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A mixed economy is an economic system that includes both elements associated with capitalism, such as private businesses, and with socialism, such as Nationalization Public service.
More specifically, a mixed economy may be variously defined as an economic system blending elements of a market economy with elements of a planned economy,Gorman, Tom. The Complete Idiot's 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." markets with state interventionism,Schiller, Bradley. The Micro Economy Today, McGraw-Hill/Irwin, 2010, p. 15. " Mixed economy - An economy that uses both market signals and government directives to allocate goods and resources." This follows immediately from a discussion on command economies and market mechanism. or private enterprise with public enterprise.Hendricks, Jean and Gaoreth D. Myles. Intermediate Public Economics, The MIT Press, 2006, p. 4 "the mixed economy where individual decisions are respected but the government attempts to affect these through the policies it implements". Common to all mixed economies is a combination of Free market principles and principles of socialism.
While there is no single definition of a mixed economy, one definition is about a mixture of markets with state interventionism, referring specifically to a capitalist market economy with strong regulatory oversight and extensive interventions into markets. Another is that of active collaboration of capitalist and socialist visions. Yet another definition is apolitical in nature, strictly referring to an economy containing a mixture of private enterprise with public enterprise. Alternatively, a mixed economy can refer to a reformist transitionary phase to a socialist economy that allows a substantial role for private enterprise and contracting within a dominant economic framework of public ownership. This can extend to a Soviet-type planned economy that has been reformed to incorporate a greater role for markets in the allocation of factors of production.
The idea behind a mixed economy, as advocated by John Maynard Keynes and several others, was not to abandon the capitalist mode of production but to retain a predominance of private ownership and control of the means of production, with profit-seeking enterprise and the accumulation of capital as its fundamental driving force. The difference from a laissez-faire capitalist system is that markets are subject to varying degrees of regulatory control and governments wield indirect macroeconomic influence through Fiscal policy and Monetary policy policies with a view to counteracting capitalism's history of boom and bust cycles, unemployment, and economic inequality.Pollin, Robert (2007). "Resurrection of the Rentier" (July–August). Book review of Andrew Glyn's Capitalism Unleashed: Finance, Globalization, and Welfare. In New Left Review (46): 141–142. "The underlying premise behind the mixed economy was straightforward. Keynes and like-minded reformers were not willing to give up on capitalism, and in particular, two of its basic features: that ownership and control of the economy's means of production would remain primarily in the hands of private capitalists; and that most economic activity would be guided by 'market forces', that is, the dynamic combination of material self-seeking and competition. More specifically, the driving force of the mixed economy, as with free-market capitalism, should continue to be capitalists trying to make as much profit as they can. At the same time, Keynes was clear that in maintaining a profit-driven marketplace, it was also imperative to introduce policy interventions to counteract capitalism's inherent tendencies—demonstrated to devastating effect during the 1930s calamity—toward financial breakdowns, depressions, and mass unemployment. Keynes's framework also showed how full employment and social welfare interventions could be justified not simply on grounds of social uplift, but could also promote the stability of capitalism." In this framework, varying degrees of public utilities and essential services are provided by the government, with state activity providing public goods and universal civic requirements, including education, healthcare, physical infrastructure, and management of public lands. This contrasts with laissez-faire capitalism, where state activity is limited to maintaining order and security, and providing public goods and services, as well as the legal framework for the protection of property rights and enforcement of contracts. "Laissez-faire" . Encyclopædia Britannica Online. 2 March 2021. Retrieved 14 October 2022.
In reference to Western European economic models as championed by conservatives (Christian democrats), Liberalism (social liberals), and socialists (social democrats – social democracy was created as a combination of socialism and liberal democracy) as part of the post-war consensus, a mixed economy is in practice a form of capitalism where most industries are privately owned but there is a number of utilities and essential services under public ownership,Miller, David (1998). "Social Democracy". In Craig, Edward (ed.). Routledge Encyclopedia of Philosophy. 8. Routledge. . usually around 15 to 20 percent.Batson, Andrew (March 2017). "The State of the State Sector" . Gavekal Dragonomics. p. 4. Retrieved 19 August 2020. "While some may find these estimates low, they are not. Even in the statist 1960s–70s, SOEs in France and the UK did not account for more than 15–20% of capital formation; in the 1980s the developed-nation average was around 8%, and it dropped below 5% in the 1990s. SOEs' role in China is many times larger."
