We explain what a mixed economy is and what its characteristics are. In addition, we tell you what its advantages and disadvantages are.
What is a mixed economy?
A mixed economy is an intermediate economic model, which seeks a balance between free market capitalism and state interventionism of the socialist planned economy. For this, the allocation of resources is delegated to the market, but the State is allowed to regulate its operation.
The idea of a mixed economic model emerged at the end of the 19th century, as part of different political-economic proposals, such as Democratic Socialism or Social Liberalism, or economic positions such as those of John Stuart Mill (1806-1873). However, Under the name “mixed economy,” the model appeared in 20th century England, specifically in the 1930s first as part of the proposals of Christian socialism and then of the Labor party.
To a large extent, the mixed economy emerged in Western nations as a strategy to deal with the social problems inherent to the free market in order to prevent the local influence of Marxism and communism from growing and promoting revolutionary uprisings. However, the success of the mixed economy in Europe laid the foundations for the welfare state which lasted, at least in the United Kingdom, until Margaret Thatcher (1925-2013) came to power in 1979.
It is important to mention that there is no single mixed economy model, but rather each country or region adapts and implements it in a particular way. Among the components and strategies available to this type of intermediate models are subsidies, taxes, regulations and other government intervention strategies, as well as public ownership of goods and companies. At the same time, unrestricted respect for private property and individual freedoms, including economic freedom, is implemented.
There are many and very different variants of the mixed economy, such as Keynesianism, developmentalism, the welfare state, among others. Today, the vast majority of nations operate under some type of mixed economic system
See also: Economic policy
Characteristics of a mixed economy
Mixed economy models are not always the same, nor are they governed by a universal guideline. However, common features of this type of models include:
- Social market economy. Production and economic exchange are based on economic freedom and private initiative, that is, the relationship between supply and demand, but at the same time the State has protection strategies for the most needy sectors.
- Coexistence of private and public property. Private property is fully respected, although efforts are made to prevent monopoly and extreme inequality. Likewise, there are public properties, such as state companies and community properties, that compete with private initiative.
- Partial economic planning mechanisms. The State has different mechanisms to intervene in the economy, such as tariff barriers, subsidies, price controls and others. They seek to channel the economy towards common well-being, without exercising direct and total control as occurs in planned economies.
- Social justice and welfare state. The State makes efforts to distribute wealth and combat inequality, and generally has a more or less progressive economic spirit.
Advantages and disadvantages of a mixed economy
Among the virtues and challenges of a mixed economy model are:
| Advantages of the mixed economy | Disadvantages of the mixed economy |
|---|---|
| It maintains economic freedom and rewards individual initiative, while counting on the State to deal with market failures. | It can simultaneously accommodate the drawbacks of the liberal economy and the planned economy, depending on how much the State intervenes and in what way. |
| It has mechanisms to protect the weakest sectors from social exclusion and extreme inequality. | Pressure on private sectors can lead to political retaliation and degenerate into repressive economic models. |
| The State can take care of the production and marketing of certain goods and services, in competition with private initiative. | Since it is difficult to measure exactly how much economic intervention by the State is enough, mixed models vary immensely and are difficult to systematize and study. |
| State regulation forces private companies and initiatives to respect the rules, and at the same time they are allowed profit and innovation. |
Examples of countries with mixed economies
Some examples of countries that apply a mixed economic model are:
- Argentina
- Germany
- Bolivia
- Canada
- Denmark
- Ecuador
- Spain
- Finland
- France
- Mexico
- Norway
- Portugal
- Sweden
Continue with: Economic liberalism
References
- “Mixed economy societies as a form of management of local public services” by Diana Santiago Iglesias at the Santiago de Compostela University (Spain).
- Gutiérrez Andrade, Osvaldo Walter (2010). “On the mixed economy (an approach to the plural economy of Bolivia)”. In Perspectives (no. 25, January-June), pp. 85-122.
- “Reading: mixed economy” in OER Services International Business.
- “Mixed economy” in The Encyclopaedia Britannica.
