs, which have characterized the bulk of human political organization through time, lend themselves to royally directed economic policies that serve the interests of the monarch. Only under systems of social democracy, which are relatively recent in their prevalence, can laissez-faire economics arise, and when they have arisen they have only briefly been allowed to remain unchecked by governmental power, because laissez-faire economies allow schemes that polarize wealth and engender predatory trade relationships, and these are socially destructive forces.
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.
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 factors of production, infrastructure, and services:
- libraries and other information services
- roads and other transportation services
- schools and other education services
- hospitals and other health services
- banks and other financial services
- telephone, mail and other communication services
- electricity and other energy services (eg oil, gas)
- water systems for drinking, agriculture, and waste disposal
- subsidies to agriculture and other businesses
- government-granted monopolies to otherwise private businesses
- legal assistance
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
- mandatory insurance (example: automobile}
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
- import and export controls, such as tarrifs and quotas
Relation to form of government
Governments can move away from market economies, which by definition involves increasing governmental control and brings the economic system closer to a socialist or command economy. According to Ludwig von Mises and Friedrich von Hayek, what is called a mixed economy is a move toward socialism and increasing servility to the state.
Governments can move towards market economies. 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 Chinas WTO entry and the opening of its media system to foreign owners will inevitably undermine the CCPs authoritarian control and facilitate press freedom."
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.
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. U.S. Secretary of State Condoleezza Rice was quoted by the New York Times as saying on March 19, 2005 in Tokyo, "[When China's leaders] look around them in Asia, they will see that freedom works....They will see that freedom of religion and respect for human rights are part of the foundation of decent and successful societies".
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 as the country's policies evolved in a free market direction. It consisted of a three core policy initiatives: protecting industry through high tariffs (1861-1932) (changing to subsidies and reciprocity from 1932-1970's), 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 with the highest standard of living, surpassing the British Empire by the 1880's.
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 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 socialism and liberalism 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.
Modern U.S. economy
- People can own their own businesses, but political leaders make policies concerning these.
- The government controls the mail system.
- Intercity passenger rail (Amtrak) is a nationalized industry.
- The government tells manufacturers what to make if something is in need during war time.
- The FDA bans certain drugs.
- The government has created a minimum wage law.
- Some industries, like Boeing, receive government incentives.
In Canada, health care has beeen nationalized so that the government can ensure that health care remains free of charge and available to everyone (see Universal health care). In addition, there are employment laws (Although often employment laws such as minimum wage are the responsiblity of the provincial governments and not the federal government). Furthermore, there is strong government influence on the postal service.
- Note: Quotes in this section indicate content taken from the article in question.
- 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."
- Managerial state "An ongoing regime that remains in power, regardless of what political party holds a majority."
- 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."
- Statism "is a term to describe any economic system where a government implements a significant degree of centralized economic planning"
- 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."
- Barr, Nicholas (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
- Berkowitz, Edward D. (1991) Americas 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.
- Cronin, James E. (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 a hostile (Austrian) approach
Sources and notes
- ^ Mixed economy. Dictionary.com
- Mixed economy entry in The Norton Dictionary of Modern Thought by Alan and Trombley, W. W. Norton & Company (1999), p. 535. "A economy in which a substantial number, though by no means all, of the activities of production, distribution and exchange are undertaken by the government, and there is more interference by the STATE than there would be in a MARKET ECONOMY. A mixed economy thus combines the characteristics of both CAPITALISM and SOCIALISM."
- Mixed economy entry in The New Dictionary of Cultural Literacy, Third Edition, Houghton Mifflin Company (2002). "An economy that combines elements of capitalism and socialism, mixing some individual ownership and regulation." -
- Dlamini, Bongile P. What is an economy anyway? How does it Work? "A mixed economy is an economy containing the characteristics of both capitalism and socialism. In other words, it is an economy with a combination of both the private and the public ownership of means of production, with some measure of control by the central government."
- Mixed economy entry in The Language of Money by Edna Carew. "One containing features of both capitalism and socialism. Australia is a mixed economy, with major state-owned enterprises in communications, transport, banking, energy generation and health services, as well as privately owned enterprises in the same areas. In common with capitalist economies such as the UK and New Zealand, Australian governments are reducing these activities by privatising state-operated businesses. Other examples are seen in eastern Europe and the former Soviet Union, where newly independent states have embraced the principles of private enterprise. China, too, provides a striking illustration of the transition to a mixed economy."