In the post-war era, Western European social democracy became associated with this economic model. As an economic ideal, mixed economies are supported by people of various political persuasions, in particular social democrats."Social democracy". Jason P. Abbot. Routledge Encyclopedia of International Political Economy. Ed. R. J. Barry Jones. Taylor & Francis, 2001. 1410 The contemporary capitalist welfare state has been described as a type of mixed economy in the sense of state interventionism, as opposed to a mixture of planning and markets, since economic planning was not a key feature or component of the welfare state.
The apolitical definition relates to patterns of ownership and management of economic enterprises in an economy, strictly referring to a mix of public and private ownership of enterprises in the economy and is unconcerned with political forms and public policy. Alternatively, it refers to a mixture of economic planning and markets for the allocation of resources.
Medieval Islamic societies drew their primary material basis from the classical Mediterranean mixed economies that preceded them, and the economies of Islamic empires such as the Abbasid Caliphate dealt with their emerging, prominent capitalistic sectors or market economies through regulation via state, social, or religious institutions. Due to having low, diffuse populations, and disconnected trade, the economies of Europe could not have supported centralized states or mixed economies and instead a primarily agrarian feudalism predominated for the centuries following the collapse of Rome. With the recovery of populations and the rise of medieval communes from the 11th century onward, economic and political power once again became centralized. According to Murray Bookchin, mixed economies, which had grown out of the medieval communes, were beginning to emerge in Europe by the 15th century as feudalism declined. In 17th-century France, Jean-Baptiste Colbert acting as finance minister for Louis XIV attempted to institute a mixed economy on a national scale.9780817951535, Hoover Press. . ISBN 9780817951535
The American System initially proposed by the first United States Secretary of the Treasury, Alexander Hamilton, and supported by later American leaders such as Henry Clay, John C Calhoun, and Daniel Webster, exhibited the traits of a mixed economy combining protectionism, laissez-faire, and infrastructure spending. After 1851, Napoleon III began the process of replacing the old agricultural economy of France with one that was mixed and focused on industrialization. By 1914 and the start of World War I, Germany had developed a mixed economy with government co-ownership of infrastructure and industry along with a comprehensive social welfare system. After the 1929 stock crash and subsequent Great Depression threw much of the global economy into a severe economic decline, British economists such as John Maynard Keynes began to advocate for economic theories that argued more government intervention in the economy. Harold Macmillan, a British politician in the Conservative Party, also began to advocate for a mixed economy in his books Reconstruction (1933) and The Middle Way (1938). Supporters of the mixed economy included R. H. Tawney, Anthony Crosland, and Andrew Shonfield, who were mostly associated with the Labour Party in the United Kingdom. During the post-war period and coinciding with the Golden Age of Capitalism, there was general worldwide rejection of laissez-faire economics as capitalist countries embraced mixed economies founded on economic planning, intervention, and welfare.
Catholic social teaching opposes both unregulated capitalism and state socialism. Subsequent scholars have noted that conceiving of subsidiarity as a "top-down, government-driven political exercise" requires a selective reading of 1960s encyclicals. A more comprehensive reading of Catholic social teaching suggests a conceptualization of subsidiarity as a "bottom-up concept" that is "rooted in recognition of a common humanity, not in the political equivalent of noblese oblige".
Following the Russian Civil War, Vladimir Lenin adopted the New Economic Policy in the Soviet Union; the introduction of a mixed economy serving as a temporary expedient for rebuilding the nation. The policy eased the restrictions of war communism and allowed a return of markets, where private individuals could administer small and medium-sized enterprises, while the state would control large industries, banks and foreign trade. "The New Economic Policy (NEP)" . Alpha History. Retrieved 2 March 2022. The Socialist Republic of Vietnam describes its economy as a socialist-oriented market economy that consists of a mixture of public, private, and cooperative enterprise—a mixed economy that is oriented toward the long-term development of a socialist economy. The People's Republic of China adopted a socialist market economy, which represents an early stage of socialist development according to the Chinese Communist Party (CCP). The CCP takes the Marxist–Leninist position that an economic system containing diverse forms of ownership—but with the public sector playing a decisive role—is a necessary characteristic of an economy in the preliminary stage of developing socialism.
In the early post-war era in Western Europe, social democratic parties rejected the Stalinist political and economic model then current in the Soviet Union, committing themselves either to an alternative path to socialism or to a compromise between capitalism and socialism. In this period, social democrats embraced a mixed economy based on the predominance of private property and a minority of essential utilities and public services under public ownership. As a result, social democracy became associated with Keynesian economics, state interventionism, and the welfare state. Social democratic governments in practice largely maintain the capitalist mode of production (, private property, and wage labor) under a mixed economy,: "In the second, mainly post-war, phase, social democrats came to believe that their ideals and values could be achieved by reforming capitalism rather than abolishing it. They favored a mixed economy in which most industries would be privately owned, with only a small number of utilities and other essential services in public ownership." and pledge to reform capitalism and make society more egalitarian and democratic.
The American School is the economic philosophy that dominated United States national policies from the time of the American Civil War until the mid-20th century. "The Progressive Movement" . United States History. Retrieved 12 February 2011. It consisted of three core policy initiatives: protecting industry through high tariffs (1861–1932; changing to subsidies and reciprocity from 1932–the 1970s), 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, surpassing the United Kingdom by 1880.See the following sources:
The social market economy is the economic policy of modern Germany that steers a middle path between the goals of social democracy and capitalism within the framework of a private market economy and aims at maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, and public welfare and public services by using state intervention. Under its influence, Germany emerged from desolation and defeat to become an industrial giant within the European Union.
Following the Chinese economic reforms initiated in 1978, the Chinese economy has reformed its state-owned enterprises and allowed greater scope for private enterprises to operate alongside the state and collective sectors. In the 1990s, the central government concentrated its ownership in strategic sectors of the economy, but local and provincial level state-owned enterprises continue to operate in almost every industry including information technology, automobiles, machinery, and hospitality. The latest round of state-owned enterprise reform initiated in 2013 stressed increased dividend payouts of state enterprises to the central government and mixed-ownership reform which includes partial private investment into state-owned firms. As a result, many nominally private-sector firms are partially state-owned by various levels of government and state institutional investors, and many state-owned enterprises are partially privately owned resulting in a mixed ownership economy.
Green New Deal (GND) proposals call for social and economic reforms to address climate change and economic inequality using economic planning with market forces for the guiding of production. The reforms involve phasing out fossil fuels through the implementation of a carbon price and emission regulations, while increasing state spending on renewable energy. Additionally, it calls for greater welfare spending, public housing, and job security. GND proposals seek to maintain capitalism but involve economic planning to reduce carbon emissions and inequality through increased taxation, social spending, and state ownership of essential utilities such as the electrical grid. "The Green New Deal Explained" . Investopedia. Retrieved 2 March 2022.
Within political discourse, mixed economies are supported by people of various political leanings, particularly the centre-left and centre-right. Debate reigns over the appropriate levels of private and public ownership, capitalism and socialism, and government planning within an economy. The centre-left usually supports markets but argues for a higher degree of regulation, public ownership, and planning within an economy. The centre-right generally accepts some level of public ownership and government intervention but argues for lower government regulation and greater privatisation. In 2010, Australians economist John Quiggin wrote: "The experience of the twentieth century suggests that a mixed economy will outperform both central planning and laissez-faire. The real question for policy debates is one of determining the appropriate mix and the way in which the public and private sectors should interact." Zombie Economics: How Dead Ideas Still Walk among Us , John Quiggin, Princeton University Press, 2010, p. 78. The author made this statement in his chapter which is sharply critical of the strong version of "The efficient-market hypothesis", especially as it pertains to financial markets.
In Human Action, Ludwig von Mises argued that there can be no mixture of capitalism and socialism. Mises elaborated on this point by contending that even if a market economy contained numerous state-run or nationalized enterprises, this would not make the economy mixed because the existence of such organizations does not alter the fundamental characteristics of the market economy. These publicly owned enterprises would still be subject to market sovereignty as they would have to acquire through markets, strive to maximize profits, or at the least try to minimize costs, and utilize monetary accounting for economic calculation. Friedrich von Hayek and Mises argued that there can be no lasting middle ground between economic planning and a market economy, and any move in the direction of socialist planning is an unintentional move toward what Hilaire Belloc called "the servile state".Gardner, Martin (1991). Whys of a Philosophical Scrivener. St. Martin's Press. p. 126.
Classical and orthodox Marxist theorists also dispute the viability of a mixed economy as a middle ground between socialism and capitalism. Irrespective of enterprise ownership, either the capitalist law of value and accumulation of capital drive the economy or conscious planning and non-monetary forms of valuation, such as calculation in kind, ultimately drive the economy. From the Great Depression onward, extant mixed economies in the Western world are still functionally capitalist because the economic system remains based on competition and profit production.
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