- Diane Kendall, Jane Lothian Murray, Rick Linden. Sociology In Our Timesictionary, Chapter 13, Nelson, a divions of Thomson Canada Limited (2004). "A mixed economy combines elements of a market economy (capitalism) with elements of a command economy (socialism)."
- Mixed economy entry in Political Dictionary, Executive Clarity (2006). "an economy in which elements from the free enterprise system are combined with elements of socialism. Most industrial economies, now including those in the post-communist world, are mixed economies."
- The Failure of Economic Interventionism, Joint Economic Committee Economic Classics, December 1994, No. 2. "With a hubris peculiar to intellectuals and the politicians who expediently latch onto their scribblings, academic and political elites in the West insisted that "socialism prudently applied," by the likes of themselves mostly, could provide a "third path" between pure socialism and capitalism. On this third path, which became known as a "mixed economy," government would selectively and carefully intervene into the free market to "improve" it"
- Schlesinger, Arthur Jr. Liberalism in America: A Note for Europeans from The Politics of Hope, Boston:Riverside Press (1962). "The broad liberal objective is a balanced and flexible "mixed economy," thus seeking to occupy that middle ground between capitalism and socialism whose viability has so long been denied by both capitalists and socialists."
- Gorman, Tom. The Complete Idiots Guide to Economics, Alpha Books (2003), p. 9"In a market economy, the private-sector businesses and consumers decide what they will produce and purchase, with little government intervention....In a command economy, also known as a planned economy, the government largely determines what is produced and in what amounts. In a mixed economy, both market forces and government decisions determine which goods and services are produced and how they are distributed."
- ^ A variety of definitions for mixed economy.
- ^ How the U.S. Economy Works article says "The United States is said to have a mixed economy because privately owned businesses and government both play important roles. Indeed, some of the most enduring debates of American economic history focus on the relative roles of the public and private sectors. The American free enterprise system emphasizes private ownership. Private businesses produce most goods and services, and almost two-thirds of the nation's total economic output goes to individuals for personal use (the remaining one-third is bought by government and business). The consumer role is so great, in fact, that the nation is sometimes characterized as having a 'consumer economy'."
- ^ The Challenges of Cuba's Economy - An Interview with Dr. Antonio Romero In 1998 "Transformations have occurred in property ownership, employment systems, and income levels to the extent that today we have a particular kind of mixed economy."
- ^ Economy Library
- ^ Gardner, Martin. Whys of a Philosophical Scrivener, St. Martin's Press (1991), p. 126
- ^ Newint
- ^ ibiblio.org
- ^ New York Times
- ^ The Library of Economics and Liberty on-line Book titled The National System of Political Economy by Friedrich List
- ^ (Boritt, Richardson, Lind)
- ^ (Gill 39)
- ^ (Gardner)
- ^ (Gardner)
- Gill: "By 1880 the United States of America had overtaken and surpassed England as industrial leader of the world.: (from "Trade Wars Against America: A History of United States Trade and Monetary Policy" Chapter 6 titled "America becomes Number 1" pg. 39-49 - published 1990 by Praeger Publishers in the USA - ISBN 0-275-93316-4)
- Lind: "Lincoln and his successors in the Republican party of 1865-1932, by presoding over the industrialization of the United State, foreclosed the option that the United States would remain a rural society with an agrarian economy, as so many Jeffersonians had hoped." and "...Hamiltonian side...the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives." (from "Hamilton's Republic" Introduction pg. xiv-xv - published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)
- Lind: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism...The patron saint of the American School was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods...The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." (from "Hamilton's Republic" Part III "The American School of National Economy" pg. 229-230 published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)
- Richardson: "By 1865, the Republicans had developed a series of high tariffs and taxes thar reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican concluded..."Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes...for ordinary expenses of Government." (from "The Greatest Nation of the Earth" Chapter 4 titled "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pg. 136-137 published 1997 by the President and Fellows of Harvard College in the USA - ISBN 0-674-36213-6)
- Boritt: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leornard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate cariety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" (from "Lincoln and the Economics of the American Dream" Chapter 14 titled "The Whig in the White House" pg. 196-197 published 1994 by University of Illinois Press in the USA - ISBN 0252064453